<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 2, 2000.
Commission File No.1-9223
SERVICE MERCHANDISE COMPANY, INC.
(Debtor-in-Possession as of March 27, 1999)
(Exact Name of Registrant as Specified In Its Charter)
TENNESSEE 62-0816060
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P.O. BOX 24600, NASHVILLE, TN (MAILING ADDRESS)
7100 SERVICE MERCHANDISE DRIVE, BRENTWOOD, TN 37202-4600
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (615) 660-6000
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 [ ].
As of April 2, 2000, there were 99,976,123 shares of the Registrant's
common stock, $.50 par value, outstanding.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
No.
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<S> <C>
PART I FINANCIAL INFORMATION
Consolidated Statements of Operations (Unaudited) First Quarter Ended April
2, 2000 and April 4, 1999...................................................................3
Consolidated Balance Sheets - April 2, 2000 (Unaudited), April 4, 1999
(Unaudited) and January 2, 2000.............................................................4
Consolidated Statements of Cash Flows (Unaudited) First Quarter Ended April
2, 2000 and April 4, 1999...................................................................5
Notes to Consolidated Financial Statements (Unaudited)........................................6
Management's Discussion And Analysis Of Financial Condition And Results Of Operations........16
Quantitative and Qualitative Disclosure about Market Risk....................................26
PART II OTHER INFORMATION
Legal Proceedings............................................................................27
Defaults Upon Senior Securities..............................................................28
Exhibits and Reports on Form 8-K.............................................................28
SIGNATURES............................................................................................30
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
----------------------
RESTATED
APRIL 2, APRIL 4,
2000 1999
--------- ---------
<S> <C> <C>
Net sales:
Operations excluding exiting categories and closed facilities $ 246,594 $ 236,168
Exiting categories and closed facilities 96,435 275,527
--------- ---------
343,029 511,695
--------- ---------
Costs and Expenses:
Cost of merchandise sold and buying and occupancy expenses:
Operations excluding exiting categories and closed facilities 184,435 187,204
Exiting categories and closed facilities 71,460 227,203
--------- ---------
255,895 414,407
--------- ---------
Gross margin after cost of merchandise sold and buying and occupancy expenses:
Operations excluding exiting categories and closed facilities 62,159 48,964
Exiting categories and closed facilities 24,975 48,324
--------- ---------
87,134 97,288
--------- ---------
Selling, general and administrative expenses:
Operations excluding exiting categories and closed facilities 85,481 106,278
Exiting categories and closed facilities 13,914 61,012
--------- ---------
99,395 167,290
--------- ---------
Other income, net (12,296) (3,049)
Restructuring charge (credit) (909) 99,454
Depreciation and amortization:
Operations excluding exiting categories and closed facilities 9,613 9,626
Exiting categories and closed facilities 131 2,608
--------- ---------
9,744 12,234
Reorganization items (income) 18,694 (43,743)
--------- ---------
Loss before interest, income tax, extraordinary item, and cumulative
effect of a change in accounting principle (27,494) (134,898)
Interest expense (contractual interest was $17,931 and $26,602 for
the quarters ended April 2, 2000 and April 4, 1999, respectively) 10,892 25,102
--------- ---------
Loss before income tax, extraordinary item, and cumulative effect of a
change in accounting principle (38,386) (160,000)
Income tax -- --
--------- ---------
Loss before extraordinary item and cumulative effect of a change in
accounting principle (38,386) (160,000)
Extraordinary loss from early extinguishment of debt -- (7,851)
Cumulative effect of a change in recording layaway sales -- (6,566)
--------- ---------
Net loss $ (38,386) $(174,417)
========= =========
Weighted average common shares - basic and diluted 99,723 99,717
========= =========
Loss per common share - basic and diluted:
Loss before extraordinary item and cumulative effect of a change in
accounting principle $ (0.38) $ (1.60)
Extraordinary loss from early extinguishment of debt -- (0.08)
Cumulative effect of a change in recording layaway sales -- (0.07)
--------- ---------
Net loss $ (0.38) $ (1.75)
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
RESTATED AUDITED
APRIL 2, APRIL 4, JANUARY 2,
2000 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 29,513 $ 80,956 $ 61,591
Accounts receivable, net of allowance of
$17,479, $870 and $19,474, respectively 6,135 19,586 13,171
Inventories 644,368 739,267 642,997
Prepaid expenses and other assets 24,174 78,625 29,135
----------- ----------- -----------
TOTAL CURRENT ASSETS 704,190 918,434 746,894
Property and equipment:
Net property and equipment - owned 346,340 406,471 353,078
Net property and equipment - leased 14,200 20,010 14,636
Other assets and deferred charges 45,337 47,453 47,336
----------- ----------- -----------
TOTAL ASSETS $ 1,110,067 $ 1,392,368 $ 1,161,944
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Liabilities Not Subject to Compromise
Current Liabilities:
Notes payable $ 97,146 $ 155,490 $ 42,977
Accounts payable 60,382 9,083 67,318
Accrued expenses 130,289 131,246 181,860
State and local sales taxes 12,672 7,520 28,737
Accrued restructuring costs 7,954 -- 38
Borrowings classified as current 1,000 1,500 1,000
Current maturities of capitalized lease obligations 118 -- 86
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 309,561 304,839 322,016
Long-term Liabilities:
Long-term debt 98,250 148,125 98,500
Capitalized lease obligations 2,467 -- 2,514
----------- ----------- -----------
TOTAL LONG-TERM LIABILITIES 100,717 148,125 101,014
Liabilities Subject to Compromise 755,244 888,073 755,975
----------- ----------- -----------
TOTAL LIABILITIES 1,165,522 1,341,037 1,179,005
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY:
Preferred stock, $1 par value, authorized, 4,600 shares, undesignated as to
rate and other rights, none issued
Series A Junior Preferred Stock, $1 par value, authorized 1,100 shares, none
issued
Common stock, $.50 par value, authorized 500,000 shares,
issued and outstanding 99,976, 100,167 and 100,012
shares, respectively 49,989 50,084 50,006
Additional paid-in capital 6,288 7,027 6,424
Deferred compensation (565) (1,383) (708)
Accumulated other comprehensive loss -- (869) --
Retained (deficit) earnings (111,167) (3,528) (72,783)
----------- ----------- -----------
TOTAL SHAREHOLDERS' (DEFICIT) EQUITY (55,455) 51,331 (17,061)
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $ 1,110,067 $ 1,392,368 $ 1,161,944
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------
RESTATED
APRIL 2, APRIL 4,
2000 1999
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(38,386) $(174,417)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Extraordinary loss from early extinguishment of debt -- 7,851
Cumulative effect of a change in accounting principle - layaway sales -- 6,566
Depreciation and amortization 12,483 22,551
Net gain on sale of property and equipment (3,729) (3,049)
Write-down of property and equipment due to restructuring -- 24,452
Reorganization items 18,694 (43,743)
Changes in assets and liabilities:
Accounts receivable 7,036 6,711
Inventories (1,371) 164,730
Prepaid expenses and other assets (2,983) (54,246)
Accounts payable (3,984) (21,285)
Accrued expenses, state and local sales taxes (72,240) (27,630)
Accrued restructuring costs (3,933) 73,505
Income tax -- 18,470
-------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: (88,413) 466
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment - owned (3,056) (3,066)
Proceeds from sale of property and equipment 4,043 3,955
Proceeds from sale of property and equipment - reorganization 7,927 --
Restricted cash and other assets, net (1,003) 23,525
-------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES: 7,911 24,414
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net 54,169 (510)
Repayment of long-term loan and long-term debt (2,913) (56,485)
Repayment of capitalized lease obligations (2,760) (1,826)
Debt issuance costs -- (18,574)
Exercise of stock options (forfeiture of restricted stock), net (72) (278)
-------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 48,424 (77,673)
-------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (32,078) (52,793)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 61,591 133,749
-------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 29,513 $ 80,956
======== =========
SUPPLEMENTAL DATA:
Cash paid (received) during the quarter for:
Interest $ 6,214 $ 22,251
Income tax $ (299) $ (18,368)
Reorganization items $ 6,311 $ 2,238
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE FIRST QUARTER ENDED APRIL 2, 2000
A. FINANCIAL STATEMENT PRESENTATION AND GOING CONCERN MATTERS
The consolidated financial statements, except for the consolidated
balance sheet as of January 2, 2000, have been prepared by the Company without
audit.
In management's opinion, the information and amounts furnished in this
report reflect all adjustments (consisting of normal recurring adjustments)
considered necessary for the fair presentation of the consolidated financial
position and consolidated results of operations for the interim periods
presented. Certain prior period amounts have been reclassified to conform to the
current period presentation.
As described in Note L, a change in accounting principle regarding
layaway sales was adopted during the quarter ended January 2, 2000. The
consolidated financial statements as of and for the quarter ended April 4, 1999
have been restated to reflect the effect of the retroactive application of the
change to January 4, 1999.
The consolidated financial statements have been prepared on a going
concern basis of accounting and in accordance with AICPA Statement of Position
("SOP") 90-7 "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code."
The consolidated statements of operations line item "Exiting categories
and closed facilities" represents activity specifically identifiable to
inventory liquidations conducted in conjunction with (1) the Company's
restructuring plan adopted on March 25, 1997 (the "1997 Restructuring Plan");
(2) the Company's rationalization plan adopted on March 8, 1999 (the
"Rationalization Plan") and (3) the exiting of toys, juvenile, sporting goods,
most consumer electronics and other merchandise categories as part of the 2000
Business Plan. All activity for these items is classified in "Exiting categories
and closed facilities." Prior year amounts reflect operating results for these
same facilities and merchandise classifications. Selling, general and
administrative expenses for exiting categories and closed facilities do not
include any allocation of corporate overhead.
The Company's recent losses and the Chapter 11 Cases raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments relating to
recoverability and classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The ability of the Company to continue as
a going concern and appropriateness of using the going concern basis is
dependent upon, among other things, (i) the Company's ability to comply with its
debtor-in-possession to exit financing agreements, (ii) the Company's ability to
implement its 2000 business plan; (iii) confirmation of a plan of reorganization
under the Bankruptcy Code, (iv) the Company's ability to achieve profitable
operations after such confirmation, and (v) the Company's ability to generate
sufficient cash from operations to meet its obligations.
As described in Note B, the Company has an exclusive right to submit a
plan of reorganization to the Bankruptcy Court through April 30, 2001.
Management believes that the plan of reorganization, as it is being developed
and subject to approval of the Bankruptcy Court, along with cash provided by the
debtor-in-possession to exit facility and operations, will provide sufficient
liquidity to allow the Company to continue as a going concern; however, there
can be no assurance that the sources of liquidity will be available or
sufficient to meet the Company's needs. A plan of reorganization could
materially change the amounts currently recorded in the consolidated financial
statements. The consolidated financial statements do not give effect to any
adjustment to the carrying value of assets or amounts and classifications of
liabilities that might be necessary as a result of the Chapter 11 Cases.
6
<PAGE> 7
On February 21, 2000, the Company's Board of Directors approved its
2000 Business Plan, which includes the following components: (i) an expansion of
jewelry and jewelry related products; (ii) a more targeted selection of those
categories that have historically performed well and have an affinity to jewelry
and an exit from certain unprofitable hardline categories; (iii) the convergence
of the Company's in-store and Internet environment; (iv) the reduction of
selling and warehouse spaces within the Company's stores to adjust for the new
merchandise mix, which allows for the subleasing of excess space; and (v) the
rationalization of the Company's overhead structure, logistics network and
stores/field organization to generate anticipated cost savings. The execution
and success of the 2000 Business Plan is subject to numerous risks and
uncertainties.
Pursuant to the 2000 Business Plan, the Company will feature an
expanded offering of jewelry and jewelry-related products, with the bulk of the
expansion in diamonds. In addition to jewelry, the Company will focus on
hardline categories that have performed well and which generate cross-selling
opportunities with jewelry. The Company will exit certain unprofitable
categories, including toys, juvenile, sporting goods and most electronics. As a
multi-channel specialty retailer, the Company has included as part of the 2000
Business Plan the planned convergence of the Internet and store selling
environments. Each store will feature Internet kiosks that will provide
immediate access to the Company's web site, www.servicemerchandise.com, its
bridal and gift registry and its store directory.
The Company's stores will be reconfigured to feature less overall
selling square footage (approximately 18,000 square feet as compared to 27,000
square feet), but increased square footage for jewelry. The excess store space
will be available for sub-leasing or other real estate transactions. Pursuant to
the 2000 Business Plan (See 8-K filed April 7, 2000), seventy stores are
scheduled for total refurbishment and upgrade to an expanded jewelry selling
area in 2000 while the balance will undergo a more limited capital improvement
remodel during 2000. Another 83 stores are scheduled for total refurbishment in
2001. Although the Company plans to continue operating substantially all of its
221 stores, in 2000 it will close its distribution centers in Montgomery, New
York and Orlando, Florida. As part of the 2000 Business Plan, the Company will
reduce its workforce at its corporate offices, its distribution centers and its
stores resulting in the elimination of 5,000 to 6,000 positions.
The Company continues to develop its business plans, which may include
additional store closings, changes in merchandise assortments, changes in
distribution networks and overhead costs and is considering various options with
respect to the Restated Retirement Plan, the Executive Security Plan and the
Savings and Investment Plan, which may include reinstatement, amendments,
termination or substitution of such plans, among other things.
The Company has historically incurred a net loss for the first three
quarters of the year because of the seasonality of its business. The results of
operations for the quarters ended April 2, 2000 and April 4, 1999 are not
necessarily indicative of the operating results for an entire fiscal year.
These consolidated financial statements should be read in conjunction
with the Company's Annual Report on Form 10-K for the fiscal year ended January
2, 2000.
B. PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
On March 15, 1999, five of the Company's vendors filed an involuntary
petition for reorganization under Chapter 11 ("Chapter 11") of title 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the Middle District of Tennessee (the "Bankruptcy Court")
seeking court supervision of the Company's restructuring efforts. On March 27,
1999, the Company and 31 of its subsidiaries (collectively, the "Debtors") filed
voluntary petitions with the Bankruptcy Court for reorganization under Chapter
11 under case numbers 399-02649 through 399-02680 (the "Chapter 11 Cases") and
orders for relief were entered by the Bankruptcy Court. The Chapter 11 Cases
have been consolidated for the purpose of joint administration under Case No.
399-02649. The Debtors are currently operating their businesses as
debtors-in-possession pursuant to the Bankruptcy Code.
7
<PAGE> 8
Under the Bankruptcy Code, actions to collect pre-petition indebtedness
are stayed and other contractual obligations against the Debtors may not be
enforced. In addition, under the Bankruptcy Code the Debtors may assume or
reject executory contracts, including lease obligations. Parties affected by
these rejections may file claims with the Bankruptcy Court in accordance with
the reorganization process. Substantially all pre-petition liabilities are
subject to settlement under a plan of reorganization to be voted upon by
creditors and equity holders and approved by the Bankruptcy Court. Although the
Debtors expect to file a reorganization plan or plans that provide for emergence
from bankruptcy in 2001, there can be no assurance that a reorganization plan or
plans will be proposed by the Debtors or confirmed by the Bankruptcy Court, or
that any such plan(s) will be consummated. As provided by the Bankruptcy Code,
the Debtors initially had the exclusive right to submit a plan of reorganization
for 120 days. On May 25, 1999, the Company received Court approval to extend the
period in which the Company has the exclusive right to file or advance a plan of
reorganization in its Chapter 11 case. The order extended the Company's
exclusive right to file a plan from July 23, 1999 to February 29, 2000, and
extended the Company's exclusive right to solicit acceptances of its plan from
September 21, 1999 to May 1, 2000. On February 2, 2000, the Company received
Court approval to extend the period in which the Company has the exclusive right
to file or advance a plan from February 29, 2000 to April 30, 2001 and extend
the Company's right to solicit acceptances of its plan from May 1, 2000 to June
30, 2001. If the Debtors fail to file a plan of reorganization during such
period or extension thereof or if such plan is not accepted by the required
number of creditors and equity holders, any party in interest may subsequently
file its own plan of reorganization for the Debtors. A plan of reorganization
must be confirmed by the Bankruptcy Court, upon certain findings being made by
the Bankruptcy Court which are required by the Bankruptcy Code. The Bankruptcy
Court may confirm a plan notwithstanding the non-acceptance of the plan by an
impaired class of creditors or equity security holders if certain requirements
of the Bankruptcy Code are met. The plan or plans currently being considered by
the Company involve a debt conversion of the Company's prepetition unsecured
claims into new common equity of the reorganized Company. Under such
circumstances, the existing common stock of the Company would be cancelled and
would result in existing holders of the common stock receiving no value for
their interests. The Company believes the value of the Common Stock is highly
speculative since it is probable that it will be cancelled, and therefore,
worthless if the expected plan of reorganization is consummated.
C. RESTRUCTURING PLANS
1997 RESTRUCTURING PLAN
On March 25, 1997, the Company adopted a business restructuring plan to
close up to 60 under performing stores and one distribution center. As a result,
a pre-tax charge of $129.5 million for restructuring costs was taken in the
first quarter of fiscal 1997. The remaining component of the restructuring
charge accrual and an analysis of the change in the accrual for the quarter
ended April 2, 2000 are outlined in the following table:
<TABLE>
<CAPTION>
ACTIVITY
---------------------------
ACCRUED ACCRUED
RESTRUCTURING RESTRUCTURING
COSTS AS OF COSTS AS OF
JANUARY 2, RESTRUCTURING CHANGE IN APRIL 2,
2000 COSTS ESTIMATE 2000
---- ----- -------- ----
(in thousands)
<S> <C> <C> <C> <C>
Lease termination and other real estate costs $7,894 $20 $(207) $7,707
====== === ===== ======
</TABLE>
Note: The accrued restructuring costs as of April 2, 2000 are included in
Liabilities Subject to Compromise.
8
<PAGE> 9
The closing of nine stores during the first half of fiscal 1998 brought
the total number of closures, in accordance with the 1997 Restructuring Plan, to
53 stores and one distribution center. Store closures were completed as of May
1998. The Company closed less than 60 stores primarily due to the inability to
negotiate acceptable exit terms from the related lessors.
Lease terminations and other real estate costs primarily consist of
contractual rent payments and other real estate costs. These amounts have been
accrued according to the remaining leasehold obligations under Section 502(b)(6)
of the Bankruptcy Code. Section 502(b)(6) limits a lessor's claim to the rent
reserved by such lease, without acceleration for the greater of one year, or 15
percent, not to exceed three years. Any unpaid rent is included in the claim.
The Company experienced lower than expected expenses in lease
termination and disposition of closed stores for the quarter ended April 2,
2000. As a result the Company reduced its estimate for these costs by $0.2
million.
The leases remaining on closed locations as of April 2, 2000 vary in
length with expiration dates ranging from April 2000 to February 2015.
RATIONALIZATION PLAN
In February 1999, the Company announced a rationalization plan to close
up to 132 stores, up to four distribution centers and to reduce corporate
overhead. On March 8, 1999, as part of the Rationalization Plan and prior to the
filing of the involuntary bankruptcy petition, the Board of Directors approved
the adoption of a business restructuring plan to close 106 stores and the Dallas
distribution center and to reduce the Company's workforce at its Nashville
corporate offices by 150 employees. As a result, a pre-tax charge of $99.5
million for restructuring costs was recorded in the first quarter of 1999. On
March 29, 1999 and in connection with the Chapter 11 Cases, store leases under
this plan were approved for rejection by the Bankruptcy Court. The remaining
components of the restructuring charge accrual and an analysis of the change in
the accrual for the quarter ended April 2, 2000 are outlined in the following
table:
<TABLE>
<CAPTION>
ACTIVITY
---------------------------
ACCRUED ACCRUED
RESTRUCTURING RESTRUCTURING
COSTS AS OF COSTS AS OF
JANUARY 2, RESTRUCTURING CHANGE IN APRIL 2,
2000 COSTS PAID ESTIMATE 2000
---------- ---------- ------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Lease termination and other real estate costs $ 38,315 $ (1,127) $ (877) $ 36,311
Employee severance 478 (410) 175 243
---------- ---------- ------- ----------
Total $ 38,793 $ (1,537) $ (702) $ 36,554
========== ========== ======= ==========
</TABLE>
Note: The accrued restructuring costs as of April 2, 2000 are included in
Liabilities Subject to Compromise.
Lease terminations and other real estate costs primarily consists of
contractual rent payments. These amounts have been accrued according to the
remaining leasehold obligations under Section 502(b)(6) of the Bankruptcy Code.
Section 502(b)(6) limits a lessor's claim to the rent reserved by such lease,
without acceleration for the greater of one year, or 15 percent, not to exceed
three years. Any unpaid rent is included in the claim.
9
<PAGE> 10
The Company experienced lower than expected expenses in lease
termination and disposition of closed stores for the quarter ended April 2,
2000. As a result the Company reduced its estimate for these costs by $0.9
million.
The employee severance provision was recorded for the planned
termination of approximately 4,400 employees associated with the closures, as
well as the reduction of corporate overhead. Substantially all such terminations
were completed as of December 1999.
D. LIABILITIES SUBJECT TO COMPROMISE
"Liabilities subject to compromise" refers to liabilities incurred
prior to the commencement of the Chapter 11 Cases. These liabilities consist
primarily of amounts outstanding under long-term debt and also include accounts
payable, accrued interest, accrued restructuring costs, and other accrued
expenses. These amounts represent the Company's estimate of known or potential
claims to be resolved in connection with the Chapter 11 Cases. Such claims
remain subject to future adjustments. Adjustments may result from (1)
negotiations; (2) actions of the Bankruptcy Court; (3) further development with
respect to disputed claims; (4) future rejection of additional executory
contracts or unexpired leases; (5) the determination as to the value of any
collateral securing claims; (6) proofs of claim; or (7) other events. Payment
terms for these amounts, which are considered long-term liabilities at this
time, will be established in connection with the Chapter 11 Cases.
Pursuant to order of the Bankruptcy Court, on or about March 15, 2000,
the Company mailed notices to all known creditors that the deadline for filing
proofs of claim with the Bankruptcy Court is May 15, 2000. Differences between
amounts scheduled by the Company and claims by creditors will be investigated
and resolved in connection with the Company's claims resolution process. That
process will not commence until after the May 15, 2000, bar date and, in light
of the number of creditors of the Company, may take considerable time to
complete.
The Company has received approval from the Bankruptcy Court to pay
pre-petition and post-petition employee wages, salaries, benefits and other
employee obligations, to pay vendors and other providers in the ordinary course
for goods and services received from March 15, 1999, and to honor customer
service programs, including warranties, returns, layaways and gift certificates.
The principal categories of claims classified as liabilities subject to
compromise under reorganization proceedings are identified below.
<TABLE>
<CAPTION>
APRIL 2, APRIL 4,
2000 1999
-------- --------
(in thousands)
<S> <C> <C>
Accounts payable $192,829 $198,005
Accrued expenses 64,905 72,541
Accrued restructuring costs:
1997 Restructuring Plan 7,707 5,683
1999 Rationalization Plan 36,554 75,002
Long-term debt 426,844 488,974
Capitalized lease obligations 26,405 47,868
-------- --------
Total $755,244 $888,073
======== ========
</TABLE>
Contractual interest expense not accrued or recorded on certain
pre-petition debt totaled $7.0 million and $1.5 million for the quarters ended
April 2, 2000 and April 4, 1999, respectively.
10
<PAGE> 11
E. REORGANIZATION ITEMS
Expenses and income directly incurred or realized as a result of the
Chapter 11 Cases have been segregated from the normal operations and are
disclosed separately. The major components are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------
APRIL 2, APRIL 4,
2000 1999
------- --------
(in thousands)
<S> <C> <C>
Reduction of accrued rent for rejected leases $ -- $(45,981)
Professional fees and other administrative items 6,988 2,238
Store closing costs 2,283 --
Severance 9,423 --
------- --------
Total reorganization items (income) expense $18,694 $(43,743)
======= ========
</TABLE>
REDUCTION OF ACCRUED RENT FOR REJECTED LEASES:
In connection with the Chapter 11 Cases, the 1997 Restructuring Plan
was adjusted to reflect the reduction allowed under Section 502(b)(6) of the
Bankruptcy Code. An amount had been accrued according to the remaining leasehold
obligation. Section 502(b)(6) limits the lessor's claim to the rent reserved by
such leases, without acceleration, for the greater of one year, or 15 percent,
not to exceed three years, of such leases, plus any unpaid rent.
PROFESSIONAL FEES AND OTHER ADMINISTRATIVE ITEMS:
Professional fees and administrative items relate to legal, accounting
and other professional costs directly attributable to the Chapter 11 Cases.
SEVERANCE:
Severance costs relate to workforce reductions at the corporate
offices, distribution centers and stores as a part of the reorganization
process.
STORE CLOSING COSTS:
Store closing costs include rent, common area maintenance, utilities,
asset write-downs and real estate taxes offset by other income resulting from
store dispositions. Rent amounts have been adjusted to reflect the reduction
allowed under Section 502(b)(6) of the Bankruptcy Code
F. BORROWINGS
This note contains information regarding the Company's short-term
borrowings and long-term debt as of April 2, 2000. Any plan of reorganization
defining the repayment terms must be approved by the Bankruptcy Court.
From September 1997 through January 20, 1999, the Company had a
five-year, $900.0 million, fully committed asset-based credit facility (the
"Amended and Restated Credit Facility"). The Amended and Restated Credit
Facility included $200.0 million in term loans and up to a maximum of $700.0
million in revolving loans including a $175.0 million sub-facility for letters
of credit. The Amended and Restated Credit Facility was set to mature on
September 10, 2002. Interest rates on the Amended and Restated Credit Facility
were subject to change based on a financial performance-based grid and could not
exceed a rate of LIBOR + 2.25% on revolving loans and
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<PAGE> 12
LIBOR + 2.50% on the term loan. There were no short-term borrowings under the
Amended and Restated Credit Facility at April 4, 1999.
On January 20, 1999, the Company completed a $750.0 million, 30-month
asset-based credit facility (the "Second Amended and Restated Credit Facility")
which replaced the Amended and Restated Credit Facility. The Second Amended and
Restated Credit Facility included $150.0 million in term loans and a maximum of
$600.0 million in revolving loans. The Second Amended and Restated Credit
Facility included a $200.0 million sub-facility for standby and trade letters of
credit. Interest rates on the Second Amended and Restated Facility were based on
either Prime Rate + 1.5% or LIBOR + 2.75%. There were no short term borrowings
under the Second Amended and Restated Credit Facility at April 2, 2000. Short
term borrowings under this facility at April 4, 1999 were $128.8 million.
Outstanding borrowings under the term loan of the Second Amended and
Restated Credit Facility were $149.6 million as of April 4, 1999.
On March 29, 1999, the Company entered into a 27-month, $750.0 million
fully committed asset-based debtor-in-possession credit facility (the "DIP
Facility") which replaced the Second Amended and Restated Credit Facility. The
Bankruptcy Court approved the DIP Facility on an interim basis on March 29, 1999
and granted final approval on April 27, 1999. The DIP Facility included $100.0
million in term loans and up to a maximum of $650.0 million in revolving loans
including a $200.0 million sub-facility for letters of credit. Interest rate
spreads on the DIP Facility were LIBOR + 2.25% on Eurodollar loans and Prime
Rate + 1.25% on Alternate Base Rate loans. Short term borrowings related to the
DIP Facility were $97.1 million and $26.7 million as of April 2, 2000 and April
4, 1999, respectively. Outstanding borrowings under the term loan of the DIP
Facility were $99.3 million as of April 2, 2000. There was a commitment fee of
0.375% on the undrawn portion of the revolving loans under the DIP Facility.
The DIP Facility was secured by all material unencumbered assets of the
Company and its subsidiaries, including inventory, but excluding previously
mortgaged property. Borrowings under the DIP Facility were limited based on a
borrowing base formula which considers eligible inventories, eligible accounts
receivable, mortgage values on eligible real properties, eligible leasehold
interests, available cash equivalents and in-transit cash. Availability under
the facility continues unless the Company breaches the financial covenants for
the DIP facility. As of April 2, 2000, the Company was in compliance with its
financial covenants.
On April 14, 2000, the Company entered into a four year, $600.0 million
fully committed asset-based debtor-in-possession and emergence credit facility
(the "DIP to Exit Facility") which replaced the DIP Facility. The Bankruptcy
Court approved the DIP to Exit Facility on April 4, 2000. The DIP to Exit
Facility matures on April 14, 2004, and includes $60.0 million in term loans and
up to a maximum of $540.0 million in revolving loans including a $150.0 million
sub-facility for letters of credit. Interest rate spreads on the DIP to Exit
Facility are initially LIBOR + 2.50% on Eurodollar loans and Prime Rate + 0.75%
on Alternate Base Rate loans. After the first quarter of 2001, these spreads are
subject to quarterly adjustment pursuant to a pricing grid based on availability
and financial performance, with ranges of 200 to 275 basis points over LIBOR and
25 to 100 basis points over prime rate. There were no outstanding borrowings
under the DIP to Exit Facility as of April 2, 2000.
Borrowings under the DIP to Exit Facility will be secured by all
material unencumbered assets of the Company and its subsidiaries, including
inventory, but excluding previously mortgaged property. Borrowings under the DIP
to Exit Facility are limited based on a borrowing base formula which considers
eligible inventories, eligible accounts receivable, mortgage values on eligible
real properties, eligible leasehold interests, available cash equivalents and
in-transit cash.
G. EARNINGS PER SHARE
Basic earnings (loss) per common share is computed by dividing net
earnings (loss) by the weighted-average number of common shares outstanding
during the reported period. Diluted net earnings (loss) per common share is
computed by dividing net earnings (loss) by the weighted-average number of
common shares outstanding during the period plus incremental shares that would
have been outstanding upon the assumed vesting of dilutive restricted stock
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<PAGE> 13
and the assumed exercise of dilutive stock options. As of April 2, 2000 and
April 4, 1999, all outstanding restricted stock and stock options are considered
anti-dilutive.
H. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets for the Company were $24.2 million as
of April 2, 2000 compared to $78.6 million as of April 4, 1999. The decrease was
primarily due to the reduction of cash in advance payments to purchase
inventory.
I. BENEFIT PLANS
On August 31, 1999, the Bankruptcy Court approved a motion by the
Company to amend the Restated Retirement Plan and the Executive Security Plan.
The amendment to the Restated Retirement Plan ceased the accrual of benefits,
disallowed new enrollments to the Plan and vested benefits already accrued under
the Plan effective September 30, 1999. The amendment to the Executive Security
Plan, covering approximately 165 former and current management associates,
ceased the accrual of benefits and suspended payments effective September 30,
1999.
J. OTHER COMMITMENTS AND CONTINGENCIES
On January 28, 1997, the Company and Service Credit Corp. (the
"Subsidiary"), a wholly-owned subsidiary, entered into an agreement with World
Financial Network National Bank ("WFNNB") for the purpose of providing a private
label credit card to the Company's customers. The contract requires the
Subsidiary to maintain a 3.0% credit risk reserve for the outstanding balances,
which are owned by WFNNB. The purpose of this reserve is to offset future
potential negative spreads and portfolio losses. The negative spreads or losses
may result from potential increased reimbursable contractual program costs. The
3.0% credit risk reserve is held by the Subsidiary, which is not in Chapter 11,
in the form of cash and cash-equivalents. On April 28, 1999, WFNNB advised the
Company that WFNNB had projected that such portfolio losses and negative spreads
would be at least approximately $9.0 million. The Company does not have in its
possession sufficient information to determine the accuracy or validity of
WFNNB's projection. Pending confirmation of the accuracy of WFNNB's projection
and a resolution of the Company's rights and remedies, the Company has made
provision for such potential liability during fiscal 1999 by maintaining an
allowance on the 3.0% credit risk reserve of $9.0 million.
On July 16, 1999, the Company filed a complaint against WFNNB in the
Bankruptcy Court alleging, among other things, breach of contract and violation
of the automatic stay provisions of the Bankruptcy Code by WFNNB with respect to
and in connection with the January 1997 private label credit card program
agreement between the Company, the Subsidiary and WFNNB (the "World Financial
Agreement"). Under the World Financial Agreement, a program was established
pursuant to which, among other things, WFNNB agreed to issue credit cards to
qualifying Company customers for the purchase of goods and services from the
Company. While the ultimate result of this litigation cannot be determined or
predicted with any accuracy at this time, the Company intends to pursue
available remedies against WFNNB.
On August 20, 1999, over the objection of WFNNB, the Bankruptcy Court
authorized the Company to enter into an agreement with Household Bank (SB), N.A.
("Household") for the purpose of offering new private label credit cards to
those customers of the Company who meet Household's credit standards. The
Company's prior private label credit card program with WFNNB was suspended in
March of 1999, and the rights and liabilities of WFNNB, the Company and the
Subsidiary are the subject of the litigation referred to in the preceding
paragraph.
On September 23, 1999, WFNNB filed a motion to dismiss the Company's
complaint and a separate motion seeking to have the complaint litigated in the
United States District Court for the Middle District of Tennessee (the
13
<PAGE> 14
"District Court"), rather than the Bankruptcy Court. The Company filed timely
oppositions to both motions, and, on October 27, 1999, the District Court denied
WFNNB's motion to have the complaint litigated in the District Court. The
Bankruptcy Court scheduled a hearing on December 6, 1999, to consider WFNNB's
motion to dismiss and the Company's opposition thereto.
On December 6, 1999, the Bankruptcy Court entered an order dismissing
the Company's complaint. On December 16, 1999, the Company filed a motion asking
the Court to clarify the order issued on December 6, 1999, and to grant the
Company leave to file an amended complaint (the "Company's Motion"). On January
11, 2000, WFNNB responded with an objection to the Company's Motion. On February
22, 2000 the Bankruptcy Court entered an order granting the Company's Motion and
the Company filed the amended complaint. On April 24, 2000 WFNNB filed a motion
to dismiss this amended complaint.
The Company was involved in litigation, investigations and various
legal matters during the quarter ended April 2, 2000, which are being defended
and handled in the ordinary course of business. While the ultimate results of
these matters cannot be determined or predicted, management believes that they
will not have a material adverse effect on the Company's results of operations
or financial position. Any potential liability may be affected by the Chapter 11
Cases.
K. SEGMENT REPORTING
The Company manages its business on the basis of one reportable
segment. As of April 2, 2000, all of the Company's operations are located within
the United States. The following data is presented in accordance with SFAS No.
131 for all periods presented.
CLASSES OF SIMILAR PRODUCTS
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------
APRIL 2, APRIL 4,
2000 1999
-------- --------
(in thousands)
<S> <C> <C>
Net Sales:
Hardlines $216,267 $349,805
Jewelry 126,762 161,890
-------- --------
Total Net Sales $343,029 $511,695
======== ========
</TABLE>
L. LAYAWAY SALES
A change in accounting principle regarding layaway sales was adopted
during the quarter ended January 2, 2000 to recognize layaway sales upon
delivery of merchandise to the customer. Layaway sales in prior periods were
recognized when the initial deposit was received. The Company changed its method
of accounting for layaway sales in response to the Securities and Exchange
Commission's Staff Accounting Bulletin: No. 101 - Revenue Recognition In
Financial Statements. The amount of cash received upon initiation of the layaway
is recorded as a deposit liability within accrued expenses. The cumulative
effect of the change for periods prior to fiscal 1999 is an increase in net loss
of $6.6 or ($0.07) per share. The restated amounts below reflect the effect of
the retroactive application of the
14
<PAGE> 15
accounting change on the Consolidated Financial Statements as of and for the
quarter ended April 4, 1999.
<TABLE>
<CAPTION>
QUARTER ENDED
APRIL 4,
(in thousands, except per share data) 1999
---------
<S> <C>
Net sales as originally reported $ 510,509
Effect of change in accounting for layaway sales 1,186
---------
Net sales as restated $ 511,695
=========
Gross margin as originally reported(a) $ 96,801
Effect of change in accounting for layaway sales 487
---------
Gross margin as restated $ 97,288
=========
Net loss as originally reported $(168,338)
Effect of change in accounting for layaway sales 487
Extraordinary loss 7,851
---------
Loss before cumulative effect of change in
accounting principle and extraordinary loss as
restated (160,000)
Extraordinary loss (7,851)
Cumulative effect of change in accounting for
layaway sales (6,566)
---------
Net loss as restated $(174,417)
=========
Per common share - basic and diluted
Net loss as originally reported $ (1.69)
Effect of change in accounting for layaway sales 0.01
Extraordinary loss 0.08
---------
Loss before cumulative effect and extraordinary
loss as restated (1.60)
Extraordinary loss (0.08)
Cumulative effect of change in accounting for
layaway sales (0.07)
---------
Net loss as restated $ (1.75)
=========
(a) Gross margin after cost of merchandise sold and buying and occupancy
expenses.
Accounts receivable as originally reported $ 30,483
Effect of change in accounting for layaway sales (10,897)
---------
Accounts receivable as restated $ 19,586
=========
Inventories as originally reported $ 732,166
Effect of change in accounting for layaway sales 7,101
---------
Inventories as restated $ 739,267
=========
Accrued expenses as originally reported $ 128,963
Effect of change in accounting for layaway sales 2,283
---------
Accrued expenses as restated $ 131,246
=========
</TABLE>
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
For comparative purposes, interim balance sheets are more meaningful
when compared to the balance sheets at the same point in time of the prior year.
Comparisons to balance sheets of the most recent fiscal year end may not be
meaningful due to the seasonal nature of the Company's business.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes certain forward-looking statements (statements
other than with respect to historical fact, including statements relating to the
Company's 2000 Business Plan, its expected plan of reorganization and
anticipated availability under the DIP to Exit Facility) based upon
management's beliefs, as well as assumptions made by and data currently
available to management. This information has been, or in the future may be,
included in reliance on the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are based on a
variety of assumptions that may not be realized and are subject to significant
business, economic, judicial and competitive uncertainties and potential
contingencies, including those set forth below, many of which are beyond the
Company's control. Actual results may differ materially from those anticipated
in any such forward-looking statements. The Company undertakes no obligation to
update or revise any such forward-looking statements.
The forward-looking statements and the Company's liquidity, capital
resources and results of operations are subject to a number of risks and
uncertainties including, but not limited to, the following: the ability of the
Company to continue as a going concern; the ability of the Company to operate
pursuant to the terms of the DIP to Exit Facility; the ability of the Company to
conduct successful clearance sales in connection with the 2000 Business Plan;
the ability of the Company to sublease successfully portions of its real estate
in connection with the 2000 Business Plan; the ability of the Company to
complete its store refurbishment program within cost and time expectations; the
successful implementation of the consolidation of its distribution centers;
risks associated with third parties seeking and obtaining Court action to
terminate or shorten the exclusivity period, the time for the Company to accept
or reject executory contracts including its store leases, and for appointment of
a Chapter 11 operation trustee or to convert the Company's reorganization cases
to liquidations cases; the ability of the Company to operate successfully under
a Chapter 11 proceeding, achieve planned sales and margin, and create and have
approved a reorganization plan in the Chapter 11 Cases; potential adverse
developments with respect to the Company's liquidity or results of operations;
the ability of the Company to obtain shipments, negotiate and maintain terms
with vendors and service providers for current orders; the ability to fund and
execute the 2000 Business Plan; the ability of the Company to achieve
cost-savings; the ability of the Company to enter into satisfactory arrangements
with third parties with respect to real estate and internet related strategies;
the ability of the Company to attract, retain and compensate key executives and
associates; competitive pressures from other retailers, including specialty
retailers and discount stores, which may affect the nature and viability of the
Company's business strategy; trends in the economy as a whole which may affect
consumer confidence and consumer demand for the types of goods sold by the
Company; the seasonal nature of the Company's business and the ability of the
Company to predict consumer demand as a whole, as well as demand for specific
goods; the ability of the Company to attract and retain customers; potential
adverse publicity; real estate occupancy and development costs, including the
substantial fixed investment costs associated with opening, maintaining or
closing a Company store; uncertainties with respect to continued public trading
in the Company's securities; the ability to effect conversions to new
technological systems; and the ability to develop, prosecute, confirm and
consummate one or more plans of reorganization with respect to the Chapter 11
Cases.
OVERVIEW
The Company, with 221 stores in 32 states at April 2, 2000, is one of
the nation's largest retailers of jewelry and offers a selection of brand-name
hard goods and other product lines. During the year ended January 2, 2000
("fiscal 1999"), the Company repositioned its product offerings to focus on
value pricing and a broad selection of jewelry and hard good products. These
remerchandising efforts were based on perceived customer expectations of
16
<PAGE> 17
entry level price points and a large selection within each product assortment.
The Company also revised its media strategy during fiscal 1999 to employ TV,
radio and print (including a seasonal sourcebook) campaigns in a coordinated
effort to build awareness, prospect for new customers and drive customer
traffic.
On February 21, 2000, the Company's Board of Directors approved its
2000 Business Plan. Key components of the 2000 Business Plan include exiting
certain hardlines categories, including toys, juvenile, sporting goods, most
consumer electronics and most indoor furniture. As part of the 2000 Business
Plan, the Company plans to eliminate between 5,000 and 6,000 positions in stages
during 2000 and 2001, including approximately 350 distribution center and 200
corporate positions. The Company announced an initiative to reformat its
existing stores as part of the 2000 Business Plan, which would result in excess
store space becoming available for subleasing or other real estate transactions.
Another important element to the Company's strategy is the convergence of the
Internet and store selling environments. Each store will feature Internet kiosks
that will provide immediate access to the Company's web site,
www.servicemerchandise.com, its bridal and gift registry, and its store
directory.
As a result of the Company's decreased net sales in the fourth quarter
of fiscal 1998 and the resulting negative cash flows from operations, in January
1999 the Company began an effort to effect an out-of-court restructuring plan.
As part of this out-of-court restructuring plan, on January 20, 1999, the
Company entered into a new credit facility with Citibank N.A. (the "Second
Amended and Restated Credit Facility"). The Company also developed a plan to
close up to 132 stores, up to four distribution centers and to reduce corporate
overhead (the "Rationalization Plan"). In March 1999, as part of the
Rationalization Plan, the Company announced the closing of the Dallas
distribution center and the reduction of its workforce at its Nashville
corporate offices by 150 employees.
Proceedings Under Chapter 11 of the Bankruptcy Code
Before the Company was able to effect an out-of-court restructuring, on
March 15, 1999, five of the Company's vendors filed an involuntary petition for
reorganization under Chapter 11 ("Chapter 11") of title 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the Middle District of Tennessee (the "Bankruptcy Court") seeking court
supervision of the Company's restructuring efforts. On March 27, 1999, the
Company and 31 of its subsidiaries (collectively, the "Debtors") filed voluntary
petitions with the Bankruptcy Court for reorganization under Chapter 11 under
case numbers 399-02649 through 399-02680 (the "Chapter 11 Cases") and orders for
relief were entered by the Bankruptcy Court. The Chapter 11 Cases have been
consolidated for the purpose of joint administration under Case No. 399-02649.
The Debtors are currently operating their businesses as debtors-in-possession
pursuant to the Bankruptcy Code.
Actions to collect pre-petition indebtedness are stayed and other
contractual obligations against the Debtors may not be enforced. In addition,
under the Bankruptcy Code, the Debtors may assume or reject executory contracts,
including lease obligations. Parties affected by these rejections may file
claims with the Bankruptcy Court in accordance with the reorganization process.
Substantially all pre-petition liabilities are subject to settlement under a
plan of reorganization to be voted upon by creditors and equity holders and
approved by the Bankruptcy Court in accordance with the Bankruptcy Code.
Although the Debtors expect to file a reorganization plan or plans that provide
for emergence from bankruptcy in 2001, there can be no assurance that a
reorganization plan or plans will be proposed by the Debtors or confirmed by the
Bankruptcy Court, or that any such plan(s) will be consummated. As provided by
the Bankruptcy Code, the Debtors initially had the exclusive right to submit a
plan of reorganization for 120 days. On May 25, 1999, the Bankruptcy Court
extended the period in which the Debtors had the exclusive right to file or
advance a plan of reorganization to February 29, 2000. On February 2, 2000, the
Bankruptcy Court extended the period in which the Debtors has the exclusive
right to file or advance a plan of reorganization to April 30, 2001 and extended
the right to solicit acceptance of its plan to June 30, 2001. If the Debtors
fail to file a plan of reorganization during such period or if such plan is not
accepted by the required number of creditors and equity holders, any party in
interest may subsequently file its own plan of reorganization for the Debtors. A
plan of reorganization must be confirmed by the Bankruptcy Court, upon certain
findings being made by the Bankruptcy Court which are required by the Bankruptcy
Code. The Bankruptcy Court may confirm a plan notwithstanding the non-acceptance
of the plan
17
<PAGE> 18
by an impaired class of creditors or equity security holders if certain
requirements of the Bankruptcy Code are met. The plan or plans currently being
considered by the Company involve a debt conversion of the Company's prepetition
unsecured claims into new common equity of the reorganized Company. Under such
circumstances the existing common stock of the Company would be cancelled and
would result in existing holders of the common stock receiving no value for
their interests. The Company believes the value of the common stock is highly
speculative since it is highly probable that it will be cancelled, and
therefore, worthless if the expected plan of reorganization is consummated.
At the first day hearing held on March 29, 1999 before Judge George C.
Paine, the Bankruptcy Court entered first day orders granting authority to the
Debtors, among other things, to pay pre-petition and post-petition employee
wages, salaries, benefits and other employee obligations, to pay vendors and
other providers in the ordinary course for goods and services received from and
after March 15, 1999, and to honor customer service programs, including
warranties, returns, layaways and gift certificates.
The Company entered into an agreement dated March 29, 1999, for a
debtor-in-possession credit facility (the "DIP Facility") under which the
Company could borrow up to $750.0 million, subject to certain limitations, to
fund ongoing working capital needs while it prepares a reorganization plan. On
April 27, 1999, the Bankruptcy Court approved the DIP Facility. The DIP Facility
included $100.0 million in term loans and a maximum of $650.0 million in
revolving loans. The DIP Facility included a $200.0 million sub-facility for
standby and trade letters of credit. Interest rates on the DIP Facility were
based on either the Citibank N.A. Alternative Base Rate plus 1.25% for ABR Loans
or 2.25% over LIBOR for Eurodollar Loans. The DIP Facility was secured by
substantially all of the assets of the Company and its subsidiaries, subject
only to valid, enforceable, subsisting and non-voidable liens of record as of
the date of commencement of the Chapter 11 Cases and other liens permitted under
the DIP Facility.
On June 10, 1999, the Company filed with the Bankruptcy Court schedules
and statements of financial affairs setting forth, among other things, the
assets and liabilities of the Company as shown by the Company's books and
records, subject to the assumptions contained in certain global notes filed in
connection therewith. Certain of the schedules were amended on March 6, 2000 and
all of the schedules and statements of financial affairs are subject to further
amendment or modification. Pursuant to order of the Bankruptcy Court, on or
about March 15, 2000, the Company mailed notices to all known creditors that the
deadline for filing proofs of claim with the Bankruptcy Court is May 15, 2000.
Differences between amounts scheduled by the Company and claims by creditors
will be investigated and resolved in connection with the Company's claims
resolution process. That process will not commence until after the May 15, 2000,
bar date and, in light of the number of creditors of the Company, may take
considerable time to complete. Accordingly, the ultimate number and amount of
allowed claims is not presently known and, because the settlement terms of such
allowed claims is subject to a confirmed plan of reorganization, the ultimate
distribution with respect to allowed claims is not presently ascertainable.
The Company has filed over 200 motions in the Chapter 11 Cases whereby
it was granted authority or approval with respect to various items required by
the Bankruptcy Code and/or necessary for the Company's reorganizational efforts.
In addition to motions pertaining to real estate disposition matters, the
Company has obtained orders providing for, among other things, (i)
implementation of employee retention and incentive programs, (ii) termination or
suspension of certain employee benefit programs, (iii) adequate protection to
certain secured creditors, (iv) implementation of a return to vendor program and
other vendor related programs, (v) the conduct of a joint review by the Company
and the creditors committee with respect to certain prepetition Board conduct,
(vi) the sale of the assets of B.A. Pargh., and (vii) the extension of time to
assume or reject leases.
2000 Business Plan
On February 21, 2000, the Company's Board of Directors approved its
2000 Business Plan, which includes the following components: (i) an expansion of
jewelry and jewelry related products; (ii) a more targeted selection of
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<PAGE> 19
those categories that have historically performed well and have an affinity to
jewelry and an exit from certain unprofitable hardlines categories; (iii) the
convergence of the Company's in-store and Internet environment; (iv) the
reduction of selling and warehouse spaces within the Company's stores to adjust
for the new merchandise mix, which allows for the subleasing of excess space;
and (v) the rationalization of the Company's overhead structure, logistics
network and stores/field organization to generate anticipated cost savings. The
execution and success of the 2000 Business Plan is subject to numerous risks and
uncertainties.
Pursuant to the 2000 Business Plan, the Company will feature an
expanded offering of jewelry and jewelry-related products, with the bulk of the
expansion in diamonds. In addition to jewelry, the Company will focus on
hardlines categories that have performed well and which generate cross-selling
opportunities with jewelry. The Company will exit certain unprofitable
categories, including toys, most electronics and sporting goods. As a
multi-channel specialty retailer, the Company has included as part of the 2000
Business Plan the planned convergence of the Internet and store selling
environments. Each store will feature Internet kiosks that will provide
immediate access to the Company's web site, www.servicemerchandise.com, its
bridal and gift registry and its store directory.
The Company's stores will be reconfigured to feature less overall
selling square footage (approximately 18,000 square feet as compared to 27,000
square feet), but increased square footage for jewelry. The excess store space
will be available for sub-leasing or other real estate transactions. Pursuant to
the 2000 Business Plan (see 8-K filed April 7, 2000,) seventy stores are
scheduled for total refurbishment and upgrade to an expanded jewelry selling
area in 2000 while the balance will undergo a more limited capital improvement
remodel during 2000. Another 83 stores are scheduled for total refurbishment in
2001. Although the Company plans to continue operating substantially all of its
221 stores, in 2000 it will close its distribution centers in Montgomery, New
York and Orlando, Florida. As part of the 2000 Business Plan, the Company will
reduce its workforce at its corporate offices, its distribution centers and its
stores resulting in the elimination of 5,000 to 6,000 positions.
To fund the 2000 Business Plan, on April 14, 2000, the Company entered
into a four year, $600.0 million fully committed asset-based
debtor-in-possession and emergence credit facility (the "DIP to Exit Facility")
which replaced the DIP Facility.
At this time, it is not possible to predict the outcome of the Chapter
11 Cases or their effect on the Company's business. If it is determined that the
liabilities subject to compromise in the Chapter 11 Cases exceed the fair value
of the assets, unsecured claims may be satisfied at less than 100% of their face
value and the equity interests of the Company's shareholders may have no value.
The Company believes and the DIP to Exit Facility should provide the Company
with adequate liquidity to conduct its business while it prepares a
reorganization plan. However, the Company's liquidity, capital resources,
results of operations and ability to continue as a going concern are subject to
known and unknown risks and uncertainties, including those set forth above under
"Safe Harbor Statement Under The Private Securities Litigation Reform Act of
1995."
RESULTS OF OPERATIONS
First Quarter Ended April 2, 2000 Compared to First Quarter Ended April 4, 1999
The consolidated statements of operations line item "Exiting categories
and closed facilities" represents activity specifically identifiable to
inventory liquidations conducted in conjunction with (1) the Company's
restructuring plan adopted on March 25, 1997 ("Restructuring Plan"); (2) the
Company's rationalization plan adopted on March 8, 1999 ("Rationalization Plan")
and (3) the exiting of toys, juvenile, sporting goods, most consumer
electronics, most indoor furniture and other merchandise categories as part of
the 2000 Business Plan. All activity for these items is classified in "Exiting
categories and closed facilities." Prior year amounts reflect operating results
for these same facilities and merchandise classifications. Selling, general and
administrative expenses for exiting categories and closed facilities do not
include any allocation of corporate overhead.
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<PAGE> 20
The Company's business is highly seasonal with a significant portion of
its sales occurring in the fourth quarter. Fourth quarter net sales accounted
for 37.5% and 40.6% of total net sales in fiscal 1999 and 1998, respectively.
Net Sales
Net sales for the Company were $343.0 million for the first quarter of
2000 compared to $511.7 million for the first quarter of 1999. The decline in
net sales was primarily due to the closure of 127 stores as a result of the
restructuring and remerchandising activities in fiscal 1999.
Net sales from operations excluding exiting categories and closed
facilities were $246.6 million for the first quarter of 2000 compared to $236.2
million for the first quarter of 1999. Comp store sales for hardlines were up
4.5% compared to the first quarter of 1999, and jewelry comp store sales were up
7.8%. The Jewelry comp sales increase was driven by Jewelry Special Events and
Diamonds. The hardlines comp sales increase was led by a strong performance in
seasonal/outdoor, houseware and personal care.
Net sales from exiting categories and closed facilities were $96.4
million for the first quarter of 2000 compared to $275.5 million for the first
quarter of 1999. Sales from exiting categories and closed facilities decreased
primarily due to the fact that first quarter 1999 reflects the sales of 127
stores that were closed by July 31, 1999 and were not reflected in first quarter
2000. First quarter 2000 sales reflect primarily the discontinued merchandise
categories of toys, juvenile, sporting goods, most consumer electronics and
other merchandising categories.
Gross Margin
Gross margin was $87.1 million for the first quarter of 2000 as
compared to $97.3 million in the first quarter of 1999. The decrease in gross
margin was primarily due to a decrease in sales.
Gross margin after cost of merchandise sold and buying and occupancy
expenses and excluding exiting categories and closed facilities was $62.2
million or 25.2% of net sales for the first quarter of 2000, compared to $49.0
million or 20.7% of net sales for the first quarter of 1999. The margin increase
was primarily due to increased sales and a shift to higher margin merchandise
assortments.
Gross margin after cost of merchandise sold and buying and occupancy
expenses for exiting categories and closed facilities as a result of
restructuring and remerchandising activities was $25.0 million, or 25.9% of net
sales for the first quarter of 2000 compared to $48.3 million, or 17.5% of net
sales for the first quarter of 1999. The margin decrease was primarily a result
of decreased sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses declined $67.9 million in
the first quarter 2000 to $99.4 million from $167.3 million in the first quarter
1999. The decline was primarily due to store closures, corporate downsizing and
overhead reduction efforts.
Selling, general and administrative expenses were $85.5 million or
34.7% of net sales from operations excluding exiting categories and closed
facilities for the first quarter of 2000 compared to $106.3 million or 45.0% of
net sales from operations excluding exiting categories and closed facilities for
the first quarter 1999. The decrease was attributable to a decrease in
employment costs and other selling, general and administrative expenses
primarily due to corporate downsizing and overhead reduction efforts.
20
<PAGE> 21
Selling, general and administrative expenses for exiting categories and
closed facilities were $13.9 million or 14.4% of net sales from operations for
exiting categories and closed facilities for the first quarter 2000 compared to
$61.0 million or 22.1% of net sales from operations for exiting categories and
closed facilities for the first quarter 1999. The decrease was attributable to
decreases in employment costs and other selling, general and administrative
expenses primarily due to store closures.
Other Income, net
The net gain on dispositions of property and leases recorded for the
first quarter of 2000 was $12.3 million, as compared to $3.0 million in 1999.
The gain included amounts realized from the completion of the auction property
sale of 20 properties. These consisted of 10 owned and 10 leased properties with
proceeds of $20.5 million, resulting in a net gain of $12.5 million.
Depreciation and Amortization
Depreciation and amortization on owned and leased property and
equipment was $9.7 million for the quarter ended April 2, 2000 as compared to
$12.2 million for the quarter ended April 4, 1999. The decrease of 20.4% was
primarily attributable to store closures.
Interest Expense
Interest expense for the first quarter of 2000 was $10.9 million as
compared to $25.1 million for the first quarter of 1999. As a result of the
filing of the Chapter 11 Cases, the Company ceased accruing interest on the 8
3/8% Senior Notes and 9% Senior Subordinated Debentures on March 16, 1999.
Income Taxes
The Company did not recognize an income tax benefit due to the
recording of a deferred tax asset valuation allowance. Deferred taxes are
recognized to reflect the estimated future utilization of temporary book/tax
differences. The Company has recorded a full valuation allowance on net deferred
tax assets as realization of such assets in future years is uncertain.
Extraordinary Item
An extraordinary loss on the early extinguishment of debt was recorded
in the amount of $7.9 million during the first quarter ended April 4, 1999. This
charge related to the write-off of deferred financing charges paid in
conjunction with the Company's prior Amended and Restated Credit Facility and
Second Amended and Restated Credit Facility upon the consummation of the DIP
Facility.
Cumulative Effect of a Change in Accounting Principle
The Company changed its method of accounting for layaway sales during
fiscal 1999. The cumulative effect of the change for periods prior to fiscal
1999 is an increase in net loss of $6.6 million or ($0.07) per share. Layaway
sales for 1999 have been recognized upon delivery of merchandise to the
customer. Layaway sales in prior years were recognized when the initial layaway
deposit was received. The Company changed its method of accounting for layaway
sales in response to the Securities and Exchange Commission's Staff Accounting
Bulletin: No. 101 - Revenue Recognition In Financial Statements.
1997 RESTRUCTURING PLAN
On March 25, 1997, the Company adopted a business restructuring plan to
close up to 60 under performing
21
<PAGE> 22
stores and one distribution center. As a result, a pre-tax charge of $129.5
million for restructuring costs was taken in the first quarter of fiscal 1997.
The remaining component of the restructuring charge accrual and an analysis of
the change in the accrual for the quarter ended April 2, 2000 are outlined in
the following table:
<TABLE>
<CAPTION>
ACTIVITY
---------------------------
ACCRUED ACCRUED
RESTRUCTURING RESTRUCTURING
COSTS AS OF COSTS AS OF
JANUARY 2, RESTRUCTURING CHANGE IN APRIL 2,
2000 COSTS ESTIMATE 2000
---------- ---------- ------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Lease termination and other real estate costs $ 7,894 $ 20 $ (207) $ 7,707
========= ======== ====== =========
</TABLE>
Note: The accrued restructuring costs as of April 2, 2000 are included in
Liabilities Subject to Compromise.
The closing of nine stores during the first half of fiscal 1998 brought
the total number of closures, in accordance with the 1997 Restructuring Plan, to
53 stores and one distribution center. Store closures were completed as of May
1998. The Company closed less than 60 stores primarily due to the inability to
negotiate acceptable exit terms from the related lessors.
Lease terminations and other real estate costs primarily consist of
contractual rent payments and other real estate costs. These amounts have been
accrued according to the remaining leasehold obligations under Section 502(b)(6)
of the Bankruptcy Code. Section 502(b)(6) limits a lessor's claim to the rent
reserved by such lease, without acceleration for the greater of one year, or 15
percent, not to exceed three years. Any unpaid rent is included in the claim.
The Company experienced lower than expected expenses in lease
termination and disposition of closed stores for the quarter ended April 2,
2000. As a result the Company reduced its estimate for these costs by $0.2
million.
The leases remaining on closed locations as of April 2, 2000 vary in
length with expiration dates ranging from April 2000 to February 2015.
RATIONALIZATION PLAN
In February 1999, the Company announced a rationalization plan to close
up to 132 stores, up to four distribution centers and to reduce corporate
overhead. On March 8, 1999, as part of the Rationalization Plan and prior to the
filing of the involuntary bankruptcy petition, the Board of Directors approved
the adoption of a business restructuring plan to close 106 stores and the Dallas
distribution center and to reduce the Company's workforce at its Nashville
corporate offices by 150 employees. As a result, a pre-tax charge of $99.5
million for restructuring costs was recorded in the first quarter of 1999. On
March 29, 1999 and in connection with the Chapter 11 Cases, store leases under
this plan were approved for rejection by the Bankruptcy Court. The remaining
component of the restructuring
22
<PAGE> 23
charge accrual and an analysis of the change in the accrual for the quarter
ended April 2, 2000 are outlined in the following table:
<TABLE>
<CAPTION>
ACTIVITY
---------------------------
ACCRUED ACCRUED
RESTRUCTURING RESTRUCTURING
COSTS AS OF COSTS AS OF
JANUARY 2, RESTRUCTURING CHANGE IN APRIL 2,
2000 COSTS PAID ESTIMATE 2000
---------- ---------- ------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Lease termination and other real estate costs $ 38,315 $ (1,127) $ (877) $ 36,311
Employee severance 478 (410) 175 243
---------- ---------- ------- ----------
Total $ 38,793 $ (1,537) $ (702) $ 36,554
========== ========== ======= ==========
</TABLE>
Note: The accrued restructuring costs as of April 2, 2000 are included in
Liabilities Subject to Compromise.
Lease terminations and other real estate costs primarily consists of
contractual rent payments. These amounts have been accrued according to the
remaining leasehold obligations under Section 502(b)(6) of the Bankruptcy Code.
Section 502(b)(6) limits a lessor's claim to the rent reserved by such lease,
without acceleration for the greater of one year, or 15 percent, not to exceed
three years. Any unpaid rent is included in the claim.
The Company experienced lower than expected expenses in lease
termination and disposition of closed stores for the quarter ended April 2,
2000. As a result the Company reduced its estimate for these costs by $0.9
million.
The employee severance provision was recorded for the planned
termination of approximately 4,400 employees associated with the closures, as
well as the reduction of corporate overhead. Substantially all such terminations
were completed as of December 1999.
LIQUIDITY AND CAPITAL RESOURCES
On March 27, 1999, the Debtors filed the Chapter 11 Cases, which will
affect the Company's liquidity and capital resources in fiscal 2000. See Note B,
Notes to the Financial Statements - "Proceedings Under Chapter 11 of the
Bankruptcy Code."
From September 1997 through January 20, 1999, the Company had a
five-year, $900.0 million, fully committed asset-based credit facility (the
"Amended and Restated Credit Facility"). The Amended and Restated Credit
Facility included $200.0 million in term loans and up to a maximum of $700.0
million in revolving loans including a $175.0 million sub-facility for letters
of credit. The Amended and Restated Credit Facility was set to mature on
September 10, 2002. Interest rates on the Amended and Restated Credit Facility
were subject to change based on a financial performance-based grid and could not
exceed a rate of LIBOR + 2.25% on revolving loans and LIBOR + 2.50% on the term
loan. There were no short-term borrowings under the Amended and Restated Credit
Facility at April 4, 1999.
On January 20, 1999, the Company completed a $750.0 million, 30-month
asset-based credit facility (the "Second Amended and Restated Credit Facility")
which replaced the Amended and Restated Credit Facility. The Second Amended and
Restated Credit Facility included $150.0 million in term loans and a maximum of
$600.0 million in revolving loans. The Second Amended and Restated Credit
Facility included a $200.0 million sub-facility for standby and trade letters of
credit. Interest rates on the Second Amended and Restated Facility were based on
either
23
<PAGE> 24
Prime Rate + 1.5% or LIBOR + 2.75%. There were no short term borrowings under
the Second Amended and Restated Credit Facility at April 2, 2000. Short term
borrowings under this facility at April 4, 1999 were $128.8 million.
Outstanding borrowings under the term loan of the Second Amended and
Restated Credit Facility were $149.6 million as of April 4, 1999.
On March 29, 1999, the Company entered into a 27-month, $750.0 million
fully committed asset-based debtor-in-possession credit facility (the "DIP
Facility") which replaced the Second Amended and Restated Credit Facility. The
Bankruptcy Court approved the DIP Facility on an interim basis on March 29, 1999
and granted final approval on April 27, 1999. The DIP Facility, which was
scheduled to mature on June 30, 2001, included $100.0 million in term loans and
up to a maximum of $650.0 million in revolving loans including a $200.0 million
sub-facility for letters of credit. Interest rate spreads on the DIP Facility
were LIBOR + 2.25% on Eurodollar loans and Prime Rate + 1.25% on Alternate Base
Rate loans. Short term borrowings related to the DIP Facility were $97.1 million
and $26.7 million as of April 2, 2000 and April 4, 1999, respectively.
Outstanding borrowings under the term loan of the DIP Facility were $99.3
million as of April 2, 2000. There was a commitment fee of 0.375% on the undrawn
portion of the revolving loans under the DIP Facility.
The DIP Facility was secured by all material unencumbered assets of the
Company and its subsidiaries, including inventory, but excluding previously
mortgaged property. Borrowings under the DIP Facility were limited based on a
borrowing base formula which considers eligible inventories, eligible accounts
receivable, mortgage values on eligible real properties, eligible leasehold
interests, available cash equivalents and in-transit cash. Availability under
the facility continued unless the Company breached the financial covenants for
the DIP facility. As of April 2, 2000, the Company was in compliance with its
financial covenants.
On April 14, 2000, the Company entered into a four year, $600.0 million
fully committed asset-based debtor-in-possession and emergence credit facility
(the "DIP to Exit Facility") which replaced the DIP Facility. The Bankruptcy
Court approved the DIP to Exit Facility on April 4, 2000. The DIP to Exit
Facility matures on April 14, 2004, and includes $60.0 million in term loans and
up to a maximum of $540.0 million in revolving loans including a $150.0 million
sub-facility for letters of credit. Interest rate spreads on the DIP to Exit
Facility are initially LIBOR + 2.50% on Eurodollar loans and Prime Rate + 0.75%
on Alternate Base Rate loans. After the first quarter of 2001, these spreads are
subject to quarterly adjustment pursuant to a pricing grid based on availability
and EBITDA performance, with ranges of 200 to 275 basis points over LIBOR and 25
to 100 basis points over prime. There were no outstandings under the DIP to Exit
Facility as of April 2, 2000.
The DIP to Exit Facility is secured by all material unencumbered assets
of the Company and its subsidiaries, including inventory, but excluding
previously mortgaged property. Borrowings under the DIP to Exit Facility are
limited based on a borrowing base formula which considers eligible inventories,
eligible accounts receivable, mortgage values on eligible real properties,
eligible leasehold interests, available cash equivalents and in-transit cash.
The following table sets forth the Company's three month borrowing base
and borrowing availability projections under the DIP to Exit Facility. The
forecast projects a borrowing base which ranges from $424 million to $522
million over the period from May 7, 2000 to July 30, 2000, and unused borrowing
availability which ranges from $174 million to $255 million. The borrowing base
and borrowing availability projections under the DIP to Exit Facility are
forward-looking statements subject to various assumptions regarding the
Company's business, operating performance and other factors including revenues,
expenses, asset dispositions, trade terms, capital expenditures and various
other known and unknown risks and uncertainties including those set forth in
"Safe Harbor Statement under the Private Securities Litigation Reform Act." The
Company undertakes no obligation to update such information
24
<PAGE> 25
or to disclose similar information in future reports. These projections are
subject to future adjustments, if any, that could materially affect such
information.
<TABLE>
<CAPTION>
Actual Forecast Forecast Forecast
4/30/00 5/28/00 7/2/00 7/30/00
------------------------------------------
(in millions)
<S> <C> <C> <C> <C>
Ending Total Revolver Balance $ 156.7 $ 144.6 $ 105.2 $ 117.9
Term Loan 60.0 60.0 60.0 60.0
Standby Letters of Credit 58.7 38.7 33.0 27.5
Trade Letters of Credit 0.0 10.0 28.2 44.8
-------- -------- -------- --------
Total Extensions of Credit $ 275.4 $ 253.3 $ 226.4 $ 250.2
-------- -------- -------- --------
Borrowing Base $ 522.6 $ 499.0 $ 445.8 $ 424.9
Availability $ 247.2 $ 245.7 $ 219.4 $ 174.7
</TABLE>
CAPITAL STRUCTURE
During the first quarter of 2000, the Company's principal source of
liquidity was the DIP Facility, which includes a $100 million term loan and a
revolving credit facility with a maximum commitment level of $650 million.
At April 2, 2000, the Company had total extensions of credit of $248.3
million under the DIP Facility. At April 4, 1999, the Company had total
extensions of credit of $380.6 million under the DIP Facility.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This pronouncement will be
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133." This pronouncement postpones the effective date of SFAS No.
133 to all fiscal quarters of fiscal years beginning after June 15, 2000. The
Company is currently in the process of analyzing the impact of the adoption of
this Statement.
YEAR 2000 COMPLIANCE
The Year 2000 issue was primarily the result of computer programs using
a two-digit format, as opposed to four digits, to indicate the year. As a
result, such computer systems would be unable to interpret dates beyond the year
1999, which could have caused a system failure or other computer errors leading
to a disruption in the operation of such systems. In 1997, the Company developed
a strategic plan to update its information systems in order to meet business
needs. As a result of this plan, several major processing systems were replaced
or significantly upgraded during 1998 and 1999, and are, for the most part, Year
2000 compliant, including certain point of sale systems, human resources and
financial reporting systems. The Company's plan devoted the necessary resources
to identify and modify systems potentially impacted by Year 2000, or implement
new systems to become Year 2000 compliant in
25
<PAGE> 26
a timely manner. In 1999, the Company executed its Year 2000 plan as systems
potentially impacted by Year 2000 were identified and, if necessary, were
modified. In addition, the Company developed contingency plans for key
operational areas that could have been impacted by the Year 2000 problem. The
Company did not incur any significant Year 2000 issues during, or after, the
move into the new calendar year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's operations are subject to market risks primarily from
changes in interest rates. The Company has immaterial exposure to exchange rate
risk. As discussed in the Company's Annual Report on Form 10-K filed on March
16, 2000, the Company had interest rate swaps at fiscal year-end with a notional
amount of $125 million. As of April 2, 2000, the fair value of the interest rate
swap agreements was $0.1 million.
26
<PAGE> 27
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On March 15, 1999, five of the Company's vendors filed an involuntary
petition for reorganization under Chapter 11 in the Bankruptcy Court seeking
court supervision of the Company's restructuring efforts. On March 27, 1999, the
Company and 31 of its subsidiaries filed voluntary petitions with the Bankruptcy
Court for reorganization under Chapter 11 of the Bankruptcy Code. The Debtors
are currently operating their businesses as debtors-in-possession. The Chapter
11 Cases have been consolidated for the purpose of joint administration under
Case No. 399-02649.
On January 28, 1997, the Company and Service Credit Corp. (the
"Subsidiary"), a wholly-owned subsidiary, entered into an agreement with World
Financial Network National Bank ("WFNNB") for the purpose of providing a private
label credit card to the Company's customers. The contract requires the
Subsidiary to maintain a 3.0% credit risk reserve for the outstanding balances,
which are owned by WFNNB. The purpose of this reserve is to offset future
potential negative spreads and portfolio losses. The negative spreads or losses
may result from potential increased reimbursable contractual program costs. The
3.0% credit risk reserve is held by the Subsidiary, which is not in Chapter 11,
in the form of cash and cash-equivalents. On April 28, 1999, WFNNB advised the
Company that WFNNB has projected that such portfolio losses and negative spreads
will be at least approximately $9.0 million. The Company does not have in its
possession sufficient information to determine the accuracy or validity of
WFNNB's projection. Pending confirmation of the accuracy of WFNNB's projection
and a resolution of the Company's rights and remedies, the Company has made
provision for such potential liability during fiscal 1999 by maintaining an
allowance on the 3.0% credit risk reserve of $9.0 million.
On July 16, 1999, the Company filed a complaint against WFNNB in the
Bankruptcy Court alleging, among other things, breach of contract and violation
of the automatic stay provisions of the Bankruptcy Code by WFNNB with respect to
and in connection with the January 1997 private label credit card program
agreement between the Company, the Subsidiary and WFNNB (the "World Financial
Agreement"). Under the World Financial Agreement, a program was established
pursuant to which, among other things, WFNNB agreed to issue credit cards to
qualifying Company customers for the purchase of goods and services from the
Company. While the ultimate result of this litigation cannot be determined or
predicted with any accuracy at this time, the Company intends to pursue
available remedies against WFNNB.
On August 20, 1999, over the objection of WFNNB, the Bankruptcy Court
authorized the Company to enter into an agreement with Household Bank (SB), N.A.
("Household") for the purpose of offering new private label credit cards to
those customers of the Company who meet Household's credit standards. The
Company's prior private label credit card program with WFNNB was suspended in
March of 1999, and the rights and liabilities of WFNNB, the Company and the
Subsidiary are the subject of the litigation referred to in the preceding
paragraph.
On September 23, 1999, WFNNB filed a motion to dismiss the Company's
complaint and a separate motion seeking to have the complaint litigated in the
United States District Court for the Middle District of Tennessee (the "District
Court"), rather than the Bankruptcy Court. The Company filed timely oppositions
to both motions, and, on October 27, 1999, the District Court denied WFNNB's
motion to have the complaint litigated in the District Court. The Bankruptcy
Court scheduled a hearing on December 6, 1999, to consider WFNNB's motion to
dismiss and the Company's opposition thereto.
On December 6, 1999, the Bankruptcy Court entered an order dismissing
the Company's complaint. On December 16, 1999, the Company filed a motion asking
the Court to clarify the order issued on December 6, 1999, and to grant the
Company leave to file an amended complaint (the "Company's Motion"). On January
11, 2000, WFNNB responded with an objection to the Company's Motion. On February
22, 2000 the Bankruptcy Court entered
27
<PAGE> 28
an order granting the Company's motion and the Company filed the amended
complaint. On April 24, 2000 WFNNB filed a motion to dismiss this amended
complaint.
The Company was involved in litigation, investigations and various
legal matters during the fiscal year ended January 2, 2000, which are being
defended and handled in the ordinary course of business. While the ultimate
results of these matters cannot be determined or predicted, management believes
that they will not have a material adverse effect on the Company's results of
operations or financial position. Any potential liability may be affected by the
Chapter 11 Cases.
At this time, it is not possible to predict the outcome of the Chapter
11 Cases or their effect on the Company's business. Additional information
regarding the Chapter 11 Cases is set forth elsewhere in this Quarterly report
on Form 10-Q and in Item 1. "Business -- Proceedings Under Chapter 11 of the
Bankruptcy Code," Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations," Note B of Notes to Consolidated Financial
Statements (Unaudited) and the Report of Independent Auditors included in the
Company's Annual Report on Form 10-K filed on March 16, 2000, which includes an
explanatory paragraph concerning a substantial doubt as to the Company's ability
to continue as a going concern. If it is determined that the liabilities subject
to compromise in the Chapter 11 Cases exceed the fair value of the assets,
unsecured claims may be satisfied at less than 100% of their face value and the
equity interests of the Company's shareholders may have no value.
ITEM 2. DEFAULTS UPON SENIOR SECURITIES.
The Company commenced the Chapter 11 Cases on March 27, 1999. As a
result of filing the Chapter 11 Cases, no principal or interest payments will be
made on certain indebtedness incurred by the Company prior to March 27, 1999,
including the 9% Senior Subordinated Debentures and 8 3/8% Senior Notes, until a
plan of reorganization defining the payment terms has been approved by the
Bankruptcy Court.
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits filed with this Form 10-Q
4 Post-Petition Credit Agreement dated as of April 14, 2000 by
and among Registrant, Fleet Retail Finance Inc., as collateral
agent and administrative agent, Foothill Capital Corporation,
National City Commercial Finance Inc. and Jackson National
Life Insurance Company, as co-agents, Heller Financial, Inc.,
as documentation agent and Fleet Boston Robertson Stephens,
Inc., as arranger.*
27.1 Financial Data Schedule for the First Quarter ended April 2,
2000.
27.2 Restated Financial Data Schedule for the First Quarter ended
April 4, 1999.
(b) Reports on Form 8-K.
During the first quarter ended April 2, 2000, the Company filed the
following current reports on Form 8-K: (i) dated January 7, 2000 attaching a
press release announcing the Company's successful holiday selling season, the
preliminary results of the 1999 business plan and the seeking of further
extension of the exclusive plan period; (ii) dated January 27, 2000 announcing
the filing and introduction into evidence in the Bankruptcy Court of certain
selected preliminary and other financial information of the Company; (iii) dated
February 2, 2000 announcing the filing with the Bankruptcy Court of the
Company's monthly operating report for the period commencing November 29, 1999
and ending January 2, 2000; (iv) dated February 25, 2000 announcing the filing
with the Bankruptcy Court of portions of the Company's monthly operating report
for the period commencing January 3, 2000 and ending January 30, 2000; (v) dated
February 25, 2000 announcing the Company's 1999 results and that the Company had
entered into a commitment letter with Fleet Retail Financing, Inc. for the DIP
to Exit Facility and attaching the commitment letter for the DIP to Exit
Facility; and (vi) dated March 14, 2000 announcing the filing with the
* Certain exhibits/schedules have been omitted, but will be supplied to the
staff upon request.
28
<PAGE> 29
Bankruptcy Court of portions of the Company's monthly operating report for the
period commencing January 3, 2000 and ending January 30, 2000.
29
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ S. Cusano
- --------------------------------------
S. Cusano
Director and Chief Executive Officer
(Principal Executive Officer)
May 17, 2000
/s/ Thomas L. Garrett, Jr.
- --------------------------------------
Thomas L. Garrett, Jr.
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
May 17, 2000
/s/ Kenneth A. Conway
- --------------------------------------
Kenneth A. Conway
Vice President Controller and Chief
Accounting Officer
(Principal Accounting Officer)
May 17, 2000
30
<PAGE> 1
EXHIBIT 4
EXECUTION COPY
U.S. $600,000,000
POST-PETITION CREDIT AGREEMENT
BY AND AMONG
SERVICE MERCHANDISE COMPANY, INC.
A DEBTOR AND DEBTOR-IN-POSSESSION
AS BORROWER
THE LENDERS PARTY HERETO
FLEET RETAIL FINANCE INC.
AS COLLATERAL AGENT AND ADMINISTRATIVE AGENT
FOOTHILL CAPITAL CORPORATION
NATIONAL CITY COMMERCIAL FINANCE INC.
JACKSON NATIONAL LIFE INSURANCE COMPANY
AS CO-AGENTS
HELLER FINANCIAL, INC.
AS DOCUMENTATION AGENT
AND
FLEETBOSTON ROBERTSON STEPHENS, INC.
AS ARRANGER
DATED: AS OF APRIL 14, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. DEFINITIONS.................................................................................... 2
1.1 Defined Terms......................................................................... 2
1.2 Other Definitional Provisions......................................................... 36
SECTION 2. AMOUNTS AND TERMS OF TERM LOANS................................................................ 37
2.1 Term Loans............................................................................ 37
2.2 Repayment of Term Loans; Amortization................................................. 37
SECTION 3. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS AND THE
INTERIM FACILITY............................................................................... 37
3.1 Revolving Credit Commitments.......................................................... 37
3.2 Procedure for Revolving Credit Borrowing.............................................. 38
3.3 Commitment Fee........................................................................ 38
3.4 Termination or Reduction of Commitments............................................... 38
3.5 Repayment of Revolving Loans.......................................................... 39
3.6 L/C Commitment........................................................................ 39
3.7 Procedure for Issuance of Letters of Credit........................................... 40
3.8 Letter of Credit Fees, Commissions and Other Charges.................................. 40
3.9 L/C Participations.................................................................... 41
3.10 Letter of Credit Reimbursement Obligations............................................ 42
3.11 Obligations Absolute.................................................................. 43
3.12 Letter of Credit Payments............................................................. 44
3.13 Letter of Credit Applications......................................................... 44
3.14 Swing Line Commitment................................................................. 44
3.15 Procedure for Swing Line Borrowing.................................................... 44
3.16 Refunding of Swing Line Loans; Participations in Swing Line Loans..................... 44
3.17 Other Fees............................................................................ 46
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT................................... 46
4.1 Optional and Mandatory Prepayments.................................................... 46
4.2 Conversion and Continuation Options................................................... 48
4.3 Minimum Amounts and Maximum Number of Tranches........................................ 48
4.4 Interest Rates and Payment Dates...................................................... 48
4.5 Computation of Interest and Fees...................................................... 49
4.6 Inability to Determine Interest Rate.................................................. 49
4.7 Pro Rata Treatment and Payments....................................................... 50
4.8 Illegality............................................................................ 51
4.9 Requirements of Law................................................................... 51
4.10 Indemnification for Taxes............................................................. 52
4.11 Indemnity............................................................................. 54
4.12 Change of Lending Office.............................................................. 54
4.13 Evidence of Debt...................................................................... 54
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 5. FINANCING SUBSEQUENT TO CONSUMMATION DATE...................................................... 56
SECTION 6. REPRESENTATIONS AND WARRANTIES................................................................. 56
6.1 Financial Condition................................................................... 56
6.2 No Change............................................................................. 56
6.3 Existence; Compliance with Law........................................................ 57
6.4 Power; Authorization; Enforceable Obligations......................................... 57
6.5 No Legal Bar.......................................................................... 57
6.6 No Material Litigation................................................................ 57
6.7 No Default............................................................................ 57
6.8 No Burdensome Restrictions............................................................ 58
6.9 Taxes................................................................................. 58
6.10 Federal Regulations................................................................... 58
6.11 ERISA................................................................................. 58
6.12 Investment Company Act; Other Regulations............................................. 59
6.13 Subsidiaries.......................................................................... 59
6.14 Environmental Matters................................................................. 59
6.15 The Security Documents................................................................ 60
6.16 Ownership of Property; Liens.......................................................... 60
6.17 Intellectual Property................................................................. 60
6.18 Pledged Stock......................................................................... 60
6.19 Real Estate Matters................................................................... 61
6.20 Purpose of Loans; Use of Proceeds..................................................... 61
6.21 Accuracy of Information............................................................... 61
6.22 Depositary Accounts................................................................... 61
6.23 Priority.............................................................................. 61
SECTION 7. CONDITIONS..................................................................................... 61
7.1 Conditions to Effectiveness........................................................... 61
7.2 Conditions to Each Extension of Credit................................................ 64
SECTION 8. AFFIRMATIVE COVENANTS.......................................................................... 64
8.1 Financial Statements.................................................................. 65
8.2 Certificates; Other Information....................................................... 65
8.3 Payment of Obligations................................................................ 67
8.4 Maintenance of Existence; Compliance with Contractual Obligations and
Requirements of Law................................................................... 67
8.5 Maintenance of Property; Insurance.................................................... 67
8.6 Inspection of Property; Books and Records; Discussions; Appraisals.................... 67
8.7 Notices............................................................................... 68
8.8 Environmental Laws.................................................................... 68
8.9 Further Assurances.................................................................... 69
8.10 Application of Proceeds............................................................... 69
8.11 Additional Collateral................................................................. 69
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
8.12 Depositary Account and Payments System; Cash Dominion................................. 70
SECTION 9. NEGATIVE COVENANTS............................................................................. 70
9.1 Financial Condition Covenants......................................................... 70
9.2 Limitation on Guarantee Obligations................................................... 72
9.3 Limitation on Liens................................................................... 73
9.4 Limitation on Fundamental Changes..................................................... 75
9.5 Limitation on Sale of Assets.......................................................... 76
9.6 Limitation on Dividends............................................................... 77
9.7 Limitation on Indebtedness............................................................ 77
9.8 Limitation on Investments, Loans and Advances......................................... 78
9.9 Limitation on Optional Payments and Modifications of Debt Instruments................. 79
9.10 Limitation on Transactions with Affiliates............................................ 80
9.11 Limitation on Sales and Leasebacks.................................................... 80
9.12 Fiscal Years and Quarters............................................................. 80
9.13 Limitation on Conduct of Business..................................................... 81
9.14 Limitation on Issuances of Capital Stock.............................................. 81
9.15 Foreign Holding Companies, Inactive Subsidiaries and Special Purpose
Subsidiaries.......................................................................... 81
9.16 Permanent Order....................................................................... 81
9.17 Application to Bankruptcy Court....................................................... 81
9.18 Limitation on Reclamation Payments.................................................... 81
SECTION 10. EVENTS OF DEFAULT.............................................................................. 81
SECTION 11. THE ADMINISTRATIVE AGENT....................................................................... 85
11.1 Appointment........................................................................... 85
11.2 Delegation of Duties.................................................................. 85
11.3 Exculpatory Provisions................................................................ 85
11.4 Reliance by Administrative Agent...................................................... 86
11.5 Notice of Default..................................................................... 86
11.6 Non-Reliance on Administrative Agent and Other Lenders................................ 86
11.7 Indemnification....................................................................... 87
11.8 Administrative Agent in Its Individual Capacity....................................... 87
11.9 Successor Administrative Agent........................................................ 87
SECTION 12. MISCELLANEOUS.................................................................................. 87
12.1 Amendments and Waivers................................................................ 87
12.2 Notices............................................................................... 89
12.3 No Waiver; Cumulative Remedies........................................................ 90
12.4 Survival of Representations and Warranties............................................ 90
12.5 Payment of Expenses and Taxes; Indemnity.............................................. 90
12.6 Successors and Assigns; Participations and Assignments................................ 92
12.7 Replacement of Lenders under Certain Circumstances.................................... 94
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
12.8 Adjustments........................................................................... 94
12.9 Counterparts.......................................................................... 95
12.10 Severability.......................................................................... 95
12.11 Integration........................................................................... 95
12.12 Termination........................................................................... 95
12.13 GOVERNING LAW......................................................................... 95
12.14 Acknowledgements...................................................................... 95
12.15 WAIVER OF JURY TRIAL.................................................................. 95
12.16 Confidentiality....................................................................... 96
12.17 Section Headings...................................................................... 96
12.18 Judgment Currency..................................................................... 96
</TABLE>
iv
<PAGE> 6
Table of Contents
(continued)
<TABLE>
<CAPTION>
page
----
<S> <C> <C>
SCHEDULES
Schedule 1.1(a) Commitments
Schedule 1.1(b) Real Estate Eligibility Conditions
Schedule 6.1 Charges and Changes
Schedule 6.2 Changes
Schedule 6.4 Consents
Schedule 6.6 Litigation
Schedule 6.7 Defaults
Schedule 6.8 Restrictions
Schedule 6.13 Subsidiaries
Schedule 6.14 Environmental Matters
Schedule 6.17 Intellectual Property Matters
Schedule 6.19 Material Real Property
Schedule 6.22 Depositary Accounts
Schedule 7.1(j) Lien Search Jurisdictions
Schedule 8.3 Payments on Obligations
Schedule 8.4 Compliance with Obligations
Schedule 9.2(b) Existing Guarantee Obligations
Schedule 9.3(f) Existing Liens
Schedule 9.7(f) Existing Indebtedness
Schedule 9.10 Transactions with Affiliates
Schedule 12.2 Addresses
EXHIBITS
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Master Security Agreement
Exhibit C-1 Form of Revolving Credit Note
Exhibit C-2 Form of Term Loan Note
Exhibit D Form of Swing Line Note
Exhibit E Form of Permanent Order
Exhibit F Form of Borrower Closing Certificate
Exhibit G Form of Opinion of Counsel
Exhibit H Form of Borrowing Base Certificate
Exhibit I Available GOB Inventory Worksheet
Exhibit J Exit Facility Agreement
</TABLE>
v
<PAGE> 7
POST-PETITION CREDIT AGREEMENT
POST-PETITION CREDIT AGREEMENT, dated as of April 14, 2000, by and
among SERVICE MERCHANDISE COMPANY, INC., a Tennessee corporation and a debtor
and debtor-in-possession under chapter 11 of the Bankruptcy Code (as
hereinafter defined) (the "Borrower"), the financial institutions and other
entities identified on the signature pages hereof as a "Lender" and the
financial institutions and other entities who become parties hereto as
successors or assigns as provided herein (collectively, the "Lenders" and each
individually, a "Lender"), FLEET RETAIL FINANCE INC., a Delaware corporation
("FRF"), as collateral agent and administrative agent for the Lenders (in such
capacity, the "Administrative Agent"), Foothill Capital Corporation, National
City Commercial Finance, Inc. and Jackson National Life Insurance Company, as
Co-Agents (collectively, in such capacity, the "Co-Agents"), and Heller
Financial, Inc., as Documentation Agent (in such capacity, the "Documentation
Agent") (as amended, modified, supplemented, extended, renewed, or refinanced
from time to time, this "Agreement").
W I T N E S S E T H:
WHEREAS, on March 15, 1999 an involuntary chapter 11 petition was
filed against the Borrower in the United States Bankruptcy Court for the Middle
District of Tennessee; and
WHEREAS, the Board of Directors of the Borrower authorized the
Borrower to commence a voluntary chapter 11 case and, on March 27, 1999 (the
"Petition Date"), the Borrower filed a voluntary petition for relief under
chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for
the Middle District of Tennessee; and
WHEREAS, the Borrower is continuing to operate its business and manage
its property as debtor and debtor-in-possession under sections 1107 and 1108 of
the Bankruptcy Code; and
WHEREAS, on March 29, 1999, the Borrower entered into a Post-Petition
Credit Agreement with certain lenders, Citicorp USA, Inc., as Collateral Agent
and Administrative Agent, BankBoston, N.A., as Documentation Agent and
Collateral Monitoring Agent and Salomon Smith Barney Inc. as Arranger and Book
Manager (as amended and in effect, the "Existing DIP Agreement"); and
WHEREAS, an ongoing need exists for the Borrower to obtain additional
funds in order to continue the operation of its business as debtor and
debtor-in-possession under the Bankruptcy Code, to confirm a Plan of
Reorganization, and to provide working capital subsequent to the confirmation
of such Plan of Reorganization; accordingly, the Borrower has requested that
the Lenders refinance the obligations under the Existing DIP Agreement and
extend financing to the Borrower subsequent to the confirmation of its Plan of
Reorganization; and
WHEREAS, the Lenders are willing to make funds available to the
Borrower during the pendency of the bankruptcy proceedings pursuant to sections
364(c)(1), (c)(2) and (c)(3) of the Bankruptcy Code, but only for the purposes
and upon the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS, the Lenders are willing to provide financing to the Borrower
subsequent to confirmation of its Plan of Reorganization, but only for the
purposes and upon the terms and subject to the conditions set forth in this
Agreement; and
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<PAGE> 8
WHEREAS, the Borrower has agreed to secure its obligations to the
Lenders in connection with such financings with, inter alia, security interests
in, and liens on, its property and assets, whether real or personal, tangible
or intangible, as provided herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and subject to the satisfaction of the conditions set forth herein, the
Borrower, the Lenders, and the Administrative Agent hereby agree as follows:
section 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": a fluctuating interest rate per annum as shall be in
effect from time to time, which rate per annum shall be equal at any
time to the then highest of:
(a) the rate of interest announced publicly by Fleet in
Boston, Massachusetts, from time to time, as its base rate;
(b) the sum (adjusted to the nearest 1/4 of one percent
or, if there is no nearest 1/4 of one percent, to the next higher 1/4
of one percent) of (i) one-half of one percent per annum plus (ii) the
Federal Funds Rate.
"ABR Loans": Term Loans or Revolving Loans the rate of
interest applicable to which is based upon the ABR.
"Account Debtor": any Person that is liable to make payments
with respect to an Account.
"Accounts": all "accounts" (as such term is defined in the
UCC) now owned or hereafter acquired by the Borrower or any Subsidiary
Guarantor and all Instruments and Chattel Paper now owned or hereafter
acquired by the Borrower or such Subsidiary Guarantor which evidence a
right to payment for goods sold or leased or for services rendered,
whether or not such right has been earned by performance.
"Accounts Receivable Calculation Date": at any time, the last
day of the most recent fiscal month.
"Acquisition": as to any Person, the acquisition by such
Person of (a) Capital Stock of any other Person that is not a
Subsidiary of such Person if, after giving effect to the acquisition
of such Capital Stock, such other Person would be a Subsidiary of such
Person, (b) all or substantially all of the assets of any other Person
or (c) assets constituting one or more business units of any other
Person.
"Administrative Agent": as defined in the preamble to this
Agreement, and any successor Administrative Agent appointed pursuant
to subsection 11.9.
"Affiliate": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or
indirectly, either to (a) vote 5% or more of the securities having
ordinary voting power for the election of directors of such Person
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<PAGE> 9
or (b) direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise. For the purposes of
this Agreement, the Borrower and its Restricted Subsidiaries shall not
be deemed to be Affiliates of each other.
"Agent's Fee": the "Agent's Fee" payable by the Borrower to
the Administrative Agent at the times and in the amounts set forth in
the Fee Letter.
"Aggregate Outstanding Extensions of Credit": at any time, an
amount equal to the sum of (a) the Aggregate Revolving Credit
Outstandings at such time and (b) the aggregate outstanding principal
amount of Term Loans of all the Term Lenders at such time.
"Aggregate Revolving Credit Outstandings": at any time, an
amount equal to the Revolving Credit Extensions of Credit of all the
Lenders at such time.
"Agreement": as defined in the preamble to this Agreement.
"Agreement Currency": as defined in subsection 12.18.
"Applicable Commitment Fee Rate": 0.375% per annum, which
will accrue commencing on the Effective Date as a percentage of the
daily average unused portion of the Revolving Credit Commitments,
payable quarterly in arrears and on the Termination Date.
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<PAGE> 10
"Applicable Margin": for each Type of Loan, subject to
subsection 4.4(d), initially, the rate per annum set forth under the
relevant column heading below:
<TABLE>
<CAPTION>
ABR LOANS EURODOLLAR LOANS
--------- ----------------
<S> <C>
0.75% 2.50%
</TABLE>
The Applicable Margin shall be adjusted as of the day of delivery of
the financial statements for the first quarter of 2001 pursuant to
subsection 8.1(c), based upon the following criteria:
<TABLE>
<CAPTION>
LEVEL ROLLING 12- EXCESS EURODOLLAR ABR
MONTH EBITDA AVAILABILITY LOANS LOANS
<S> <C> <C> <C> <C>
I N/A Less than or equal 2.75% 1.00%
to $50,000,000
II N/A Greater than 2.50% 0.75%
$50,000,000 but
less than or equal
to $75,000,000
III Greater than Greater than 2.25% 0.50%
$50,000,000, but $75,000,000
less than or equal
to $75,000,000
IV Greater than Greater than 2.00% 0.25%
$75,000,000 $75,000,000
</TABLE>
Thereafter, the Applicable Margin shall be adjusted quarterly,
commencing with the quarter ending on June 30, 2001 based upon the
criteria set forth above. All adjustments to the Applicable Margin
shall be based upon, and shall become effective as of the date of
delivery of, the financial statements and Borrowing Base Certificate
delivered to the Administrative Agent pursuant to subsections 8.1(c)
and 8.2(c) hereof, respectively, for the period ending as of (or in
the case of the Borrowing Base Certificate, the nearest date occurring
before) the adjustment date. The Applicable Margin shall be that level
in which all applicable tests are met; if only one of the tests in
Level III or IV is met, then the pricing will be in the next higher
Level (with Level I being the highest Level and Level IV the lowest).
"Applicant": with respect to any Letter of Credit, the
Borrower or any Subsidiary Guarantor.
"Application": an application or request, in such form as an
Issuing Bank may specify from time to time, requesting such Issuing
Bank to open a Letter of Credit.
"Arranger ": FleetBoston Robertson Stephens, Inc.
"Asset Sale": any sale or other disposition, or series of
sales or other dispositions (including, without limitation, by merger
or consolidation, and whether by operation of law or otherwise), made
on or after the Effective Date by the Borrower and/or any of the
Restricted Subsidiaries to any Person of any asset or assets.
-4-
<PAGE> 11
"Asset Sale Proceeds": with respect to any Asset Sale, cash
payments received by the Borrower or any Restricted Subsidiary
(including, without limitation, any cash payments received by way of
deferred payment of principal (but not interest) pursuant to a note or
receivable or otherwise and any cash realized from any disposition of
non-cash proceeds received by the seller, but only as and when
received) from any Asset Sale (after repayment of any Indebtedness
other than the Loans due by reason of such Asset Sale), in each case
net of the amount of (i) brokers' and advisors' fees and commissions
payable in connection with such Asset Sale, (ii) the fees and expenses
attributable to such Asset Sale, to the extent not included in clause
(i) above, and (iii) any amount required to be paid to any Person
(other than the Borrower or any Restricted Subsidiary) owning a
beneficial interest in the property or assets subject to such Asset
Sale. For purposes of this definition, an Asset Sale shall be deemed
to include, without limitation, any award of compensation for any
asset or property or group thereof taken by condemnation or eminent
domain and insurance proceeds for the loss of or damage to any asset
or property.
"Assignee": as defined in subsection 12.6(c).
"Available Accounts Receivable Amount": as of any Accounts
Receivable Calculation Date, an amount equal to up to 80% of the
Eligible Trade Accounts Receivable Amount as of such Accounts
Receivable Calculation Date.
"Available Cash Equivalents": as of any Calculation Date, an
amount equal to 100% of Cash Equivalents which have then been pledged
to the Administrative Agent pursuant to the Master Security Agreement.
"Available GOB Inventory Amount": as of any Calculation Date,
an amount equal to the GOB Inventory Amount minus the GOB Discount
Amount for the period reported on at such Calculation Date, as
calculated on the Available GOB Inventory Worksheet attached hereto as
Exhibit I.
"Available Inventory Amount": as of any Calculation Date, an
amount equal to (a) (i) during the period September 1 through December
15 of each year, 75% (subject to upward adjustment to 77.5% in the
Administrative Agent's discretion) of the Eligible Adjusted Inventory
Amount as of such Calculation Date, and (ii) at all other times 70%
(subject to upward adjustment to 72.5% in the Administrative Agent's
discretion) of the Eligible Adjusted Inventory Amount as of such
Calculation Date (subject, in case of each of clauses (i) and (ii)
above, to the provisions of clause (2) of the definition of "Borrowing
Base") minus in each case, (b) the Customer Credit Liability Amount as
of the most recent Reserve Calculation Date.
"Available L/C Amount": as of any Calculation Date, an amount
equal to up to (i) during the period September 1 through December 15
of each year, 75% (subject to upward adjustment to 77.5% in the
Administrative Agent's discretion), and (ii) at all other times 70%
(subject to upward adjustment to 72.5% in the Administrative Agent's
discretion) (subject, in case of each of clauses (i) and (ii) above,
to the provisions of clause (2) of the definition of "Borrowing
Base"), of the sum of (a) the aggregate undrawn face amount of Trade
Letters of Credit (including Trade Letters of Credit which have been
collateralized by Standby Letters of Credit issued by an Issuing Bank)
issued to finance the purchase of Inventory, which Trade Letters of
Credit have an expiry no later than 120 days after the Calculation
Date, and (b) the aggregate Inventory Value of Inventory financed with
Trade Letters of Credit which have been fully drawn and the
Reimbursement Obligations in respect of which have been fully paid so
long as, in the case of clause (a) and (b), (i) such Inventory shall
be in transit to properties owned or
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<PAGE> 12
leased by the Borrower or a Subsidiary Guarantor in the United States,
and (ii) such Inventory is not included in the calculation of Eligible
Inventory Amount and, upon arrival in the United States, will be
included in the determination of the Eligible Inventory Amount (but
not included in the determination of the Ineligible Inventory Amount).
"Available Leasehold Amount": as of any Calculation Date, an
amount equal to 25% of the Eligible Leasehold Interests.
"Available Mortgaged Real Property Amount": an amount equal
to 54.5% of the excess of (A) the aggregate Mortgage Value of all
parcels of Eligible Mortgaged Real Property as of the most recent
Calculation Date over (B) the sum of (I) the aggregate Real Property
Amortization Amounts for all parcels of Eligible Mortgaged Real
Property at such time, (II) the Environmental Reserve Amount at such
time and (III) the aggregate Mechanics' Lien Reserve Amounts for all
parcels of Eligible Mortgaged Real Property at such time.
"Available Revolving Credit Commitment": as to any Lender, at
any time, an amount equal to the excess, if any, of (a) such Lender's
Revolving Credit Commitment at such time over (b) such Lender's
Revolving Credit Extensions of Credit at such time.
"Bankruptcy Code": title 11, United State Code, as amended
from time to time, as applicable to the Reorganization Case.
"Bankruptcy Court": the United States Bankruptcy Court for
the Middle District of Tennessee and any other court having competent
jurisdiction over the Reorganization Cases, the Borrower or the
Subsidiary Guarantors, or any of their assets.
"benefited Lenders": as defined in subsection 12.8(a).
"Blocked Account Agreement": as defined in the Master
Security Agreement..
"Board of Governors": the Board of Governors of the Federal
Reserve System and any Governmental Authority which succeeds to the
powers and functions thereof.
"Borrower": as defined in the preamble to this Agreement.
"Borrowing Base": at any time, (i) an amount, calculated
based upon the Borrowing Base Certificate delivered pursuant to
subsection 7.2(e) and thereafter the most recent Borrowing Base
Certificate delivered pursuant to this Agreement, equal to the sum of
(a) the Available Inventory Amount as of the most recent Calculation
Date, plus (b) the Available Accounts Receivable Amount as of the most
recent Accounts Receivable Calculation Date, plus (c) the Available
L/C Amount as of the most recent Calculation Date, plus (d) the
Available Mortgaged Real Property Amount as of the most recent
Calculation Date, plus (e) In-Transit Cash calculated as of the
Wednesday immediately preceding the most recent Calculation Date, plus
(f) the Available Leasehold Amount, plus (ii) on each Borrowing Date,
the Available Cash Equivalents amount as of such Borrowing Date,
provided that the amounts available pursuant to clauses (d) and (f)
hereof shall in no event exceed $115,000,000 in the aggregate. The
Borrowing Base established based upon a particular Borrowing Base
Certificate shall remain in effect until the delivery of a subsequent
Borrowing Base Certificate. The Administrative Agent (1) shall have
the right, in connection with any periodic audit or appraisal of the
Inventory performed by or on behalf of the Administrative Agent, any
reports provided to the Administrative Agent by the Borrower, or as a
result of changing market conditions, in its sole discretion exercised
-6-
<PAGE> 13
commercially reasonably and in accordance with customary business
practices for comparable asset based transactions of $100,000,000 or
more and upon at least 10 Business Days prior written notice to the
Borrower, to require that additional reserves of the types described
below be included in the determination of the Available Inventory
Amount: (A) additional reserves relating to new categories of
inventory (e.g. produce) unrelated to the current or disclosed future
business of the Borrower and the Subsidiary Guarantors; (B) additional
reserves to reflect substantial changes in the overall composition or
mix of the Inventory which have the effect of materially reducing the
Net Recoverable Value of the Inventory taken as a whole; (C)
additional reserves relating to changes in the marketability of
Inventory (including, for example, as a result of a recession) which
have the effect of materially reducing the Net Recoverable Value of
the Inventory taken as a whole; (D) additional reserves relating to a
material negative variance between the Borrower's or a Subsidiary
Guarantor's cost and the market price of a major product category
(e.g., a decline in the price of gold), (E) additional GOB Inventory
reserves, and (F) additional reserves relating to the Inventory
discontinued under the Business Plan and not sold prior to July 31,
2000, and (2) shall, in connection with any periodic audit or
appraisal of the Inventory performed by or on behalf of the
Administrative Agent, any reports provided to the Administrative Agent
by the Borrower, or as a result of changing market conditions, upon at
least 10 days prior written notice to the Borrower, require that
additional reserves be included in the determination of the Available
Inventory Amount to the extent that the Available Inventory Amount
exceeds 85% of the Net Recoverable Value of the Inventory taken as a
whole.
"Borrowing Base Certificate": as defined in subsection
8.2(c).
"Borrowing Date": any Business Day specified in a notice
pursuant to subsection 3.2 or 3.15 as a date on which the Borrower
requests the Lenders to make Loans hereunder.
"Business": as defined in subsection 6.14(b).
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in Boston, Massachusetts are authorized
or required by law to close, provided that, when used in connection
with a Eurodollar Loan, the term "Business Day" shall also exclude any
day on which banks are not open for dealings in Dollar deposits in the
London interbank market.
"Business Plan": the business plan of the Borrower and its
Subsidiaries through the period ending December 31, 2003, as delivered
to the Administrative Agent prior to the date hereof.
"Calculation Date": at any time, the last day of any period
covered by the most recent Borrowing Base Certificate.
"Capital Expenditures": for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities during
such period) by the Borrower or any Restricted Subsidiary during such
period that, in conformity with GAAP, are required to be included in
"capital expenditures", "additions to property, plant, equipment or
intangibles" or similar fixed asset accounts reflected in the
consolidated balance sheet of the Borrower and the Restricted
Subsidiaries which are consolidated Subsidiaries of the Borrower
(including equipment which is purchased simultaneously with the
trade-in of existing equipment owned by the Borrower or any Restricted
Subsidiary to the extent of the gross amount of such purchase price
less the book value of the equipment being traded-in at such time),
but excluding expenditures made in connection with the replacement or
restoration of assets to the extent reimbursed or financed from
insurance proceeds paid on account of the loss of or the damage to the
assets being replaced
-7-
<PAGE> 14
or restored, or from awards of compensation arising from the taking by
condemnation or eminent domain of such assets being replaced and
deducting cash amounts (including free rent) received by the Borrower
and the Restricted Subsidiaries from other Persons during such period
in reimbursement of Capital Expenditures made by the Borrower and the
Restricted Subsidiaries.
"Capital Stock": any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in
a Person (other than a corporation) and any and all warrants or
options to purchase any of the foregoing.
"Cash Equivalents": (a) direct obligations of, or obligations
guaranteed by, the United States of America or any agency thereof, (b)
commercial paper issued in the United States of America and rated at
least A-1 or P-1 by at least one nationally recognized rating
organization, (c) certificates of deposit issued by or eurodollar
deposits made with any Lender, any Affiliate of any Lender, or any
bank or trust company which has (or the parent of which has) capital,
surplus and undivided profits aggregating at least $100,000,000 (or
the equivalent amount in another currency), (d) loan participations in
respect of loans made in the United States by any bank or trust
company referred to in clause (c) above to borrowers which have
short-term ratings of at least A-1 or P-1 by at least one nationally
recognized rating organization, (e) drafts accepted by any bank or
trust company referred to in clause (c) above or any other negotiable
instrument guaranteed or endorsed with full recourse by any such bank
or trust company, (f) repurchase agreements with respect to any of the
foregoing types of securities described in clause (a), (b) and (d)
above, (g) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in
clauses (a) through (f) above, (h) obligations the return with respect
to which is excluded from gross income under Section 103 of the Tax
Code, with a maturity of not more than six months or with the right of
the holder to put such obligations for purchase at par upon not more
than seven days' notice and which are rated at least A-l or P-1 by at
least one nationally recognized rating organization, (i) (A) tax free
money market funds that invest solely in the securities described in
clause (h) above or (B) money market preferred municipal bond funds
which have a term of not more than seven days and which are rated at
least AAA or the equivalent thereof by Standard & Poor's Ratings Group
or at least Aaa or the equivalent thereof by Moody's Investors
Services, Inc., and (j) any other securities reasonably acceptable to
the Administrative Agent which are rated at least A-1 or P-1 by at
least one nationally recognized rating organization, or which are of
an equivalent credit quality in the reasonable judgment of the
Administrative Agent, provided that (i) all such obligations,
commercial paper, certificates of deposit, eurodollar deposits, loan
participations, drafts, investments, instruments, securities and
repurchase agreements are denominated in Dollars, (ii) each such
obligation, commercial paper, certificate of deposit, draft,
investment, security and instrument (including those subject to
repurchase agreements) is evidenced by an Instrument or a Security of
which (and of any confirmations related thereto) the Administrative
Agent or its agents promptly take possession unless such items are
Permitted Book-Entry Securities or, at the Borrower's or the relevant
Subsidiary Guarantor's option, an Excepted Cash Equivalent or, in the
case of eurodollar deposits or loan participations, are held in the
name of the Administrative Agent or any agent therefor, and in the
case of loan participations, are evidenced by facsimile or other
written confirmation, (iii) each such obligation, certificate of
deposit, draft, investment, security and instrument (including those
subject to repurchase agreements) matures within six months after it
is acquired by the Borrower or any Subsidiary Guarantor and (iv) each
item of such commercial paper (including those subject to repurchase
agreements) matures within three months after it is acquired by the
Borrower or any Subsidiary Guarantor.
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<PAGE> 15
"Cash Proceeds": all Proceeds of Collateral consisting of
cash, checks, credit card proceeds, money orders or commercial paper
of any kind whatsoever.
"Chattel Paper": with respect to the Borrower or any
Subsidiary Guarantor, all "chattel paper" (as such term is defined in
the UCC) now owned or hereafter acquired by such Borrower or
Subsidiary Guarantor.
"Claim": as defined in section 101(5) of the Bankruptcy Code.
"Closing Fee": the "Closing Fee" payable to the
Administrative Agent on the Effective Date in the amount and on the
terms set forth in the Fee Letter.
"Co-Agents": as defined in the preamble to this Agreement.
"Collateral": collectively, all the Security and all other
property in which the Administrative Agent is granted a Lien from time
to time hereunder or under any Security Document or the Permanent
Order.
"Collateral Account": the account maintained by the
Administrative Agent at Fleet entitled the "Fleet Retail Finance Inc.,
as Administrative Agent: Service Merchandise Company, Inc. -
Collateral Account".
"Commitment": with respect to any Lender, such Lender's
Revolving Credit Commitment, and collectively, as to all the Lenders,
the "Commitments".
"Committee": as defined in the definition of "Permitted
Expenses".
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414 of the Tax Code.
"Confidential Information": as defined in subsection 12.16.
"Consignment Inventory": all Inventory of the Borrower and
the Subsidiary Guarantors consisting of Inventory supplied by vendors
on a consignment basis, including without limitation, jewelry and
watches currently purchased on a consignment basis, and other
categories of Inventory to be purchased on a consignment basis in the
future; provided that the terms, arrangements and/or agreements for
such Inventory shall be on normal and typical business terms for
consignment Inventory.
"Consignment Inventory Account": an account maintained by the
Administrative Agent at Fleet (or such other bank approved by the
Administrative Agent) entitled "Fleet Retail Finance Inc., as
Administrative Agent: Service Merchandise Company, Inc. - Consignment
Inventory Account", into which the Borrower shall deposit, not less
frequently than weekly, all amounts due to the suppliers of
Consignment Inventory consisting of (i) the cost of the Consignment
Inventory actually sold plus (ii) other expenses due and payable to
such suppliers of Consignment Inventory with respect to such
Consignment Inventory.
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<PAGE> 16
"Consolidated": when used in connection with any defined
term, and not otherwise defined, such term as it applies to any Person
and its Subsidiaries on a consolidated basis, after eliminating all
intercompany items.
"Consummation Date": the date of substantial consummation of
a Plan of Reorganization confirmed by a Final Order.
"Continuing Directors": as defined in Subsection 10(j).
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or
any of its material property is bound.
"Credit Agreement Obligations": the collective reference to
the unpaid principal of and interest on the Loans and the
Reimbursement Obligations and all other obligations and liabilities of
the Borrower to the Administrative Agent or the Lenders (including
interest accruing at the then applicable rate provided for herein
after the maturity of the Loans or Reimbursement Obligations and
interest accruing at the then applicable rate provided for herein
after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the
Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, any Letter of Credit, any of the other Loan
Documents or any other document made, delivered or given in connection
herewith or therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including all fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be paid by
the Borrower pursuant to the terms of this Agreement or any other Loan
Document).
"Credit Card Issuer": any bank or other Person which issues
credit cards and extends credit to cardholders in connection with a
Credit Card Program.
"Credit Card Program": a private credit card program and/or
co-branded Visa, Mastercard or other credit card program created and
operated or maintained by the Credit Card Subsidiaries pursuant to (a)
the Private Label Credit Card Agreement, dated as of January 28, 1997,
among World Financial Network National Bank, the Borrower and Service
Credit Corp. (formerly known as Service Merchandise Co. No. 80, Inc.),
or (b) the Merchant Agreement, dated as of July 18, 1999, between
Household Bank (SB) N.A. and Service Merchandise Co., Inc., or (c) any
other similar agreement or arrangement with terms and conditions
reasonably satisfactory to the Administrative Agent.
"Credit Card Subsidiaries": any direct or indirect Subsidiary
of the Borrower, and any wholly-owned Subsidiaries of such Subsidiary,
existing from time to time that are created in connection with a
Credit Card Program, as long as (i) such Subsidiaries engage in no
business or transactions other than (x) the issuance (or providing for
the issuance) of credit cards, the extension of credit to cardholders
pursuant thereto, and other transactions arising from or related
thereto (including the sale or transfer of Accounts or credit card
receivables pursuant to asset backed financing transactions) and (y)
the entering into and performance of agreements with a Credit Card
Issuer that facilitate the Credit Card Issuer's doing business in
connection with a Credit Card Program and (ii) the liabilities of the
Credit Card Subsidiaries are without recourse to the Borrower and its
Restricted Subsidiaries (other than the Credit Card Subsidiaries),
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<PAGE> 17
provided that the Borrower and its Restricted Subsidiaries may enter
into customary commitments and/or underwriting agreements on behalf of
the Credit Card Subsidiaries for the purpose of customary securities
law or regulatory indemnifications.
"Cumulative EBITDA": for any fiscal month, Consolidated
EBITDA for the period beginning January 1, 2000 through and including
the end of such fiscal month.
"Current Assets": cash, accounts receivable, inventory and
all other assets (other than Fixed Assets) used in the operation of
the business of the Borrower and its Subsidiaries.
"Custody and Control Agreement": as defined in the Master
Security Agreement.
"Customer Credit Liability Amount": as of any Reserve
Calculation Date, an amount equal to 50% of the aggregate amount of
gift certificates, merchandise credits and special order deposits then
outstanding entitling the holders thereof to use all or a portion
thereof to pay all or a portion of the purchase price for any
Inventory as of such day which are not being held for escheatment or
which have not been escheated as of such day.
"Customs Broker Inventory": any Inventory which has arrived
in the United States and is located at a customs broker's warehouse
facility, so long as such Inventory (a) is fully paid and subject only
to a Lien in favor of the Administrative Agent (other than Permitted
Inventory Liens), (b) is in the possession of such customs broker, and
(c) such Inventory is reported in a Borrowing Base Certificate
separately from other Inventory included in the calculation of the
Available Inventory Amount.
"Default": any of the events specified in Section 10 which,
with the giving of notice, the lapse of time, or both, or the
satisfaction of any other condition specified in Section 10, would
become an Event of Default.
"Depositary Bank": each bank or financial institution at
which the Borrower or any Subsidiary Guarantor maintains any
depositary account into which Cash Proceeds are deposited, including
each bank or financial institution listed on Schedule 6.22.
"Derivative Agreements": any foreign exchange contracts,
interest rate and currency swap agreements, floors, caps, collars,
swap, options and similar derivative contracts, in each case, between
the Borrower or any Subsidiary Guarantor, on the one hand, and any
Lender or any Affiliate of any Lender, on the other hand.
"Designated Material Real Property": collectively, at any
time, all parcels of Material Real Property which are then subject to
a first priority Lien granted pursuant to the Master Security
Agreement.
"Documentation Agent": as defined in the preamble to this
Agreement.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Dollar Equivalent": at any date of determination thereof
with respect to the face amount of any Letter of Credit issued in any
currency other than Dollars or any Reimbursement Obligations in
respect of any such Letter of Credit, an amount in dollars equivalent
to such face amount calculated at the rate of exchange quoted by the
Administrative Agent on such date of determination (at the hour on
such date of determination at which it customarily makes such
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<PAGE> 18
determination) to prime banks in the interbank market where its
foreign currency exchange operations in respect of the currency in
which such Letter of Credit is issued are then being conducted for the
spot purchase of such currency with Dollars.
"Domestic Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction (including territories)
within the United States of America, excluding the Inactive
Subsidiaries, Securitization Entities, Excluded Subsidiaries, Special
Purpose Subsidiaries and Foreign Holding Companies.
"EBITDA": with respect to any period, Consolidated Net Income
of the Borrower and its Consolidated Subsidiaries for such period plus
(a) in each case to the extent deducted in determining such
Consolidated Net Income for such period, the sum of the following
(without duplication): (i) Consolidated Interest Expense of the
Borrower and its Consolidated Subsidiaries, (ii) consolidated income
tax expense of the Borrower and its Consolidated Subsidiaries, (iii)
consolidated depreciation and amortization expense of the Borrower and
its Consolidated Subsidiaries, and any non-cash expenses, losses or
other charges resulting from the termination of the pension plan or
executive security plan of the Borrower and its Consolidated
Subsidiaries, including, without limitation, depreciation and
amortization included in selling, general and administrative expenses
of the Borrower and its Consolidated Subsidiaries, (iv) any non-cash
expenses, non-cash losses or other non-cash charges resulting from the
impairment or write-down in the valuation of any assets, (v) any
non-recurring charge, reorganization cost or restructuring charge
which was deducted in determining Consolidated Net Income for such
period, (vi) Permitted Expenses, (vii) expenses, losses and other
charges in respect of employee retention bonuses and other payments
approved by the Bankruptcy Court, (viii) non-cash losses or gains
arising from the freezing or termination of any Plan or other employee
benefit or welfare plan, and (ix) losses or gains arising from asset
dispositions, minus (b) to the extent added in determining such
Consolidated Net Income for such period, any non-cash gains resulting
from the write-up in the valuation of any assets; in each case
exclusive of any Non-Continuing EBITDA Items for such period, provided
that, to the extent that Non-Continuing EBITDA Items for such period
(exclusive of any such items covered by clauses (i) through (ix)
above) aggregate more than $(100,000,000), such additional negative
amounts will reduce EBITDA.
"Effective Date": the date on which the conditions set forth
in subsection 7.1 are satisfied.
"Eligible Adjusted Inventory Amount": as of any Calculation
Date, (a) the Eligible Inventory Amount, plus (b) the Available GOB
Inventory Amount, minus (c) the Shrink Reserve in respect of such
Eligible Inventory Amount, in each case as of such Calculation Date.
"Eligible Assignee": as defined in subsection 12.6(c).
"Eligible Inventory Amount": as of any Calculation Date, (a)
the Inventory Value as of such Calculation Date of all Inventory of
the Borrower and the Subsidiary Guarantors that consists of finished
goods, loose diamonds or colored stones, plus (b) the Inventory Value
of all Customs Broker Inventory as of such Calculation Date, plus (c)
the Inventory Value of all Landed Inventory as of such Calculation
Date, minus (d) the sum of (i) the Ineligible Inventory Amount as of
such Calculation Date and (ii) the GOB Inventory Amount as of such
Calculation Date.
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<PAGE> 19
"Eligible Leasehold Interests": at any date, the forced
liquidation value at such date of leasehold interests as determined by
an appraiser reasonably acceptable to the Administrative Agent.
"Eligible Mortgaged Real Property": at any time, any parcel
of Material Real Property of the Borrower or any Subsidiary Guarantor
as to which each of the following conditions has been satisfied at
such time:
(a) (i) Such parcel of Material Real Property (A)
comprises a developed retail store, distribution center,
shopping center or office building with respect to which a
certificate of occupancy or temporary certificate of
occupancy or the local equivalent thereof (or any other
similar proof of completion) shall have been issued by the
relevant Governmental Authority or the Administrative Agent
shall have received other evidence reasonably satisfactory to
it of the completion of such retail store, distribution
center, shopping center or office building or (B) is
undeveloped and has a book value (excluding soft costs) of at
least $1,000,000, (ii) a Lien on such parcel of Material Real
Property shall have been granted by the Borrower or such
Subsidiary Guarantor, as the case may be, in favor of the
Administrative Agent pursuant to the Master Security
Agreement or the Permanent Order, and (iii) such Lien shall
be in full force and effect in favor of the Administrative
Agent at such time.
(b) to the extent the Borrower or a Subsidiary
Guarantor has the following in its possession, the
Administrative Agent shall have received maps or plats of an
as-built survey of the sites of the Material Real Property by
an independent professional licensed land surveyor, showing:
(A) the locations on such sites of all the buildings,
structures and other improvements and the established
building setback lines (where setback information is readily
obtainable); (B) the lines of streets abutting such sites and
the width thereof; (C) all access and other easements
appurtenant to such sites or necessary to use such sites; (D)
all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting
such sites, whether recorded, apparent from a physical
inspection of such sites or otherwise known to the surveyor;
(E) any encroachments on any adjoining property by the
building structures and improvements on such sites; and (F)
if such sites are described as being on a filed map, a legend
or other information relating the survey to said map.
(c) the Administrative Agent shall have received a
title report with respect to such parcel of Material Real
Property reasonably satisfactory to the Administrative Agent;
and if an Event of Default has occurred and the
Administrative Agent has required the execution of mortgages
and deeds of trust pursuant to Subsection 8.9 hereof, within
45 days after the execution of such mortgages and deeds of
trust, the Administrative Agent shall have received in
respect of such parcel of Material Real Property a
mortgagee's title policy (or policies) or marked-up
unconditional binder (or binders) for such insurance (or
other evidence acceptable to the Administrative Agent proving
ownership thereof) dated a date reasonably satisfactory to
the Administrative Agent, and such policy shall (A) be in an
amount not less than the Mortgage Value (as of the date such
parcel of Material Real Property becomes a parcel of Eligible
Mortgaged Real Property) of such parcel of Material Real
Property, (B) be issued at ordinary rates, (C) insure that
the Lien granted pursuant to the Master Security Agreement or
the Permanent Order insured thereby creates a valid first
Lien on such parcel of Material Real Property free and clear
of all defects and encumbrances, except such as may be
approved by the Administrative Agent and Permitted Mortgage
Liens, (D) name the
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<PAGE> 20
Administrative Agent for the benefit of the Lenders as the
insured thereunder, (E) be in the form of ALTA Loan Policy -
1992 (or such local equivalent thereof as is reasonably
satisfactory to the Administrative Agent), (F) contain a
comprehensive lender's endorsement and (G) be issued by
Chicago Title Insurance Company, First American Title
Insurance Company, Lawyers Title Insurance Corporation or any
other title company reasonably satisfactory to the
Administrative Agent (including any such title companies
acting as co-insurers or reinsurers). In the event that title
policies are required hereunder, the Administrative Agent
shall have received (x) evidence satisfactory to it that all
premiums in respect of each such policy have been paid and (y)
a copy of all documents referred to, or listed as exceptions
to title, in such title policy (or policies);
(d) the Administrative Agent shall have received an
Existing Appraisal with respect to such parcel of Material
Real Property;
(e) with respect to any such parcel of Material Real
Property acquired after the Effective Date (other than Store
463 in Bossier City, Louisiana), a Phase I environmental
report with respect to such parcel of Material Real Property,
dated a date not more than one year prior to the date such
parcel becomes Eligible Mortgaged Real Property under this
Agreement, showing no material condition of environmental
concern shall have been delivered to the Administrative Agent
and in form reasonably satisfactory to the Administrative
Agent;
(f) if such parcel of Material Real Property is
subject to a ground lease in favor of the Borrower or any
Subsidiary Guarantor as lessee, no consent shall be required
under such ground lease to mortgage or foreclose upon such
parcel of Material Real Property (or such consent shall have
been obtained or shall not be required as a result of the
Bankruptcy Code or an order of the Bankruptcy Court); and
(g) such parcel of Material Real Property shall be
in compliance, or, as applicable, the Loan Party which is the
owner or lessee thereof, shall be in compliance, with all of
the terms, covenants, conditions, representations and
warranties set forth in Schedule 1.1(b), provided that, (i)
if any such term, covenant, condition, representation or
warranty shall reference any provision of this Agreement,
such reference shall be read without giving effect to any
qualification or limitation contained therein regarding a
Material Adverse Effect, and (ii) if such parcel of Material
Real Property or, as applicable, the Loan Party which is the
owner or lessee thereof ceases to be in compliance with any
of the terms, covenants, conditions, representations or
warranties set forth in Schedule 1.1(b), such parcel of
Material Real Property shall cease (effective as of the
delivery of the next succeeding Borrowing Base Certificate)
to be Eligible Mortgaged Real Property during the
continuation of such non-compliance if such non-compliance
could reasonably be expected to have a material adverse
effect on the value of such parcel of Material Real Property,
but such non-compliance shall not constitute, in and of
itself, a Default or Event of Default.
If a parcel of Material Real Property of the type described in clause
(a)(i)(B) of this definition becomes a parcel of Eligible Mortgaged
Real Property and is thereafter subsequently developed such that such
parcel of Eligible Mortgaged Real Property satisfies the requirements
of clause (a)(i)(A) of this definition, the Borrower may, at its
option, deliver a notice to the Administrative Agent to the effect
that the Borrower wishes to cause such parcel of Material Real
Property to satisfy the requirements of this definition as if (x) such
parcel of Material Real Property became
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<PAGE> 21
a parcel of Material Real Property as of the date of such notice, (y)
such parcel of Material Real Property was not then a parcel of
Eligible Mortgaged Real Property and (z) if applicable, such parcel of
Material Real Property was not subject to a Lien granted pursuant to
the Master Security Agreement or the Permanent Order as of the
Effective Date. Upon delivery of any such notice, the Administrative
Agent shall commission a new appraisal with respect to such parcel of
Material Real Property. Upon satisfaction of the conditions set forth
in this definition following such date with respect to such parcel of
Material Real Property, such parcel of Material Real Property shall,
without duplication, be deemed to become a parcel of Eligible
Mortgaged Real Property as of the date such conditions are satisfied
and the Mortgage Value of such parcel of Eligible Mortgaged Real
Property shall be included in the Borrowing Base effective as of the
delivery of the Borrowing Base Certificate in respect of the fiscal
month in which such conditions are satisfied.
"Eligible Trade Accounts Percentage": as of any Accounts
Receivable Calculation Date, up to 85%, provided that, in connection
with each periodic audit or appraisal of the Accounts of the Borrower
and the Subsidiary Guarantors performed by or on behalf of the
Administrative Agent, the Administrative Agent shall have the right in
its sole discretion exercised commercially reasonably and in
accordance with customary business practices, upon at least 10 days
prior written notice to the Borrower, to change the "Eligible Trade
Accounts Percentage" to the percentage estimated to be the percentage
of the aggregate amount of the Accounts as of such Accounts Receivable
Calculation Date which satisfy each of the following criteria:
(a) such Account has been adjusted to reflect the
return or rejection of, or any loss of or damage to any of
the Inventory giving rise to such Account and is not subject
to bona fide set-offs, counterclaims, defenses, or disputes
asserted with respect to such Account (it being understood
that such Account shall not include material financing
charges, or late or other fees);
(b) the Account Debtor with respect to such Account
is not insolvent or the subject of any bankruptcy case or
insolvency proceeding of any kind, unless such Account is due
from such Account Debtor as an administrative priority claim
under the Bankruptcy Code and the Administrative Agent, in
the exercise of its reasonable business judgment, deems the
Account Debtor to be creditworthy;
(c) the Account Debtor in respect of such an Account
has a place of business within the United States of America
(excluding Puerto Rico, the Virgin Islands and any other
territory of the United States);
(d) the Account Debtor in respect of such Account is
not the United States of America or any state, territory,
subdivision, department, or agency thereof, unless all
applicable requirements of the Assignment of Claims Act of
1940 have been satisfied;
(e) such Account does not arise out of transactions
with an employee, officer, director, Subsidiary or Affiliate
of the Borrower or any Subsidiary Guarantor;
(f) no amount payable in respect of such Account has
remained unpaid for a period exceeding sixty days after the
due date stated on the invoice therefor (excluding the amount
of any net credit balances relating to Accounts with invoice
dates more than 60 days from the due date);
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<PAGE> 22
(g) such Account is owed by an Account Debtor which
does not then have balances on its Accounts which are more
than 60 days past due which exceed 50% of the total balance
of all such Accounts owed by such Account Debtor;
(h) such Account has not been and is not required to
be charged off or written off as uncollectible in accordance
with the customary business practice of the Borrower and the
Subsidiary Guarantors;
(i) such Account does not arise out of any claim in
tort, is not evidenced by chattel paper, a promissory note, a
negotiable instrument, or any other instrument of any kind
or, if such Account is evidenced by chattel paper, a
promissory note, a negotiable instrument or any other
instrument, such chattel paper, promissory note, negotiable
instrument or other instrument has been delivered to the
Administrative Agent and is subject to a first priority
security interest in favor of the Administrative Agent;
(j) the amount of the face value of such Account
listed on any schedule of Accounts and shown on all invoices
and statements delivered to the Agent with respect to such
Account is not subject to any asserted bona fide retainages
or holdbacks of any type, is actually and absolutely owing,
and is not contingent on any condition, in each case, other
than in respect of repurchase or return agreements that (i)
arise in the ordinary course of the Borrower's business and
(ii) are consistent with the Borrower or such Subsidiary
Guarantor's historical business practice;
(k) such Account does not arise out of a cash on
delivery sale; and
(l) such Account does not arise out of the sale of
samples.
In addition, to the extent that any Accounts or credit card
receivables that arise in connection with a Credit Card Program are
included in Eligible Trade Accounts Receivable at the option of the
Borrower, the Eligible Trade Accounts Percentage shall include such
reserves and the Available Accounts Receivable Amount shall reflect
eligibility criteria as the Administrative Agent shall require in its
sole discretion with respect to such Accounts and credit card
receivables as a separate class of Accounts based upon the results of
any periodic audit or appraisal of the Accounts of the Borrower and
the Subsidiary Guarantors performed by or on behalf of the
Administrative Agent, provided that no such Accounts or credit card
receivables shall be included in "Eligible Trade Accounts Receivable"
until a satisfactory audit or appraisal of such Accounts and credit
card receivables has been performed by or on behalf of the
Administrative Agent.
"Eligible Trade Accounts Receivable Amount": as of any
Accounts Receivable Calculation Date, an amount equal to the Eligible
Trade Accounts Percentage of the aggregate amount of all Accounts of
the Borrower and the Subsidiary Guarantors as of such Accounts
Receivable Calculation Date that satisfy all of the following criteria
as of such Accounts Receivable Calculation Date:
(a) such Account is owned solely by the Borrower or
a Subsidiary Guarantor and is evidenced by an invoice and has
arisen from the sale of goods which have been shipped or
delivered to an Account Debtor on an absolute sale basis,
have not been shipped or delivered on a consignment,
approval, or sale-return basis, and are not subject to any
repurchase or return agreement or arrangement, other than
those repurchase or return agreements or arrangements that
(i) arise in the ordinary course of
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<PAGE> 23
the Borrower's business and (ii) are consistent with the
Borrower or such Subsidiary Guarantor's historical business
practices; and
(b) such Account is subject to a Lien in favor of
the Administrative Agent and is not subject to Liens other
than Permitted Account Liens.
"Environmental Laws": any and all foreign, federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority
or other Requirements of Law (including common law) regulating or
imposing liability or standards of conduct concerning protection of
human health or the environment, as are now or may at any time
hereafter be in effect.
"Environmental Reserve Amount": at any time, an amount equal
to the product of (a) $75,000 and (b) the number of parcels of
Eligible Mortgaged Real Property which are included in the Borrowing
Base at such time.
"Equipment": all equipment, machinery, chattels, tools, dies,
jigs, molds, parts, machine tools, furniture, furnishings, fixtures
and supplies, of every nature, now owned or hereafter acquired by the
Borrower or any Subsidiary Guarantor, wherever located, additions,
accessories and improvements thereto and substitutions therefor and
all parts and equipment which may be attached to or which are
necessary for the operation and use of such personal property or
fixtures, whether or not the same shall be deemed to be affixed to
real property and in any event all "equipment" (as such term is
defined in the UCC), but excluding Inventory.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors or
other Governmental Authority having jurisdiction with respect thereto)
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board of Governors)
maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate for deposits in Dollars for the period commencing on
the first day of such Interest Period and ending on the last day of
such Interest Period which appears on Telerate Page 3750 as of 11:00
A.M., London time, two Business Days prior to the beginning of such
Interest Period. If at least two rates appear on such Telerate Page
for such Interest Period, the "Eurodollar Base Rate" shall be the
arithmetic mean of such rates. If the "Eurodollar Base Rate" cannot be
determined in accordance with the immediately preceding sentences with
respect to any Interest Period, the "Eurodollar Base Rate" with
respect to each day during such Interest Period shall be the rate per
annum equal to the average (rounded upward to the nearest 1/100th of
1%) of the respective rates notified to the Administrative Agent by
each of the Lenders as the rate at which such Lender is offered Dollar
deposits at or about 10:00 A.M. Boston time, two Business Days prior
to the beginning of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange
operations in respect of its Eurodollar Loans are then being conducted
for delivery on the first day of such Interest Period for the number
of days comprised therein and in an amount comparable to the amount of
its Eurodollar Loan to be outstanding during such Interest Period.
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"Eurodollar Loans": Term Loans and Revolving Loans the rate
of interest applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section
10, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"Excepted Cash Equivalents": Cash Equivalents up to an
aggregate amount at any one time equal to the amount not required to
be pledged to the Administrative Agent by reason of subsection 9.8(b).
"Excess Availability": as of the date of determination, the
excess of the Borrowing Base on such date as reflected on the most
recently delivered Borrowing Base Certificate over the Aggregate
Outstanding Extensions of Credit on such date.
"Excluded Subsidiaries": SerPlus Assurance Co., Ltd.,
SMC-SPE, Inc., SMC-SPE-2, Inc., Service Credit Corp. and their
respective Subsidiaries.
"Existing Appraisal": with respect to any parcel of Material
Real Property, (i) until the Administrative Agent receives its initial
appraisals of each parcel of Material Real Property, the most recent
appraised value of such parcels established under the Existing DIP
Agreement, and (ii) thereafter, a final complete appraisal of the
value of such parcel of Material Real Property, commissioned in
connection with this Agreement from time to time in accordance with
the provisions of Subsection 8.6(b) hereof and valued on an
"alternative use" basis which in the reasonable judgment of the
Administrative Agent satisfies all applicable requirements of FIRREA
and the Uniform Standards of Professional Appraisal Practice.
"Existing DIP Agreement": is defined in the recitals hereof.
"Extension of Credit": with respect to any Lender, (a) the
making of a Loan by such Lender and (b) the issuance or extension of a
Letter of Credit in which such Lender has a participating interest.
"FRF": as defined in the preamble to this Agreement.
"Federal Funds Rate": means for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
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"Fee Letter": the fee letter of even date herewith between
the Borrower and the Administrative Agent, as amended and in effect
from time to time.
"Final Order": an order or judgment of the Bankruptcy Court
as entered on the docket of the Clerk of the Bankruptcy Court, that
has not been reversed, stayed, modified or amended, and as to which
the time to appeal, petition for certiorari, reargument or rehearing
has expired and no proceeding for certiorari, reargument or rehearing
is pending or any right to appeal, reargue, petition for certiorari or
seek rehearing has been waived, or if an appeal, reargument, petition
for certiorari, or rehearing thereof has been sought, the order or
judgment of the Bankruptcy Court has been affirmed by the highest
court to which the order was appealed from which the reargument or
rehearing was sought, or certiorari has been denied, and the time to
take any further appeal or to seek certiorari or further reargument or
rehearing has expired.
"Financing Lease": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of such
lessee.
"FIRREA": the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
"First Day Orders": those orders entered by the Bankruptcy
Court on the Petition Date or within five Business Days of the
Petition Date or based on motions filed on the Petition Date.
"Fiscal Year": each fiscal year of the Borrower. Fiscal Years
are referred to herein by reference to the calendar year in which a
majority of the days comprising such Fiscal Year fall.
"Fixed Assets": plant, machinery, equipment, furniture and
fixtures, leasehold improvements and other tangible property used in
the operation of the business of the Borrower and its Subsidiaries.
"Fleet": Fleet National Bank, a national banking association
and its successors.
"Floor Planning Facility": as to the Borrower or any
Restricted Subsidiary, any manufacturer- or vendor-sponsored Inventory
financing program (whether directly from the manufacturer or vendor or
through a third party financing source) extending loans or trade terms
to the Borrower or such Restricted Subsidiary and secured solely by
such manufacturer's or vendor's named brand or identified Inventory,
subject to the prior approval of the Administrative Agent in its
reasonable discretion and execution and delivery of an intercreditor
agreement reasonably acceptable to the Administrative Agent.
"Foreign Holding Company": any Subsidiary organized under the
laws of any jurisdiction (including territories) within the United
States of America whose sole assets (exclusive of assets with an
aggregate book value not exceeding $5,000,000 and assets consisting of
advances or loans to the Borrower or any of its Subsidiaries) consist
of the Capital Stock of one or more Foreign Subsidiaries or other
Foreign Holding Companies.
"Foreign L/C Commitment Sublimit": at any time, the lesser of
(a) $10,000,000 and (b) the Revolving Credit Commitments then in
effect.
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"Foreign Subsidiary": any Subsidiary of the Borrower
organized under the law of any jurisdiction outside the United States
of America, excluding Inactive Subsidiaries, but including in any
event Foreign Holding Companies.
"GAAP": generally accepted accounting principles in the
United States of America in effect from time to time, provided that,
solely for purposes of determining compliance with subsection 9.1,
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect as of the Effective Date.
"GOB Deal Shrink": an amount equal to (i) the difference
between (A) the Inventory Value of the GOB Inventory and (B) the value
of the GOB Inventory as determined by a physical inventory count taken
immediately prior to the commencement of a going-out-of-business or
similar sale at the GOB Stores, or (ii) in the absence of a physical
count of the GOB Inventory, 3% of the Inventory Value of the GOB
Inventory on the date of commencement of the going-out-of-business or
similar sales.
"GOB Discount Amount": an amount equal to (i) the weighted
average discount offered to customers during the applicable period of
the going-out-of-business or similar sale, expressed as a percentage,
multiplied by (ii) the GOB Inventory Amount.
"GOB Inventory": all Inventory located at GOB Stores as of
the Calculation Date after the date of commencement of a
going-out-of-business or similar sale at such GOB Stores.
"GOB Inventory Amount": as of any Calculation Date, the
Inventory Value of the GOB Inventory as of such Calculation Date,
minus (a) the Shrink Reserve in respect of such GOB Inventory as of
such Calculation Date, minus (b) the GOB Deal Shrink as of such
Calculation Date, minus (c) the Inventory Value of all GOB Inventory
remaining at any GOB Store on the 91st day after the commencement of
the going-out-of-business or similar sale with respect to such GOB
Store.
"GOB Stores": the Borrower's and the Subsidiary Guarantors'
stores which are in the process of being liquidated and closed, other
than Store Closures.
"Governmental Authority": 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.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), without duplication, any obligation, contingent or
otherwise, of the guaranteeing person (a) under a guarantee,
reimbursement, indemnity or similar obligation guaranteeing or in
effect guaranteeing any Indebtedness of any other Person, in any
manner, whether directly or indirectly, (b) to reimburse any other
Person for drawings under undrawn letters of credit issued by such
other Person for the account of the guaranteeing person, or (c) under
a guarantee, reimbursement, indemnity or similar obligation to the
extent the obligations of the guaranteeing person in respect thereof
should be reflected as a liability in a consolidated balance sheet of
the guaranteeing person (or should be reflected in the notes thereto)
in accordance with GAAP, provided that the term Guarantee Obligation
shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be
the lower of (i) an amount equal to the stated or determinable amount
of the primary obligation in respect of which such Guarantee
Obligation is made and (ii) the maximum amount for which such
guaranteeing person may be liable pursuant
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to the terms of the instrument embodying such Guarantee Obligation,
unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in
which case the amount of such Guarantee Obligation shall be such
guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by such guaranteeing person in good
faith.
"IE System": the Borrower's electronic inventory evaluation
system which tracks Inventory on a store-by-store basis.
"In-Transit Cash": as of the date of determination, the
aggregate amount of (i) cash and cash equivalents of the Borrower and
the Subsidiary Guarantors which is deposited into deposit accounts
covered by Blocked Account Agreements, plus (ii) the net amount
receivable by the Borrower and the Subsidiary Guarantors in respect of
Visa, Mastercard or other branded credit card receivables (after
deduction of discounts and fees payable to the processors of such
credit card receivables) to the extent such amounts are credited to
deposit accounts covered by Blocked Account Agreements or other
arrangements acceptable to the Administrative Agent in its sole
discretion exercised commercially reasonably, in each case prior to
the transfer of such amounts to the Collateral Account.
"Inactive Subsidiary": any Subsidiary of the Borrower which
(and only for so long as such Subsidiary) (a) does not own assets with
an aggregate book value in excess of $5,000,000 and (b) is not then
engaged in any business.
"Indebtedness": of any Person at any date (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than trade liabilities
and accounts payable incurred in the ordinary course of business and
payable in accordance with the Borrower's and its Restricted
Subsidiaries' customary practices and extensions thereof), (b) any
other indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations (to the extent
capitalized for accounting purposes) of such Person under Financing
Leases, (d) all obligations of such Person in respect of acceptances
issued or created for the account of such Person, (e) all obligations
of the types described in the other clauses of this definition secured
by any Lien on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment
thereof and (f) all obligations of such Person in respect of interest
rate and currency hedging agreements. For purposes of this Agreement,
(x) the amount of any Indebtedness referred to in clause (f) of the
preceding sentence shall be the net amounts (including by offset of
amounts payable thereunder), including any net termination payments,
required to be paid to a counterparty rather than any notional amount
with regard to which payments may be calculated and (y) any
obligations described in clauses (a) through (e) above denominated in
a currency other than Dollars shall be determined after giving effect
to related currency swap and hedging agreements. It is understood and
agreed that "Indebtedness" of a Person (i) shall include advances or
loans to such Person under Floor Planning Facilities and (ii) shall
not include (A) obligations of such Person in respect of letters of
credit to the extent such obligations are not reflected as liabilities
on the consolidated balance sheet of such Person (excluding the notes
to such balance sheet) in accordance with GAAP or (B) obligations of
such Person in respect of consignments of Inventory to such Person.
"Indemnified Liabilities": as defined in subsection 12.5.
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"Ineligible Inventory Amount": as of any Calculation Date,
the Inventory Value of all Inventory of the Borrower and the
Subsidiary Guarantors that falls in any one or more of the following
categories as of such Calculation Date:
(a) Consignment Inventory or any other Inventory
that (i) is not owned solely by the Borrower or any such
Subsidiary Guarantor or (ii) is leased by or on consignment
or sale-or-return to the Borrower or any such Subsidiary
Guarantor;
(b) Inventory that is not located at (or in transit
between) property that is owned or leased by the Borrower or
any Subsidiary Guarantor, other than Landed Inventory and
Customs Broker Inventory;
(c) Inventory that is damaged or defective or has
otherwise been segregated for return to the vendor thereof;
(d) Inventory that is not located in the United
States of America;
(e) Inventory which is not subject to a Lien in
favor of the Administrative Agent or is subject to any Lien
(other than Permitted Inventory Liens);
(f) Inventory which is subject to a Lien in
connection with Floor Planning Facilities;
(g) Inventory that is being repaired or is used in
the repair of other Inventory; and
(h) Inventory consisting of "Samples" which is not
included in the normal merchandising assortment but has been
supplied by vendors for consideration to be included in the
merchandising assortment.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Instrument": any "instrument" (as such term is defined in
the UCC) now owned or hereafter acquired by the Borrower or any
Subsidiary Guarantor.
"Intellectual Property": as defined in subsection 6.17.
"Intercompany Debt": with respect to the Borrower, any
Indebtedness of the Borrower to any Subsidiary Guarantor and, with
respect to any Subsidiary Guarantor, any Indebtedness of such
Subsidiary Guarantor to the Borrower or any other Subsidiary
Guarantor, including all amounts payable in respect thereof whether in
respect of principal, interest or otherwise.
"Interest Expense": of any Person for any period, (a) the
amount of interest expense, both expensed and capitalized, of such
Person and its Consolidated Subsidiaries determined on a consolidated
basis in accordance with GAAP for such period, plus, without
duplication, that portion of payments under Financing Leases of such
Person attributable to interest expense of such Person for such period
in accordance with GAAP minus (b) the amount of interest income of
such Person and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP for such period.
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"Interest Payment Date": (a) as to any ABR Loan, the last day
of each calendar quarter, (b) as to any Eurodollar Loan having an
Interest Period of three months or less, the last day of such Interest
Period, (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day which is three months, or a whole multiple
thereof, after the first day of such Interest Period and the last day
of such Interest Period and (d) as to any Swing Line Loan, the last
day of each calendar quarter.
"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on the
borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three or
six months thereafter (or such shorter periods as the
Administrative Agent may permit), as selected by the Borrower
in its notice of borrowing or notice of conversion, as the
case may be, given with respect thereto; and
(b) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to such
Eurodollar Loan and ending one, two, three or six months
thereafter (or such shorter periods as the Administrative
Agent may permit), as selected by the Borrower by irrevocable
notice to the Administrative Agent not less than three
Business Days prior to the last day of the then current
Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest
Period into another calendar month in which event such
Interest Period shall end on the immediately preceding
Business Day;
(2) any Interest Period that would otherwise extend
beyond the Termination Date, will end on the Termination
Date; and
(3) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month.
"Inventory": goods now owned or hereafter acquired by the
Borrower or any Subsidiary Guarantor and held for sale or lease or to
be furnished under contracts of service or so leased or furnished, and
all raw materials, work in process or materials used or consumed in a
business, and in any event including all "inventory" (as such term is
defined in the UCC) but excluding Equipment.
"Inventory Value": with respect to any Inventory of the
Borrower or any Subsidiary Guarantor reflected on the Borrower's
Borrowing Base Certificate, the value of such Inventory valued at cost
on the IE System on a basis consistent with the Borrower's or such
Subsidiary Guarantor's current and historical accounting practice
(without giving effect to markdowns, intercompany profit, rebates and
discounts, accounts payable inventory accruals and capitalized
inventory costs on the consolidated balance sheet of the Borrower and
its Consolidated
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Subsidiaries in respect of Inventory), plus freight charges incurred
in connection therewith, minus accruals for deferred volume rebates
(it being understood that the amount of freight charges and accruals
for deferred volume rebates shall be determined monthly as of the end
of the most recent fiscal month, notwithstanding the fact that
Borrowing Base Certificates may be delivered more frequently than
monthly pursuant to this Agreement). The value of the Inventory as set
forth above will, without duplication for any element of the Shrink
Reserve, be calculated net of the reserve established by the Borrower
or any Subsidiary Guarantor on a basis consistent with the Borrower's
or such Subsidiary Guarantor's current and historical accounting
practice in respect of lost, misplaced or stolen Inventory at such
time. In addition the value of Inventory that is subject to a layaway
purchase by any customer shall be valued net of any deposits made by
such customer therefor.
"Investment": as defined in subsection 9.8.
"Investment Securities": all Instruments and all "securities"
(as such term is defined in the UCC) now owned or hereafter acquired
by the Borrower or any Subsidiary Guarantor, other than (a) Pledged
Stock, (b) Capital Stock of any Subsidiary that is not expressly
required to be pledged pursuant to this Agreement or the Master
Security Agreement, (c) Cash Equivalents and (d) any note, debenture,
bond or other Instrument evidencing Intercompany Debt.
"Issuing Banks": initially, each Lender and each Affiliate of
a Lender specified on Schedule 1.1(a) as an Issuing Bank in its
capacity as issuer of a Letter of Credit. Additional Lenders or
Affiliates of additional Lenders may from time to time be designated
as "Issuing Banks" by the Borrower (in each case, with the consent of
such Lender and such Affiliate) by written notice to such effect from
the Borrower to the Administrative Agent, provided that if the
Borrower fails to comply with the provisions of subsection 8.2(g)
hereof and such failure is not cured within five Business Days of
notice thereof from the Administrative Agent, the Administrative Agent
may notify the Borrower that, from and after the date of such
notification, no Person other than Fleet may thereafter be an Issuing
Bank. Each Affiliate of a Lender acting as an Issuing Bank shall be
deemed to have agreed to be bound by, and shall have the benefits of,
the provisions of this Agreement and the other Loan Documents
applicable to Issuing Banks and shall be deemed a party hereto.
"Judgment Currency": as defined in subsection 12.18.
"Landed Inventory": any Inventory which has arrived in the
United States and cleared customs but which has not been delivered to
property that is owned or leased by the Borrower or any Subsidiary
Guarantor as long as such Inventory (a) is fully paid and subject only
to a Lien in favor of the Administrative Agent (other than Permitted
Inventory Liens), (b) is in the possession of the Borrower or any
Subsidiary Guarantor or any agent thereof and (c) is reported in a
Borrowing Base Certificate separately from other Inventory included in
the calculation of the Available Inventory Amount.
"L/C Commitment": the lesser of (a) $150,000,000 and (b) the
Revolving Credit Commitments then in effect.
"L/C Fee Payment Date": the last day of each calendar quarter
and the Termination Date.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the Trade Letter of Credit Outstandings at such time and (b) the
Standby Letter of Credit Outstandings at such time.
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"L/C Participants": the collective reference to all the
Revolving Credit Lenders.
"Lender" and "Lenders": as defined in the preamble to this
Agreement.
"Letters of Credit": as defined in subsection 3.6(a).
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"Loan": any Term Loan, Revolving Loan or Swing Line Loan, as
the case may be.
"Loan Documents": this Agreement, the Notes, the Fee Letter,
the Master Security Agreement and all other Security Documents, each
Application, the other documents executed or delivered pursuant to
subsection 7.1 by the Borrower or any Subsidiary of the Borrower and
all other instruments, agreements and written contractual obligations
between the Borrower and any Subsidiary of the Borrower, on the one
hand, and any of the Administrative Agent or the Lenders, on the other
hand, in each case delivered to either the Administrative Agent or
such Lender before, on, or after the Effective Date pursuant to or in
connection with the transactions contemplated hereby.
"Loan Parties": the collective reference to the Borrower and
the Subsidiary Guarantors.
"Lockbox Agreement": as defined in the Master Security
Agreement.
"Majority Lenders": at any time, Lenders the Voting
Percentages of which aggregate more than 50%.
"Majority Revolving Credit Lenders": at any time, Revolving
Credit Lenders the Revolving Credit Commitment Percentages of which
aggregate more than 50%.
"Majority Term Loan Lenders": at any time, Term Loan Lenders
whose Term Loans aggregate more than 50% of the outstanding principal
amount of all Term Loans.
"Master Security Agreement": the Master Security Agreement to
be made by the Borrower and each Subsidiary Guarantor in favor of the
Administrative Agent, in substantially the form of Exhibit B, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, performance, property, or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as
a whole or (b) the ability of the Borrower or any Subsidiary
Guarantor, taken as a whole, to perform their respective obligations
under this Agreement or any of the other Loan Documents or the
material rights or remedies, of the Administrative Agent or the
Lenders hereunder or thereunder.
"Material Real Property": real property not subject to a
mortgage, deed of trust or other similar instrument (other than
pursuant hereto or any other Loan Document or the Permanent Order)
that (a) (i) is owned in fee by the Borrower or any Subsidiary
Guarantor and is not subject
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to a ground lease in favor of any other Person as lessee, (ii) is
located in the United States or Puerto Rico and (iii) (A) has been
developed with a retail store, distribution center, shopping center or
office building with respect to which a certificate of occupancy or
temporary certificate of occupancy or the local equivalent thereof (or
any other similar proof of completion) shall have been issued by the
relevant Governmental Authority, (B) is being developed with a retail
store, distribution center, shopping center or office building which
is under construction as of the Effective Date or (C) is undeveloped
and has a book value (excluding soft costs) of at least $1,000,000 or
(b) (i) (A) consists of a developed retail store, distribution center,
shopping center or office building with respect to which a certificate
of occupancy or temporary certificate of occupancy or the local
equivalent thereof (or any other similar proof of completion) shall
have been issued by the relevant Governmental Authority, or (B) is
being developed with a retail store, distribution center, shopping
center or office building which was under construction as of the
Effective Date, (ii) is located on property which is subject to a
ground lease in favor of the Borrower or any Subsidiary Guarantor as
lessee and no consent shall be required under such ground lease to
mortgage or foreclose upon such property (or such consent shall have
been obtained), (iii) is or, upon completion, will be classified as an
owned retail store, distribution center, shopping center or office
building by the Borrower or such Subsidiary Guarantor and (iv) is
located in the United States or Puerto Rico.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Mechanics' Lien Reserve Amount": with respect to any parcel
of Eligible Mortgaged Real Property at any time, an amount equal to
the excess, if any, of (a) the sum of all outstanding amounts which
are then secured by mechanics' liens on such parcel of Eligible
Mortgaged Real Property and which have been outstanding for a period
in excess of one year over (b) $200,000.
"Mortgage": a fee or ground leasehold mortgage, deed of trust
or other similar document executed and delivered in favor of the
Administrative Agent, as the same may be amended, supplemented or
otherwise modified from time to time and in effect.
"Mortgage Value": with respect to any parcel of Eligible
Mortgaged Real Property, the lesser of (a) the maximum stated amount
secured by the Lien on such parcel of Eligible Mortgaged Real Property
granted in favor of the applicable secured mortgagee pursuant to the
relevant Mortgage and (b) the value of such parcel of Eligible
Mortgaged Real Property set forth in the Existing Appraisal delivered
with respect thereto.
"Mortgaged Property": all property of the Borrower and any
Subsidiary Guarantor in which the Administrative Agent is granted a
Lien pursuant to the Master Security Agreement or the Permanent Order.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Income": of any Person for any period, net income of
such Person and its Consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP for such period.
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"Net Recoverable Value": as to the Inventory of the Borrower
and the Subsidiary Guarantors, the amount determined based upon
periodic audits or appraisals of such Inventory to be equal to the
percentage of the cost of Inventory which could be realized (net of
disposal costs and expenses) in a liquidation sale of the Inventory at
such time.
"Non-Continuing EBITDA Items": With respect to any period,
the following (without duplication): (i) the revenues and cost of
goods sold for discontinued product lines pursuant to the Business
Plan; (ii) all other expenses associated with the clearance of such
discontinued product lines; (iii) advertising expenses and cooperative
income associated with discontinued product lines; (iv) store payroll,
benefits and other expenses that are either directly associated with
the conversion of stores pursuant to the Business Plan, or which would
not have been incurred had the conversions been completed; (v) all
expenses associated with the Orlando and Montgomery distribution
centers; (vi) all corporate payroll, benefits and other expenses
arising in connection with positions to be eliminated pursuant to the
Business Plan; and (vii) severance for employees terminated or to be
terminated as a result of the discontinued product lines, distribution
center closures and corporate downsizing; in each of the above cases
to the extent arising after February, 2000.
"Non-Excluded Taxes": as defined in subsection 4.10.
"Notes": the collective reference to any Revolving Credit
Notes, Term Notes or Swing Line Notes.
"Overdraft": at any time, the amount by which the aggregate
amount debited from any deposit, concentration, operating or
disbursement account maintained by the Borrower or any Subsidiary
Guarantor with any Lender or any Affiliate of any Lender, as a result
of processing of payment orders issued by the Borrower or such
Subsidiary Guarantor or otherwise, exceeds the aggregate funds on
deposit in such account.
"Parcel": when used in connection with any parcel of real
property, means such parcel of real property, together with all of the
structures, buildings and other improvements located thereon and all
other property associated therewith and, when used in connection with
any parcel of real property subject to a ground lease in favor of the
Borrower or any Subsidiary Guarantor as lessee, means the leasehold
interest in such ground lease.
"Participant": as defined in subsection 12.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any Governmental
Authority which succeeds to the powers and functions thereof.
"Permanent Facility": the revolving credit facility and term
loans made available from and after the Effective Date pursuant to
subsection 3.1(a), as approved by the Permanent Order.
"Permanent Order": that certain order entered by the
Bankruptcy Court approving this Agreement, in form and substance
satisfactory to the Administrative Agent, in substantially the form of
Exhibit E. For purposes hereof, the references in the Permanent Order
to the "Revolving Credit Lenders" shall include all Lenders (both
Revolving Credit Lenders and Term Loan Lenders) hereunder.
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"Permitted Account Liens": the collective reference to Liens
permitted by subsections 9.3(a), 9.3(b), 9.3(l) and 9.3(u).
"Permitted Book-Entry Securities": securities (i) which
conform in all respects to the requirements set forth in the
definition of Cash Equivalents except that such securities are not
evidenced by a certificate and (ii) in which the Administrative Agent
shall have acquired a perfected first priority security interest or in
the security entitlement with respect thereto in the manner provided
by the UCC.
"Permitted Expenses": expenses arising from claims in the
Reorganization Cases of the following parties for the following
amounts: (i)(A) allowed professional fees and disbursements incurred
by the professionals (the "Professionals") retained, pursuant to
sections 327(a) or (e) of the Bankruptcy Code under a general retainer
(excepting ordinary course professionals) or 1103(a), by the Loan
Parties and up to two statutory committees (each, a "Committee")
appointed in the Reorganization Cases and (B) the expenses of any
member of any such Committee allowed under section 503(b)(3)(F) of the
Bankruptcy Code, which collectively may not exceed the sum of
$3,000,000 in the aggregate, inclusive of any holdbacks required by
the Bankruptcy Court for post-default services, plus professional fees
and disbursements previously incurred, accrued or invoiced prior to
the occurrence of an Event of Default and the delivery of notice as
provided below, to the extent previously or subsequently allowed, and
(ii) quarterly fees required to be paid to the United States Trustee
pursuant to 28 U.S.C. ss. 1930(a)(6) and any fees payable to the Clerk
of the Bankruptcy Court; provided that notwithstanding the occurrence
or continuance of an Event of Default, no fees or disbursements
incurred, accrued or invoiced during the pendency of an Event of
Default shall reduce the gross amount of the Permitted Expenses prior
to the delivery (by hand, facsimile or overnights delivery) to the
Borrower and counsel to the Committee of a notice by the
Administrative Agent of the Borrower's noncompliance with the terms of
this Agreement and the triggering of the dollar limitations set forth
above; provided, further that Permitted Expenses shall not include,
apply to or be available for any fees or expenses incurred by any
person, including the Professionals or the Committee, in (A) objecting
to or contesting in any manner, or in raising any defenses to, the
validity, extent, perfection, priority or enforceability of
Indebtedness arising under this Agreement (or any other Loan Documents
related thereto) or any liens or security interests with respect
thereto or any other rights or interests of the Administrative Agent
or the Lenders, or in asserting any claims or causes of action,
including, without limitation, any actions under chapter 5 of the
Bankruptcy Code, against the Administrative Agent or the Lenders, (B)
preventing, hindering or delaying the Lenders' or the Administrative
Agent's enforcement or realization upon any of the Collateral (during
the continuance of an Event of Default), (C) using cash collateral or
selling any Collateral except as permitted herein, (D) incurring
Indebtedness except as permitted herein or (E) modifying the Lenders'
or the Administrative Agent's rights under this Agreement or the other
Loan Documents in a non-consensual manner. The automatic stay shall be
deemed lifted with respect to the delivery by the Administrative Agent
or the Lenders of the notice notifying the Borrower of the
commencement of the limitation described above.
"Permitted Inventory Liens": the collective reference to
Liens permitted by subsections 9.3(a), 9.3(b), 9.3(l) and 9.3(u).
"Permitted Mortgage Liens": the collective reference to Liens
permitted by subsections 9.3(a), 9.3(b), 9.3(e), 9.3(l) and 9.3(u).
"Permitted Prepetition Claim Payment": a payment (as adequate
protection or otherwise) on account of any Claim arising or deemed to
have arisen prior to the commencement
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of the Reorganization Cases, which is made (i) pursuant to authority
granted by a First Day Order of the Bankruptcy Court, (ii) in
connection with (A) pre-petition Consignment Inventory Claims, (B)
reclamation Claims up to $15,000,000, (C) pre-petition sales tax and
payroll tax Claims, (D) Claims in respect of the assumption of leases
and other contractual obligations, and (E) in respect of pre-petition
secured Indebtedness, in amounts pursuant to this clause (E) that do
not exceed $4,000,000 for any fiscal quarter, (F) pursuant to an
effective order of the Bankruptcy Court, unless the Administrative
Agent has filed with the Bankruptcy Court and not withdrawn an
objection to such authorization, and (G) additional payments in
respect of pre-petition Claims of up to $15,000,000, or (iii) in
satisfaction of secured Indebtedness by application of the Proceeds
received from the sale of the specific assets securing such
Indebtedness.
"Permitted Sale-Leaseback": as defined in subsection 9.11.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, limited liability company, Governmental Authority or other
entity of whatever nature.
"Petition Date": as defined in the recitals hereto.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Plan of Reorganization": a proposed plan of reorganization
for the Borrower whether filed with or confirmed by order of the
Bankruptcy Court.
"Pledged Securities": the collective reference to (i) the
Pledged Stock, (ii) all Investment Securities, (iii) all Cash
Equivalents, Permitted Book-Entry Securities and funds held or on
deposit from time to time in the Securities Accounts, and (iv) all
Proceeds thereof, except as provided for in subsection 10.9 of the
Master Security Agreement.
"Pledged Stock": the shares of Capital Stock set forth on
Schedule 2 to the Master Security Agreement and other shares of
Capital Stock pledged thereunder from time to time pursuant to Section
4 thereof.
"Pledgors": the collective reference to the obligors parties
to the Master Security Agreement.
"Post-Confirmation Credit Agreement": as defined in Section 5
hereof.
"Proceeds": as defined in the UCC.
"Professionals": as defined in the definition of "Permitted
Expenses".
"Protective Advance": as defined in subsection 3.16(f).
"Qualified Stock": any stock of the Borrower which does not
by its terms mature or require repurchase or redemption thereof in
whole or in part on or prior to the first anniversary of the
Termination Date.
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"Real Property Amortization Amount": with respect to all
Eligible Mortgaged Real Property at any time, an amount equal to (a)
$500,000 times (b) the number of full three-month periods that have
been elapsed since the Effective Date.
"Register": as defined in subsection 12.6(d).
"Regulation U": Regulation U of the Board of Governors as in
effect from time to time.
"Regulation X": Regulation X of the Board of Governors as in
effect from time to time.
"Reimbursement Obligation": the obligation of the Borrower
pursuant to subsection 3.10(a) to reimburse each Issuing Bank for
amounts drawn under any Letter of Credit issued by such Issuing Bank.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reorganization Cases": the collective reference to the cases
of the Borrower and the Subsidiary Guarantors pursuant to chapter 11 of
the Bankruptcy Code pending in the Bankruptcy Court.
"Reportable Event": any of the events set forth in Section
4043 of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .27, .28, .29, .30, .31, .32,
.34 or .35 of PBGC Reg. ss. 4043.
"Required Lenders": at any time, Lenders the Voting
Percentages of which aggregate more than 66-2/3%.
"Requirement of Law": as to any Person, the Certificate or
Articles of Incorporation and Bylaws or other organizational or
governing documents of such Person, and any law, statute, ordinance,
code, decree, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject (including, without
limitation, laws, ordinances and regulations pertaining to the zoning,
occupancy and subdivision of real property).
"Reserve Calculation Date": the date of the second Borrowing
Base Certificate of any month, in which Borrowing Base Certificate the
various reserve amounts shall be calculated and/or revised based upon
the operating results as of the end of the previous fiscal month.
"Responsible Officer": the chief executive officer, the
president, any executive vice president, the chief financial officer or
the treasurer of the Borrower or, with respect to financial matters,
the chief executive officer, the president, the executive vice
president-finance, the chief financial officer, the treasurer or
comptroller of the Borrower, provided that, for purposes of subsection
10.3(f) of the Master Security Agreement and subsection 8.7 and Section
10(d) only, a "Responsible Officer" shall also include the general
counsel and any assistant treasurer of the Borrower.
"Restricted Payments": as defined in subsection 9.6.
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"Restricted Subsidiaries": collectively, the Domestic
Subsidiaries and Foreign Subsidiaries.
"Revolving Credit Commitment": as to any Lender, the
obligation of such Lender to make Revolving Loans to and/or participate
in Swing Line Loans to and/or issue or participate in Letters of Credit
issued on behalf of the Borrower in an aggregate principal and/or face
amount at any one time outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule 1.1(a) under the heading
"Revolving Credit Commitment", as such amount may be reduced from time
to time pursuant to this Agreement or as such amount may be adjusted
from time to time pursuant to subsection 12.6.
"Revolving Credit Commitment Percentage": as to any Lender (a)
at any time prior to the termination of the Revolving Credit
Commitments, the percentage of the Revolving Credit Commitments then
constituted by such Lender's Revolving Credit Commitment and (b) at any
time after the termination of the Revolving Credit Commitments, that
amount expressed as a percentage derived by dividing (i) the sum of (x)
such Lender's Revolving Loans then outstanding plus (y) the product of
such Lender's Revolving Credit Commitment Percentage immediately prior
to the termination of the Revolving Credit Commitments (after giving
effect to any permitted assignment pursuant to subsection 12.6) times
the sum of (1) the aggregate principal amount of Swing Line Loans then
outstanding plus (2) the L/C Obligations then outstanding by (ii) the
sum of (x) the aggregate principal amount of Revolving Loans of all the
Lenders then outstanding plus (y) the aggregate principal amount of all
Swing Line Loans then outstanding plus (z) the aggregate L/C
Obligations then outstanding.
"Revolving Credit Commitment Period": the period from and
including the Effective Date to, but not including, the Termination
Date.
"Revolving Credit Extensions of Credit": as to any Lender at
any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Loans made by such Lender then outstanding and
(b) such Lender's Revolving Credit Commitment Percentage of the sum of
(i) the aggregate principal amount of Swing Line Loans then outstanding
and (ii) the L/C Obligations then outstanding.
"Revolving Credit Lender": any Lender with an unused Revolving
Credit Commitment hereunder and/or any Revolving Loans outstanding
hereunder.
"Revolving Loans": as defined in subsection 3.1(a).
"Revolving Credit Note": as defined in subsection 4.13(d).
"Rolling 12-Month EBITDA": for any fiscal month, Consolidated
EBITDA for the consecutive twelve-fiscal month period ending with the
end of such fiscal month.
"Sale-Leaseback": as defined in subsection 9.11.
"SEC": the Securities and Exchange Commission and any
Governmental Authority which succeeds to the powers and functions
thereof.
"Secured Obligations": all of the following, in each case
whether now existing or hereafter incurred or created, except to the
extent otherwise expressly provided in the agreements or instruments
relating thereto:
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(i) the Credit Agreement Obligations;
(ii) all sums payable by the Borrower and the
Subsidiary Guarantors under the Master Security Agreement or
any other Security Document;
(iii) liabilities of the Borrower or any Subsidiary
Guarantor for Overdrafts; and
(iv) liabilities and obligations of the Borrower or
any Subsidiary Guarantor under Derivative Agreements.
When used in this Agreement or any of the other Loan Documents with
respect to any of the Secured Obligations that constitute the
obligations of the Borrower or any Subsidiary Guarantor in respect of a
Letter of Credit issued on behalf of the Borrower or such Subsidiary
Guarantor or under any Derivative Agreement or any similar obligation,
the term "outstanding" shall include, at any time, without duplication,
the aggregate of the principal, interest and other amounts then
outstanding that are the subject of such Letter of Credit or similar
obligation that have not then been reimbursed by the Borrower or the
relevant Subsidiary Guarantor and the amount then available to be drawn
or demanded under such Letter of Credit or similar obligation (assuming
compliance with all conditions to drawing) or the termination
liabilities, if any, of the Borrower or the Subsidiary Guarantor under
such Derivative Agreement.
"Secured Parties": the Lenders, the Issuing Banks, the
Administrative Agent, each counterparty to any Derivative Agreement
entered into with the Borrower (if such counterparty is a Lender or an
Affiliate of a Lender) and the beneficiaries of each indemnification
obligation of any Loan Party undertaken in any Loan Document, and the
successors and assigns of each of the foregoing.
"Securitization Entity": with respect to the Borrower or any
Subsidiary, a corporation, partnership, trust, limited liability
company or other entity that is formed by the Borrower or such
Subsidiary for the purpose of effecting or facilitating a
Securitization Transaction and which engages in no business and incurs
no Indebtedness or other liabilities other than those related to or
incidental to the Securitization Transaction.
"Securitization Transaction": a transaction or series of
related transactions pursuant to which a corporation, partnership,
trust, limited liability company or other entity incurs obligations or
issues interests, the proceeds of which are used to finance a discrete
pool (which may be fixed or revolving) of receivables, leases or other
financial assets, or a discrete portfolio of real property or
equipment, subject in each case (except as to credit card receivable
securitizations and securitizations of real properties in compliance
with the provisions of subsection 9.5(f) hereof) to the approval of the
Administrative Agent .
"Securities Account": any account which is maintained with the
Administrative Agent or any agent thereof or any instructions delivered
by the Borrower or a Subsidiary Guarantor to the Administrative Agent
or such agent in accordance with subsection 4.8(a) of the Master
Security Agreement, in which all Pledged Securities which are Cash
Equivalents (other than Excepted Cash Equivalents) are to be held by
the Administrative Agent or a custodian or other agent of the
Administrative Agent, subject to release upon request by the relevant
Pledgor strictly in accordance with subsection 4.8(c) of the Master
Security Agreement thereafter, and in each of which the Administrative
Agent shall have a perfected first priority security interest.
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"Security": as defined in subsection 1.1 of the Master
Security Agreement.
"Security Documents": the collective reference to the Master
Security Agreement, the Blocked Account Agreements, the Custody and
Control Agreements, the Lockbox Agreements and each other agreement
entered into pursuant to subsection 11.1(b) of the Master Security
Agreement.
"Senior Notes Indenture": the Indenture, dated as of October
15, 1993, between the Borrower and State Street Bank and Trust Company
(as successor trustee to The First National Bank of Boston), as
trustee, as amended, supplemented or otherwise modified from time to
time.
"Shrink Reserve": as of any Calculation Date, an amount equal
to 1.75% of the cost of Inventory as reflected on the IE System. Such
Shrink Reserve percentage shall adjust from time to time at the
Administrative Agent's sole discretion exercised commercially
reasonably in accordance with customary business practices, based on
the results of the Borrower's cycle and physical Inventory counts.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"SMC": Service Merchandise Company, Inc., a Tennessee
corporation.
"Special Purpose Subsidiary": any Subsidiary of the Borrower
organized solely for the purpose of (a) holding a license or permit
issued by any Governmental Authority and used in connection with the
business of the Borrower and/or its Subsidiaries or (b) providing
employee services for use in the foreign operations of the Borrower or
any of its Subsidiaries, provided that such Subsidiary shall only be a
"Special Purpose Subsidiary" for so long as such Subsidiary does not
own any assets (other than any such license or permit and other than
any assets with a book value not exceeding $5,000,000 in the aggregate)
and does not engage in any business other than holding such license or
permit or providing such employee services and, in each case,
activities directly related thereto.
"Standby L/C Fee Rate": at any time, the rate per annum on the
aggregate undrawn amount of Standby Letters of Credit equal to the then
Applicable Margin for Eurodollar Loans minus 0.25% per annum provided
that during the continuance of an Event of Default the Standby L/C Fee
Rate shall be increased by 2.0% per annum.
"Standby Letter of Credit": as defined in subsection
3.6(b)(i).
"Standby Letter of Credit Outstandings": at any time, an
amount equal to the sum of (a) the aggregate then undrawn and unexpired
amount of the then outstanding Standby Letters of Credit issued in
Dollars, (b) the Dollar Equivalent of the aggregate then undrawn and
unexpired amount of then outstanding Letters of Credit issued in
currencies other than Dollars (such Dollar Equivalent to be determined
as of the date of issuance of such Standby Letter of Credit), (c) the
aggregate amount of Reimbursement Obligations in respect of Standby
Letters of Credit issued in Dollars which have not then been paid
pursuant to subsection 3.10(a) and (d) (i) the Dollar Equivalent of the
aggregate amounts of Reimbursement Obligations in respect of Standby
Letters of Credit issued in currencies other than Dollars which have
not been reimbursed pursuant to subsection 3.10(a) (such Dollar
Equivalent to be calculated as of the date such Reimbursement
Obligation becomes due and payable) and which have not been converted
into Dollars in accordance with subsection 3.10(a) and (ii) the
aggregate amount of Reimbursement
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Obligations in respect of Standby Letters of Credit issued in
currencies other than Dollars which have not been reimbursed pursuant
to subsection 3.10(a) and which have been converted into Dollars in
accordance with such subsection.
"Store Closures": Liquidations and/or closures of the
Borrower's and Restricted Subsidiaries stores (including, without
limitation, the equipment associated therewith) and the complete
Inventory therein not to exceed $125,000,000 of Inventory Value.
"Structuring Fee": the "Structuring Fee" payable to the
Administrative Agent on the Effective Date in the amount and on the
terms set forth in the Fee Letter.
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantor": each Subsidiary set forth on Schedule
6.13 under the heading "Initial Subsidiary Guarantors", together with
each other Subsidiary that becomes a party to the Master Security
Agreement in compliance with subsection 8.11.
"Swing Line Commitment": the lesser of (a) $50,000,000 and (b)
the Revolving Credit Commitments then in effect.
"Swing Line Lender": FRF and any other Lender acceptable to
the Administrative Agent that agrees to be a Swing Line Lender.
"Swing Line Loans": as defined in subsection 3.14.
"Swing Line Note": as defined in subsection 4.13(f).
"Tax Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Telerate Page 3750": the display page currently so designated
on the Dow Jones Telerate Service (or such other page as may replace
that service for the purpose of displaying comparable rates or prices).
"Term Loan": as defined in subsection 2.1.
"Term Loan Lender": any Lender with Term Loans outstanding
hereunder.
"Term Note": as defined in subsection 4.13(e).
"Termination Date": the earliest of (i) April 14, 2004, (ii)
the Consummation Date and (iii) the date of termination in whole of the
Revolving Credit Commitments pursuant to subsection 3.4 or Section 10.
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"Trade L/C Fee Rate": at any time the rate per annum on the
aggregate undrawn amount of Trade Letters of Credit equal to 1.25%,
provided that during the continuance of any Event of Default, the Trade
L/C Fee Rate shall be 3.25% per annum.
"Trade Letter of Credit": as defined in subsection 3.6(b)(i).
"Trade Letter of Credit Outstandings": at any time, an amount
equal to the sum of (a) the aggregate then undrawn and unexpired amount
of the then outstanding Trade Letters of Credit issued in Dollars, (b)
the Dollar Equivalent of the aggregate then undrawn and unexpired
amount of the then outstanding Trade Letters of Credit issued in
currencies other than Dollars (such Dollar Equivalent to be calculated
as of the date of issuance of such Letters of Credit), (c) the
aggregate amount of Reimbursement Obligations in respect of Trade
Letters of Credit issued in Dollars which have not then been paid
pursuant to subsection 3.10(a), and (d) (i) the Dollar Equivalent of
the aggregate amount of Reimbursement Obligations in respect of Trade
Letters of Credit issued in currencies other than Dollars which have
not then been paid pursuant to subsection 3.10(a) (such Dollar
Equivalent to be calculated as of the date such Reimbursement
Obligation becomes due and payable) and which have not been converted
into Dollars in accordance with subsection 3.10(a), and (ii) the
aggregate amount of Reimbursement Obligations in respect of Trade
Letters of Credit issued in currencies other than Dollars which have
not been reimbursed pursuant to subsection 3.10(a) and which have been
converted into Dollars in accordance with such subsection.
"Tranche": the collective reference to Eurodollar Loans, the
then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such
Eurodollar Loans shall originally have been made on the same day).
"Transferee": as defined in subsection 12.6(f).
"Transaction Costs": the fees, costs and expenses payable by
the Borrower to the Administrative Agent or any Lender (as provided in
Subsection 12.5 hereof) in connection with the execution, delivery and
performance of the Loan Documents and the transactions contemplated
thereby.
"Type": as to any Term Loan or Revolving Loan, its nature as
an ABR Loan or a Eurodollar Loan.
"UCC": the Uniform Commercial Code as in effect in the
Commonwealth of Massachusetts from time to time or, where applicable as
to specific Collateral, any other relevant state.
"UCC Filing Collateral": Collateral (other than fixtures) as
to which filing financing statements under the UCC of the applicable
jurisdiction is an appropriate method of perfection of a security
interest in such Collateral.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and the International Standby Practices - ISP98,
International Chamber of Commerce Publication No. 590, each as the same
may be amended or revised from time to time.
"Voting Percentage": as to any Lender (a) at any time prior to
the termination of the Revolving Credit Commitments, that amount
expressed as a percentage derived by dividing (i)
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the sum of (x) such Lender's Revolving Credit Commitment plus (y) the
outstanding principal amount of such Lender's Term Loan by (ii) the sum
of (x) the Revolving Credit Commitments of all the Lenders, plus (y)
the aggregate principal amount of Term Loans of all the Lenders then
outstanding and (b) at any time after the termination of the Revolving
Credit Commitments, that amount expressed as a percentage derived by
dividing (i) the sum of (x) the principal amount of such Lender's Loans
(other than Swing Line Loans) then outstanding plus (y) the product of
such Lender's Revolving Credit Commitment Percentage times the L/C
Obligations and Swing Line Loans then outstanding by (ii) the sum of
(x) the aggregate principal amount of Loans of all the Lenders then
outstanding plus (y) the aggregate L/C Obligations of all the Lenders
then outstanding.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in
this Agreement shall have the defined meanings when used in any Loan Document or
any certificate or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in any other Loan Document, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The word "including" shall mean "including, without
limitation" unless the context otherwise requires.
(e) The meanings given to defined terms herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNTS AND TERMS OF TERM LOANS
2.1 Term Loans. On the Effective Date the Term Loan Lenders shall make
Term Loans to the Borrower in an aggregate principal amount not to exceed
$85,000,000, the proceeds of which will be used to repay outstanding
Indebtedness under the Existing DIP Agreement. After giving effect to such Term
Loans under this Agreement, each Term Loan Lender shall have outstanding a Term
Loan owing to it by the Borrower in a principal amount equal to the amount set
forth opposite such Lender's name on Schedule 1.1(a). The Term Loans may from
time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination
thereof, as determined by the Borrower and notified to the Administrative Agent
in accordance with subsection 4.2.
2.2 Repayment of Term Loans. The Borrower hereby agrees to pay interest
on the unpaid principal amount of the Term Loans from time to time outstanding
from the Effective Date until payment in full thereof at the rates per annum,
and on the dates, set forth in subsection 4.4. The principal amount of the Term
Loans shall be prepaid in accordance with the provisions of subsection 3.4. The
outstanding principal amount of the Term Loans shall be payable on the
Termination Date.
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section 3. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS AND
THE INTERIM FACILITY
3.1 Revolving Credit Commitments.
(a) Subject to the terms and conditions hereof, each Revolving
Credit Lender severally agrees to make revolving credit loans ("Revolving
Loans") to the Borrower from time to time during the Revolving Credit Commitment
Period in an aggregate principal amount at any one time outstanding which, when
added to such Revolving Credit Lender's Revolving Credit Commitment Percentage
of an amount equal to the sum of (i) the aggregate principal amount of Swing
Line Loans then outstanding plus (ii) the then outstanding L/C Obligations (in
each case, after giving effect to the use of proceeds of such Revolving Loans),
does not exceed the amount of such Revolving Credit Lender's Revolving Credit
Commitment, provided that no Revolving Credit Lender shall be required to make a
Revolving Loan to the extent that, after giving effect thereto, the Aggregate
Outstanding Extensions of Credit at such time would exceed the Borrowing Base.
During the Revolving Credit Commitment Period, the Borrower may use the
Revolving Credit Commitments by borrowing, prepaying and reborrowing the
Revolving Loans in whole or in part, all in accordance with the terms and
conditions hereof.
(b) The Revolving Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Administrative Agent in accordance with
subsections 3.2 and 4.2.
3.2 Procedure for Revolving Credit Borrowing. The Borrower may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent (a) prior to 12:00 Noon, Boston time, two Business Days
prior to the requested Borrowing Date, if all or any part of the requested
Revolving Loans are to be initially Eurodollar Loans or (b) prior to 3:00 p.m.,
Boston time, on the requested Borrowing Date, otherwise), which notice may be
given by telephone (to be promptly confirmed in writing, including by
facsimile), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR
Loans or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the respective amounts of each such Type of Loan and
the respective lengths of the initial Interest Periods therefor. Each borrowing
under the Revolving Credit Commitments shall be in an amount equal to (x) in the
case of ABR Loans (except as otherwise provided in subsection 3.16(a)),
$1,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then
Available Revolving Credit Commitments are less than $1,000,000, such lesser
amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple
of $l,000,000 in excess thereof. Upon receipt of any such notice from the
Borrower, the Administrative Agent shall promptly notify each Revolving Credit
Lender thereof. Each Revolving Credit Lender will make the amount of its pro
rata share of each borrowing available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent specified in
subsection 12.2 prior to 1:00 P.M., Boston time, (a) with respect to Eurodollar
Loans, on the Borrowing Date requested by the Borrower in Dollars, and (b) with
respect to ABR Loans, on the Business Day after the Borrowing Date, in each case
in funds immediately available to the Administrative Agent. Such borrowing will
be made available to the Borrower promptly (but, in the case of Eurodollar
Loans, no event later than 1:00 P.M., Boston time) by the Administrative Agent
crediting the account of the Borrower on the books of such office of the
Administrative Agent with the aggregate of the amounts made available to the
Administrative Agent by the Revolving Credit Lenders and in like funds as
received by the Administrative Agent.
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3.3 Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
non-refundable commitment fee for the period from and including the first day of
the Revolving Credit Commitment Period to but not including the Termination
Date, computed at a rate per annum equal to the Applicable Commitment Fee Rate
then in effect on the average daily amount of the Available Revolving Credit
Commitment of such Revolving Credit Lender during the period for which payment
is made, payable quarterly in arrears on the last day of each calendar quarter
and on the Termination Date (whether by stated maturity or otherwise) or such
earlier date as the Revolving Credit Commitments shall terminate as provided
herein, commencing on the first of such dates to occur after the Effective Date.
3.4 Termination or Reduction of Commitments. The Borrower shall
have the right, upon not less than two Business Days' notice to the
Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments, provided
that no such termination or reduction shall be permitted if, after giving effect
thereto and to any prepayments of the Revolving Loans made on the effective date
thereof, the aggregate principal amount of the Revolving Loans then outstanding,
when added to the then outstanding L/C Obligations and the aggregate principal
amount of then outstanding Swing Line Loans, would exceed the Revolving Credit
Commitments then in effect; and provided further that at the time of any such
reduction or termination, the Borrower also prepays the Term Loans in full (in
the event of a termination of the Revolving Credit Commitments) or prepays the
principal of the Term Loans by an amount equal to the same percentage of the
Term Loans which is equal to the percentage reduction of the Revolving Credit
Commitments. Any such reduction shall be in an amount equal to $10,000,000 or a
whole multiple of $l,000,000 in excess thereof and shall reduce permanently the
Revolving Credit Commitments then in effect. Upon receipt of any notice pursuant
to this subsection 3.4, the Administrative Agent shall promptly notify each
Revolving Credit Lender thereof.
3.5 Repayment of Revolving Loans. The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Revolving Credit Lender the then unpaid principal amount of each Revolving
Loan of such Revolving Credit Lender on the Termination Date (or such earlier
date on which the Revolving Loans become due and payable pursuant to Section
10). The Borrower hereby further agrees to pay interest on the unpaid principal
amount of the Revolving Loans from time to time outstanding from the Effective
Date until payment in full thereof at the rates per annum, and on the dates, set
forth in subsection 4.4.
3.6 L/C Commitment.
(a) Subject to the terms and conditions hereof, each
Issuing Bank, in reliance on the agreements of the other Lenders set forth in
subsection 3.9(a), agrees to issue letters of credit ("Letters of Credit") for
the account of the Borrower on any Business Day during the Revolving Credit
Commitment Period in such form as may be approved from time to time by such
Issuing Bank; provided that no Issuing Bank shall have any obligation to issue
any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations at such time would exceed the L/C Commitment, (ii) the Standby
Letter of Credit Outstandings at such time would exceed $125,000,000, (iii) the
Aggregate Revolving Credit Outstandings at such time would exceed the aggregate
amount of the Revolving Credit Commitments at such time, (iv) in the case of
Letters of Credit issued in currencies other than Dollars only, the L/C
Obligations in respect of Letters of Credit issued in currencies other than
Dollars would exceed the Foreign L/C Commitment Sublimit at such time, or (v)
the Aggregate Outstanding Extensions of Credit at such time would exceed the
Borrowing Base at such time.
(b) Each Letter of Credit shall:
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(i) be denominated in Dollars or such other
currency that as of the date of issuance thereof is in the reasonable
judgment of the relevant Issuing Bank (which shall be binding on the
L/C Participants) freely convertible or exchangeable into Dollars as
the Borrower, the relevant Issuing Bank and the Administrative Agent
may from time to time agree, and shall be either (A) a standby letter
of credit issued to support obligations of the Borrower or a
Subsidiary, contingent or otherwise, including, without limitation,
except as provided in clause (e) hereof, to support letters of credit
and the reimbursement obligations attendant thereto issued pursuant to
or under the Existing DIP Agreement which are then outstanding on the
Effective Date (a "Standby Letter of Credit"), or (B) a commercial
letter of credit issued in respect of the purchase of inventory or
other goods or services by the Borrower and its Subsidiaries in the
ordinary course of business (a "Trade Letter of Credit"), and
(ii) expire no later than the earlier of (A) five
Business Days prior to the Termination Date (unless the Administrative
Agent has received and maintains cash Collateral in an amount equal to
103% of the maximum amount available to be drawn under any such Letter
of Credit for which the Borrower has requested an expiry date after the
Termination Date, in which event the expiry of any such Letter of
Credit may extend beyond the Termination Date) and (B) one year after
the date of issuance thereof, provided that, subject to clause (A)
above, any Letter of Credit may, at the request of the Applicant as set
forth in the applicable Application, be automatically renewed on each
anniversary of the issuance thereof for an additional period of one
year or less unless the Issuing Bank which issued such Letter of Credit
shall have given at least sixty days prior written notice to the
Borrower and the beneficiary of such Letter of Credit that such Letter
of Credit will not be renewed, in which case such Letter of Credit may,
at the option of the Borrower, provide that the beneficiary of such
Letter of Credit will be entitled to draw on such Letter of Credit at
any time during the thirty days prior to the expiry thereof.
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the law of the
Commonwealth of Massachusetts.
(d) No Issuing Bank shall at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause such Issuing Bank or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
(e) On the Effective Date, all letters of credit and the
reimbursement obligations attendant thereto issued by Fleet under the Existing
DIP Agreement which are then outstanding shall be, from and after such date,
deemed to be, and shall become for all purposes, Letters of Credit with
Reimbursement Obligations attendant thereto issued pursuant to, and be
outstanding under, this Agreement.
3.7 Procedure for Issuance of Letters of Credit. An Applicant may
from time to time request that an Issuing Bank issue a Letter of Credit by
delivering (a) to such Issuing Bank at its address for notices specified herein
in such manner as may be agreed by or be reasonably acceptable to such Issuing
Bank (including by electronic transmission) an Application therefor, completed
to the satisfaction of such Issuing Bank, and such other certificates, documents
and other papers and information as such Issuing Bank may reasonably request and
(b) a notice to the Administrative Agent that such Letter of Credit has been
requested. Upon receipt of any Application, each Issuing Bank agrees to process
such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall such Issuing Bank be required to issue any Letter
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of Credit earlier than two Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by such Issuing Bank
and the Borrower. Each Issuing Bank shall furnish a copy of each Letter of
Credit issued by such Issuing Bank to the Borrower and the Administrative Agent
promptly following the issuance thereof.
3.8 Letter of Credit Fees, Commissions and Other Charges.
(a) The Borrower shall pay to the relevant Issuing Bank
with respect to each Letter of Credit issued by such Issuing Bank under this
Agreement, for the account of such Issuing Bank, a fronting fee with respect to
the period from the date of issuance of such Letter of Credit to the expiration
or termination date of such Letter of Credit, computed at a rate per annum equal
to 0.125% on the average aggregate amount available to be drawn under such
Letter of Credit during the period for which such fee is calculated. Such
fronting fee shall be payable quarterly in arrears on each L/C Fee Payment Date
to occur after the issuance of such Letter of Credit and on the Termination Date
or on such earlier date as the Revolving Credit Commitments shall terminate as
provided herein and shall be nonrefundable.
(b) The Borrower shall pay to the Administrative Agent,
for the account of the L/C Participants, a letter of credit commission with
respect to each Trade Letter of Credit issued under this Agreement with respect
to the period from the date of issuance of such Trade Letter of Credit to the
expiration or termination date of such Letter of Credit, computed at a rate per
annum equal to the Trade L/C Fee Rate in effect from time to time on the average
aggregate amount available to be drawn under such Trade Letter of Credit during
the period for which such fee is calculated. Such commission shall be shared
ratably among the L/C Participants in accordance with their respective Revolving
Credit Commitment Percentages. Such commission shall be payable in arrears on
each L/C Fee Payment Date to occur after the issuance of such Letter of Credit
and on the Termination Date (or on such earlier date as the Revolving Credit
Commitments shall terminate as provided herein) and shall be nonrefundable.
(c) The Borrower shall pay to the Administrative Agent,
for the account of the L/C Participants, a letter of credit commission with
respect to each Standby Letter of Credit with respect to the period from the
date of issuance of such Standby Letter of Credit to the expiration or
termination date of such Letter of Credit, computed at a rate per annum equal to
the Standby L/C Fee Rate in effect from time to time on the average aggregate
amount available to be drawn under such Standby Letter of Credit during the
period for which such fee is calculated. Such commission shall be shared ratably
among the L/C Participants in accordance with their respective Revolving Credit
Commitment Percentages. Such commission shall be payable in arrears on each L/C
Fee Payment Date to occur after the issuance of such Letter of Credit and on the
Termination Date (or on such earlier date as the Revolving Credit Commitments
shall terminate as provided herein) and shall be nonrefundable.
(d) In addition to the foregoing fees and commissions,
the Borrower shall pay or reimburse each Issuing Bank
for such normal and customary costs and expenses as may be agreed upon by the
Borrower and such Issuing Bank in connection with issuing, effecting payment
under, amending or otherwise administering any Letter of Credit issued by such
Issuing Bank.
(e) The Administrative Agent shall, promptly following
its receipt thereof, distribute to each Issuing Bank and the L/C Participants
all fees and commissions received by the Administrative Agent for their
respective accounts pursuant to this subsection.
3.9 L/C Participations.
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(a) Each Issuing Bank irrevocably agrees to grant and
hereby grants to each L/C Participant (other than such Issuing Bank), and, to
induce such Issuing Bank to issue Letters of Credit hereunder, each such L/C
Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from such Issuing Bank, on the terms and conditions hereinafter
stated, for such L/C Participant's own account and risk an undivided interest
equal to such L/C Participant's Revolving Credit Commitment Percentage in such
Issuing Bank's obligations and rights under each Letter of Credit issued by such
Issuing Bank hereunder and the amount of each draft paid by such Issuing Bank
thereunder. Each such L/C Participant unconditionally and irrevocably agrees
with each Issuing Bank that, if a draft is paid under any Letter of Credit
issued by such Issuing Bank for which such Issuing Bank is not reimbursed in
full by the Borrower in accordance with the terms of this Agreement, such L/C
Participant shall pay to the Administrative Agent for the account of such
Issuing Bank upon demand an amount equal to such L/C Participant's Revolving
Credit Commitment Percentage of the amount of such draft, or any part thereof,
which is not so reimbursed.
(b) If any amount required to be paid by any L/C
Participant to any Issuing Bank pursuant to subsection 3.9(a) in respect of any
unreimbursed portion of any payment made by such Issuing Bank under any Letter
of Credit issued by such Issuing Bank is paid to such Issuing Bank within three
Business Days after the date such payment is due, such L/C Participant shall pay
to such Issuing Bank on demand an amount equal to the product of (i) such
amount, times (ii) the daily average Federal Funds Rate, during the period from
and including the date such payment is required to the date on which such
payment is immediately available to such Issuing Bank, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360. If any such amount required to be paid by any
L/C Participant pursuant to subsection 3.9(a) is not in fact made available to
any Issuing Bank by such L/C Participant within three Business Days after the
date such payment is due, such Issuing Bank shall be entitled to recover from
such L/C Participant, on demand, such amount with interest thereon calculated
from such due date at the rate per annum applicable to Revolving Credit Loans
that are ABR Loans hereunder. A certificate of any Issuing Bank submitted to any
L/C Participant with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
(c) Whenever, at any time after any Issuing Bank has made
payment under any Letter of Credit issued by such Issuing Bank and has received
from any L/C Participant its pro rata share of such payment in accordance with
subsection 3.9(a), such Issuing Bank receives any payment related to such
Letter of Credit (whether directly from the Borrower or otherwise, including
proceeds of collateral applied thereto by such Issuing Bank), or any payment of
interest on account thereof, such Issuing Bank will distribute to such L/C
Participant its pro rata share thereof.
(d) If any payment received by any Issuing Bank pursuant
to subsection 3.10 with respect to any Letter of Credit issued by it shall be
required to be returned by such Issuing Bank, each L/C Participant shall pay to
such Issuing Bank its pro rata share thereof.
3.10 Letter of Credit Reimbursement Obligations.
(a) The Borrower agrees to reimburse each Issuing Bank
for the amount of (i) any draft paid by such Issuing Bank under any Letter of
Credit issued by such Issuing Bank and (ii) any taxes, fees, charges or other
costs or expenses reasonably incurred by such Issuing Bank in connection with
such payment (including any such costs and expenses related to any conversion of
any such amount into Dollars as contemplated by the next succeeding sentence).
Except as otherwise agreed by the Borrower and the relevant Issuing Bank, each
such payment shall be made to the relevant Issuing Bank at its address for
notices specified herein in the currency in which the relevant Letter of Credit
was issued in immediately available funds in such currency, provided that if the
Borrower does not reimburse the
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relevant Issuing Bank for any draft paid by such Issuing Bank under any Letter
of Credit issued by such Issuing Bank in a currency other than Dollars on the
date required pursuant to subsection 3.10(b), such Issuing Bank shall convert
such amount into Dollars at the rate of exchange then available to such Issuing
Bank in the interbank market where its foreign currency exchange operations in
respect of such currency are then being conducted and the Borrower shall
thereafter be required to reimburse in Dollars such Issuing Bank for such amount
with interest pursuant to subsection 3.10(b).
(b) If any draft shall be presented for payment under any
Letter of Credit issued by any Issuing Bank, such Issuing Bank shall promptly
notify the Borrower of the date and amount thereof. The Borrower shall reimburse
each Issuing Bank pursuant to subsection 3.10(a) with respect to any drawing
under any Letter of Credit issued by such Issuing Bank on (i) the Business Day
on which such drawing is paid by such Issuing Bank, if notice of such drawing is
given to the Borrower by such Issuing Bank prior to 12:00 Noon, Boston time, on
the date such drawing is paid, or (ii) the first Business Day after notice of
such drawing is given to the Borrower by the Issuing Bank, if such notice is
given after 12:00 Noon, Boston time, on the date such drawing is paid, and, if
such drawing is reimbursed after the date of such drawing, interest shall be
payable on the amount of such drawing for the period from the date such drawing
is paid by the Issuing Bank until reimbursed by the Borrower at the rate then
applicable to Revolving Credit Loans that are ABR Loans hereunder. If any amount
payable under this subsection is not paid when due, interest shall be payable on
such amount from the date such amount becomes payable under this subsection
until payment in full thereof at the rate which would be payable on any
outstanding ABR Loans which were then overdue.
(c) If requested by the Administrative Agent on no
earlier than the thirtieth day prior to the Termination Date, the Borrower shall
either (a) deposit in a cash Collateral Account opened by the Administrative
Agent an amount equal to 103% of the aggregate then undrawn and unexpired amount
of all outstanding Letters of Credit, or (b) furnish the Administrative Agent
with a "back to back" letter of credit in form and substance and issued by a
bank reasonably satisfactory to the Administrative Agent in an amount equal to
103% of the aggregate then undrawn and unexpired amount of all outstanding
Letters of Credit. The Borrower hereby grants to the Administrative Agent, for
the benefit of each Issuing Bank and the L/C Participants, a security interest
in any such cash Collateral to secure all obligations of the Borrower under this
Agreement and the other Loan Documents. Amounts held in such cash Collateral
Account and drawings made under such "back to back" letter of credit shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit. The unused portion of any such cash Collateral after all such
Letters of Credit shall have expired or been fully drawn upon, if any, shall be
applied to repay other obligations of the Borrower hereunder and under the
Notes. After all such Letters of Credit shall have expired or been fully drawn
upon, all Reimbursement Obligations shall have been satisfied and all other
obligations of the Borrower hereunder and under the Notes shall have been paid
in full, the balance, if any, in such cash Collateral Account shall be returned
to the Borrower and/or the "back to back" letter of credit shall be returned to
the Borrower. The Borrower shall execute and deliver to the Administrative
Agent, for the account of each Issuing Bank and the L/C Participants, such
further documents and instruments as the Administrative Agent may reasonably
request to evidence the creation and perfection of the security interest in such
cash Collateral Account.
3.11 Obligations Absolute.
(a) The Borrower's obligations under this Section 3 in
respect of Letters of Credit shall be absolute and unconditional under any and
all circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower or any Applicant may have or have had against any
Issuing Bank or any beneficiary of any Letter of Credit.
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(b) The Borrower also agrees with each Issuing Bank that
such Issuing Bank shall not be responsible for, and the Borrower's Reimbursement
Obligations shall not be affected by, among other things, (i) the validity or
genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any
dispute between or among the Borrower, any Applicant and any beneficiary of any
Letter of Credit or any other party to which such Letter of Credit may be
transferred or (iii) any claims whatsoever of the Borrower or any Applicant
against any beneficiary of such Letter of Credit or any such transferee.
(c) No Issuing Bank shall be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of Credit
issued by such Issuing Bank, except for errors or omissions caused by such
Issuing Bank's gross negligence or willful misconduct.
(d) The Borrower agrees that any action taken or omitted
by any Issuing Bank under or in connection with any Letter of Credit issued by
such Issuing Bank or the related drafts or documents, if done in the absence of
gross negligence or willful misconduct and in accordance with the standards of
care specified in the UCC and the Uniform Customs, shall be binding on the
Borrower and shall not result in any liability of such Issuing Bank to the
Borrower.
3.12 Letter of Credit Payments. The responsibility of each Issuing
Bank to the Borrower in connection with any draft presented for payment under
any Letter of Credit issued by such Issuing Bank shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
3.13 Letter of Credit Applications. To the extent that any
provision of any Application related to any Letter of Credit is inconsistent
with the provisions of this Section 3 or any other terms of this Agreement or
any other Loan Document, the provisions of this Section 3 shall apply and such
inconsistent provision of such Application shall be of no force and effect.
3.14 Swing Line Commitment. Subject to the terms and conditions
hereof, each Swing Line Lender, in reliance on the agreements of the other
Lenders set forth in subsection 3.16, agrees to make swing line loans ("Swing
Line Loans") to the Borrower from time to time during the Revolving Credit
Commitment Period, provided that (a) no Swing Line Lender shall have any
obligation to make a Swing Line Loan if, after giving effect to any such Swing
Line Loans and the use of proceeds thereof, (i) the aggregate principal amount
of Swing Line Loans then outstanding would exceed the Swing Line Commitment,
(ii) the Aggregate Revolving Credit Outstandings at such time would exceed the
Revolving Credit Commitments in effect at such time or (iii) the Aggregate
Outstanding Extensions of Credit at such time would exceed the Borrowing Base at
such time, and (b) all borrowings and prepayments of Swing Line Loans shall be
made such that the aggregate principal amount of Swing Line Loans of each Swing
Line Lender outstanding at any time shall be equal. During the Revolving Credit
Commitment Period, the Borrower may use the Swing Line Commitment by borrowing,
prepaying and reborrowing the Swing Line Loans in whole or in part, all in
accordance with the terms and conditions hereof. All Swing Line Loans shall be
ABR Loans.
3.15 Procedure for Swing Line Borrowing. The Borrower may borrow
under the Swing Line Commitment during the Revolving Credit Commitment Period on
any Business Day, provided that the Borrower shall give the relevant Swing Line
Lender and the Administrative Agent irrevocable notice (which notice may be
given by telephone (to be promptly confirmed in writing, including by facsimile)
and must be received by the Swing Line Lender prior to 3:00 P.M. Boston time) on
the requested Borrowing Date specifying the amount of the requested Swing Line
Loan which shall be in an aggregate
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minimum amount of $l,000,000 or a whole multiple of $100,000 in excess thereof
(or, if less, the unused portion of the Swing Line Commitment). The proceeds of
the Swing Line Loan will be made available by the relevant Swing Line Lender to
the Borrower at the office of the Swing Line Lender by 4:00 P.M., Boston time,
on the Borrowing Date by crediting the account of the Borrower at such office
with such proceeds. The Borrower may at any time and from time to time, subject
to subsection 3.14, prepay the Swing Line Loans, in whole or in part, without
premium or penalty, by notifying (which notice may be given by telephone (to be
promptly confirmed in writing, including by facsimile)) the relevant Swing Line
Lender and the Administrative Agent prior to 2:00 P.M., Boston time, on any
Business Day of the date and amount of prepayment. If any such notice is given,
the amount specified in such notice shall be due and payable on the date
specified therein. Partial prepayments shall be in an aggregate principal amount
of $100,000 or a whole multiple of $100,000 in excess thereof.
3.16 Refunding of Swing Line Loans; Participations in Swing Line
Loans.
(a) Except as otherwise provided in subsection 3.16(f),
in the event that (i) the aggregate average daily outstanding principal amount
of Swing Line Loans during any weekly period ending on Thursday (or, in the
event Thursday is not a Business Day, on the next succeeding Business Day) of
any week exceeds $30,000,000, and (ii) the principal amount of Swing Line Loans
outstanding on the last day of such period exceeds $30,000,000, the Borrower
shall, or the Administrative Agent may, on behalf of the Borrower (which hereby
irrevocably authorizes the Administrative Agent to act on its behalf in such
regard) request each Revolving Credit Lender to make a Revolving Loan (which
shall be an ABR Loan) in an amount equal to such Lender's Revolving Credit
Commitment Percentage of the amount by which the aggregate outstanding principal
amount of Swing Line Loans on the last day of such period exceeds $20,000,000,
regardless of whether the conditions set forth in subsection 7.2 have been
satisfied in connection therewith. The Swing Line Lenders may, on behalf of the
Borrower (which hereby authorizes the Swing Line Lenders to act on its behalf in
such regard), at any time request each Revolving Credit Lender (including the
Swing Line Lenders) to make a Revolving Credit Loan (which shall be an ABR Loan)
in an amount equal to such Lender's Revolving Credit Commitment Percentage of
the aggregate principal amount of Swing Line Loans then outstanding, regardless
of whether the conditions set forth in subsection 7.2 have been satisfied in
connection therewith. Unless any of the events described in paragraph (f) of
Section 10 shall have occurred with respect to the Borrower (in which event the
procedures of paragraph (c) of this subsection 3.16 shall apply) each Lender
shall make the proceeds of its Revolving Loan available to the Administrative
Agent for the account of the relevant Swing Line Lender at the Administrative
Agent's office specified in or pursuant to subsection 12.2 prior to 12:00 noon,
Boston time, in funds immediately available in Dollars on the Business Day next
succeeding the date such notice is given. The proceeds of such Revolving Loans
shall be immediately applied to repay the relevant Swing Line Loan. Effective on
the day such Revolving Loans are made, the relevant Swing Line Loan so paid
shall no longer be outstanding as a Swing Line Loan and shall no longer be due
under the Swing Line Note. The Borrower authorizes each Swing Line Lender, upon
written notice to the Borrower, to charge the Borrower's accounts with such
Swing Line Lender (up to the amount available in each such account) in order to
immediately pay the amount of its outstanding Swing Line Loans to the extent
amounts received from the Lenders are not sufficient to repay in full such
outstanding Swing Line Loans.
(b) Notwithstanding anything herein to the contrary, and
except as provided in subsection 3.16(f), no Swing Line Lender shall make any
Swing Line Loans if the Swing Line Lender has received written notice that the
conditions set forth in subsection 7.2 have not been satisfied in connection
with the making of such Swing Line Loans and no Swing Line Lender shall
otherwise be required to determine that, or take notice whether, the conditions
precedent set forth in subsection 7.2 have been satisfied in connection with the
making of any Swing Line Loan.
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(c) If prior to the making of a Revolving Loan pursuant
to subsection 3.16(a) one of the events described in paragraph (f) of Section 10
shall have occurred and be continuing with respect to the Borrower, each Lender
will, on the date such Revolving Loan was to or would have been made pursuant to
the notice in subsection 3.16(a), purchase an undivided participating interest
in the outstanding Swing Line Loans in an amount equal to (i) its Revolving
Credit Commitment Percentage times (ii) the aggregate principal amount of Swing
Line Loans then outstanding. Each Lender will immediately transfer to the Swing
Line Lender, in immediately available funds, the amount of its participation.
(d) Whenever, at any time after any Lender has purchased
a participating interest in a Swing Line Loan, any Swing Line Lender receives
any payment on account thereof, such Swing Line Lender will distribute to such
Lender its participating interest in such amount (appropriately adjusted, in the
case of interest payments, to reflect the period of time during which such
Lender's participating interest was outstanding and funded), provided that, in
the event that such payment received by such Swing Line Lender is required to be
returned, such Lender will return to such Swing Line Lender any portion thereof
previously distributed by such Swing Line Lender to it.
(e) Each Lender's obligation to make the Revolving Loans
referred to in subsection 3.16(a) and to purchase participating interests
pursuant to subsection 3.16(c) shall be absolute and unconditional and shall not
be affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such Lender or the
Borrower may have against the relevant Swing Line Lender, the Borrower or any
other Person for any reason whatsoever, (ii) the occurrence or continuance of a
Default or an Event of Default, (iii) any adverse change in the condition
(financial or otherwise) of the Borrower, (iv) any breach of this Agreement or
any other Loan Document by the Borrower, any Subsidiary or any other Lender, or
(v) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(f) (i) The Administrative Agent may, as a Swing Line
Lender hereunder, from time to time, after the occurrence and during the
continuance of any Default or Event of Default, and subject to clause (C) of
this subsection 3.16(f), and notwithstanding the requirements of subsections
7.2(a) and 7.2(b), make such disbursements and advances pursuant to the Loan
Documents, in the form of Swing Line Loans, which the Administrative Agent, in
its sole discretion, deems necessary or desirable to preserve or protect the
Collateral or any portion thereof or to enhance the likelihood or maximize the
amount of repayment of the Loans and other Credit Agreement Obligations;
provided that, after giving effect to any such Swing Line Loans and the use of
proceeds thereof, (A) the aggregate principal amount of Swing Line Loans then
outstanding would not exceed the Swing Line Commitment, (B) the Aggregate
Revolving Credit Outstandings at such time would not exceed the Revolving Credit
Commitment in effect at such time and (C) the Aggregate Outstanding Extensions
of Credit at such time would not exceed the Borrowing Base at such time
(collectively, "Protective Advances"). The Administrative Agent shall notify the
Borrower and each Lender in writing of such Protective Advance. All outstanding
principal of, and interest on, the Protective Advances shall constitute Credit
Agreement Obligations secured by the Collateral until paid in full by the
Borrower.
3.17 Other Fees. The Borrower agrees to pay (i) to the
Administrative Agent the Closing Fee, the Structuring Fee, and the Agent's Fee
in the amounts and on the dates set forth in the Fee Letter.
section 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF
CREDIT
4.1 OPTIONAL AND MANDATORY PREPAYMENTS.
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(a) The Borrower may, at any time and from time to time,
prepay the Loans, in whole or in part, without premium or penalty (except, with
respect to Eurodollar Loans that are prepaid on a date other than the last day
of the Interest Period with respect thereto, as provided under subsection 4.11),
upon (i) in the case of prepayments of Eurodollar Loans, at least three Business
Days' irrevocable notice (which notice may be given by telephone (to be promptly
confirmed in writing, including by facsimile) to the Administrative Agent and
(ii) in the case of prepayments of ABR Loans (other than Swing Line Loans),
irrevocable notice (which notice may be given by telephone (to be promptly
confirmed in writing, including by facsimile)) to the Administrative Agent prior
to 11:30 A.M., Boston time, on the date of such prepayment, in each case
specifying the date and amount of prepayment and whether the prepayment is of
Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination
thereof, the amount allocable to each. Upon receipt of any such notice the
Administrative Agent shall promptly notify each affected Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with any amounts payable
pursuant to subsection 4.11 in connection therewith and, in the case of
prepayments of the Term Loans only, accrued interest to such date on the amount
prepaid. Amounts prepaid on account of the Term Loans may not be reborrowed and
will be applied to the installments thereof in the scheduled order of maturity
thereof. Partial prepayments under this subsection 4.1(a) shall be, in the case
of Eurodollar Loans, in an aggregate principal amount of $1,000,000 or a whole
multiple of $1,000,000 in excess thereof and in the case of ABR Loans, in an
aggregate principal amount of $1,000,000 or a whole multiple of $1,000,000 in
excess thereof.
(b) If, at any time, the Aggregate Outstanding Extensions
of Credit at such time exceed the Borrowing Base at such time, the Borrower
shall, without notice or demand, immediately repay Swing Line Loans then
outstanding and/or, after the Swing Line Loans have been paid in full, Revolving
Loans in an aggregate principal amount equal to the lesser of (i) the amount of
such excess and (ii) the aggregate principal amount of Swing Line Loans and
Revolving Loans then outstanding, together with interest accrued to the date of
such payment or prepayment on the principal so prepaid and any amounts payable
under subsection 4.11 in connection therewith. To the extent that after giving
effect to any prepayment of Swing Line Loans and Revolving Loans required by the
preceding sentence, the Aggregate Outstanding Extensions of Credit at such time
exceed the Borrowing Base at such time, the Borrower shall, without notice or
demand, immediately deposit in the Collateral Account upon terms reasonably
satisfactory to the Administrative Agent an amount equal to the lesser of (i)
the aggregate then outstanding L/C Obligations and (ii) the amount of such
remaining excess. The Administrative Agent shall apply any cash deposited in the
Collateral Account (to the extent thereof) to pay any Reimbursement Obligations
which become due thereafter. To the extent that after giving effect to any
prepayment of the Revolving Loans and cash deposits required by the preceding
sentences, the Aggregate Outstanding Extensions of Credit at such time exceed
the Borrowing Base at such time, the Borrower shall, without notice or demand,
immediately repay the Term Loans in the scheduled order of maturity thereof in
an aggregate principal amount equal to the lesser of (i) the amount of such
excess and (ii) the aggregate principal amount of Term Loans then outstanding,
together with interest accrued to the date of such payment or prepayment on the
principal so prepaid and any amounts payable under subsection 4.11 in connection
therewith. The Borrower shall also prepay the Revolving Loans to the extent
required to comply with subsection 3.16.
(c) The Borrower shall deposit in the Collateral Account
or a Depositary Account (i) except as otherwise provided in subsection 5.1(f) of
the Master Security Agreement, all Asset Sale Proceeds within three business
days after the receipt by the Borrower or any Restricted Subsidiary thereof, and
(ii) all other amounts required by the Master Security Agreement.
(d) The Borrower agrees that, prior to the delivery of a
Notice of Acceleration (as defined in the Master Security Agreement), all
available funds in the Collateral Account shall be applied
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first, to pay amounts due and payable under this Agreement and the other Loan
Documents (other than ABR Loans and Eurodollar Loans), including, without
limitation, interest and fees then due, second, pro rata, to the amount of the
Swing Line Loans and any Reimbursement Obligations then outstanding, third to
the outstanding principal amount of the Revolving Loans, fourth, to any
principal amounts then due on account of the Term Loans, and fifth, after all
amounts payable under clauses first through and including fourth have been paid,
(i) on any Business Day that no Default or Event of Default has occurred and is
continuing, the Borrower may direct the Administrative Agent to transfer to the
Borrower's disbursement account the balance of the available funds, or (ii) on
any Business Day that a Default or Event of Default has occurred and is
continuing, to cash collateralize Letters of Credit outstanding in an amount
equal to 103% of the maximum amount available to be drawn under such Letters of
Credit and thereafter, the Borrower may direct the Administrative Agent to
transfer to the Borrower's disbursement account the balance of the available
funds. The Borrower shall utilize funds on deposit in, or transferred from, the
Collateral Account that are available to it pursuant to the terms hereof (other
than funds the Borrower is entitled to retain in accordance with the provisions
of subsection 5.1(f) of the Master Security Agreement) prior to requesting
Revolving Loans to be made hereunder. All amounts from the Collateral Account to
be applied to ABR Loans and Eurodollar Loans shall be applied first to reduce
outstanding ABR Loans, and second, to cash collateralize, or at the Borrower's
option reduce, outstanding Eurodollar Loans until the expiration of the Interest
Period therefor (with the Borrower being obligated to pay any breakage fees
associated with a reduction of Eurodollar Loans). All amounts in the Collateral
Account shall be applied or released as described above as of the day
immediately following receipt; in that regard the Borrower shall indemnify
Fleet, the Administrative Agent and the Lenders against, and shall pay on
demand, the amount of any provisional items credited to the Credit Agreement
Obligations or released to the Borrower which are not paid.
4.2 Conversion and Continuation Options.
(a) The Borrower may, subject to paragraph (b) below,
elect from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent irrevocable notice of such election prior to 1:00 P.M.,
Boston time, two Business Days prior to the date of conversion, which notice may
be given by telephone (to be promptly confirmed in writing, including by
facsimile), provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent irrevocable notice of such election prior to 1:00 P.M.,
Boston time, two Business Days prior to the date of conversion, which notice may
be given by telephone (to be promptly confirmed in writing, including by
facsimile). Any such notice of conversion to Eurodollar Loans shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon receipt
of any such notice the Administrative Agent shall promptly notify each affected
Lender thereof. All or any part of outstanding Eurodollar Loans and ABR Loans
may be converted as provided herein, provided that (i) no ABR Loan may be
converted into a Eurodollar Loan when any Event of Default has occurred and is
continuing and (ii) no ABR Loan may be converted into a Eurodollar Loan after
the date that is one month prior to the Termination Date.
(b) Any Eurodollar Loans may be continued as such upon
the expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
of the length of the next Interest Period to be applicable to such Eurodollar
Loans, which notice may be given by telephone (to be promptly confirmed in
writing, including by facsimile), provided that no Eurodollar Loan may be
continued as such (i) when any Event of Default has occurred and is continuing
and the Administrative Agent has notified the Borrower that it has determined
that such a continuation is not appropriate or (ii) after the date that is one
month prior to the Termination Date, and provided further, that if the Borrower
shall fail to give such notice or if such continuation is not permitted such
Eurodollar
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Loans shall be automatically converted to ABR Loans on the last day
of such then expiring Interest Period. Upon receipt of any notice pursuant to
this subsection 4.2(b), the Administrative Agent shall notify each affected
Lender thereof.
4.3 Minimum Amounts and Maximum Number of Tranches. All
borrowings, conversions and continuations of Eurodollar Loans hereunder and all
selections of Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of Eurodollar Loans comprising each Tranche shall be equal to
$10,000,000 or a whole multiple of $l,000,000 in excess thereof. In no event
shall there be more than 15 Tranches outstanding at any time.
4.4 Interest Rates and Payment Dates.
(a) Each Eurodollar Loan shall bear interest for each day
during each Interest Period with respect thereto at a rate per annum equal to
the Eurodollar Rate determined for such Interest Period plus the Applicable
Margin.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR plus the Applicable Margin.
(c) Each Swing Line Loan shall bear interest at a rate
per annum equal to the ABR plus the Applicable Margin for ABR Loans.
(d) Notwithstanding the rate of interest specified in
this subsection 4.4 or elsewhere herein, upon the occurrence of any Event of
Default and for so long thereafter as such Event of Default is continuing, at
the Administrative Agent's discretion or at the request of the Required Lenders,
upon notice to the Borrower, the principal balance of all Loans shall bear
interest at a rate per annum which is equal to the greater of (x) the rate that
would otherwise be applicable thereto pursuant to this Agreement plus 2% per
annum, or (y) the aggregate of ABR plus 2% per annum. If all or a portion of (i)
any interest payable on any Loan, (ii) any commitment fee or (iii) any other
amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), any such overdue interest, commitment
fee or other amount shall bear interest at a rate per annum which is the rate
described in paragraph (b) of this subsection plus 2%, in each case from the
date of such non-payment until such overdue interest, commitment fee or other
amount is paid in full (as well after as before judgment).
(e) Interest shall be payable in arrears on each Interest
Payment Date, provided that (i) interest accruing pursuant to subsection 4.4(d)
shall be payable from time to time on demand and (ii) interest on the Term Loans
shall also be payable on the Termination Date (or such earlier date on which the
Term Loans become due and payable pursuant to Section 10) and (iii) interest on
the Revolving Loans shall also be due and payable on the Termination Date (or
such earlier date on which the Revolving Loans become due and payable pursuant
to Section 10).
4.5 Computation of Interest and Fees.
(a) Commitment fees and, whenever it is calculated on the
basis of Fleet's base rate, interest shall be calculated on the basis of a 365-
(or 366-, as the case may be) day year for the actual days elapsed; and
otherwise interest and fees and commissions in respect of Letters of Credit
shall be calculated on the basis of a 360-day year for the actual days elapsed.
The Administrative Agent shall as soon as practicable notify the Borrower and
the affected Lenders of each determination of a Eurodollar Rate. Any change in
the interest rate on a Loan resulting from a change in the ABR or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such
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change becomes effective. The Administrative Agent shall as soon as practicable
notify the Borrower and the affected Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
presumed correct in the absence of manifest error.
(c) Each Lender shall use its best efforts to furnish
quotations of rates to the Administrative Agent as contemplated hereby. If any
of the Lenders shall be unable or shall otherwise fail to supply such rates to
the Administrative Agent upon its request, the rate of interest shall, subject
to the provisions of this subsection 4.5, be determined on the basis of the
quotations of the remaining Lenders or Lender.
4.6 Inability to Determine Interest Rate. If prior to the first
day of any Interest Period:
(a) the Administrative Agent shall have
determined (which determination shall be conclusive and binding upon
the Borrower) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received
notice from any Lender that the making or continuation of any
Eurodollar Loan has become impracticable as a result of a contingency
occurring after the date hereof which materially and adversely affects
the London interbank market,
the Administrative Agent shall give facsimile or telephonic notice thereof to
the Borrower and the affected Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as ABR Loans, (y) any ABR Loans that were
to have been converted on the first day of such Interest Period to Eurodollar
Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans
which the Borrower has requested to continue as such pursuant to subsection
4.2(b) shall be converted, on the first day of such Interest Period, to ABR
Loans, provided that, in the case of clause (b) above, only the Eurodollar Loan
of a Lender which delivers a notice pursuant to such clause shall be subject to
this sentence and the following sentence. Until such notice has been withdrawn
by the Administrative Agent, no further Eurodollar Loans shall be made or
continued as such, nor shall the Borrower have the right to convert ABR Loans to
Eurodollar Loans.
4.7 Pro Rata Treatment and Payments.
(a) Except as otherwise provided in subsections 3.6
through 3.16, all payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without set off or counterclaim and shall be made prior to 1:00 P.M.,
Boston time, on the due date thereof to the Administrative Agent, for the
account of the Revolving Credit Lenders or the Term Loan Lenders, as the case
may be, at the Administrative Agent's office specified in or pursuant to
subsection 12.2 (except as otherwise provided herein) in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders entitled to receive the same promptly upon receipt in
like funds as received. If any payment hereunder (other than payments on
Eurodollar Loans) becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day, and, with
respect to payments of principal. Interest thereon shall be payable at the then
applicable rate during such extension. If any payment on a Eurodollar Loan
becomes due and payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day (and, with respect to
payments of
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principal, interest thereon shall be payable at the then applicable rate during
such extension) unless the result of such extension would be to extend such
payment into another calendar month, in which event such payment shall be made
on the immediately preceding Business Day. Each payment (including each
prepayment) by the Borrower on account of principal of and interest on the Term
Loans shall be made pro rata according to the respective outstanding principal
amounts of the Term Loans then held by the Term Loan Lenders.
(b) Unless the Administrative Agent shall have been
notified in writing by any Lender prior to a borrowing that such Lender will not
make the amount that would constitute its portion of such borrowing available to
the Administrative Agent, the Administrative Agent may assume that such Lender
is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Rate for the
period until such Lender makes such amount immediately available to the
Administrative Agent. A certificate of the Administrative Agent submitted to any
Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's portion of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to ABR Loans hereunder, on demand, from the Borrower.
(c) Each borrowing by the Borrower of Revolving Loans
shall be made ratably from the Revolving Credit Lenders in accordance with their
respective and Revolving Credit Commitment Percentages. Any reduction of the
Revolving Credit Commitments shall be made ratably among the Lenders, in
accordance with their respective Revolving Credit Commitment Percentages. Each
payment (including each prepayment) by the Borrower on account of principal of
and interest on the Revolving Loans shall be made pro rata according to the
respective outstanding principal amounts of the Revolving Loans then held by the
Revolving Credit Lenders.
4.8 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, such Lender shall give
prompt notice thereof to the Borrower and the Administrative Agent and
thereafter (a) the commitment of such Lender hereunder to make Eurodollar Loans,
continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans
shall forthwith be suspended during the period of illegality and (b) such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 4.11.
4.9 Requirements of Law.
(a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof 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 date hereof shall increase the cost to such Lender, by an amount which such
Lender deems to be material, of making, converting into, continuing or
maintaining Eurodollar Loans or issuing or participating in Letters of Credit or
reduce any amount receivable hereunder in respect thereof including any such
cost or reduced amount receivable resulting from (i) any tax of any kind
whatsoever with
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respect to this Agreement, any Note, any Eurodollar Loan, any Letter of Credit
issued or participated in by it or any Application, or change the basis of
taxation of payments to such Lender in respect thereof (except for Non-Excluded
Taxes covered by subsection 4.10 and changes in the rate of tax on the overall
gross or net income of such Lender) or (ii) any reserve, special deposit,
compulsory loan or singular requirement against assets held by deposits or other
liabilities in or for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds by, any office of such Lender which
is not otherwise included in the determination of the Eurodollar Rate hereunder,
then, in any such case, within 15 days after demand therefor (accompanied by the
certificate contemplated by subsection 4.9(c) with respect thereto) the Borrower
shall pay such Lender such additional amount or amounts as will compensate such
Lender for such increased cost or reduced amount receivable.
(b) If any 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 or compliance by such Lender or any
corporation 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 date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time,
within 15 days after demand therefor (accompanied by the certificate
contemplated by subsection 4.9(c) with respect thereto), the Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
for such reduction.
(c) If any Lender becomes entitled to claim any
additional amounts pursuant to this subsection 4.9, it shall promptly notify the
Borrower (with a copy to the Administrative Agent) of the event by reason of
which it has become so entitled, provided that no Lender shall be entitled to
claim any such additional amount (i) with respect to the period which is more
than 180 days prior to the delivery of such notice or (ii) if such Lender shall
not seek as a result of such event payment of any similar amounts from at least
one other borrower to whom it has extended credit. A certificate as to any
additional amounts payable pursuant to this subsection 4.9 submitted by such
Lender to the Borrower (with a copy to the Administrative Agent) setting forth
in reasonable detail the calculation of such amounts and the basis therefor
shall be conclusive in the absence of manifest error. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
4.10 Indemnification for Taxes.
(a) All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise and excise
taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent
or any Lender as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Administrative Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder or
under any Note, the amounts so payable to the Administrative Agent or such
Lender shall be increased to the extent necessary to yield to
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the Administrative Agent or such Lender (after payment of all Non-Excluded
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement, provided, that the Borrower shall not
be required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof if
such Lender fails to comply with the requirements of paragraph (b) of this
subsection 4.10. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws
of the United States of America or a state thereof shall:
(a) in the case of a Lender or a Transferee that
is a "bank" under Section 881(c)(3)(A) of the Tax Code:
(A) on or before the date it becomes a
party to this Agreement (or, in the case of a Participant, on
or before the date such Participant becomes a Participant
hereunder), deliver to the Borrower and the Administrative
Agent (I) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable
form, as the case may be, and (II) an Internal Revenue Service
Form W-8 or W-9, or successor applicable form, as the case may
be;
(B) deliver to the Borrower and the
Administrative Agent two further copies of any such form or
certification on or before the date that any such form or
certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower; and
(C) obtain such extensions of time for
filing and complete such forms or certifications as may
reasonably be requested by the Borrower or the Administrative
Agent; and
(b) in the case of a Lender or a Transferee that
is not a "bank" under Section 881(c)(3)(A) of the Tax Code:
(A) on or before the date it becomes a
party to this Agreement (or, in the case of a Participant, on
or before the date such Participant becomes a Participant
hereunder), deliver to the Borrower and the Administrative
Agent (I) a statement under penalties of perjury that such
Lender or Transferee (x) is not a "bank" under Section
881(c)(3)(A) of the Tax Code, is not subject to regulatory or
other legal requirements as a bank in any jurisdiction, and
has not been treated as a bank for purposes of any tax,
securities law or other filing or submission made to any
Governmental Authority, any application made to a rating
agency or qualification for any exemption from tax, securities
law or other legal requirements, (y) is not a 10-percent
shareholder within the meaning of Section 881(c)(3)(B) of the
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Tax Code and (z) is not a controlled foreign corporation
receiving interest from a related person within the meaning of
Section 881(c)(3)(C) of the Tax Code and (II) a properly
completed and duly executed internal Revenue Service Form W-8
or applicable successor form;
(B) deliver to the Borrower and the
Administrative Agent two further properly completed and duly
executed copies of such Form W-8, or any successor applicable
form, on or before the date that any such Form W-8 expires or
becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrower or upon the request of the
Borrower; and
(C) obtain such extensions of time for
filing and completing such forms or certifications as may be
reasonably requested by the Borrower or the Administrative
Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the
Administrative Agent. Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall certify (i) in the case of a
Form 1001 or 4224, that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
(ii) in the case of a Form W-8 or W-9 provided pursuant to subsection
4.10(b)(i)(A)(II) that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 12.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Lender
from which the related participation shall have been purchased.
4.11 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or reasonable expense which such Lender
may sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans, after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of a Eurodollar Loan, after the Borrower has given a notice thereof
in accordance with the provisions of this Agreement or (c) the making of a
prepayment or conversion of Eurodollar Loans on a day which is not the last day
of an Interest Period with respect thereto, which loss shall be equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
amount so prepaid or converted, or not so borrowed, converted or continued, for
the period from the date of such prepayment or conversion or of such failure to
borrow, convert or continue to the last day of such Interest Period (or proposed
Interest Period), respectively, in each case at the applicable Eurodollar Rate
(exclusive of any Applicable Margin) for such Eurodollar Loans provided for
herein over (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
eurodollar market (it being understood that the Borrower shall not be required
to indemnify any Lender for lost profits). A certificate as to any amounts
payable pursuant to this subsection 4.11 submitted by any Lender to the Borrower
(with a copy to the Administrative Agent) shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
4.12 Change of Lending Office. Each Lender agrees that if it makes
any demand for payment under subsection 4.9 or 4.10(a), or if any adoption or
change of the type described in subsection 4.8 shall occur with respect to it,
it will 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, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
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obviate the need for the Borrower to make payments under subsection 4.9 or
4.10(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 4.8.
4.13 Evidence of Debt.
(a) Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of the Borrower to
such Lender resulting from the Loans of such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.
(b) The Administrative Agent shall maintain the Register
pursuant to subsection 12.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) the amount of each Loan made hereunder, the Type
thereof and each Interest Period (if any) applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(c) The entries made in the Register and the accounts of
each Lender maintained pursuant to subsection 4.13(a) shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations of the Borrower therein recorded; provided, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans in
accordance with the terms of this Agreement.
(d) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender a promissory note of the Borrower evidencing the Revolving Loans of
such Lender, substantially in the form of Exhibit C-1 (each, "Revolving Credit
Note"), payable to the order of such Lender. Each Lender is hereby authorized to
record the date, Type and amount of each Revolving Loan of such Lender, the date
and amount of each payment or prepayment of principal thereof, each continuation
of all or a portion thereof as the same Type, each conversion of all or a
portion thereof to another Type and, in the case of Eurodollar Loans, the length
of each Interest Period and Eurodollar Rate with respect thereto, on the
schedule (or any continuation of the schedule) annexed to and constituting a
part of its Revolving Credit Note, as the case may be, and any such recordation
shall, to the extent permitted by applicable law, constitute prima facie
evidence of the accuracy of the information so recorded, provided that the
failure to make any such recordation (or any error therein) shall not affect the
obligation of the Borrower to repay (with applicable interest) the Revolving
Loans in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Term Loan Lender, the Borrower will execute and
deliver to such Term Loan Lender a promissory note of the Borrower evidencing
the Term Loan of such Term Loan Lender, substantially in the form of Exhibit C-2
(a "Term Note"), payable to the order of such Term Loan Lender and in a
principal amount equal to, the outstanding Term Loan of such Term Loan Lender.
Each Term Loan Lender is hereby authorized to record the date, Type and amount
of the Term Loan of such Term Loan Lender, the date and amount of each payment
or prepayment of principal thereof, each continuation of all or portion thereof
as the same Type, each conversion of all or a portion thereof to another Type
and, in the case of Eurodollar Loans, the length of each Interest Period and
Eurodollar Rate with respect thereto, on the schedule (or any continuation of
the schedule) annexed to and constituting a part of its Term Note, as the case
may be, and any such recordation shall, to the extent permitted by applicable
law, constitute prima facie evidence of the accuracy of the information so
recorded, provided that the failure to make any such recordation (or any error
therein) shall
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not affect the obligation of the Borrower to repay (with applicable interest)
the Term Loans in accordance with the terms of this Agreement.
(f) The Borrower agrees that, upon the request to the
Administrative Agent by any Swing Line Lender, the Borrower will execute and
deliver to such Swing Line Lender a promissory note of the Borrower evidencing
the Swing Line Loans of such Swing Line Lender, substantially in the form of
Exhibit D (a "Swing Line Note"), payable to the order of such Swing Line Lender
and in a principal amount equal to the Swing Line Commitment. Each Swing Line
Lender is hereby authorized to record the date and amount of each Swing Line
Loan made by it and the date and amount of each payment or prepayment of
principal thereof on the schedule (or any continuation of the schedule) annexed
to and constituting a part of its Swing Line Note, as the case may be, and any
such recordation shall, to the extent permitted by applicable law, constitute
prima facie evidence of the accuracy of the information so recorded, provided
that the failure to make any such recordation (or any error therein) shall not
affect the obligation of the Borrower to repay (with applicable interest) the
Swing Line Loans in accordance with the terms of this Agreement.
SECTION 5. FINANCING SUBSEQUENT TO CONSUMMATION DATE
The Administrative Agent and the Lenders (in accordance with their
Commitments and Commitment Percentages at the time of consummation of such
financing facility) shall provide the Borrower (or such other Persons as
provided in the Post-Confirmation Credit Agreement), at the Borrower's request,
with a financing facility on and after the Consummation Date in the amounts, on
the terms, and subject to the conditions set forth in the Post-Confirmation
Credit Agreement annexed hereto as Exhibit J.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make or continue to make the Extensions of Credit, the Borrower
hereby represents and warrants to the Administrative Agent and each Lender that:
6.1 Financial Condition. The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at January 2, 2000 and the related
consolidated statements of income and retained earnings and cash flows for the
Fiscal Year ended on such date, reported on by Deloitte & Touche, copies of
which have heretofore been furnished to each Lender, are complete and correct in
all material respects and present fairly the consolidated financial condition of
the Borrower and its Consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the Fiscal Year then ended. The unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at February 29, 2000 and the
related unaudited consolidated statements of, financial condition, income and
retained earnings and cash flows for the nine-month period ended on such date,
certified by a Responsible Officer, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the nine-month period then ended (subject
to normal year-end audit adjustments). All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
such accountants or Responsible Officer, as the case may be, and as disclosed
therein). Except as set forth on Schedule 6.1, neither the Borrower nor any of
its Consolidated Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation not permitted under
subsection 9.2, material contingent liability or liability for taxes, or any
material long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing statements or in the notes
thereto. Except as set forth on Schedule 6.1 and other than pursuant to the
Business Plan and the Borrower's 1999 business plan, during the period from
January 2, 2000 to and
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including the date hereof, there has been no sale, transfer or other disposition
by the Borrower or any of its Consolidated Subsidiaries of any material part of
its business or property and no purchase or other acquisition of any business or
property (including any capital stock of any other Person) material in relation
to the consolidated financial condition of the Borrower and its Consolidated
Subsidiaries at January 2, 2000.
6.2 No Change. Except as set forth on Schedule 6.2 and other than
the Reorganization Cases and the events related to the Reorganization Cases or
the Business Plan, since January 2, 2000, there has been no development or event
which has had or could reasonably be expected to have a Material Adverse Effect.
6.3 Existence; Compliance with Law. Each of the Borrower and its
Restricted Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, except as the
good standing of the Borrower or any Restricted Subsidiary is affected by the
Borrower's or such Restricted Subsidiary's failure to have paid franchise and
excise taxes or to have filed the required corporation annual report in
Tennessee, (b) has the power and authority, and the legal right, to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently engaged, (c) is duly qualified as a
foreign corporation, foreign limited liability company or foreign limited
partnership, as the case may be, and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification and (d) is in compliance with all
Requirements of Law, including the requirements of the WARN Act, except, in each
case, where the failure to be so organized, existing, in good standing or
qualified, or the failure to have such power or authority or to so comply, could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.4 Power; Authorization; Enforceable Obligations. Each of the
Borrower and its Restricted Subsidiaries has the power and authority, and the
legal right, to make, deliver and perform the Loan Documents to which it is a
party and (in the case of the Borrower) to borrow and obtain the other
Extensions of Credit hereunder and has taken all necessary corporate or other
action to authorize the Extensions of Credit on the terms and conditions of this
Agreement and any Notes and to authorize the execution, delivery and performance
of the Loan Documents to which it is a party. No consent or authorization of,
filing with, notice to, or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the Extensions of
Credit hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents to which the Borrower or any of its
Restricted Subsidiaries is a party except as may be necessary to perfect the
Liens created pursuant to the Security Documents, except as described on
Schedule 6.4 and except those which have been obtained, made or waived. This
Agreement has been, and each other Loan Document will be, duly executed and
delivered on behalf of the Borrower and each of its Restricted Subsidiaries that
is a party thereto. This Agreement constitutes, and each other Loan Document
when executed and delivered will constitute, a legal, valid and binding
obligation of the Borrower and each of its Restricted Subsidiaries that is a
party thereto enforceable against the Borrower and each such Restricted
Subsidiary in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
6.5 No Legal Bar. The execution, delivery and performance of the
Loan Documents to which the Borrower or any of its Restricted Subsidiaries is a
party, the Extensions of Credit hereunder and the use of the proceeds thereof
will not violate any Requirement of Law or Contractual Obligation of the
Borrower or of any of its Restricted Subsidiaries and will not result in, or
require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation (other than pursuant to the Loan Documents), except to
the extent (a) that any such violations (individually or in the aggregate) could
not reasonably be expected to have a Material Adverse Effect and (b) that any
such Liens would otherwise be permitted under subsection 9.3.
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6.6 No Material Litigation. Except as set forth on Schedule 6.6
and other than the Reorganization Cases, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Restricted Subsidiaries or against any of its or their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby or (b) which could reasonably be
expected to have a Material Adverse Effect.
6.7 No Default. As of any date after the Effective Date, except as
set forth on Schedule 6.7, (i) neither the Borrower nor any of its Restricted
Subsidiaries is in default under or with respect to any Contractual Obligation
in respect of post-petition Indebtedness or other obligations greater than
$1,000,000, and (ii) no other party is in default under or with respect to any
Contractual Obligation in respect of Indebtedness or other obligations greater
than $1,000,000 owed to the Borrower or any of its Restricted Subsidiaries, in
each case which could reasonably be expected to have a Material Adverse Effect.
No Default or Event of Default has occurred and is continuing.
6.8 No Burdensome Restrictions. Except as set forth on Schedule
6.8, no Requirement of Law or Contractual Obligation of the Borrower or any of
its Restricted Subsidiaries could reasonably be expected to have a Material
Adverse Effect.
6.9 Taxes. Each of the Borrower and its Restricted Subsidiaries
has filed or caused to be filed all tax returns which, to the knowledge of the
Borrower, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property (including, without limitation, any Material Real Property) and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any such tax returns, taxes, fees or other
charges (i) the amount or validity of which are then being contested in good
faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Borrower or its
Subsidiaries, as the case may be, or (ii) which, if not paid or filed, could not
reasonably be expected to have a Material Adverse Effect); no tax Lien has been
filed, and, to the knowledge of the Borrower, no claim is being asserted, with
respect to any such tax, fee or other charge (other than with respect to any
such tax, fee or other charge the amount or validity of which is then being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the Borrower
or its Subsidiaries, as the case may be) which could reasonably be expected to
have a Material Adverse Effect.
6.10 Federal Regulations. No part of the proceeds of any Extension
of Credit will be used in violation of Regulation U and in no event shall
"margin stock" constitute 25% or more of the assets of the Borrower and its
Restricted Subsidiaries that are subject to the restrictions contained in
Section 9.
6.11 ERISA. Other than the Reorganization Cases and the termination
of the Borrower's pension plan and, to the extent subject to ERISA, if at all,
the Borrower's executive security plan, neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Tax
Code or Section 302 of ERISA) which could reasonably be expected to have a
Material Adverse Effect has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan. Each Plan has complied in all material respects with the applicable
provisions of ERISA and the Tax Code, except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect. No
termination of a Single Employer Plan has occurred, except where such a
termination could not reasonably be expected to have a Material Adverse Effect,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plan) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of
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the assets of such Plan allocable to such accrued benefits, except to the extent
any such excess (individually or in the aggregate) could not reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, except where such withdrawal could not reasonably be
expected to have a Material Adverse Effect, and neither the Borrower nor any
Commonly Controlled Entity would become subject to any liability under ERISA if
the Borrower or any such Commonly Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding the
date on which this representation is made or deemed made, except where such
liability could not reasonably be expected to have a Material Adverse Effect. No
such Multiemployer Plan is in Reorganization or Insolvency, except to the extent
any such Reorganization or Insolvency could not reasonably be expected to have a
Material Adverse Effect.
6.12 Investment Company Act; Other Regulations. The Borrower is not
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. To the
best knowledge of the Borrower, the Borrower is not subject to regulation under
any federal or state statute or regulation (other than Regulation X) which
limits its ability to incur Indebtedness.
6.13 Subsidiaries. Schedule 6.13 sets forth all the Subsidiaries of
the Borrower at the date hereof.
6.14 Environmental Matters. To the knowledge of the Borrower,
except as set forth on Schedule 6.14:
(a) The Mortgaged Properties do not contain any Materials
of Environmental Concern in amounts or concentrations or under such conditions
which (i) constitute a violation of, or (ii) could reasonably be expected to
give rise to liability under, any Environmental Law, except in either case
insofar as such violation or liability, or any aggregation thereof, could not
reasonably be expected to have a Material Adverse Effect.
(b) The Mortgaged Properties and all operations at the
Mortgaged Properties are in compliance, and have within the periods covered by
the applicable statute of limitations been in compliance, in all material
respects with all applicable Environmental Laws, and there is no contamination
at, under or about the Mortgaged Properties or violation of any Environmental
Law with respect to the Mortgaged Properties or the business operated by the
Borrower or any of its Restricted Subsidiaries at the Mortgaged Properties (the
"Business"), except for any such noncompliance, contamination or violation (or
any aggregation thereof) which could not reasonably be expected to have a
Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, noncompliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Mortgaged Properties or the
Business, nor does the Borrower have knowledge or reason to believe that any
such notice will be received or is being threatened, except insofar as such
notice or threatened notice, or any aggregation thereof, does not involve a
matter or matters that could reasonably be expected to have a Material Adverse
Effect.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Mortgaged Properties in violation of, or in
a manner or to a location which could reasonably be expected to give rise to
liability under, any Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or under any of
the Mortgaged Properties in violation of, or in a manner that could reasonably
be expected to give rise to liability under, any applicable
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Environmental Law except insofar as any such violation or liability referred to
in this paragraph, or any aggregation thereof, could not reasonably be expected
to have a Material Adverse Effect.
(e) No judicial proceeding or governmental or
administrative action is pending or threatened under any Environmental Law to
which the Borrower or any Restricted Subsidiary is or could reasonably be
expected to be named as a party with respect to the Mortgaged Properties or the
Business, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the
Mortgaged Properties or the Business except insofar as such proceeding, action,
decree, order or other requirement, or any aggregation thereof, could not
reasonably be expected to have a Material Adverse Effect.
(f) There has been no release or threat of release of
Materials of Environmental Concern at or from the Mortgaged Properties, or
arising from or related to the operations of the Borrower or any Restricted
Subsidiary in connection with the Mortgaged Properties or otherwise in
connection with the Business, in violation of or in amounts or in a manner that
could reasonably give rise to liability under Environmental Laws except insofar
as any such violation or liability referred to in this paragraph, or any
aggregation thereof, could not reasonably be expected to have a Material Adverse
Effect.
(g) Each of the representations and warranties set forth
in subsections 6.14(a) through (f) is true and correct with respect to each
parcel of real property owned or operated by the Borrower or any of its
Restricted Subsidiaries (other than the Mortgaged Properties) except to the
extent that the facts and circumstances giving rise to any such failure to be so
true and correct could not reasonably be expected to have a Material Adverse
Effect.
6.15 The Security Documents. The provisions of the Master Security
Agreement are effective to create in favor of the Administrative Agent a legal
and valid security interest in all right, title and interest of the Borrower and
each Subsidiary Guarantor party thereto in the collateral described therein, and
the Administrative Agent has a fully perfected Lien on all right, title and
interest of the Borrower and each Subsidiary Guarantor in all Mortgaged Property
and security interest in all right, title and interest of the Borrower or such
Subsidiary Guarantor, as the case may be, in all "accounts", "chattel paper",
"inventory", "investment property", "equipment", "goods", "fixtures" and
"general intangibles" (each as defined in the applicable UCC) in each case
superior in right to any Liens of any third person against such collateral or
interests therein, subject only to Liens permitted under subsection 9.3 or by
the Master Security Agreement.
6.16 Ownership of Property; Liens. Each of the Borrower and each
Restricted Subsidiary has good title in fee simple to, or valid ground leasehold
interests in, their respective Material Real Properties and has good title in
fee simple to their other owned real property and valid ownership interests in
their owned personal property, in each case that is material to the operation of
their respective businesses, subject to defects in title and leasehold and other
interests which are not material to the business, operations and financial
condition of the Borrower and its Restricted Subsidiaries taken as a whole and
other than those items referred to in the applicable Mortgages or in the
schedules to the applicable Mortgages, and none of such property is subject to
any Lien other than Liens permitted under subsection 9.3.
6.17 Intellectual Property. The Borrower and each of its Restricted
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which could not reasonably be expected to have a Material Adverse Effect (the
"Intellectual Property"). Except as set forth on Schedule 6.17, no claim has
been asserted and is pending by any Person challenging or questioning the use of
any such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, which could reasonably be expected to have a Material
Adverse Effect, nor does the Borrower know of any valid basis for any such
claim. Except as set forth on Schedule 6.17, to the Borrower's knowledge, the
use
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of such Intellectual Property by the Borrower and its Restricted Subsidiaries
does not infringe on the rights of any Person, except for such claims and
infringements that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
6.18 Pledged Stock. As of the date hereof, the shares of Capital
Stock listed on Schedule 2 to the Master Security Agreement will constitute all
the issued and outstanding shares of Capital Stock of the issuers thereof listed
on said Schedule that are owned by the Borrower or the Subsidiary Guarantors
party to the Master Security Agreement; all such shares have been duly and
validly issued and are fully paid and nonassessable; the relevant Pledgor of
said shares is the record and beneficial owner of said shares; and said shares
are free of any Liens or options in favor of, or claims of, any other Person,
except the Lien of the Master Security Agreement (subject to Section 14 thereof)
and Liens permitted under subsection 8.3(a).
6.19 Real Estate Matters. The real property described on Schedule
6.19 constitutes all of the Material Real Property of the Borrower or any
Subsidiary Guarantor on the date hereof.
6.20 Purpose of Loans; Use of Proceeds. The proceeds of the
Revolving Loans and the Term Loans made on the Effective Date will be used to
repay all obligations outstanding under the Existing DIP Agreement and
Transaction Costs and other general corporate purposes, and the proceeds of all
other Revolving Loans and all Swing Line Loans made after the Effective Date
will be used to provide working capital from time to time for the Borrower and
its Subsidiaries and for other general corporate purposes.
6.21 Accuracy of Information. All statements and other information
(other than statements and information constituting projections or
forward-looking statements) contained in any written documents or other
materials provided to the Administrative Agent and the Lenders by the Borrower
are, when taken as a whole, correct in all material respects and do not contain
any untrue statements of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements were made.
All statements and other information constituting projections which are
contained in any written documents or other materials provided to the
Administrative Agent and the Lenders by the Borrower were prepared based on good
faith estimates and assumptions of the Borrower believed to be reasonable at the
time such projections were prepared.
6.22 Depositary Accounts. Schedule 6.22 sets forth a true and
complete list of all bank accounts maintained by the Borrower and its Restricted
Subsidiaries as of the date hereof.
6.23 Priority. Pursuant to subsections 364(c)(1), (2) and (3) of
the Bankruptcy Code and the Permanent Order, the obligations of the Borrower
hereunder and under the other Loan Documents constitute allowed administrative
expense claims in the Reorganization Cases having priority over all
administrative expenses of the kind specified in sections 503(b) or 507(b) of
the Bankruptcy Code, subject only to Permitted Expenses.
section 7. CONDITIONS
7.1 Conditions to Effectiveness. This Agreement shall become
effective upon satisfaction or waiver of the following conditions:
(a) Bankruptcy Court Order.
(a) The Bankruptcy Court shall have entered the
Permanent Order, which shall have been certified by the Clerk of the
Bankruptcy Court as having been duly entered.
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(b) All motions and other documents to be filed
with and submitted to the Bankruptcy Court in connection with the
Permanent Facility and the approval thereof shall be satisfactory in
form and substance to the Administrative Agent.
(b) Execution of Loan Documents. The Administrative Agent
shall have received (i) this Agreement, executed and delivered by a duly
authorized officer of the Borrower, with a counterpart for the Administrative
Agent and each Lender and (ii) the Master Security Agreement, executed and
delivered by a duly authorized officer of each Loan Party that is a party
thereto, with a copy for each Lender.
(c) Closing Certificate. The Administrative Agent shall
have received, with a copy for each Lender, a certificate of the Borrower, dated
the Effective Date, substantially in the form of Exhibit F, with appropriate
insertions and attachments, executed by the President, the Chief Executive
Officer, the Chief Financial Officer or any Vice President and the Secretary or
any Assistant Secretary of the Borrower.
(d) Corporate Proceedings of the Borrower. The
Administrative Agent shall have received, with a copy for each Lender, a copy of
the resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of the Borrower authorizing (i)
the execution, delivery and performance of this Agreement and the other Loan
Documents to which it is a party (ii) the Extensions of Credit contemplated
hereunder and (iii) the granting by it of the Liens created pursuant to the
Security Documents, certified by the Secretary or an Assistant Secretary of the
Borrower as of the Effective Date, which certificate shall be in form and
substance reasonably satisfactory to the Administrative Agent and shall state
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded.
(e) Borrower Incumbency Certificate. The Administrative
Agent shall have received, with a copy for each Lender, a certificate of the
Borrower, dated the Effective Date, as to the incumbency and signature of the
officers of the Borrower executing any Loan Document reasonably satisfactory in
form and substance to the Administrative Agent, executed by the President, the
Chief Executive Officer or any Vice President and the Secretary or any Assistant
Secretary of the Borrower.
(f) Corporate Proceedings of Subsidiaries. The
Administrative Agent shall have received, with a copy for each Lender, a copy of
the resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors or sole shareholder of each
Restricted Subsidiary which is a party to a Loan Document authorizing (i) the
execution, delivery and performance of the Loan Documents to which it is a party
and (ii) the granting by it of the Liens created pursuant to the Security
Documents to which it is a party certified by the Secretary or an Assistant
Secretary of each such Subsidiary as of the Effective Date, which certificate
shall be in form and substance reasonably satisfactory to the Administrative
Agent and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(g) Subsidiary Incumbency Certificates. The
Administrative Agent shall have received, with a copy for each Lender, a
certificate of each Restricted Subsidiary of the Borrower which is a party to a
Loan Document, dated the Effective Date, as to the incumbency and signature of
the officers of such Subsidiary acknowledging and consenting to the execution
and delivery of this Agreement by the Borrower, reasonably satisfactory in form
and substance to the Administrative Agent, executed by the President, the Chief
Executive Officer or any Vice President and the Secretary or any Assistant
Secretary of such Subsidiary.
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(h) Fees.
(a) The Administrative Agent, the Arranger and
each Lender shall have received or concurrently receive the Transaction
Costs payable on or prior to the Effective Date and the Administrative
Agent shall have been reimbursed for all reimbursable expenses for
which invoices have been presented to the Borrower.
(b) On the Effective Date the Administrative
Agent shall have been paid the Closing Fee (to the extent not
previously paid), the Structuring Fee, and the Agent's Fee.
(i) Legal Opinions. The Administrative Agent shall have
received, with a copy for each Lender, (i) the executed legal opinion of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Borrower and the other
Loan Parties, substantially in the form of Exhibit G; and (ii) such other legal
opinions as the Administrative Agent may reasonably require.
(j) Lien Searches. On or before the Effective Date, the
Administrative Agent shall have received the results of (i) a recent search in
the jurisdictions listed on Schedule 7.1(j) of the UCC, judgment and tax lien
filings (as indicated on such Schedule) which may have been filed with respect
to personal property of the Borrower and the Subsidiary Guarantors, and (ii) a
real estate title search or other evidence reasonably satisfactory to the
Administrative Agent with respect to all Mortgaged Property, and the results of
such searches shall be reasonably satisfactory to the Administrative Agent.
(k) No Material Adverse Change. Except as set forth on
Schedule 6.2 and other than the Reorganization Cases and the events related to
the Reorganization Cases or the Business Plan, there shall have occurred no
material adverse change in the business, condition (financial or otherwise),
operations, performance or properties of the Borrower and its subsidiaries since
January 2, 2000.
(l) No Litigation. Other than the Reorganization Cases
and as set forth on Schedule 6.6, there shall exist no action, suit,
investigation, litigation or proceeding pending or threatened in any court or
before any arbitrator or governmental instrumentality that could reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise), operations, performance, properties or prospects of the Borrower
and its subsidiaries.
(m) Consents and Approvals. All governmental and third
party consents and approvals necessary in connection with this Agreement and the
grant of security interests shall have been obtained (without the imposition of
any conditions that are not reasonably acceptable to the Lenders) and shall
remain in effect; and no law or regulation shall be applicable in the reasonable
judgment of the Lenders that restrains, prevents or imposes materially adverse
conditions upon the transactions contemplated hereby.
(n) Insurance and Bonding. The Lenders shall be satisfied
with the amount, types and terms and conditions of all insurance and bonding
maintained by the Borrower and its subsidiaries, and the Lenders shall have
received endorsements naming the Administrative Agent, on behalf of the Lenders,
as an additional insured and loss payee under all insurance policies to be
maintained with respect to the properties of the Borrower and its Subsidiaries
forming part of the Lenders' Collateral.
(o) Flood Insurance. To the extent required by applicable
law, the Administrative Agent shall have received (i) evidence of a policy of
flood insurance which (A) covers any parcel of Material Real Property subject to
a first priority Mortgage located in an area identified as an area having
special flood hazards by the Secretary of Housing and Urban Development or other
applicable agency, and (B) otherwise complies with such applicable law and (ii)
confirmation that the Borrower has received the notice required pursuant to
Section 208(e)(3) of Regulation H of the Board of Governors.
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(p) Financial Information. The Administrative Agent shall
have received all information (financial or otherwise) reasonably requested by
it, including, without limitation, a detailed one year financial projection and
the business assumptions with respect thereto, and such information shall be
reasonably satisfactory be in form and substance to the Administrative Agent.
(q) Excess Availability. After giving effect to the
making of the Term Loan and the initial Revolving Loans hereunder, the payment
of all fees and expenses required hereunder and the issuance of all Letters of
Credit to be issued upon or immediately subsequent to the Effective Date, the
Borrower shall have Excess Availability of at least $155,000,000.
(r) Cash Management. The Borrower shall have established
a cash management system as described herein and in the Master Security
Agreement reasonably satisfactory to the Administrative Agent.
(s) Payoff of Existing DIP Agreement. The Administrative
Agent shall have received a payoff letter from the administrative agent under
the Existing DIP Agreement in form reasonably satisfactory to the Administrative
Agent and an assignment of such administrative agent's rights in and to all
blocked account agreements and lockbox agreements executed in connection with
the Existing DIP Agreement.
(t) Additional Matters. All corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received such
other documents and legal opinions in respect of any aspect or consequence of
the transactions contemplated hereby or thereby as it shall reasonably request.
7.2 Conditions to Each Extension of Credit. The agreement
of each Lender to make any Extension of Credit requested to be made by it on any
date (including, without limitation, its initial Extension of Credit) is subject
to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Loan Parties in or pursuant to
Section 6 and in or pursuant to the other Loan Documents shall be true and
correct in all material respects and as of such date as if made on and as of
such date, except to the extent such representations and warranties related to a
specific earlier date (i.e. those in subsections 6.1, 6.13, 6.18, 6.19 and 6.22
of this Agreement or subsections 7.4, 7.5, 7.7(a),(c), and (d), and 7.8(a),(b),
and (c) of the Master Security Agreement) in which case such representations and
warranties shall be true and correct in all material respects as of such earlier
date, provided, that if such earlier date is the "date hereof", such
representation and warranty shall also be true and correct in all material
respects on and as of the Effective Date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the Extension
of Credit requested to be made on such date.
(c) Borrowing Base. After giving effect to the Extensions
of Credit requested to be made on any such date and the use of proceeds thereof,
the Aggregate Outstanding Extensions of Credit at such time shall not exceed the
Borrowing Base at such time.
(d) No Legal Impediment. The making of the Loans on such
date does not violate any Requirement of Law and is not enjoined, temporarily,
preliminarily or permanently.
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(e) Borrowing Base Certificate. The Administrative Agent
shall have received a Borrowing Base Certificate, executed and delivered by a
duly authorized officer of the Borrower.
(f) Bankruptcy Court Approval. The Permanent Order
authorizing and approving the Permanent Facility, shall be in full force and
effect and shall not have been vacated, reversed, modified, amended or stayed
without the consent of the Required Lenders.
Each Extension of Credit to the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date thereof that, except
to the extent waived in accordance with this Agreement, the conditions contained
in this subsection have been satisfied.
section 8. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any Letter of Credit remains outstanding or any amount is owing to any
Lender or the Administrative Agent hereunder or under any other Loan Document,
the Borrower shall and (except in the case of delivery of financial information,
reports and notices) shall cause each of its Restricted Subsidiaries to:
8.1 Financial Statements. Furnish to the Administrative Agent with
a copy for each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each Fiscal Year of the Borrower, a copy of the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of
such year and the related consolidated statements of income and retained
earnings and of cash flows for such year, setting forth in each case in
comparative form the figures as of the end of and for the previous Fiscal Year,
reported on without a qualification as to the scope of the audit, by Deloitte &
Touche or other independent certified public accountants of nationally
recognized standing, together with a copy of the Borrower's Form 10-K filed with
the SEC for such Fiscal Year;
(b) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of each
Fiscal Year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at the end of such quarter and the
related unaudited consolidated statements of income and retained earnings and of
cash flows of the Borrower and its Consolidated Subsidiaries for such quarter
and the portion of the Fiscal Year through the end of such quarter, setting
forth in each case in comparative form the figures for the previous Fiscal Year
as set forth in the Borrower's Form 10-Q filed with the SEC for such quarterly
period, certified by a Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit adjustments);
(c) as soon as available, but in any event not later than
30 days after the end of each fiscal month (other than January of each year, for
which such financial information shall be furnished not later than 60 days after
the end of such fiscal month) (i) for each fiscal month other than a fiscal
month which is also the end of a quarterly period, an unaudited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries in summary form
as at the end of such fiscal month and the related unaudited consolidated
statement of income of the Borrower and its Consolidated Subsidiaries in summary
form for such fiscal month, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit adjustments)
and (ii) for each fiscal month a statement setting forth the Cumulative EBITDA
or Rolling 12-Month EBITDA, as applicable, of the Borrower and its Consolidated
Subsidiaries for such fiscal month; and
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(d) as soon as available, all schedules of assets and
liabilities, all statements of financial affairs, all operating reports, all
claims registers and all other pleadings, in each case filed in the
Reorganization Cases by or on behalf of any Loan Party.
All such financial statements referred to in paragraphs (a) and (b) above shall
be complete and correct in all material respects (subject to, in the case of the
financial statements referred to in paragraph (b) above, normal
year-end adjustments) and shall be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein). The financial statements
referred to in paragraph (c) above shall be prepared in summary form and
otherwise in a manner consistent with the Borrower's current internal reporting
practices.
8.2 Certificates; Other Information. Furnish to the Administrative
Agent with a copy for each Lender (which the Administrative Agent shall promptly
distribute to such Lenders):
(a) concurrently with the delivery of the financial
statements referred to in subsection 8.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating that
in making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default under subsection 9.1, except as specified in such
certificate;
(b) (i) concurrently with the delivery of the financial
statements referred to in subsections 8.1(a) and (b), a certificate of a
Responsible Officer stating that such Responsible Officer has obtained no
knowledge of any Default or Event of Default with respect to the period covered
by such financial statements except as specified in such certificate and (ii)
concurrently with the delivery of the financial statements referred to in
subsections 8.1(a), (b) and (c), a certificate of a Responsible Officer setting
forth, in reasonable detail, a calculation of the financial covenants set forth
in subsection 9.1 for the period corresponding to such financial statements;
(c) on or prior to Thursday of each week (or more
frequently in the Borrower's discretion), an officer's certificate as of the
previous Sunday (or another day within four days of the date of delivery
thereof) substantially in the form of Exhibit H (a "Borrowing Base
Certificate"), certified by a Responsible Officer as true and correct, provided
that any reserves of the types described in the definition of "Borrowing Base"
shall be calculated and/or revised in each Borrowing Base Certificate delivered
on the Reserve Calculation Date, and provided, further, that as to each
Borrowing Base Certificate, (A) Available Cash Equivalents shall be calculated
as of the date of delivery of the Borrowing Base Certificate, and (B) In-
Transit Cash shall be calculated as of the date immediately preceding the date
of delivery of the Borrowing Base Certificate;
(d) concurrently with the delivery of the financial
statements referred to in subsections 8.1(a) and (b), a certificate of a
Responsible Officer setting forth a list of all stores and distribution centers
owned or leased and classified as owned by the Borrower or any of its Restricted
Subsidiaries for which a certificate of occupancy or a temporary certificate of
occupancy has been issued during the period covered by such financial
statements;
(e) not later than (i) 90 days after the beginning of
each Fiscal Year of the Borrower, a copy of the projections by the Borrower of
the operating budget and cash flow budget of the Borrower and its Subsidiaries
for such Fiscal Year, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been prepared on
the basis of assumptions believed to have been reasonable when made and (ii) 45
days after the first day of the third fiscal quarter of such fiscal year, a
certificate of a Responsible Officer updating such projections and budgets for
any significant changes since the delivery thereof;
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(f) promptly after the same are sent, copies of all
financial statements and reports which the Borrower sends to its stockholders,
and promptly after the same are filed, copies of all reports on Form 8-K which
the Borrower may make to, or file with, the SEC;
(g) promptly after the issuance of a Letter of Credit by
an Issuing Bank other than Fleet, an officer's certificate, certified by a
Responsible Officer as true and correct, setting forth the name of the Issuing
Bank, the amount and beneficiary of the Letter of Credit, and such other
information as the Administrative Agent may reasonably require; and
(h) promptly, such additional financial, Collateral and
other information and business reports as the Administrative Agent (on its own
behalf or on behalf of any Lender) may from time to time reasonably request.
8.3 Payment of Obligations. Except as set forth on Schedule 8.3 or
as otherwise required by the Bankruptcy Code or by a Final Order of the
Bankruptcy Court, pay, discharge or otherwise satisfy (whether by exchange,
compromise, settlement or similar satisfaction of such obligations) at or before
maturity or before they become delinquent, as the case may be, all its
post-petition obligations of whatever nature, except where (i) the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower or its Subsidiaries, as the case may be,
or (ii) the failure to so pay, discharge or otherwise satisfy such obligation
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
8.4 Maintenance of Existence; Compliance with Contractual
Obligations and Requirements of Law. Except as set forth on Schedule 8.4,
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except as otherwise
permitted pursuant to subsection 9.4 and except where the failure to maintain
such rights, privileges and franchises could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect; comply with all post-petition
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, be reasonably expected
to have a Material Adverse Effect, provided, that the Borrower shall comply in
all material respects with (i) the Bankruptcy Code, (ii) the Federal Rules of
Bankruptcy Procedure and (iii) the local rules and all orders of the Bankruptcy
Court.
8.5 Maintenance of Property; Insurance. Except as otherwise
required by the Bankruptcy Code or by a Final Order of the Bankruptcy Court,
keep its property necessary in its business in good working order and condition,
ordinary wear and tear excepted, if the failure to do so could reasonably be
expected to have a Material Adverse Effect; maintain with financially sound and
reputable insurance companies insurance on all its property in at least such
amounts and against at least such risks as are usually insured against in the
same general area by similar companies of comparable size engaged in the same or
a similar business and owning or operating similar properties in localities
where the Borrower and its Restricted Subsidiaries operate and furnish upon the
written request of the Administrative Agent information as to the insurance
carried.
8.6 Inspection of Property; Books and Records; Discussions;
Appraisals.
(a) Keep proper books of records and account in which
full, true and correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and transactions in relation to its business
and activities; and, upon reasonable prior written notice, permit
representatives of the Administrative Agent or the Majority Lenders to visit and
inspect any of its properties and examine and
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make abstracts from the books of account of the Borrower and its Restricted
Subsidiaries at any reasonable time and as often as may reasonably be desired
and, during normal business hours, to discuss the business, operations,
properties and financial and other condition of the Borrower and its Restricted
Subsidiaries with officers and employees of the Borrower and its Restricted
Subsidiaries and, in the presence of a Responsible Officer, with its independent
certified public accountants.
(b) Permit the Administrative Agent to obtain, and to
cooperate with the Administrative Agent, to the extent it so requests, in
obtaining (i) other than during the occurrence of an Event of Default, updated
real estate appraisals on all Eligible Leasehold Interests and Eligible
Mortgaged Real Property bi- annually, at the Borrower's expense, (ii) without
duplication of appraisals pursuant to clause (i) hereof, updated real estate
evaluations (not constituting a full appraisal) on all Eligible Leasehold
Interests and Eligible Mortgaged Real Property annually, at the Borrower's
expense, and (iii) during the occurrence of an Event of Default, updated real
estate appraisals and evaluations on all Eligible Leasehold Interests and
Eligible Mortgaged Real Property and environmental site assessments with respect
thereto, at the Borrower's expense, at reasonable intervals.
(c) Permit the Administrative Agent to obtain, and to
cooperate with the Administrative Agent, to the extent it so requests, in
obtaining appraisals of the Borrower's or any Subsidiary Guarantor's Inventory
at the Borrower's expense, (i) no more than three times in any fiscal year (or
such greater number as the Borrower may reasonably request) if no Event of
Default has occurred and is continuing, and (ii) at such intervals as may be
reasonably required by the Administrative Agent during the continuance of an
Event of Default.
8.7 Notices. Promptly upon a Responsible Officer becoming aware
thereof, give notice to the Administrative Agent (which shall promptly give
notice thereof to each Lender) of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of the Borrower or any of its Restricted Subsidiaries
which could reasonably be expected to have a Material Adverse Effect or (ii)
litigation, investigation or proceeding which may exist at any time between the
Borrower or any of its Subsidiaries and any Governmental Authority, which could
reasonably be expected to have a Material Adverse Effect;
(c) any claims, litigation or proceeding affecting the
Borrower or any of its Subsidiaries in which the amount involved is $20,000,000
or more to the extent not covered by insurance or in which injunctive or similar
relief is sought which, in any such case, could reasonably be expected to have a
Material Adverse Effect;
(d) the following events, as soon as administratively
practicable and in any event within 30 days after the Borrower knows or has
reason to know thereof: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan
or any withdrawal from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan which, in any case, could reasonably be expected to have a
Material Adverse Effect or (ii) the institution of proceedings or the taking of
any other action by the PBGC or the Borrower or any Commonly Controlled Entity
or any Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan which, in any case, could
reasonably be expected to have a Material Adverse Effect; and
(e) if the Borrower or any of the Subsidiary Guarantors
cease to perform cycle counts in accordance with historical practices.
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Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
8.8 Environmental Laws.
(a) Except as otherwise required by the Bankruptcy Code
or by a Final Order of the Bankruptcy Court, comply with all applicable
Environmental Laws and obtain and comply in all material respects with and
maintain any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except in any such case to the
extent that failure to do so could not be reasonably expected to have a Material
Adverse Effect.; and
(b) Except as otherwise required by the Bankruptcy Code
or by a Final Order of the Bankruptcy Court, conduct and complete all
investigations, studies, sampling and testing, and all remedial, removal and
other actions required under Environmental Laws, except where the failure to do
so could not reasonably be expected to have a Material Adverse Effect, and
promptly comply in all material respects with all lawful orders and directives
of all Governmental Authorities regarding Environmental Laws except to the
extent that the same are being contested in good faith by appropriate
proceedings and the pendency of such proceedings could not be reasonably
expected to have a Material Adverse Effect.
8.9 Further Assurances. Upon the request of the Administrative
Agent at any time, promptly perform or cause to be performed any and all acts
and execute or cause to be executed any and all documents which are necessary
or, in the reasonable opinion of the Administrative Agent, advisable to maintain
in favor of the Administrative Agent Liens on the Collateral that are duly
perfected (to the extent that the same are contemplated to be so perfected under
the terms of the Loan Documents) in accordance with all applicable Requirements
of Law. During, but at no time before, the continuance of any Event of Default,
the applicable Loan Parties shall execute such Mortgages and UCC financing
statements as the Administrative Agent may reasonably request.
8.10 Application of Proceeds. The Borrower shall use the entire
amount of the proceeds of each Loan in accordance with subsection 6.20, provided
that nothing herein shall in any way prejudice or prevent the Administrative
Agent or the Lenders from objecting, for any reason, to any requests or
applications made for interim or final allowances of compensation for services
rendered or reimbursement of expenses incurred under section 105(a), 330 or 331
of the Bankruptcy Code by any party in interest, and provided, further, that
unless otherwise allowed by the Bankruptcy Court, the Borrower shall not use the
proceeds from any Loans for any purpose that is prohibited under the Bankruptcy
Code.
8.11 Additional Collateral.
(a) With respect to any Person that, subsequent to the
Effective Date, becomes a Domestic Subsidiary (other than a Credit Card
Subsidiary) promptly: (i) execute and deliver to the Administrative Agent a new
pledge agreement or such amendments to the Master Security Agreement as the
Administrative Agent shall deem necessary or advisable to grant to the
Administrative Agent a Lien on the Capital Stock of such Domestic Subsidiary
which is owned by the Borrower or any of its Subsidiaries, (ii) deliver to the
Administrative Agent the certificates representing such Capital Stock, together
with undated stock powers executed and delivered in blank by a duly authorized
officer of the pledgor thereof, (iii) cause such new Domestic Subsidiary (A) to
become a party to the Master Security Agreement, in each case pursuant to
documentation which is in form and substance satisfactory to the Administrative
Agent, and (B) to take all actions reasonably deemed necessary or advisable by
the Administrative Agent to cause the Lien created by the Master Security
Agreement to be duly perfected (to the extent contemplated therein and in
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the other Loan Documents) in accordance with all applicable Requirements of Law,
including, without limitation, the filing of financing statements in such
jurisdictions as may be requested by the Administrative Agent (it being agreed
that for any such Domestic Subsidiary that is not a debtor-in-possession, no
action shall be required pursuant to this clause (iii) to perfect a Lien in
assets that would not constitute UCC Filing Collateral or in assets constituting
UCC Filing Collateral if such perfection relates to assets constituting UCC
Filing Collateral with an aggregate book value of less than $1,000,000) and (iv)
with respect to assets of any such Domestic Subsidiary with a book value in
excess of $l,000,000 that are perfected under the laws of any jurisdiction, if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described in clauses (i), (ii) and (iii)
immediately preceding, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the
Effective Date, becomes a Foreign Subsidiary with a net worth in excess of
$l,000,000 or Inventory with a book value in excess of $1,000,000, promptly upon
the request of the Administrative Agent: (i) execute and deliver to the
Administrative Agent a new pledge agreement or such amendments to the Master
Security Agreement as the Administrative Agent shall deem necessary or advisable
to grant to the Administrative Agent a Lien on the Capital Stock of such
Subsidiary which is owned by the Borrower or any of its Subsidiaries (provided
that in no event shall more than 65% of the Capital Stock of any such Subsidiary
be required to be so pledged) and (ii) deliver to the Administrative Agent any
certificates representing such Capital Stock, together with undated stock powers
executed and delivered in blank by a duly authorized officer of the Borrower or
such Subsidiary, as the case may be, and take or cause to be taken all such
other actions under the law of the jurisdiction of organization of such Foreign
Subsidiary as may be necessary or advisable to perfect such Lien on such Capital
Stock.
(c) If the Borrower or any Subsidiary Guarantor shall
acquire any Investment Securities (other than Investment Securities of any
issuer aggregating less than $1,000,000) such Loan Party shall deliver
certificates representing such Investment Securities to the Administrative Agent
or its agent or custodian (or otherwise "transfer" such Investment Security
(within the meaning of the applicable UCC) to the Administrative Agent or its
agent or custodian (or take such other action as shall be required to perfect
the security interest of the Collateral in accordance with the applicable UCC)),
together with, when necessary or appropriate, undated powers as provided in
subsection 4.1(b) of the Master Security Agreement, to be held by the
Administrative Agent (or its agent or custodian) as Pledged Securities, subject
to the terms of the Master Security Agreement, as collateral security for the
Secured Obligations.
8.12 Depositary Account and Payments System; Cash Dominion. The
Borrower has established a depositary account and payment system under the
Master Security Agreement pursuant to which, subject to the terms of the Loan
Documents, the Administrative Agent possesses sole dominion and control over the
Borrower's and the Subsidiary Guarantors' cash. Except as set forth in the Loan
Documents, neither the Borrower nor any Subsidiary Guarantor, nor any Person or
entity claiming by, through or under the Borrower nor any Subsidiary Guarantor
shall have any control over the use of, or any right to effect a withdrawal
from, any such depositary account and such payment system. The Borrower shall
maintain such depositary account and payment system and shall, within 30 days
after the Effective Date, deliver to each Depositary Bank instructions
reasonably satisfactory to the Administrative Agent informing each such
Depositary Bank of the Bankruptcy Court's order directing that all of the Loan
Parties' cash continue to be sent to the Administrative Agent pursuant to the
cash dominion arrangements and confirming the assignment to the Administrative
Agent of the blocked account agreements and lockbox agreements from the
administrative agent under the Existing DIP Agreement.
SECTION 9. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any Letter of Credit remains outstanding or any amount is owing to any
Lender or the Administrative Agent hereunder
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or under any other Loan Document, the Borrower shall not, and (except in the
case of subsection 9.1) shall not permit any of its Restricted Subsidiaries to,
directly or indirectly:
9.1 Financial Condition Covenants.
(a) EBITDA. Permit Excess Availability to be less than
$50,000,000 at any time or alternatively, in the event Excess Availability is
less than $50,000,000, permit Cumulative EBITDA or Rolling 12-Month EBITDA, as
applicable, for the most recently ended fiscal month for which financial
statements have been delivered pursuant to subsection 8.1(c), to be less than
the amount set forth below opposite such fiscal month:
<TABLE>
<CAPTION>
FISCAL MONTH ENDING MINIMUM CUMULATIVE
- ------------------- EBITDA
------------------
<S> <C>
April, 2000 $(60,000,000)
May, 2000 $(58,000,000)
June, 2000 $(60,000,000)
July, 2000 $(63,000,000)
August, 2000 $(69,000,000)
September, 2000 $(72,000,000)
October, 2000 $(74,000,000)
November, 2000 $(70,000,000)
December, 2000 $(12,000,000)
</TABLE>
<TABLE>
<CAPTION>
FISCAL MONTH ENDING ROLLING 12-MONTH EBITDA
- ------------------- -----------------------
<S> <C>
January, 2001 $(13,000,000)
February, 2001 $(14,000,000)
March, 2001 $(11,000,000)
April, 2001 $(8,000,000)
May, 2001 $(5,000,000)
June, 2001 $(2,000,000)
July, 2001 $2,000,000
August, 2001 $6,000,000
September, 2001 $8,000,000
October, 2001 $13,000,000
</TABLE>
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<TABLE>
<S> <C>
November, 2001 $15,000,000
December, 2001 $32,000,000
January, 2002 $36,000,000
February, 2002 $42,000,000
March, 2002 $46,000,000
April, 2002 $51,000,000
May, 2002 $56,000,000
June, 2002 $60,000,000
July, 2002 $64,000,000
August, 2002 $67,000,000
September, 2002 $70,000,000
October, 2002 $73,000,000
November, 2002 $76,000,000
December, 2002 $84,000,000
January, 2003 and each $85,000,000
month end thereafter
</TABLE>
(b) Capital Expenditures. Make aggregate Capital
Expenditures in excess of (i) in the case of the 2000 and 2001 Fiscal Years,
subject to the provisions of the following sentences, $150 million in the
aggregate for such two Fiscal Years, and (ii) in the case of the 2002, 2003 and
2004 Fiscal Years, the sum of $50,000,000 per Fiscal Year, plus any unused
permitted Capital Expenditures for the immediately preceding Fiscal Year. In
Fiscal Year 2000, Capital Expenditures shall not exceed the sum of (A)
$70,000,000, plus (B) for all times after August 31, 2000, an amount equal to
$650,000 for each store in excess of sixty-five for which subleases are executed
(whether executed before, on, or after August 31, 2000). Capital Expenditures
for Fiscal Year 2001 shall not exceed $150,000,000 less the actual amount of
Capital Expenditures made or incurred in Fiscal Year 2000. Notwithstanding the
foregoing, no Capital Expenditures (except for maintenance) shall be made if,
before or after giving effect to the making of such Capital Expenditure, an
Event of Default then exists or thereafter would exist.
9.2 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) the Guarantee Obligations in the Master Security
Agreement and any Guarantee Obligations arising under any of the other Loan
Documents;
(b) Guarantee Obligations in existence on the Effective
Date and (i) set forth on Schedule 9.2(b) or (ii) otherwise not exceeding
$5,000,000 in the aggregate;
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(c) Guarantee Obligations of the Borrower or any
Restricted Subsidiary of obligations of any Restricted Subsidiary or the
Borrower which obligations are otherwise permitted under this Agreement;
(d) Guarantee Obligations entered into in connection with
surety, appeal, payment and performance bonds (and other obligations of a like
nature) incurred in the ordinary course of business;
(e) subject to subsection 9.8(e), Guarantee Obligations
of the Borrower or any Restricted Subsidiary of Indebtedness or other
obligations incurred in the ordinary course of business of Subsidiaries that are
not Subsidiary Guarantors (including, without limitation, obligations in respect
of indemnifications on behalf of Credit Card Subsidiaries as contemplated by the
proviso to the definition of Credit Card Subsidiaries, to the extent such
obligations constitute Guarantee Obligations); provided that the aggregate
amount of the Indebtedness or other obligations shall not exceed at any time
outstanding (i) in the case of Indebtedness and other obligations in respect of
non-Credit Card Program obligations, together with outstanding Investments
permitted pursuant to subsection 9.8(e), $10,000,000 and (ii) in the case of
Indebtedness and other obligations in respect of Credit Card Program
obligations, together with Investments permitted pursuant to subsection 9.8(h),
$25,000,000;
(f) Guarantee Obligations in respect of obligations of
vendors to the Borrower and its Restricted Subsidiaries created in the ordinary
course of business;
(g) Guarantee Obligations of the Borrower or any
Restricted Subsidiary of Indebtedness or other obligations of Securitization
Entities incurred in connection with Securitization Transactions;
(h) Guarantee Obligations in respect of (i) obligations
in respect of trade letters of credit and (ii) other obligations in respect of
standby letters of credit, provided that the aggregate outstanding amount of all
such Guarantee Obligations (not otherwise permitted pursuant to this subsection
9.2) shall at no time exceed, in the case of clause (i) $100,000,000, and in the
case of clause (ii) $10,000,000; and
(i) Guarantee Obligations of the Borrower or any
Restricted Subsidiary incurred in the ordinary course of business in respect of
obligations (other than Indebtedness) of others and other Guarantee Obligations
(in each case not otherwise permitted pursuant to this subsection 9.2) incurred
after the Effective Date, provided that the aggregate amount of all such
Guarantee Obligations for the Borrower and its Restricted Subsidiaries shall not
exceed $15,000,000 at any one time outstanding.
9.3 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of
Foreign Subsidiaries, generally accepted accounting principles in effect from
time to time in their respective jurisdictions of incorporation);
(b) carriers', warehousemen's, mechanics', landlord's,
materialmen's, repairmen's or other like Liens (including statutory Liens and
other Liens arising by operation of law) arising in the ordinary course of
business securing amounts which do not in the aggregate impair the use thereof
in the operation of the business of the Borrower and its Restricted
Subsidiaries, which are not overdue for a period of more than 60 days or which
are being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property or assets
subject to any such Lien;
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(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements and Liens granted to banks in the ordinary course
of business in connection with deposit, disbursement or concentration accounts
(other than in connection with borrowed money) maintained with such banks on
funds and other items in such accounts;
(d) Liens granted and deposits made in connection with
the performance of bids, trade arrangements and real estate related contracts
entered into in the ordinary course of business (in each case, other than for
borrowed money), utilities, leases, statutory obligations, surety, appeal and
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(e) easements, rights-of-way, restrictions,
subdivisions, parcelizations and other similar encumbrances incurred in the
ordinary course of business which do not in any case materially detract from
the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or such Restricted Subsidiary;
(f) Liens in existence on the Effective Date and (i)
listed on Schedule 9.3(f) securing Indebtedness or other obligations described
on such Schedule or (ii) otherwise securing Indebtedness or other obligations
not exceeding $8,000,000 in the aggregate;
(g) Liens securing Indebtedness or other obligations of
the Borrower and its Restricted Subsidiaries incurred after the Effective Date
to finance the acquisition, construction or completion of fixed or capital
assets (whether pursuant to a loan, a Financing Lease or otherwise), including,
without limitation, improvements, provided that (i) such Liens are created
within 180 days after such acquisition, construction or completion and (ii)
such Liens do not at any time encumber any property other than the property
financed by such Indebtedness or other obligations and the proceeds thereof;
and the Indebtedness or other obligations secured by such Liens do not exceed a
principal amount of $35,000,000 in the aggregate.
(h) Liens on assets of any Foreign Subsidiary securing
Indebtedness of such Foreign Subsidiary and other obligations incurred in the
ordinary course of business;
(i) Liens on the Fixed Assets of a corporation which
becomes a Restricted Subsidiary after the Effective Date and Liens existing on
Fixed Assets acquired by the Borrower or a Restricted Subsidiary after the
Effective Date, in either case securing Indebtedness or other obligations,
provided that no such Liens shall cover any Current Assets (including Accounts
or Inventory) of the Borrower or any Restricted Subsidiary, the Capital Stock
of any Subsidiary (including, without limitation, any Securitization Entity or
Credit Card Subsidiary) or any Indebtedness of the Borrower or any Subsidiary,
and provided, further, that (A) such Liens existed at the time such corporation
became a Restricted Subsidiary or such fixed asset was acquired and were not
created in anticipation thereof, (B) any such Lien is not spread to cover any
additional property or assets of such corporation after the time such
corporation becomes a Restricted Subsidiary or such fixed asset is acquired,
and (C) the amount of Indebtedness or other obligations secured thereby is not
increased;
(j) Liens securing Indebtedness or other obligations
which refunds, refinances extends or otherwise restructures any other
Indebtedness or other obligations to the extent such refunded or refinanced
Indebtedness or other obligation was originally permitted to be secured
pursuant to this subsection, provided that the principal amount of such
Indebtedness is not increased (other than by an amount equal to any costs and
expenses incurred in connection with such refunding or refinancing) and that no
such Lien is spread to cover additional property;
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(k) Liens (not otherwise permitted hereunder) which
secure Indebtedness or other obligations not exceeding (as to the Borrower and
all its Restricted Subsidiaries) $20,000,000 in aggregate principal or face
amount at any time outstanding, provided that no such Liens shall cover any
Current Assets (including Accounts or Inventory) of the Borrower or any
Restricted Subsidiary, the Capital Stock of any Subsidiary (including, without
limitation, any Securitization Entity or Credit Card Subsidiary) or any
Indebtedness of the Borrower or any Subsidiary;
(l) Liens created pursuant to the Security Documents;
(m) Liens created in favor of any Person who delivers
goods under a consignment to the Borrower or a Restricted Subsidiary, provided
that the Borrower or such Restricted Subsidiary treats and designates on its
books and records such goods as "goods on consignment" for all purposes and
such goods are not included as Inventory of the Borrower or such Restricted
Subsidiary, as the case may be, on the books of the Borrower or such Restricted
Subsidiary, as the case may be;
(n) Subject to execution and delivery of intercreditor
agreements reasonably satisfactory to the Administrative Agent, Liens granted
to secure the Borrower's or any Restricted Subsidiary's obligations under any
Floor Planning Facility, provided that such Liens are limited to the goods
financed pursuant to such Floor Planning Facility and the proceeds of such
goods;
(o) Liens covering Accounts, credit card receivables and
related assets owned or that may be deemed owned by the Borrower and its
Restricted Subsidiaries in connection with a Credit Card Program or as a result
of a Securitization Transaction;
(p) Liens arising from offsets, deposits or restricted
assets granted by any Credit Card Subsidiary in respect of a Credit Card
Program or a Securitization Transaction;
(q) Liens on real property (and related fixtures and
leases) now or hereafter owned or leased by the Borrower or any Restricted
Subsidiary, including Designated Material Real Property, securing Indebtedness
of the Borrower and such Restricted Subsidiary, provided that with respect to
any such Liens involving any Eligible Mortgaged Real Property, the net proceeds
therefrom shall be in an amount at least equal to 54.5% of the alternate use
appraised value thereof as set forth in the Existing Appraisal of such
property;
(r) Liens arising under or in connection with Permitted
Sale-Leasebacks;
(s) Liens (including possessory Liens) on cash (and
corresponding Liens on cash collateral accounts and all investments of amounts
on deposit therein), commercial documents relating to goods financed under the
relevant facility or trade letters of credit, such goods and the proceeds
thereof, in each case securing obligations in respect of trade letters of
credit, provided that no such Lien may extend to or cover such commercial
documents, goods or related proceeds after such goods are delivered to a
warehouse, distribution center or store owned or leased by the Borrower or a
Restricted Subsidiary (it being understood that the Administrative Agent may
(and, to the extent the same is reasonably satisfactory to it, shall) enter
into one or more intercreditor agreements with respect to trade letters of
credit with respect to the foregoing);
(t) Liens arising out of the deposit arrangement
described on Schedule 6.22; and
(u) Liens to secure Indebtedness permitted pursuant to
Section 9.7(c) hereof;
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provided that, notwithstanding the foregoing, no Lien created, incurred,
assumed or suffered to exist pursuant to this subsection 9.3 (other than
Permitted Inventory Liens, Permitted Account Liens, and Liens permitted under
subsections 9.3(f) (with respect to pre-petition tax liens only), 9.3(h),
9.3(m), 9.3(n), 9.3(o) and 9.3(s)) shall be a Lien on Inventory or Accounts of
the Borrower or any of its Restricted Subsidiaries.
9.4 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets except:
(a) any Restricted Subsidiary of the Borrower may be
merged or consolidated with or into the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or with or into any one or
more wholly owned Subsidiaries of the Borrower (provided that a Subsidiary
Guarantor or wholly owned Restricted Subsidiary or Restricted Subsidiaries
shall be the continuing or surviving corporation and provided, further, that if
one of the parties to such transaction (i) is a Subsidiary Guarantor then the
continuing or surviving corporation shall be a Subsidiary Guarantor or (ii) is
not a Restricted Subsidiary, no Default shall result therefrom);
(b) any Restricted Subsidiary may convey, sell, lease,
transfer, assign or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Borrower or any Subsidiary Guarantor
or any wholly owned Restricted Subsidiary of the Borrower (provided that if
such selling Restricted Subsidiary is a Subsidiary Guarantor then the acquiring
Restricted Subsidiary shall be a Subsidiary Guarantor); and
(c) any Restricted Subsidiary may be merged or
consolidated with or into, or convey, sell, lease, transfer, assign or
otherwise dispose of any or all of its assets to, any Person to the extent that
the sale or other disposition of the assets of such Restricted Subsidiary would
be permitted under subsection 9.5.
9.5 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Restricted Subsidiary,
issue or sell any shares of such Restricted Subsidiary's Capital Stock to any
Person (in each case, other than the Borrower or any Subsidiary Guarantor or,
if such Restricted Subsidiary is not (x) a wholly-owned Restricted Subsidiary,
pro-rata to the owners of the equity securities of such Restricted Subsidiary
or (y) a Subsidiary Guarantor, to any Restricted Subsidiary), except:
(a) the sale or other disposition of uneconomical,
obsolete, surplus or worn out assets in the ordinary course of business,
including, without limitation, in connection with store closures and real
estate development or divestiture activities;
(b) the sale or other disposition of Inventory and other
Current Assets in the ordinary course of business (including sales of Inventory
and other Current Assets in connection with closed stores or stores to be
closed or sold and sales of discontinued Inventory pursuant to the Business
Plan) and transfers of assets among the Borrower and the Subsidiary Guarantors
pursuant to reasonable business requirements;
(c) the sale or discount of accounts receivable arising
in the ordinary course of business in connection with the compromise or
collection thereof and sales or other dispositions of Cash Equivalents in the
ordinary course of business in each case at fair market value and on
commercially reasonable terms;
(d) as permitted by subsection 9.4(b);
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(e) the lease, sublease or other transfer of space (by
assignment of leases or otherwise) in the Borrower's and the Restricted
Subsidiaries' respective stores in furtherance of the Business Plan and leases
of space at the Borrower's headquarters;
(f) Asset Sales of any assets (other than, directly or
indirectly, Inventory) in connection with Permitted Sale-Leasebacks or
Securitization Transactions, provided that in the case of an Asset Sale in
connection with a Permitted Sale-Leaseback to the extent otherwise permitted
hereunder (other than an Asset Sale in connection with a Securitization
Transaction), the proceeds of any such Permitted Sale-Leaseback shall be
entirely in cash and shall be not less than 100% of the fair market value of
the assets being sold (as determined by the Borrower in good faith) and in the
case of an Asset Sale in connection with a Securitization Transaction (which
may be in the form of a capital contribution to the relevant Securitization
Entity), the purchase price (including the Capital Stock of any Securitization
Entity owned by the Borrower or any Restricted Subsidiary) with respect to the
assets sold or disposed shall be not less than the fair market value of such
assets (as determined by the Borrower in good faith), provided that in addition
to the foregoing requirements, with respect to any Securitization Transaction
involving any Eligible Mortgaged Real Property, the Asset Sale Proceeds shall
be in an amount at least equal to 54.5% of the alternate use appraised value
thereof as set forth in the Existing Appraisal for such property;
(g) the sale or other disposition of the Borrower's and
its Subsidiaries' Brentwood headquarters, Montgomery distribution center and/or
Orlando distribution center, provided that if any such sale or disposition
involves any Eligible Mortgaged Real Property, the Asset Sale Proceeds shall be
in an amount at least equal to 54.5% of the alternate use appraised value
thereof as set forth in the Existing Appraisal for such property;
(h) the sale or other disposition of any property (other
than, directly or indirectly, Inventory and other Current Assets, and other
than any sale or other disposition which is otherwise permitted under this
subsection 9.5), provided that at the time of and after giving effect to such
sale or disposition, the aggregate fair market value of all assets so sold or
disposed of in any Fiscal Year pursuant to this paragraph (h) shall not exceed
an amount equal to $125,000,000;
(i) subject to the other terms and provisions hereof,
leases or subleases (or assignments of leases) or licenses or sublicenses (or
assignments of licenses or sublicenses) of any assets in the ordinary course of
business;
(j) sales and other dispositions of assets in connection
with Investments (other than Investments received in respect of the sale or
disposition of Fixed Assets) permitted under subsection 9.8;
(k) sales or other dispositions of Accounts, credit card
receivables and related assets in connection with a Credit Card Program;
(l) issuances, sales and other dispositions of Capital
Stock by any Credit Card Subsidiary to any Person so long as after giving
effect thereto, such Credit Card Subsidiary remains a Subsidiary; and
(m) sales and dispositions of assets pursuant to Store
Closures;
provided that the foregoing limitations are not intended to prevent the
Borrower or any of its Restricted Subsidiaries from rejecting leases or
contracts in connection with the Reorganization Cases.
9.6 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other
than those payable solely in common stock or Qualified Stock of the Borrower or
options or warrants with respect thereto) on, or make
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any payment (other than those payable solely in common stock or Qualified Stock
of the Borrower or options or warrants with respect thereto) on account of, or
set apart assets for a sinking or other analogous fund for, the purchase
redemption, defeasance, retirement or other acquisition of, any shares of any
class of Capital Stock (including Qualified Stock) of the Borrower or any
warrants or options to purchase any such Stock, whether now or hereafter
outstanding, or make any other distribution (other than those payable solely in
common stock or Qualified Stock of the Borrower or options or warrants with
respect thereto) in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of the Borrower or any Restricted Subsidiary
(such declarations, payments, setting apart, purchases, redemptions,
defeasances, retirements, acquisitions and distributions being herein called
"Restricted Payments"), except that the Borrower may (i) purchase or exchange
then-existing employee stock options for consideration consisting solely of
(subject to subsection 9.14) Capital Stock of the Borrower and (ii) may
purchase or redeem up to $1,000,000 in Capital Stock solely for the purpose of
purchasing minority interests in order for such Subsidiaries to become wholly
owned Subsidiaries of the Borrower.
9.7 LIMITATION ON INDEBTEDNESS. The Borrower shall not create or
suffer to exist, or permit any Restricted Subsidiary to create or suffer to
exist, any Indebtedness except:
(a) the Credit Agreement Obligations;
(b) Guarantee Obligations permitted by subsection 9.2;
(c) Indebtedness of the Borrower to Back Bay Capital
Funding, LLC (or such other lenders reasonably acceptable to the Administrative
Agent) in connection with a term loan facility up to an amount not to exceed
$50,000,000 and otherwise on terms and conditions reasonably acceptable to the
Administrative Agent. Without limitation, such term loan facility shall be
subject to an intercreditor agreement reasonably satisfactory to the
Administrative Agent, which shall provide, among other things, that the term
loan facility shall be repaid only after payment in full of the Credit
Agreement Obligations and shall be limited to a specified percentage of the
appraised value of the Borrower's Inventory.
(d) Intercompany Debt and Indebtedness of the Borrower
to any Excluded Subsidiary, provided that such Indebtedness to an Excluded
Subsidiary is (i) at all times junior and subordinate in right of payment to
the Secured Obligations and (ii) not paid until after the repayment in full of
the Credit Agreement Obligations;
(e) Indebtedness secured by Liens permitted by
subsection 9.3, including without limitation, in respect of Floor Planning
Facilities permitted under subsection 9.3(o);
(f) Indebtedness outstanding on the Effective Date and
listed on Schedule 9.7(f) and refinancings thereof to the extent permitted
under subsection 9.9; and
(g) Indebtedness of the Borrower arising pursuant to
Derivative Agreements entered into with any Lender for the purpose of hedging
the Borrower's interest rate exposure and not for speculative purposes, and
Indebtedness in respect of cash management obligations.
9.8 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of any Person or consummate
any Acquisition (an "Investment"), except for:
(a) extensions of trade credit and prepaid expenses made
in the ordinary course of business;
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(b) Investments in Cash Equivalents; provided that (A)
the maximum amount of cash and Cash Equivalents held in accounts (other than
Consignment Inventory Accounts) over which the Administrative Agent does not
have a valid and perfected Lien shall not exceed $15,000,000 at any time
outstanding and (B) the maximum amount of cash and Cash Equivalents held in
Consignment Inventory Accounts shall not exceed the amounts due to suppliers of
Consignment Inventory consisting of (i) the cost of the Consignment Inventory
actually sold plus (ii) other expenses due and payable to such suppliers of
Consignment Inventory;
(c) (i) loans to officers of the Borrower or any
Subsidiary, (ii) loans and advances to employees of the Borrower or its
Subsidiaries for travel, entertainment and relocation expenses in the ordinary
course of business, and (iii) loans by the Borrower to its employees (other
than to officers of the Borrower or any Subsidiary) in connection with
management incentive plans, provided that the aggregate outstanding principal
amount of all such loans and advances shall not exceed $5,000,000 at any time;
(d) Investments by the Borrower in Subsidiary Guarantors
and Investments by Restricted Subsidiaries in the Borrower and in Subsidiary
Guarantors;
(e) Investments not otherwise permitted hereunder by the
Borrower and Restricted Subsidiaries in Subsidiaries that are not Subsidiary
Guarantors, provided that, after giving effect to such Investments, the
aggregate then outstanding amount of all such Investments (including
Investments in such Subsidiaries in the nature of sales and transfers of assets
(including, pursuant to a transaction permitted under subsection 9.4) for less
than fair market value and outstanding Guarantee Obligations pursuant to
subsection 9.2(e)) made subsequent to the Effective Date pursuant to this
paragraph (e), together with outstanding Guarantee Obligations permitted
pursuant to subsection 9.2(e), shall not exceed $10,000,000, provided, further,
that the conversion of any Indebtedness owed to the Borrower or any Restricted
Subsidiary by any Subsidiary into equity of such Subsidiary shall not
constitute an additional Investment in such Subsidiary by the Borrower or such
Restricted Subsidiary for purposes of the limitation contained in the
immediately preceding proviso;
(f) Investments received in connection with the creation
and collection of accounts receivable in the ordinary course of business;
(g) Investments received as consideration in connection
with any Asset Sale or other disposition of assets permitted hereunder;
(h) Investments not otherwise permitted hereunder in
Credit Card Subsidiaries in an amount, together with Guaranteed Obligations
permitted pursuant to subsection 9.2(e), not to exceed $25,000,000 outstanding
at any time;
(i) Investments by Credit Card Subsidiaries in
connection with the Credit Card Program;
(j) loans and advances to suppliers in the ordinary
course of business consistent with past practice but in any event not in excess
of an outstanding principal amount of $500,000;
(k) purchases of Accounts, credit card receivables and
related assets by Credit Card Subsidiaries in connection with the Credit Card
Program;
(l) Acquisitions and other Investments not otherwise
permitted hereunder made by the Borrower or any of its Restricted Subsidiaries,
provided that, after giving effect thereto, (i) the aggregate outstanding
amount of all such Investments (other than Acquisitions) made at any time after
the Effective
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Date, shall not exceed the sum of $2,000,000 and (ii) the aggregate outstanding
amount of all such Acquisitions (including assumed Indebtedness and the fair
market value of Capital Stock issued) and other Investments made at any time
after the Effective Date shall not exceed the sum of $20,000,000; and
(m) Capital Expenditures permitted under subsection
9.1(b) hereof.
9.9 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS. At any time:
(a) make any optional payment or prepayment on or
optionally redeem or purchase any Indebtedness (other than the Loans and
Indebtedness of the Borrower or any Restricted Subsidiary to the Borrower or
any Restricted Subsidiary) of the Borrower or any Subsidiary,
(b) amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms relating to the payment
or prepayment of principal of or interest on, any Indebtedness described in
clause (a) (unless such amendment, modification or change does not shorten the
maturity or increase the amount of any payment of principal thereof or would
not increase the rate or shorten the date for payment of interest thereon),
provided, that the Borrower and its Restricted Subsidiaries may prepay
Indebtedness permitted hereunder:
(a) from the proceeds of new Indebtedness
incurred to refinance such Indebtedness and permitted hereunder to be
incurred,
(b) under Financing Leases for stores and other
property no longer occupied or used by the Borrower or such Restricted
Subsidiary in connection with the settlement, termination or
assignment of such Financing Lease,
(c) secured by assets in connection with any
sale or other disposition of such assets permitted under subsection
9.5,
(d) consisting of Floor Planning Facilities,
(e) incurred after the Effective Date and
otherwise permitted hereunder to the extent such prepayment is
financed with the proceeds of other Indebtedness (other than Loans)
permitted hereunder,
(f) consisting of Financing Leases as long as
such Financing Leases are paid in full in connection with any such
prepayment and such prepayment is made in connection with the closure
or sale of a parcel of real property subject to such Financing Lease,
(g) secured by a Lien on any parcel of Material
Real Property so long as such Indebtedness is paid in full in
connection with any such prepayment and such prepayment is financed
with the proceeds of other Indebtedness (other than Loans) permitted
hereunder,
(h) that is short term Indebtedness and
unsecured, and
(i) from proceeds of the issuance of Capital
Stock, but only if after giving effect to such issuance, no Default or
Event of Default would have occurred and be continuing.
9.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Except as set
forth on Schedule 9.10, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is (a) otherwise
permitted under this
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Agreement or (b) upon fair and reasonable terms no less favorable to the
Borrower or such Restricted Subsidiary, as the case may be, than it would
obtain in a comparable arm's length transaction with a Person which is not an
Affiliate.
9.11 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Restricted
Subsidiary of real or personal property (other than Capital Stock) which has
been or is to be sold or transferred by the Borrower or such Restricted
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Restricted Subsidiary (such arrangement, a
"Sale-Leaseback"), except for (a) Sale-Leasebacks in the ordinary course of the
Borrower's or such Restricted Subsidiary's business, consistent with past
practice and at market rates and subject to compliance with subsection 9.5(f),
in each case on terms and conditions acceptable to the Administrative Agent in
its sole discretion, exercised commercially reasonably and in accordance with
its customary criteria, (b) Sale-Leasebacks in connection with Securitization
Transactions, (c) Sale-Leasebacks of the Borrower's and its Restricted
Subsidiaries' Brentwood headquarters, Montgomery distribution center and/or
Orlando distribution center, subject to compliance with Section 9.5(f), and (d)
Sale-Leasebacks solely among the Borrower and the Subsidiary Guarantors
("Permitted Sale-Leasebacks"). For the avoidance of doubt, Sale-Leasebacks that
result in a Financing Lease shall be treated as Indebtedness for all purposes
of this Agreement.
9.12 FISCAL YEARS AND QUARTERS. Change the last day of the Fiscal
Year of the Borrower (other than to a day on or about January 31 of any
calendar year) or permit any Fiscal Year to be less than a period of
approximately 365 days or permit any fiscal quarter to be less than a period of
approximately 90 days.
9.13 LIMITATION ON CONDUCT OF BUSINESS. Enter into any business
either directly or through any Restricted Subsidiary except for businesses in
which the Company and its Subsidiaries are engaged on the date of this
Agreement and businesses related or similar thereto or entered into in
connection with any of the foregoing.
9.14 LIMITATION ON ISSUANCES OF CAPITAL STOCK. Issue (a) any
preferred stock or (b) any class of redeemable common stock, provided, however,
that the Borrower may issue Qualified Stock.
9.15 FOREIGN HOLDING COMPANIES, INACTIVE SUBSIDIARIES AND SPECIAL
PURPOSE SUBSIDIARIES. Permit the aggregate book value of the assets of all
Foreign Holding Companies (exclusive of assets consisting of advances or loans
to the Borrower or any of its Subsidiaries and Capital Stock of Foreign
Subsidiaries and other Foreign Holding Companies), Inactive Subsidiaries and
Special Purpose Subsidiaries (exclusive of assets consisting of licenses or
permits) which are not Subsidiary Guarantors to exceed $25,000,000 at any time.
9.16 PERMANENT ORDER. Make or permit to be made any change,
amendment or modification, or any application or motion for any change,
amendment or modification, to the Permanent Order without the prior written
consent of the Required Lenders.
9.17 APPLICATION TO BANKRUPTCY COURT. Apply to the Bankruptcy Court
for the authority to take any action that is prohibited by the terms of this
Agreement or any of the other Loan Documents or refrain from taking any action
that is required to be taken by the terms of this Agreement or any of the other
Loan Documents.
9.18 LIMITATION ON RECLAMATION PAYMENTS. Make any reclamation
payment in excess of $15,000,000 in the aggregate from and after the Petition
Date.
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SECTION 10. EVENTS OF DEFAULT.
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any
Loan when due in accordance with the terms hereof; or the Borrower shall fail
to pay any Reimbursement Obligation within two Business Days after such
Reimbursement Obligation becomes due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan, or any other amount
payable hereunder, within five days after any such interest or other amount
becomes due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made
by the Borrower or any other Loan Party herein or in any other Loan Document or
which is contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or any
such other Loan Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or
performance of any agreement contained in subsection 8.7(a) or 8.12 or Section
9, or the Borrower shall fail to deliver a Borrowing Base Certificate pursuant
to subsection 8.2(c) within two Business Days after such Borrowing Base
Certificate was due pursuant to such subsection; or
(d) The Borrower or any other Loan Party shall default
in the observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs (a)
through (c) of this Section), and such default shall continue unremedied for a
period of 30 days after the earlier of (i) the date upon which written notice
thereof is given to the Borrower by the Administrative Agent or the Majority
Lenders or (ii) the date upon which a Responsible Officer becomes aware of such
default; or
(e) The Borrower or any of its Restricted Subsidiaries
shall (i) default during the Reorganization Cases in any payment of principal
of or interest on any post-petition Indebtedness (other than the Loans) or in
the payment of any post-petition Guarantee Obligation, beyond the period of
grace, if any, provided in the instrument or agreement under which such
Indebtedness or Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required (but after the expiration of all
grace periods applicable thereto), such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become payable, provided that
(x) no Default or Event of Default shall exist under this paragraph (A) unless
the aggregate amount of Indebtedness (other than Indebtedness in respect of
Floor Planning Facilities) and/or Guarantee Obligations in respect of which any
default or other event or condition referred to in this paragraph shall have
occurred shall be equal to at least $10,000,000 or (B) unless the aggregate
amount of Indebtedness in respect of Floor Planning Facilities in respect of
which any default or other event or condition referred to in this paragraph
shall have occurred shall be equal to at least $20,000,000 and (y) clause (ii)
above shall not apply to Indebtedness that becomes due solely as a result of
the voluntary sale or transfer of property or assets or prepayments that become
due as a result of any issuance of Capital Stock or incurrence of Indebtedness
(in each case to the extent such, sale, transfer, issuance or incurrence is
permitted by the terms of such Indebtedness); or
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(f) The termination or resignation of both the chief
executive officer and the president of the Borrower or the failure of both the
chief executive officer and the president to perform substantially the same
duties which they perform as of the date hereof (unless they succeed to a
position of greater responsibility and maintain such position) , provided that
the foregoing shall not constitute an Event of Default is the Borrower engages
at least one replacement officer reasonably satisfactory to the Administrative
Agent within ninety (90) days after such termination, resignation or failure;
or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Tax
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined
in Section 302 of ERISA), whether or not waived, shall exist with respect to
any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets
of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event
(other than the Reorganization Cases) shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Majority Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Majority Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan
or (vi) any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered
against the Borrower or any of its Restricted Subsidiaries involving in the
aggregate a liability (to the extent not paid or covered by insurance) of
$15,000,000 or more, and such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or
(i) (i) For any reason (other than any act on the
part of the Administrative Agent or any Lender or any act or failure to act
(except to the extent such act or failure to act constitutes a breach of the
relevant Blocked Account Agreement or Lockbox Agreement on the part of any
Depositary Bank) the Master Security Agreement or any Security Document ceases
to be or is not in full force and effect in any material respect and such
default shall continue unremedied for 30 days after the earlier of receipt by
the Borrower of notice of such default from the Administrative Agent or actual
knowledge of such default by a Responsible Officer, (ii) the Borrower or any of
its Restricted Subsidiaries shall assert in writing that the Master Security
Agreement or any Security Document has ceased to be or is not in full force and
effect or (iii) the Lien created by any of the Security Documents shall cease
to be enforceable or of the same effect and priority purported to be created
thereby except to the extent contemplated hereunder and under the other Loan
Documents; or
(j) (i) Any Person or "group" (within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) (A)
shall have acquired beneficial ownership of 50% or more of any outstanding
class of Capital Stock having ordinary voting power in the election of
directors of the Borrower or (B) shall obtain the power (whether or not
exercised) to elect a majority of the Borrower's directors, or (ii) (A) the
Board of Directors of the Borrower shall not consist of a majority of
Continuing Directors; "Continuing Directors" shall mean the directors of the
Borrower on the Effective Date and each other director, if such other
director's nomination for election to the Board of Directors of the Borrower is
recommended by a majority of the then Continuing Directors and (B) the Chief
Executive Officer of the Borrower shall resign or be removed during the period
commencing three months prior to the date the Board of Directors shall not
consist of a majority of Continuing Directors and ending six months after such
date; or
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(k) Any provision of any Loan Document shall for any
reason cease to be valid and binding on the Loan Party party thereto other than
by reason of the application of applicable bankruptcy, insolvency,
reorganization or other similar laws or the application of equitable principles
relating to or limiting creditors' rights generally, or such Loan Party shall
so state in writing; or
(l) Any Loan Party shall fail to comply with the terms
of the Permanent Order in any material respect; or
(m) Any of the Reorganization Cases shall be dismissed,
suspended or converted to a case under chapter 7 of the Bankruptcy Code (which,
in the case of a conversion, such Reorganization Case(s) individually or
together with any Reorganization Case that was previously or was simultaneously
converted own or possess assets whose value exceeds $2,000,000, which value
shall be determined by reference to the schedule of assets and liabilities
filed with the Bankruptcy Court) or a trustee shall be appointed in any of the
Reorganization Cases, or an application shall be filed by a Loan Party for the
approval of, or there shall arise, any other claim having priority senior to or
, other than pursuant to the First Day Orders and obligations in respect of
permitted adequate protection payments, pari passu with the claims of the
Administrative Agent and the Lenders under the Loan Documents or any other
claim having priority over any or all administrative expenses of the kind
specified in sections 503(b) or 507(b) of the Bankruptcy Code (other than
Permitted Expenses); provided that (i) upon the occurrence of an Event of
Default caused by the appointment of a chapter 11 trustee and (ii) provided no
other Event of Default shall have occurred, the Lenders will in good faith
negotiate a stipulation with such trustee, the terms and conditions of which
are reasonably acceptable to the Lenders and the Administrative Agent, for the
use of cash collateral for a period of not less than five Business Days; or
(n) The Bankruptcy Court shall (i) enter an order
approving payment of any pre-petition Claims other than an order approving a
Permitted Prepetition Claim Payment, (ii) grant relief from the automatic stay
applicable under section 362 of the Bankruptcy Code to holders of security
interests in respect of the ability of such holders to foreclose on assets
valued in excess of $15,000,000 in the aggregate, or (iii) except to the extent
the same would not constitute a default under any of the previous clauses,
enter an order approving any settlement or other stipulation with any creditor
of the Borrower other than the Administrative Agent and the Lenders or
otherwise providing for payments as adequate protection or otherwise to such
creditor individually or in the aggregate in excess of $1,000,000 for any and
all such creditors; or
(o) A Loan Party shall make any payment (as adequate
protection or otherwise) on account of any Claim arising or deemed to have
arisen prior to the commencement of the Reorganization Cases other than a
payment or payments which would not constitute a default under Section 9(n)(ii)
or a Permitted Prepetition Claim Payment; or
(p) The Bankruptcy Court shall enter an order amending,
supplementing, vacating or otherwise modifying the Permanent Order without the
consent of the Required Lenders; or
(q) The Bankruptcy Court shall enter an order appointing
an examiner with powers beyond the duty to investigate and report, as set forth
in section 1106(a)(3) and (4) of the Bankruptcy Code in any of the
Reorganization Cases; or
(r) A Loan Party shall bring a motion in any of the
Reorganization Cases: (i) to obtain working capital financing from any Person
other than the Lenders under section 364(d) of the Bankruptcy Code (other than
with respect to a working capital financing used, in whole or in part, to repay
in full the Credit Agreement Obligations) or (ii) to obtain financing from any
Person other than the Lenders under
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section 364(c) of the Bankruptcy Code (other than with respect to a financing
used, in whole or in part, to repay in full the Credit Agreement Obligations or
otherwise permitted by this Agreement) or (iii) to grant any Lien other than
Liens upon or affecting any Collateral permitted by the Master Security
Agreement or (iv) except as otherwise provided herein, to use any of the
Collateral pursuant to section 363(c) of the Bankruptcy Code without the prior
written consent of the Required Lenders except to pay Permitted Expenses or (v)
to recover from any portions of the Collateral any costs or expenses of
preserving or disposing of such Collateral under section 506(c) of the
Bankruptcy Code, if such motion is not dismissed within 60 days of the filing
thereof; or
(s) The Bankruptcy Court shall enter an order granting
relief pursuant to section 362(d) of the Bankruptcy Code (except to the extent
such would not cause a breach of clause (iii) of Section 10(n)); or
(t) The Permanent Order shall be stayed, reversed,
modified, amended or vacated, in whole or in part; or
(u) The entry of an order confirming a Plan of
Reorganization that does not require repayment in full of all Credit Agreement
Obligations on the effective date of such Plan of Reorganization;
then, and in any such event, either or both of the following actions may be
taken: (i) with the consent of the Majority Lenders, the Administrative Agent
may, or upon the request of the Majority Lenders, the Administrative Agent
shall, by notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative Agent shall, by notice to
the Borrower, declare the Loans hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement (including, without limitation,
all amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived. In addition, subject to any requirement of the giving
of notice by the terms of the Permanent Order, the Administrative Agent and the
Lenders shall be entitled to exercise their respective rights under the Master
Security Agreement or any other Security Document.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
a cash Collateral Account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of each
Issuing Bank and the L/C Participants, a security interest in such cash
Collateral to secure all obligations of the Borrower under this Agreement and
the other Loan Documents. Amounts held in such cash Collateral Account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrower hereunder and under the Notes. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations
of the Borrower hereunder and under the Notes shall have been paid in full, the
balance, if any, in such cash Collateral Account shall be returned to the
Borrower. The Borrower shall execute and deliver to the Administrative Agent,
for the account of each Issuing Bank and the L/C Participants, such further
documents and instruments as the Administrative Agent may reasonably request to
evidence the creation and perfection of the security interest in such cash
Collateral Account.
SECTION 11. THE ADMINISTRATIVE AGENT
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11.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably authorizes
the Administrative Agent, in such capacity, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental
thereto, including, without limitation, all powers, rights and remedies
provided in the Master Security Agreement. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or 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 the the
Administrative Agent.
11.2 DELEGATION OF DUTIES. The Administrative Agent may execute
any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
11.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Loan Document or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Administrative Agent shall not 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 the Borrower.
11.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
facsimile, telex or teletype message, statement, order 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, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of Lenders entitled to so act in
accordance with the terms of this Agreement as it deems appropriate or it shall
first be indemnified to its satisfaction by the 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. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of Lenders
entitled to so act in accordance with the terms of this Agreement, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.
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11.5 NOTICE OF DEFAULT. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall promptly give notice thereof to the Lenders. The Administrative
Agent shall take such action with respect to such Default or Event of Default
as shall be reasonably directed by Lenders entitled to so act in accordance
with the terms of this Agreement; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.
11.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of
the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent 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 analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower. Except for
notices, reports, financial statements, and other documents furnished to the
Administrative Agent by the Borrower or any Subsidiary Guarantor hereunder (as
to which the Administrative Agent shall furnish copies to each Lender
requesting same), the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
11.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Voting Percentages in effect on the date
on which indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. The agreements
in this subsection shall survive the payment of the Loans and all other amounts
payable hereunder. The Administrative Agent shall have the right to deduct any
amount owed to it by any Lender under this Agreement from any payment made by
it to such Lender hereunder.
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11.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from and generally engage in any
kind of business with the Borrower as though the Administrative Agent were not
an agent hereunder and under the other Loan Documents. With respect to the
Loans made by it or any Letter of Credit issued or participated in by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not an agent hereunder, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
11.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 25 Business Days' notice to the Borrower
and the Lenders. If the Administrative Agent shall resign as Administrative
Agent under this Agreement and the other Loan Documents, then the Majority
Lenders shall appoint from among the Lenders a successor agent for the Lenders,
which successor agent (provided that it shall have been approved by the
Borrower), shall succeed to the rights, powers and duties of the Administrative
Agent hereunder. Effective upon such appointment and approval, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
11.10 ARRANGER; CO-AGENTS; DOCUMENTATION AGENT. Notwithstanding the
provisions of this Agreement or any of the other Loan Documents, the Arranger,
the Co-Agents and the Documentation Agent, in their capacities as such, shall
have no powers, rights, duties, responsibilities or liabilities with respect to
this Agreement and the other Loan Documents.
SECTION 12. MISCELLANEOUS
12.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Majority Lenders may, or, the Administrative Agent, with the written consent of
the Majority Lenders may, from time to time, (a) enter into with the applicable
Loan Party or Parties written amendments, supplements or modifications hereto
and to the other Loan Documents for the purpose of adding, deleting or revising
any provisions to this Agreement or the other Loan Documents or changing in any
manner the rights of the Lenders or of the Borrower hereunder or thereunder or
(b) waive, on such terms and conditions as the Majority Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any
of the requirements of this Agreement or the other Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no
such waiver and no such amendment, supplement or modification shall:
(a) reduce the amount or extend the scheduled
date of maturity of any Loan or of any installment thereof, or reduce
the stated rate of any interest or fee payable hereunder, or extend
the scheduled date of any payment thereof, increase the amount or
extend the expiration date of any Lender's Commitments, in each case
without the consent of each Lender adversely affected thereby,
(b) amend, modify or waive any provision of
this subsection or consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement and
the other Loan Documents or any other provision of any other Loan
Document, or, except as set forth in the Master Security Agreement or
for sales or dispositions permitted under this Agreement,
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each as amended and in effect from time to time, release or
subordinate the interest of the Administrative Agent in the Collateral
or the Subsidiary Guarantors, without the written consent of all the
Lenders,
(c) reduce the percentage specified in the
definition of Majority Lenders or Required Lenders without the written
consent of all the Lenders,
(d) increase any percentage set forth in the
definition of Borrowing Base, Available Inventory Amount or Available
Accounts Receivable Amount or Available L/C Amount without the consent
of all the Lenders, provided, the Administrative Agent may increase
the percentages set forth in the definition of Borrowing Base,
Available Inventory Amount, Available Accounts Receivable Amount or
Available L/C Amount by up to an additional 5% above the percentages
as of the Effective Date with the consent of the Required Lenders, the
amount set forth in the proviso to the first sentence of the
definition of Borrowing Base without the consent of the Required
Lenders or the maximum aggregate amount of Commitments hereunder
without the consent of the Required Lenders,
(e) amend, modify or waive any provision of
Section 2 without the written consent of the Majority Term Loan
Lenders or reduce the percentage specified in the definition of
Majority Term Loan Lenders without the consent of all the Term Loan
Lenders,
(f) modify the provisions of subsection 9.5 so
as to increase the amount of assets permitted to be sold or disposed
of thereunder without the written consent of the Majority Term Loan
Lenders, unless the increased cash amounts realized are utilized to
prepay principal of the Term Loans in an amount equal to the product
of such amounts and a fraction, the numerator of which is the
aggregate outstanding principal amount of the Term Loans and the
denominator of which is the sum of the principal amount of the Term
Loans and the then Revolving Credit Commitments, and the balance
utilized to reduce the outstanding Revolving Loans (but not reduce the
Revolving Credit Commitments),
(g) amend or modify the definitions of Majority
Lenders or Required Lenders without the consent of all the Lenders;
(h) amend, modify or waive any provision of
Section 3 or of subsection 7.2 without the prior written consent of
the Majority Revolving Credit Lenders or reduce the percentage
specified in the definition of Majority Revolving Credit Lenders
without the consent of all the Revolving Credit Lenders,
(i) amend, modify or waive any provision of
subsection 4.7(c) of this Agreement or of subsection 3.6(a) or 3.6(b)
of the Master Security Agreement without the written consent of the
Majority Term Loan Lenders and the Majority Revolving Credit Lenders,
(j) amend, modify or waive any provision of
subsections 3.6 through 3.13 without the consent of each Issuing Bank
adversely affected in any material respect thereby,
(k) amend, modify or waive any provision of
subsections 3.14, 3.15 or 3.16 without the consent of the Swing Line
Lender, or
(l) amend, modify or waive any provision of
Section 11 without the written consent of the Administrative Agent.
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Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Borrower, the
Lenders, the Administrative Agent and all future holders of the Loans. In the
case of any waiver, the Borrower, the Lenders, and the Administrative Agent
shall be restored to their former positions and rights hereunder and under the
other Loan Documents, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon. If, in connection with any proposed amendment, supplement,
modification, consent or waiver of any provisions of this Agreement or any
other Loan Documents as contemplated by this subsection 12.1, the consent of
Lenders whose Voting Percentages aggregate at least 90% is obtained but the
consent of one or more of the other Lenders is not obtained, then the Borrower
may replace each such non-consenting Lender or Lenders with one or more
replacement Lenders pursuant to subsection 12.7 so long as at the time of such
replacement, each replacement Lender consents to the proposed amendment,
supplement, modification, consent or waiver, provided that the Borrower shall
not have the right to replace any Lender solely as a result of the exercise of
such Lender's rights (and the withholding of any required consent of such
Lender) pursuant to clauses (a), (b) or (c) of the first proviso of this
subsection 12.1.
12.2 NOTICES. Unless otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by facsimile transmission) and shall
be deemed to have been duly given or made (a) in the case of delivery by hand
(including by overnight courier), when delivered, (b) in the case of delivery
by mail, three days after being deposited in the mails, postage prepaid, or (c)
in the case of delivery by facsimile transmission, when sent and receipt has
been confirmed, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule 12.2 in the case of the
other parties hereto, or to such other address as may be hereafter notified by
the respective parties hereto:
The Borrower: Service Merchandise Company, Inc.
7100 Service Merchandise Drive
Brentwood, TN 37027
Attention: Treasurer and Chief
Financial Officer
Fax: (615) 660-3667
Telephone: (615) 660-3440
With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Attention: John Wm. Butler, Jr., Esq.
Lawrence Frishman, Esq.
Fax: (212) 735-2000
Telephone: (212) 735-3000
The Administrative
Agent: Fleet Retail Finance Inc.
40 Broad Street
Boston, Massachusetts 02109
Attention: Betsy Ratto
Fax: (617) 434-4339
Telephone: (617) 434-4113
With a copy to: Riemer & Braunstein, LLP
Three Center Plaza
Boston, Massachusetts 02108
Attention: David S. Berman, Esquire
Fax: (617) 880-3456
Telephone: (617) 523-9000
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provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsections 3.2, 3.4, 3.6, 3.15, 4.1, 4.2 or 4.7
shall not be effective until received. Whenever the Administrative Agent sends
a notice by mail, the Administrative Agent will use reasonable efforts to also
send such notice by one of the other means of notice permitted hereunder,
provided that the failure to do so shall not affect in any way the validity of
any delivery by mail pursuant to this subsection or otherwise result in any
liability to the Administrative Agent or the Lenders.
12.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
12.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
12.5 PAYMENT OF EXPENSES AND TAXES; INDEMNITY. The Borrower agrees
(a) to pay or reimburse the Administrative Agent for all
its reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation
and administration of the transactions contemplated hereby and thereby,
including, without limitation, the reasonable fees and disbursements of one
counsel for the Administrative Agent,
(b) to pay or reimburse the Administrative Agent for all
its reasonable out-of-pocket costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other Loan
Documents and any such other documents, including, without limitation, costs
and expenses which the Administrative Agent may incur in enforcing or
protecting its Liens on or rights and interest in the Collateral, and the fees
and disbursements of counsel to the Administrative Agent, and any review of
pleadings and documents related to the Reorganization Cases, attendance at
meetings related to the Reorganization Cases, general monitoring of the
Reorganization Cases and any subsequent chapter 7 case, and
(c) to pay or reimburse each Lender for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other Loan
Documents and any such other documents following the occurrence and during the
continuation of a Default or an Event of Default, including, without
limitation, the fees and disbursements of counsel to each Lender,
(d) to pay, indemnify, and hold each Lender and the
Administrative Agent (and their respective directors, officers, employees and
agents) harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise (other than excise taxes imposed in lieu of net income taxes) and other
similar taxes, if any, which may be payable or
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determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and
(e) to pay, indemnify, and hold each Lender and the
Administrative Agent (and their respective directors, officers, employees and
agents) harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits and reasonable
out-of-pocket costs, expenses or disbursements (including, without limitation,
the reasonable fees and expenses of the same counsel for all of the Lenders or
the Administrative Agent (absent a conflict of interest or inability to join
the relevant actions or proceedings, in which additional counsel may be
retained by the Administrative Agent and Lenders)) of any kind or nature
whatsoever with respect to any claim, litigation, investigation or proceeding
relating to the execution, delivery, enforcement, performance and
administration of this Agreement and the other Loan Documents and any such
other documents or any use of any of the Extensions of Credit, including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the "Indemnified
Liabilities"), provided that the Borrower shall have no obligation hereunder to
the Administrative Agent or any Lender (or their respective directors,
officers, employees or agents) with respect to Indemnified Liabilities arising
from the bad faith, gross negligence or willful misconduct of the
Administrative Agent or any such Lender (or their respective directors,
officers, employees or agents, as the case may be), provided, however, that in
connection with the enforcement or preservation of any rights under this
Agreement or the other Loan Documents, the Borrower shall not be required to
pay or reimburse the Lenders for more than one counsel to all of the Lenders
and for one counsel to the Administrative Agent. The agreements in this
subsection shall survive the termination of this Agreement and the repayment of
the Loans and all other amounts payable hereunder.
12.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to
the benefit of the Borrower, the Lenders, the Agents and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Lender.
(b) Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any time
sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any interest of such Lender in any
Letter of Credit, any Commitment of such Lender or any other interest of such
Lender hereunder and under the other Loan Documents. In the event of any such
sale by a Lender of a participating interest to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Loan for
all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
be entitled to create in favor of any Participant, in the participation
agreement pursuant to which such Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document except for those
specified in clauses (a) and (b) of the proviso to subsection 12.1. The
Borrower agrees that if amounts outstanding under this Agreement are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this
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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 that, in
purchasing such participating interest, such Participant shall be deemed to
have agreed to share with the Lenders the proceeds thereof as provided in
subsection 12.8(a) as fully as if it were a Lender hereunder. The Borrower also
agrees that each Participant shall be entitled to the benefits of subsections
4.9, 4.10 and 4.11 with respect to its participation in the Commitments and the
Loans outstanding from time to time as if it were a Lender; provided that, in
the case of subsection 4.10, such Participant shall have complied with the
requirements of said subsection and provided, further, that the aggregate
amounts payable to a Participant and the transferor Lender pursuant to any such
subsection shall not exceed the amounts the transferor Lender would have been
entitled to receive had no such transfer occurred. Each Lender promptly shall
notify the Administrative Agent in writing of the sale of any participating
interest in a Loan to any Participant.
(c) Any Lender may, in the ordinary course of its
business of making or investing in loans and in accordance with applicable law,
at any time and from time to time assign to any Lender or any Affiliate thereof
or, with the consent of the Administrative Agent and, if no Event of Default
then is continuing, except as expressly provided herein, the Borrower (which
consent shall not be unreasonably withheld), to an additional bank, financial
institution or other entity that is then engaged in the business of lending
money or for the purposes of the Term Loans, engaged in the business of
investing in loans (an "Assignee") all or any part of its rights and
obligations under this Agreement and the other Loan Documents pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit A, executed by
such Assignee and such assigning Lender (and, in the case of an Assignee that
is not then a Lender or an affiliate thereof, by the Borrower and the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register, with a copy thereof to the Borrower,
provided that (a) in the case of any such assignment (other than to a Lender or
an Affiliate of a Lender), the sum of the aggregate principal amount of the
Loans, the aggregate amount of the L/C Obligations and the aggregate amount of
the unused Commitments being assigned and, if such assignment is of less than
all of the rights and obligations of the assigning Lender, the sum of the
aggregate principal amount of the Loans, the aggregate amount of the L/C
Obligations and the aggregate amount of the unused Commitments remaining with
the assigning Lender are each not less than $10,000,000 (or such lesser amount
as may be agreed to by the Borrower and the Administrative Agent), (b)
assignments shall not be required to be made on a ratable basis between the
Commitments and/or Loans held by any Lender, (c) assignments by a Revolving
Credit Lender of all or a portion of its Revolving Loans and/or Revolving
Credit Commitment must be to either (i) a commercial bank having total assets
in excess of $5,000,000,000 or any of its Affiliates, or (ii) a finance
company, insurance company or other financial institution or fund which is
regularly engaged in the making of, purchasing or investing in loans and having
total assets in excess of $300,000,000 ("Eligible Assignee"), (d) any Lender
may make an assignment consisting solely of Term Loans (without regard to the
requirements of clause (a) above) so long as the aggregate principal amount of
Term Loans so assigned (if less than the Assignor's entire interest) is at
least $5,000,000, (e) the consent of the Borrower shall be required in
connection with any assignment to a Lender or an Affiliate of a Lender solely
to the extent that after giving effect thereto such Lender or Affiliate would
be entitled to receive any greater payment under subsection 4.9, 4.10 or 4.11
at such time than the assigning Lender is entitled to receive at such time, (f)
the consent of the Administrative Agent and the Borrower shall not be required
in connection with any bulk assignment by a Lender of its entire loan portfolio
(including its rights and obligations under this Agreement and the other Loan
Documents) to an Eligible Assignee, and (g) the Administrative Agent shall at
all times hold at least (i) $30,000,000 of the Commitments minus (ii) its
Commitment Percentage of any reductions of the Commitments applicable to all
Lenders. Upon such execution, delivery, acceptance and recording, from and
after the effective date determined pursuant to such Assignment and Acceptance,
(x) the Assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein, and (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining
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portion of an assigning Lender's rights and obligations under this Agreement,
such assigning Lender shall cease to be a party hereto).
(d) The Administrative Agent, on behalf of the Borrower,
shall maintain at the address of the Administrative Agent referred to in
subsection 12.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the names and addresses of the
Lenders and the Commitments of, and principal amounts of the Loans owing to,
each Lender from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrower, the Administrative Agent
and the Lenders may (and, in the case of any Loan or other obligation hereunder
not evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder shall be effective only upon appropriate entries with
respect thereto being made in the Register. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an Assignee (and, in the case of an
Assignee that is not then a Lender or an Affiliate thereof, by the Borrower and
the Administrative Agent) together with payment to the Administrative Agent of
a registration and processing fee of $3,000, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower; provided, however, that no such registration and processing fee
shall be paid in connection with the initial syndication of the Loans.
(f) The Borrower authorizes each Lender to disclose to
any Participant or Assignee (each, a "Transferee") and any prospective
Transferee, subject to the provisions of subsection 12.16, any and all
financial information in such Lender's possession concerning the Borrower and
its Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) For avoidance of doubt, the parties to this
Agreement acknowledge that the provisions of this subsection do not prohibit
any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors or other
applicable law or the creation of a security interest by any Lender other than
a commercial bank.
(h) So long as no Default or Event of Default shall have
then occurred and be continuing, no assignment by a Lender pursuant to this
subsection 12.6 shall be permitted without the consent of the Administrative
Agent and the Borrower if, after giving effect thereto, any Lender other than
the Administrative Agent would hold in excess of 20% of the aggregate Voting
Percentages at any such time.
12.7 REPLACEMENT OF LENDERS UNDER CERTAIN CIRCUMSTANCES. The
Borrower shall be permitted to replace any Lender which (a) requests
reimbursement for amounts owing pursuant to subsection 4.9 or 4.10, (b) has
received a written notice from the Borrower of an impending change in law that
would entitle such Lender to payment of additional amounts under subsection 4.9
or 4.10(a), unless such Lender designates a different lending office before
such change in law becomes effective and such alternate lending office obviates
the need for the Borrower to make payments of additional amounts under
subsection 4.9 or 4.10(a), (c) is affected in the manner described in
subsection 4.6(b) or 4.8 and as a result thereof any of the actions described
in subsection 4.6 or 4.8, as the case may be, are required to be taken, (d)
does not consent to any proposed amendment, supplement, modification, consent
or waiver of any provisions of this Agreement or
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any other Loan Document as contemplated by the last sentence of subsection
12.1, or (e) defaults in its obligation to make Loans or issue, or participate
in, any Letter of Credit, provided that (i) such replacement does not conflict
with any Requirement of Law, (ii) no Event of Default shall have occurred and
be continuing at the time of such replacement, (iii) the Borrower shall repay
(or the replacement bank or institution shall purchase, at par) all Loans and
other amounts owing to such replaced Lender prior to the date of replacement,
(iv) the Borrower shall be liable to such replaced Lender under subsection 4.11
if any Eurodollar Loan owing to such replaced Lender shall be prepaid (or
purchased) other than on the last day of the Interest Period relating thereto,
(v) the replacement bank or institution, if not already a Lender, and the terms
and conditions of such replacement, shall be reasonably satisfactory to the
Administrative Agent, (vi) the replaced Lender shall be obligated to make such
replacement in accordance with the provisions of subsection 12.6 (provided that
the Borrower or replacement Lender shall be obligated to pay the registration
and processing fee referred to therein), (vii) until such time as such
replacement shall be consummated, the Borrower shall pay all additional amounts
(if any) required pursuant to subsection 4.9 or 4.10, as the case may be, and
(viii) any such replacement shall not be deemed to be a waiver of any rights
which the Borrower, the Administrative Agent or any other Lender shall have
against the replaced Lender.
12.8 ADJUSTMENTS. If any Lender (a "benefited Lender") shall at any
time receive any payment of all or part of its Loans or the Reimbursement
Obligations owing to it, or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by set-off, or
otherwise), and, after giving effect to any such payment or the receipt of any
such collateral, such benefited Lender shall have received a greater
proportionate payment (determined in accordance with subsection 4.7) or
interest in collateral than that received by any other relevant Lender, if any,
in respect of such other relevant Lender's relevant Loans or, if applicable,
the Reimbursement Obligations owing to it, or interest thereon, such benefited
Lender shall purchase for cash from the other relevant Lenders a participating
or other similar interest in such portion of each such other relevant Lender's
relevant Loans or, if applicable, the Reimbursement Obligations owing to it, or
shall provide such other relevant Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders entitled to the same under this
subsection, provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefited Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest.
12.9 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall
be deemed to constitute one and the same instrument. A set of the copies of
this Agreement signed by all the parties shall be lodged with the Borrower and
the Administrative Agent.
12.10 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12.11 INTEGRATION. This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof and thereof, and there
are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Loan
Documents.
12.12 TERMINATION. This Agreement shall terminate when the
Commitments have terminated or expired, no Loan or Letter of Credit is
outstanding (other than Letters of Credit which have been cash collateralized
or supported by a "back to back" letter of credit, in each case,in a manner
substantially the
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same as the manner described pursuant to the penultimate paragraph of Section
3.10(c)) and the other then unpaid or accrued Credit Agreement Obligations have
been paid in full.
12.13 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS.
12.14 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has
any fiduciary relationship with or fiduciary duty to the Borrower arising out
of or in connection with this Agreement or any of the other Loan Documents, and
the relationship between the Administrative Agent and the Lenders, on the one
hand, and the Borrower, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other
Loan Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrower and the Lenders or among the
Borrower and the Administrative Agent.
12.15 WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
12.16 CONFIDENTIALITY. Each of the Administrative Agent and the
Lenders agrees to keep confidential all information provided to it by the
Borrower or the Administrative Agent pursuant to or in connection with this
Agreement that is designated by the Borrower in writing as confidential (the
"Confidential Information"); provided that nothing herein shall prevent any
Lender or the Administrative Agent from disclosing any such Confidential
Information (i) to the Administrative Agent or any other Lender, (ii) to any
Transferee or prospective Transferee which receives such Confidential
Information having been made aware of the confidential nature thereof and which
has agreed in writing to be bound by the terms of this subsection 12.16, (iii)
to its directors, officers, employees, employees of affiliates, examiners and
professional advisers who have a need to know such Confidential Information in
accordance with customary banking practices and who receive such Confidential
Information having been made aware of the restrictions of this subsection and,
in the case of professional advisers, having agreed to be bound thereby, (iv)
upon the request or demand of any Governmental Authority having jurisdiction
over such Lender, (v) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (vi) in connection with the exercise of any remedy
hereunder, (vii) which is now or hereafter becomes generally available to the
public other than as a result of a disclosure by such Lender or the
Administrative Agent or a disclosure known to such Lender or the Administrative
Agent to have been made by any person or entity to which such Lender or the
Administrative Agent has delivered such Confidential Information, (viii) which
was available to such Lender or the Administrative Agent prior to its
disclosure to such Lender or the Administrative Agent by the Borrower, or (ix)
which becomes available to such Lender or the Administrative Agent from a
source other than the Borrower, provided that such source is not (1) known to
such Lender or the Administrative Agent to be bound by a confidentiality
agreement with the Borrower or (2) known to such Lender or the Administrative
Agent to be otherwise prohibited from
-95-
<PAGE> 102
transmitting the information to such Lender or the Administrative Agent by a
contractual, legal or fiduciary obligation.
12.17 SECTION HEADINGS. The Section and subsection headings in this
Agreement are for convenience in reference only and shall not deemed to alter
or affect the interpretation of any provisions hereof.
12.18 JUDGMENT CURRENCY. The obligation of the Borrower under this
Agreement to make payments in respect of each Reimbursement Obligation in the
currency in which it is outstanding (the "Agreement Currency") shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any other currency (the "Judgment Currency")
except to the extent that such tender or recovery of the Judgment Currency
results in the effective receipt by the Lenders or the relevant Issuing Banks,
as the case may be, of the full amount of the Agreement Currency payable under
this Agreement and the Borrower agrees to indemnify the Lenders or the relevant
Issuing Banks, as the case may be (and the Lenders or the relevant Issuing
Banks, as the case may be, shall have an additional legal claim) for any
difference between such full amount and the amount effectively received by such
Lenders or such Issuing Banks, as the case may be, pursuant to any such tender
or recovery. Each Lender's or Issuing Bank's determination of amounts
effectively received by such Lender or Issuing Bank shall be presumed correct
absent manifest error. If a judgment in respect of the obligations of the
Borrower hereunder is rendered in a currency other than the Agreement Currency
and if, upon receipt of the full amount of such judgment in such currency and
the conversion into, and receipt of such amount in the Agreement Currency, such
amount of the Agreement Currency exceeds the obligations of the Borrower
hereunder, such excess amount shall be remitted to the Borrower by the Lenders
or the relevant Issuing Banks, as the case may be. The obligations of the
Borrower under this subsection shall survive the termination of this Agreement
and the repayment of the Loans and all other amounts payable hereunder.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-96-
<PAGE> 103
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS POST-PETITION
CREDIT AGREEMENT TO BE DULY EXECUTED AND DELIVERED BY THEIR PROPER AND DULY
AUTHORIZED OFFICERS AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
SERVICE MERCHANDISE COMPANY, INC.,
AS THE BORROWER
BY: /s/ R. John Pindred
---------------------------------------------
NAME: R. John Pindred
-------------------------------------------
TITLE: VP, Treasurer
------------------------------------------
FLEET RETAIL FINANCE INC.
AS ADMINISTRATIVE AGENT AND AS A LENDER
BY: /s/
---------------------------------------------
NAME:
-------------------------------------------
TITLE:
------------------------------------------
FLEET NATIONAL BANK,
AS AN ISSUING BANK
BY: /s/
---------------------------------------------
NAME:
-------------------------------------------
TITLE:
------------------------------------------
FOOTHILL CAPITAL CORPORATION,
AS CO-AGENT AND LENDER
BY: /s/ Michael P. Baranowski
---------------------------------------------
NAME: Michael P. Baranowski
-------------------------------------------
TITLE: Vice President
------------------------------------------
NATIONAL CITY COMMERCIAL FINANCE INC.,
AS CO-AGENT AND LENDER
BY: /s/
---------------------------------------------
NAME:
-------------------------------------------
TITLE:
------------------------------------------
-97-
<PAGE> 104
JACKSON NATIONAL LIFE INSURANCE COMPANY
AS CO-AGENT AND LENDER
BY: /s/ Michael Williams
---------------------------------------------
NAME: Michael Williams
-------------------------------------------
TITLE: VP
------------------------------------------
HELLER FINANCIAL INC.,
AS DOCUMENTATION AGENT AND LENDER
BY: /s/ John Buff
---------------------------------------------
NAME: John Buff
-------------------------------------------
TITLE: SVP
------------------------------------------
CONGRESS FINANCIAL CORPORATION (SOUTHERN)
AS LENDER
BY: /s/ Barry A. Kastner
---------------------------------------------
NAME: Barry A. Kastner
-------------------------------------------
TITLE: Executive Vice President
------------------------------------------
DEBIS FINANCIAL SERVICES, INC.
AS LENDER
BY: /s/ James A. Vandervalk
---------------------------------------------
NAME: James A. Vandervalk
-------------------------------------------
TITLE: President, ABL Division
------------------------------------------
GUARANTY BUSINESS CREDIT CORPORATION
AS LENDER
BY: /s/ Edward E. Henkel
---------------------------------------------
NAME: Edward E. Henkel
-------------------------------------------
TITLE: Senior Vice President
------------------------------------------
FINOVA CAPITAL CORPORATION
AS LENDER
BY: /s/
---------------------------------------------
NAME:
-------------------------------------------
TITLE:
------------------------------------------
GMAC BUSINESS CREDIT, LLC
AS LENDER
BY: /s/ W. Wakefield Smith
---------------------------------------------
NAME: W. Wakefield Smith
-------------------------------------------
TITLE: Director
------------------------------------------
-98-
<PAGE> 105
IBJ WHITEHALL BUSINESS CREDIT CORPORATION
AS LENDER
BY: /s/ John N. Favale
---------------------------------------------
NAME: John N. Favale
-------------------------------------------
TITLE: Asst. Vice President
------------------------------------------
LASALLE BUSINESS CREDIT, INC.
AS LENDER
BY:
---------------------------------------------
NAME:
-------------------------------------------
TITLE:
------------------------------------------
ORIX BUSINESS CREDIT, INC.
AS LENDER
BY: /s/
---------------------------------------------
NAME:
-------------------------------------------
TITLE:
------------------------------------------
SOVEREIGN BANK
AS LENDER
BY: /s/ Joseph Becker
---------------------------------------------
NAME: Joseph Becker
-------------------------------------------
TITLE: VP
------------------------------------------
THE PROVIDENT BANK
AS LENDER
BY: /s/ Jose V. Garde
---------------------------------------------
NAME: Jose V. Garde
-------------------------------------------
TITLE: Vice President
------------------------------------------
GMAC COMMERCIAL CREDIT, LLC
AS LENDER
BY: /s/ Joseph P. Grimaldi
---------------------------------------------
NAME: Joseph P. Grimaldi
-------------------------------------------
TITLE: President
------------------------------------------
FOOTHILL INCOME TRUST, L.P.
AS LENDER
BY: /s/
---------------------------------------------
NAME:
-------------------------------------------
TITLE:
------------------------------------------
-99-
<PAGE> 106
SCHEDULE 1.1(A)
TO CREDIT AGREEMENT
COMMITMENTS
<TABLE>
<CAPTION>
==========================================================================================
LENDER TOTAL REVOLVER TERM LOAN
==========================================================================================
<S> <C> <C> <C>
FLEET RETAIL FINANCE INC $ 50,000,000 $ 40,000,000 $10,000,000
- ------------------------------------------------------------------------------------------
FOOTHILL CAPITAL CORPORATION $ 50,000,000 $ 50,000,000 0
- ------------------------------------------------------------------------------------------
NATIONAL CITY COMMERCIAL $ 45,000,000 $ 35,000,000 $10,000,000
FINANCE, INC
- ------------------------------------------------------------------------------------------
JACKSON NATIONAL LIFE $150,000,000 $140,000,000 $10,000,000
INSURANCE COMPANY
- ------------------------------------------------------------------------------------------
HELLER FINANCIAL INC $ 50,000,000 $ 40,000,000 $10,000,000
- ------------------------------------------------------------------------------------------
CONGRESS FINANCIAL $ 35,000,000 $ 35,000,000 0
CORPORATION (SOUTHERN)
==========================================================================================
DEBIS FINANCIAL SERVICES, INC $ 25,000,000 $ 25,000,000 0
==========================================================================================
GUARANTY BUSINESS CREDIT $ 20,000,000 $ 20,000,000 0
CORPORATION
==========================================================================================
FINOVA CAPITAL CORPORATION $ 20,000,000 $ 20,000,000 0
==========================================================================================
GMAC BUSINESS CREDIT LLC $ 25,000,000 $ 25,000,000 0
==========================================================================================
IBJ WHITEHALL BUSINESS CREDIT $ 20,000,000 $ 20,000,000 0
CORPORATION
==========================================================================================
LASALLE BUSINESS CREDIT, INC $ 25,000,000 $ 25,000,000 0
==========================================================================================
ORIX BUSINESS CREDIT, INC $ 15,000,000 $ 15,000,000 0
==========================================================================================
SOVEREIGN BANK $ 15,000,000 $ 15,000,000 0
==========================================================================================
THE PROVIDENT BANK $ 10,000,000 $ 10,000,000 0
==========================================================================================
GMAC COMMERCIAL CREDIT, $ 25,000,000 $ 25,000,000 0
LLC
==========================================================================================
FOOTHILL INCOME TRUST, L.P. $ 20,000,000 0 $20,000,000
==========================================================================================
</TABLE>
100
<PAGE> 107
Schedule 12.2
TO CREDIT AGREEMENT
ADDRESS OF OTHER PARTIES
<TABLE>
<CAPTION>
Name of Lender Address for Notices Contact
========================================================================================
<S> <C> <C>
Foothill Capital Corporation 11111 Santa Monica Blvd. Michael Baranowski
Suite 1500
Los Angeles, CA 90025
- ----------------------------------------------------------------------------------------
National City Commercial 1965 East Sixth Street, Carla Kehres
Finance Inc. Suite 400
Cleveland, OH 44114
- ----------------------------------------------------------------------------------------
Jackson National Life Insurance c/o PPM America, Inc. Michael Williams
Company 225 West Wacker Drive,
Suite 1100
Chicago, IL 60606
- ----------------------------------------------------------------------------------------
Heller Financial Inc. 150 East 42nd Street Thomas Bukowski
New York, NY 10017
- ----------------------------------------------------------------------------------------
Congress Financial Corporation 1133 Avenue of the Robert Milhorat
(Southern) Americas
New York, NY 10036
========================================================================================
debis Financial Services, Inc. 89 Headquarters Plaza Chris Esposito
North, Suite 1444, Room
1417
Morristown, NJ 07960
========================================================================================
Guaranty Business Credit d/b/a Fidelity Funding James Johnson
Corporation 8333 Douglas Avenue,
Suite 530
Dallas, TX 75225
========================================================================================
FINOVA Capital Corporation 311 S. Wacker Drive, Thomas Gibbons
Suite 4400
Chicago, IL 60606
========================================================================================
LaSalle Business Credit, Inc. 565 Fifth Avenue, 27th Anthony J. Veith
Floor
New York, NY 10017
========================================================================================
GMAC Business Credit, LLC 630 Fifth Avenue, 30th Richard E. Peller
Floor
New York, NY 10104
========================================================================================
IBJ Whitehall Business Credit One State Street, 6th Floor Thomas Bayer
Corporation New York, NY 10004
========================================================================================
ORIX Business Credit, Inc. 846 East Algonquin Road, Kevin R. Kirsten
Suite 101
Schaumburg, IL 60173
========================================================================================
Sovereign Bank 50 Rowes Wharf Joseph Becker
Suite 430
Boston, MA 02110
========================================================================================
</TABLE>
Schedule 11.2 to
SERVICE MERCHANDISE COMPANY, INC.
POST PETITION CREDIT AGREEMENT
<PAGE> 108
<TABLE>
========================================================================================
<S> <C> <C>
The Provident Bank One East Fourth Street, Jose Garde
249A
Cincinnati, OH 45202
========================================================================================
GMAC Commercial Credit, LLC 1290 Avenue of the David Duffy
Americas
New York, NY 10104
========================================================================================
Foothill Income Trust, L.P. 11111 Santa Monica Michael Bohannon
Boulevard
Suite 1500
Los Angeles, CA 90025
========================================================================================
</TABLE>
<PAGE> 109
EXECUTION COPY
U.S. $600,000,000
EXIT FACILITY AGREEMENT
by and among
SERVICE MERCHANDISE COMPANY, INC.
a debtor and debtor-in-possession
as Borrower
THE LENDERS PARTY HERETO
FLEET RETAIL FINANCE INC.
as Collateral Agent and Administrative Agent
FOOTHILL CAPITAL CORPORATION
NATIONAL CITY COMMERCIAL FINANCE INC.
JACKSON NATIONAL LIFE INSURANCE COMPANY
as Co-Agents
HELLER FINANCIAL, INC.
as Documentation Agent
Dated: as of _________
<PAGE> 110
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. DEFINITIONS.....................................................................................2
1.1 Defined Terms..........................................................................2
1.2 Other Definitional Provisions.........................................................40
SECTION 2. AMOUNTS AND TERMS OF TERM LOANS................................................................40
2.1 Term Loans............................................................................40
2.2 Repayment of Term Loans; Amortization.................................................40
SECTION 3. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS
AND THE INTERIM FACILITY.......................................................................41
3.1 Revolving Credit Commitments..........................................................41
3.2 Procedure for Revolving Credit Borrowing..............................................41
3.3 Commitment Fee........................................................................42
3.4 Termination or Reduction of Commitments...............................................42
3.5 Repayment of Revolving Loans..........................................................42
3.6 L/C Commitment........................................................................42
3.7 Procedure for Issuance of Letters of Credit...........................................44
3.8 Letter of Credit Fees, Commissions and Other Charges..................................44
3.9 L/C Participations....................................................................45
3.10 Letter of Credit Reimbursement Obligations............................................46
3.11 Obligations Absolute..................................................................47
3.12 Letter of Credit Payments.............................................................48
3.13 Letter of Credit Applications.........................................................48
3.14 Swing Line Commitment.................................................................48
3.15 Procedure for Swing Line Borrowing....................................................48
3.16 Refunding of Swing Line Loans; Participations in Swing Line
Loans.................................................................................49
3.17 Other Fees............................................................................51
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF
CREDIT.........................................................................................51
4.1 Optional and Mandatory Prepayments....................................................51
4.2 Conversion and Continuation Options...................................................53
4.3 Minimum Amounts and Maximum Number of Tranches........................................53
4.4 Interest Rates and Payment Dates......................................................54
4.5 Computation of Interest and Fees......................................................54
4.6 Inability to Determine Interest Rate..................................................55
4.7 Pro Rata Treatment and Payments.......................................................55
4.8 Illegality............................................................................56
4.9 Requirements of Law...................................................................57
4.10 Indemnification for Taxes.............................................................58
4.11 Indemnity.............................................................................60
4.12 Change of Lending Office..............................................................60
4.13 Evidence of Debt......................................................................60
</TABLE>
i
<PAGE> 111
<TABLE>
<S> <C> <C>
SECTION 5. REPRESENTATIONS AND WARRANTIES.................................................................62
5.1 Financial Condition...................................................................62
5.2 No Change.............................................................................62
5.3 Existence; Compliance with Law........................................................62
5.4 Power; Authorization; Enforceable Obligations.........................................63
5.5 No Legal Bar..........................................................................63
5.6 No Material Litigation................................................................63
5.7 No Default............................................................................64
5.8 No Burdensome Restrictions............................................................64
5.9 Taxes.................................................................................64
5.10 Federal Regulations...................................................................64
5.11 ERISA.................................................................................64
5.12 Investment Company Act; Other Regulations.............................................65
5.13 Subsidiaries..........................................................................65
5.14 Environmental Matters.................................................................65
5.15 The Security Documents................................................................66
5.16 Ownership of Property; Liens..........................................................66
5.17 Intellectual Property.................................................................67
5.18 Pledged Stock.........................................................................67
5.19 Real Estate Matters...................................................................67
5.20 Purpose of Loans; Use of Proceeds.....................................................67
5.21 Accuracy of Information...............................................................67
5.22 Depositary Accounts...................................................................68
SECTION 6. CONDITIONS.....................................................................................68
6.1 Conditions to Effectiveness...........................................................68
(a) Plan of Reorganization; Bankruptcy Court Order...............................68
(b) Execution of Loan Documents..................................................68
(c) Closing Certificate..........................................................68
(d) Corporate Proceedings of the Borrower........................................69
(e) Borrower Incumbency Certificate..............................................69
(f) Corporate Proceedings of Subsidiaries........................................69
(g) Subsidiary Incumbency Certificates...........................................69
(h) Fees.........................................................................69
(i) Legal Opinions...............................................................69
(j) Lien Perfection..............................................................70
(k) No Material Adverse Change...................................................70
(l) No Litigation................................................................70
(m) Consents and Approvals.......................................................70
(n) Insurance and Bonding........................................................70
(o) Flood Insurance..............................................................70
(p) Financial Information........................................................70
(q) Intercreditor Agreements.....................................................71
(r) Trade Credit.................................................................71
(s) Rolling 12-Month EBITDA......................................................71
(t) Excess Availability..........................................................72
(u) Cash Management..............................................................72
(v) Payoff of Existing DIP Agreement.............................................72
(w) No Defaults..................................................................72
(x) Additional Matters...........................................................72
</TABLE>
ii
<PAGE> 112
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
6.2 Conditions to Each Extension of Credit................................................72
(a) Representations and Warranties...............................................72
(b) No Default...................................................................73
(c) Borrowing Base...............................................................73
(d) No Legal Impediment..........................................................73
(e) Borrowing Base Certificate...................................................73
SECTION 7. AFFIRMATIVE COVENANTS..........................................................................73
7.1 Financial Statements..................................................................73
7.2 Certificates; Other Information.......................................................74
7.3 Payment of Obligations................................................................75
7.4 Maintenance of Existence; Compliance with Contractual
Obligations and Requirements of Law...................................................75
7.5 Maintenance of Property; Insurance....................................................76
7.6 Inspection of Property; Books and Records; Discussions;
Appraisals............................................................................76
7.7 Notices...............................................................................76
7.8 Environmental Laws....................................................................77
7.9 Further Assurances....................................................................77
7.10 Application of Proceeds...............................................................77
7.11 Additional Collateral.................................................................78
7.12 Depositary Account and Payments System; Cash Dominion.................................79
SECTION 8. NEGATIVE COVENANTS.............................................................................79
8.1 Financial Condition Covenants.........................................................79
(a) EBITDA.......................................................................79
(b) Capital Expenditures.........................................................80
8.2 Limitation on Guarantee Obligations...................................................81
8.3 Limitation on Liens...................................................................82
8.4 Limitation on Fundamental Changes.....................................................84
8.5 Limitation on Sale of Assets..........................................................85
8.6 Limitation on Dividends...............................................................86
8.7 Limitation on Indebtedness............................................................87
8.8 Limitation on Investments, Loans and Advances.........................................87
8.9 Limitation on Optional Payments and Modifications of Debt
Instruments...........................................................................89
8.10 Limitation on Transactions with Affiliates............................................90
8.11 Limitation on Sales and Leasebacks....................................................90
8.12 Fiscal Years and Quarters.............................................................90
8.13 Limitation on Conduct of Business.....................................................90
8.14 Limitation on Issuances of Capital Stock..............................................91
8.15 Foreign Holding Companies, Inactive Subsidiaries and Special
Purpose Subsidiaries..................................................................91
</TABLE>
iii
<PAGE> 113
<TABLE>
<S> <C> <C>
SECTION 9. EVENTS OF DEFAULT..............................................................................91
SECTION 10. THE ADMINISTRATIVE AGENT.......................................................................95
10.1 Appointment...........................................................................95
10.2 Delegation of Duties..................................................................95
10.3 Exculpatory Provisions................................................................95
10.4 Reliance by Administrative Agent......................................................95
10.5 Notice of Default.....................................................................96
10.6 Non-Reliance on Administrative Agent and Other Lenders................................96
10.7 Indemnification.......................................................................97
10.8 Administrative Agent in Its Individual Capacity.......................................97
10.9 Successor Administrative Agent........................................................97
SECTION 11. MISCELLANEOUS..................................................................................97
11.1 Amendments and Waivers................................................................97
11.2 Notices...............................................................................99
11.3 No Waiver; Cumulative Remedies.......................................................100
11.4 Survival of Representations and Warranties...........................................101
11.5 Payment of Expenses and Taxes; Indemnity.............................................101
11.6 Successors and Assigns; Participations and Assignments...............................102
11.7 Replacement of Lenders under Certain Circumstances...................................104
11.8 Adjustments..........................................................................105
11.9 Counterparts.........................................................................105
11.10 Severability.........................................................................105
11.11 Integration..........................................................................106
11.12 Termination..........................................................................106
11.13 GOVERNING LAW........................................................................106
11.14 Acknowledgements.....................................................................106
11.15 WAIVER OF JURY TRIAL.................................................................106
11.16 Confidentiality......................................................................106
11.17 Section Headings.....................................................................107
11.18 Judgment Currency....................................................................107
</TABLE>
iv
<PAGE> 114
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SCHEDULES
Schedule 1.1(a) Commitments
Schedule 1.1(b) Real Estate Eligibility Conditions
Schedule 5.1 Charges and Changes
Schedule 5.2 Changes
Schedule 5.4 Consents
Schedule 5.6 Litigation
Schedule 5.7 Defaults
Schedule 5.8 Restrictions
Schedule 5.13 Subsidiaries
Schedule 5.14 Environmental Matters
Schedule 5.17 Intellectual Property Matters
Schedule 5.19 Material Real Property
Schedule 5.22 Depositary Accounts
Schedule 7.3 Payments on Obligations
Schedule 7.4 Compliance with Obligations
Schedule 8.2(b) Existing Guarantee Obligations
Schedule 8.3(f) Existing Liens
Schedule 8.7(f) Existing Indebtedness
Schedule 8.10 Transactions with Affiliates
Schedule 11.2 Addresses
EXHIBITS
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Master Security Agreement
Exhibit C-1 Form of Revolving Credit Note
Exhibit C-2 Form of Term Loan Note
Exhibit D Form of Swing Line Note
Exhibit E Intentionally Omitted
Exhibit F Form of Borrower Closing Certificate
Exhibit G Form of Opinion of Counsel
Exhibit H Form of Borrowing Base Certificate
Exhibit I Available GOB Inventory Worksheet
</TABLE>
v
<PAGE> 115
This Agreement assumes that Service Merchandise Company, Inc. is the Borrower.
The Borrower may be, at Service Merchandise Company Inc.'s election, (and
subject to the completion of satisfactory legal due diligence by the
Administrative Agent with respect thereto), either a holding company or one or
more operating companies, so long as all subsidiaries of Service Merchandise
Company, Inc. required to guaranty the obligations under the Existing DIP
Agreement (or its parent, if applicable) provide secured guaranties. If the
Borrower is an entity other than Service Merchandise Company, Inc., this
Agreement will be revised as needed to reflect such restructuring.
EXIT FACILITY CREDIT AGREEMENT
EXIT FACILITY CREDIT AGREEMENT, dated as of _______, by and among
SERVICE MERCHANDISE COMPANY, INC., a Tennessee corporation (the "Borrower"),
the financial institutions and other entities identified on the signature pages
hereof as a "Lender" and the financial institutions and other entities who
become parties hereto as successors or assigns as provided herein
(collectively, the "Lenders" and each individually, a "Lender") FLEET RETAIL
FINANCE INC., a Delaware corporation ("FRF"), as collateral agent and
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), Foothill Capital Corporation, National City Commercial Finance, Inc.
and Jackson National Life Insurance Company, as Co-Agents (collectively, in
such capacity, the "Co-Agents"), and Heller Financial, Inc., as Documentation
Agent (in such capacity, the "Documentation Agent") (as amended, modified,
supplemented, extended, renewed, or refinanced from time to time, this
"Agreement").
W I T N E S S E T H:
WHEREAS, on March 15, 1999 an involuntary chapter 11 petition was
filed against the Borrower in the United States Bankruptcy Court for the Middle
District of Tennessee; and
WHEREAS, the Board of Directors of the Borrower authorized the
Borrower to commence a voluntary chapter 11 case and, on March 27, 1999 (the
"Petition Date"), the Borrower filed a voluntary petition for relief under
chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for
the Middle District of Tennessee; and
WHEREAS, on April __, 2000, the Borrower entered into a Post-Petition
Credit Agreement with certain lenders, Fleet Retail Finance Inc., as Collateral
Agent and Administrative Agent, Foothill Capital Corporation, National City
Commercial Finance, Inc. and Jackson National Life Insurance Company, as
Co-Agents, Heller Financial, Inc., as Documentation Agent and FleetBoston
Robertson Stephens, Inc. as Arranger (as amended and in effect, the "Existing
DIP Agreement"); and
WHEREAS, the Bankruptcy Court has confirmed the Borrower's Plan of
Reorganization and accordingly, the Borrower has requested that the Lenders
refinance the obligations under the Existing DIP Agreement and extend financing
to the Borrower subsequent to the confirmation of its Plan of Reorganization;
and
WHEREAS, the Lenders are willing to make funds available to the
Borrower, but only for the purposes and upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, the Borrower has agreed to secure its obligations to the
Lenders in connection with such financings with, inter alia, security interests
in, and liens on, its property and assets, whether real or personal, tangible
or intangible, as provided herein;
-1-
<PAGE> 116
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and subject to the satisfaction of the conditions set forth herein, the
Borrower, the Lenders, and the Administrative Agent hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"ABR": a fluctuating interest rate per annum as shall be in
effect from time to time, which rate per annum shall be equal at any
time to the then highest of:
(a) the rate of interest announced publicly by Fleet in
Boston, Massachusetts, from time to time, as its base rate;
(b) the sum (adjusted to the nearest 1/4 of one percent
or, if there is no nearest 1/4 of one percent, to the next higher
1/4 of one percent) of (i) one-half of one percent per annum plus
(ii) the Federal Funds Rate.
"ABR Loans": Term Loans or Revolving Loans the rate of interest
applicable to which is based upon the ABR.
"Account Debtor": any Person that is liable to make payments with
respect to an Account.
"Accounts": all "accounts" (as such term is defined in the UCC)
now owned or hereafter acquired by the Borrower or any Subsidiary
Guarantor and all Instruments and Chattel Paper now owned or hereafter
acquired by the Borrower or such Subsidiary Guarantor which evidence a
right to payment for goods sold or leased or for services rendered,
whether or not such right has been earned by performance.
"Accounts Receivable Calculation Date": at any time, the last day
of the most recent fiscal month.
"Acquisition": as to any Person, the acquisition by such Person
of (a) Capital Stock of any other Person that is not a Subsidiary of
such Person if, after giving effect to the acquisition of such Capital
Stock, such other Person would be a Subsidiary of such Person, (b) all
or substantially all of the assets of any other Person or (c) assets
constituting one or more business units of any other Person.
"Administrative Agent": as defined in the preamble to this
Agreement, and any successor Administrative Agent appointed pursuant to
subsection 10.9.
"Affiliate": as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" of
a Person means the power, directly or indirectly, either to (a) vote 5%
or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or
otherwise. For the purposes of this Agreement, the Borrower and its
Restricted Subsidiaries shall not be deemed to be Affiliates of each
other.
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"Agent's Fee": the "Agent's Fee" payable by the Borrower to the
Administrative Agent at the times and in the amounts set forth in the
Fee Letter.
"Aggregate Outstanding Extensions of Credit": at any time, an
amount equal to the sum of (a) the Aggregate Revolving Credit
Outstandings at such time and (b) the aggregate outstanding principal
amount of Term Loans of all the Term Lenders at such time.
"Aggregate Revolving Credit Outstandings": at any time, an amount
equal to the Revolving Credit Extensions of Credit of all the Lenders at
such time.
"Agreement": as defined in the preamble to this Agreement.
"Agreement Currency": as defined in subsection 11.18.
"Applicable Commitment Fee Rate": 0.375% per annum, which will
accrue commencing on the Effective Date as a percentage of the daily
average unused portion of the Revolving Credit Commitments, payable
quarterly in arrears and on the Termination Date.
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<PAGE> 118
"Applicable Margin": for each Type of Loan, subject to subsection
4.4(d), initially, the rate per annum set forth under the relevant
column heading below:
ABR LOANS EURODOLLAR LOANS
TO BE COMPLETED BASED UPON THE MARGIN IN EFFECT UNDER THE EXISTING DIP
AGREEMENT AT TIME OF EXECUTION OF THIS AGREEMENT
The Applicable Margin shall be adjusted as of the day of delivery of the
financial statements for the ___ quarter of _______ (THE LATER OF THE
FIRST QUARTER 2001 AND THE FISCAL QUARTER IN WHICH THE EFFECTIVE DATE
OCCURS), pursuant to subsection 7.1(c), based upon the following
criteria:
<TABLE>
<CAPTION>
ABR
ROLLING 12- EXCESS EURODOLLAR LOANS
LEVEL MONTH EBITDA AVAILABILITY LOANS MARGIN MARGIN
- ----- ------------ ------------ ------------ ------
<S> <C> <C> <C> <C>
I N/A Less than or equal 2.75% 1.00%
to $50,000,000
II N/A Greater than 2.50% 0.75%
$50,000,000 but
less than or equal
to $75,000,000
III Greater than Greater than 2.25% 0.50%
$50,000,000, but $75,000,000
less than or equal
to $75,000,000
IV Greater than Greater than 2.00% 0.25%
$75,000,000 $75,000,000
</TABLE>
Thereafter, the Applicable Margin shall be adjusted quarterly,
commencing with the quarter ending on ________ (THE LATER OF JUNE 30,
2001 AND THE LAST DAY OF THE FISCAL QUARTER IN WHICH THE EFFECTIVE DATE
OCCURS) based upon the criteria set forth above. All adjustments to the
Applicable Margin shall be based upon, and shall become effective as of
the date of delivery of, the financial statements and Borrowing Base
Certificate delivered to the Administrative Agent pursuant to
subsections 7.1(c) and 7.2(c) hereof, respectively, for the period
ending as of (or in the case of the Borrowing Base Certificate, the
nearest date occurring before) the adjustment date. The Applicable
Margin shall be that level in which all applicable tests are met; if
only one of the tests in Level III or IV is met, then the pricing will
be in the next higher Level (with Level I being the highest Level and
Level IV the lowest).
"Applicant": with respect to any Letter of Credit, the Borrower
or any Subsidiary Guarantor.
"Application": an application or request, in such form as an
Issuing Bank may specify from time to time, requesting such Issuing Bank
to open a Letter of Credit.
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<PAGE> 119
"Asset Sale": any sale or other disposition, or series of sales
or other dispositions (including, without limitation, by merger or
consolidation, and whether by operation of law or otherwise), made on or
after the Effective Date by the Borrower and/or any of the Restricted
Subsidiaries to any Person of any asset or assets.
"Asset Sale Proceeds": with respect to any Asset Sale, cash
payments received by the Borrower or any Restricted Subsidiary
(including, without limitation, any cash payments received by way of
deferred payment of principal (but not interest) pursuant to a note or
receivable or otherwise and any cash realized from any disposition of
non-cash proceeds received by the seller, but only as and when received)
from any Asset Sale (after repayment of any Indebtedness other than the
Loans due by reason of such Asset Sale), in each case net of the amount
of (i) brokers' and advisors' fees and commissions payable in connection
with such Asset Sale, (ii) the fees and expenses attributable to such
Asset Sale, to the extent not included in clause (i) above, and (iii)
any amount required to be paid to any Person (other than the Borrower or
any Restricted Subsidiary) owning a beneficial interest in the property
or assets subject to such Asset Sale. For purposes of this definition,
an Asset Sale shall be deemed to include, without limitation, any award
of compensation for any asset or property or group thereof taken by
condemnation or eminent domain and insurance proceeds for the loss of or
damage to any asset or property.
"Assignee": as defined in subsection 11.6(c).
"Available Accounts Receivable Amount": as of any Accounts
Receivable Calculation Date, an amount equal to up to 80% of the
Eligible Trade Accounts Receivable Amount as of such Accounts Receivable
Calculation Date.
"Available Cash Equivalents": as of any Calculation Date, an
amount equal to 100% of Cash Equivalents which have then been pledged to
the Administrative Agent pursuant to the Master Security Agreement.
"Available GOB Inventory Amount": as of any Calculation Date, an
amount equal to the GOB Inventory Amount minus the GOB Discount Amount
for the period reported on at such Calculation Date, as calculated on
the Available GOB Inventory Worksheet attached hereto as Exhibit I.
"Available Inventory Amount": as of any Calculation Date, an
amount equal to (a) (i) during the period September 1 through December
15 of each year, 75% (subject to upward adjustment to 77.5% in the
Administrative Agent's discretion) of the Eligible Adjusted Inventory
Amount as of such Calculation Date, and (ii) at all other times 70%
(subject to upward adjustment to 72.5% in the Administrative Agent's
discretion) of the Eligible Adjusted Inventory Amount as of such
Calculation Date (subject, in case of each of clauses (i) and (ii)
above, to the provisions of clause (2) of the definition of "Borrowing
Base") minus in each case, (b) the Customer Credit Liability Amount as
of the most recent Reserve Calculation Date, and minus in each case, (c)
the Landlord's Lien Amount as of the most recent Reserve Calculation
Date..
"Available L/C Amount": as of any Calculation Date, an amount
equal to up to (i) during the period September 1 through December 15 of
each year, 75% (subject to upward adjustment to 77.5% in the
Administrative Agent's discretion), and (ii) at all other times 70%
(subject to upward adjustment to 72.5% in the Administrative Agent's
discretion) (subject, in case of each of clauses (i) and (ii) above, to
the provisions of clause (2) of the definition of "Borrowing Base"), of
the sum of (a) the aggregate undrawn face amount of Trade Letters of
Credit (including Trade Letters of Credit which have been collateralized
by Standby Letters of
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<PAGE> 120
Credit issued by an Issuing Bank) issued to finance the purchase of
Inventory, which Trade Letters of Credit have an expiry no later than
120 days after the Calculation Date, and (b) the aggregate Inventory
Value of Inventory financed with Trade Letters of Credit which have been
fully drawn and the Reimbursement Obligations in respect of which have
been fully paid so long as, in the case of clause (a) and (b), (i) such
Inventory shall be in transit to properties owned or leased by the
Borrower or a Subsidiary Guarantor in the United States, (ii) such
Inventory is not included in the calculation of Eligible Inventory
Amount and, upon arrival in the United States, will be included in the
determination of the Eligible Inventory Amount (but not included in the
determination of the Ineligible Inventory Amount) and (iii) either the
Administrative Agent or its agent or bailee shall be named as the
consignee of the applicable bill of lading or other document of title or
the Administrative Agent shall have received an agreement with the
applicable customs broker in form and substance reasonably satisfactory
to the Administrative Agent..
["Available Leasehold Amount": as of any Calculation Date, such
amount, if any, as the Administrative Agent, in its discretion
determines but in no event in excess of 25% of the Eligible Leasehold
Interests.]1
"Available Mortgaged Real Property Amount": an amount equal to
54.5% of the excess of (A) the aggregate Mortgage Value of all parcels
of Eligible Mortgaged Real Property as of the most recent Calculation
Date over (B) the sum of (I) the aggregate Real Property Amortization
Amounts for all parcels of Eligible Mortgaged Real Property at such
time, (II) the Environmental Reserve Amount at such time and (III) the
aggregate Mechanics' Lien Reserve Amounts for all parcels of Eligible
Mortgaged Real Property at such time.
"Available Revolving Credit Commitment": as to any Lender, at any
time, an amount equal to the excess, if any, of (a) such Lender's
Revolving Credit Commitment at such time over (b) such Lender's
Revolving Credit Extensions of Credit at such time.
"Bankruptcy Code": title 11, United State Code, as amended from
time to time, as applicable to the Reorganization Case.
"Bankruptcy Court": the United States Bankruptcy Court for the
Middle District of Tennessee and any other court having competent
jurisdiction over the Reorganization Cases, the Borrower or the
Subsidiary Guarantors, or any of their assets.
"benefited Lenders": as defined in subsection 11.8(a).
"Blocked Account Agreement": as defined in the Master Security
Agreement..
"Board of Governors": the Board of Governors of the Federal
Reserve System and any Governmental Authority which succeeds to the
powers and functions thereof.
"Borrower": as defined in the preamble to this Agreement.
"Borrowing Base": at any time, (i) an amount, calculated based
upon the Borrowing Base Certificate delivered pursuant to subsection
6.2(e) and thereafter the most recent Borrowing Base Certificate
delivered pursuant to this Agreement, equal to the sum of (a) the
Available Inventory Amount as of the most recent Calculation Date, plus
(b) the Available Accounts
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1 To be included only if the Administrative Agent determines to include
such items in the Borrowing Base (as the February 21, 2000 commitment letter
and Term Sheet permits).
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<PAGE> 121
Receivable Amount as of the most recent Accounts Receivable Calculation
Date, plus (c) the Available L/C Amount as of the most recent
Calculation Date, plus (d) the Available Mortgaged Real Property Amount
as of the most recent Calculation Date, plus (e) In-Transit Cash
calculated as of the Wednesday immediately preceding the most recent
Calculation Date, plus [(f) the Available Leasehold Amount,]2 plus (ii)
on each Borrowing Date, the Available Cash Equivalents amount as of such
Borrowing Date, provided that the amounts available pursuant to clauses
(d) and (f) hereof shall in no event exceed $115,000,000 in the
aggregate. The Borrowing Base established based upon a particular
Borrowing Base Certificate shall remain in effect until the delivery of
a subsequent Borrowing Base Certificate. The Administrative Agent (1)
shall have the right, in connection with any periodic audit or appraisal
of the Inventory performed by or on behalf of the Administrative Agent,
any reports provided to the Administrative Agent by the Borrower, or as
a result of changing market conditions, in its sole discretion exercised
commercially reasonably and in accordance with customary business
practices for comparable asset based transactions of $100,000,000 or
more and upon at least 10 Business Days prior written notice to the
Borrower, to require that additional reserves of the types described
below be included in the determination of the Available Inventory
Amount: (A) additional reserves relating to new categories of inventory
(e.g. produce) unrelated to the current or disclosed future business of
the Borrower and the Subsidiary Guarantors; (B) additional reserves to
reflect substantial changes in the overall composition or mix of the
Inventory which have the effect of materially reducing the Net
Recoverable Value of the Inventory taken as a whole; (C) additional
reserves relating to changes in the marketability of Inventory
(including, for example, as a result of a recession) which have the
effect of materially reducing the Net Recoverable Value of the Inventory
taken as a whole; (D) additional reserves relating to a material
negative variance between the Borrower's or a Subsidiary Guarantor's
cost and the market price of a major product category (e.g., a decline
in the price of gold), (E) additional GOB Inventory reserves, and (F)
additional reserves relating to the Inventory discontinued under the
Business Plan and not sold prior to July 31, 2000, and (2) shall, in
connection with any periodic audit or appraisal of the Inventory
performed by or on behalf of the Administrative Agent, any reports
provided to the Administrative Agent by the Borrower, or as a result of
changing market conditions, upon at least 10 days prior written notice
to the Borrower, require that additional reserves be included in the
determination of the Available Inventory Amount to the extent that the
Available Inventory Amount exceeds 85% of the Net Recoverable Value of
the Inventory taken as a whole.3
"Borrowing Base Certificate": as defined in subsection 8.2(c).
"Borrowing Date": any Business Day specified in a notice pursuant
to subsection 3.2 or 3.15 as a date on which the Borrower requests the
Lenders to make Loans hereunder.
"Business": as defined in subsection 5.14(b).
"Business Day": a day other than a Saturday, Sunday or other day
on which commercial banks in Boston, Massachusetts are authorized or
required by law to close, provided that, when
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2 To be included only if the Administrative Agent determines to include
such items in the Borrowing Base (as the February 21, 2000 commitment letter
and Term Sheet permits).
3 The foregoing assumes that the Borrowing Base will not include
consumer credit card receivables as components thereof. If the Administrative
Agent determines to include such items in the Borrowing Base (as the February
21, 2000 commitment letter and Term Sheet permits), additional definitions and
modifications to this Agreement will be required.
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<PAGE> 122
used in connection with a Eurodollar Loan, the term "Business Day" shall
also exclude any day on which banks are not open for dealings in Dollar
deposits in the London interbank market.
"Business Plan": the business plan of the Borrower and its
Subsidiaries through the period ending December 31, 2003, as delivered
to the Administrative Agent prior to the date hereof.
"Calculation Date": at any time, the last day of any period
covered by the most recent Borrowing Base Certificate.
"Capital Expenditures": for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities during such
period) by the Borrower or any Restricted Subsidiary during such period
that, in conformity with GAAP, are required to be included in "capital
expenditures", "additions to property, plant, equipment or intangibles"
or similar fixed asset accounts reflected in the consolidated balance
sheet of the Borrower and the Restricted Subsidiaries which are
consolidated Subsidiaries of the Borrower (including equipment which is
purchased simultaneously with the trade-in of existing equipment owned
by the Borrower or any Restricted Subsidiary to the extent of the gross
amount of such purchase price less the book value of the equipment being
traded-in at such time), but excluding expenditures made in connection
with the replacement or restoration of assets to the extent reimbursed
or financed from insurance proceeds paid on account of the loss of or
the damage to the assets being replaced or restored, or from awards of
compensation arising from the taking by condemnation or eminent domain
of such assets being replaced and deducting cash amounts (including free
rent) received by the Borrower and the Restricted Subsidiaries from
other Persons during such period in reimbursement of Capital
Expenditures made by the Borrower and the Restricted Subsidiaries.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"Cash Dominion Period": as defined in the Master Security
Agreement.
"Cash Equivalents": (a) direct obligations of, or obligations
guaranteed by, the United States of America or any agency thereof, (b)
commercial paper issued in the United States of America and rated at
least A-1 or P-1 by at least one nationally recognized rating
organization, (c) certificates of deposit issued by or eurodollar
deposits made with any Lender, any Affiliate of any Lender, or any bank
or trust company which has (or the parent of which has) capital, surplus
and undivided profits aggregating at least $100,000,000 (or the
equivalent amount in another currency), (d) loan participations in
respect of loans made in the United States by any bank or trust company
referred to in clause (c) above to borrowers which have short-term
ratings of at least A-1 or P-1 by at least one nationally recognized
rating organization, (e) drafts accepted by any bank or trust company
referred to in clause (c) above or any other negotiable instrument
guaranteed or endorsed with full recourse by any such bank or trust
company, (f) repurchase agreements with respect to any of the foregoing
types of securities described in clause (a), (b) and (d) above, (g)
investments in money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (a) through
(f) above, (h) obligations the return with respect to which is excluded
from gross income under Section 103 of the Tax Code, with a maturity of
not more than six months or with the right of the holder to put such
obligations for purchase at par upon not more than seven days' notice
and which are rated at least A-l or P-1 by at least one nationally
recognized rating organization, (i) (A) tax free money market funds that
invest solely in the securities described in clause (h) above or (B)
money market preferred
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<PAGE> 123
municipal bond funds which have a term of not more than seven days and
which are rated at least AAA or the equivalent thereof by Standard &
Poor's Ratings Group or at least Aaa or the equivalent thereof by
Moody's Investors Services, Inc., and (j) any other securities
reasonably acceptable to the Administrative Agent which are rated at
least A-1 or P-1 by at least one nationally recognized rating
organization, or which are of an equivalent credit quality in the
reasonable judgment of the Administrative Agent, provided that (i) all
such obligations, commercial paper, certificates of deposit, eurodollar
deposits, loan participations, drafts, investments, instruments,
securities and repurchase agreements are denominated in Dollars, (ii)
each such obligation, commercial paper, certificate of deposit, draft,
investment, security and instrument (including those subject to
repurchase agreements) is evidenced by an Instrument or a Security of
which (and of any confirmations related thereto) the Administrative
Agent or its agents promptly take possession unless such items are
Permitted Book-Entry Securities or, at the Borrower's or the relevant
Subsidiary Guarantor's option, an Excepted Cash Equivalent or, in the
case of eurodollar deposits or loan participations, are held in the name
of the Administrative Agent or any agent therefor, and in the case of
loan participations, are evidenced by facsimile or other written
confirmation, (iii) each such obligation, certificate of deposit, draft,
investment, security and instrument (including those subject to
repurchase agreements) matures within six months after it is acquired by
the Borrower or any Subsidiary Guarantor and (iv) each item of such
commercial paper (including those subject to repurchase agreements)
matures within three months after it is acquired by the Borrower or any
Subsidiary Guarantor.
"Cash Proceeds": all Proceeds of Collateral consisting of cash,
checks, credit card proceeds, money orders or commercial paper of any
kind whatsoever.
"Chattel Paper": with respect to the Borrower or any Subsidiary
Guarantor, all "chattel paper" (as such term is defined in the UCC) now
owned or hereafter acquired by such Borrower or Subsidiary Guarantor.
"Claim": as defined in section 101(5) of the Bankruptcy Code.
"Co-Agents": as defined in the preamble to this Agreement.
"Collateral": collectively, all the Security and all other
property in which the Administrative Agent is granted a Lien from time
to time hereunder or under any Security Document; provided that the
Collateral shall not include (i) any leasehold interests which are not
included as Eligible Leasehold Interests, (ii) real property which is
subject to first priority Liens in favor of a Person other than the
Administrative Agent and either (x) the Administrative Agent, in its
discretion, does not require a junior Lien thereon, or (y) the
pre-petition senior lenders of the Borrower did not have a junior Lien
thereon, and (iii) such other exceptions as the Administrative Agent may
agree in writing.
"Collateral Account": the account maintained by the
Administrative Agent at Fleet entitled the "Fleet Retail Finance Inc.,
as Administrative Agent: Service Merchandise Company, Inc. - Collateral
Account".
"Commitment": with respect to any Lender, such Lender's Revolving
Credit Commitment, and collectively, as to all the Lenders, the
"Commitments".
"Committee": as defined in the definition of "Permitted
Expenses".
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a
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<PAGE> 124
group which includes the Borrower and which is treated as a single
employer under Section 414 of the Tax Code.
"Confidential Information": as defined in subsection 11.16.
"Consignment Inventory": all Inventory of the Borrower and the
Subsidiary Guarantors consisting of Inventory supplied by vendors on a
consignment basis, including without limitation, jewelry and watches
currently purchased on a consignment basis, and other categories of
Inventory to be purchased on a consignment basis in the future; provided
that the terms, arrangements and/or agreements for such Inventory shall
be on normal and typical business terms for consignment Inventory.
"Consignment Inventory Account": an account maintained by the
Administrative Agent at Fleet (or such other bank approved by the
Administrative Agent) entitled "Fleet Retail Finance Inc., as
Administrative Agent: Service Merchandise Company, Inc. - Consignment
Inventory Account", into which the Borrower shall deposit, not less
frequently than weekly, all amounts due to the suppliers of Consignment
Inventory consisting of (i) the cost of the Consignment Inventory
actually sold plus (ii) other expenses due and payable to such suppliers
of Consignment Inventory with respect to such Consignment Inventory.
"Consolidated": when used in connection with any defined term,
and not otherwise defined, such term as it applies to any Person and its
Subsidiaries on a consolidated basis, after eliminating all intercompany
items.
"Consummation Date": the date of substantial consummation of a
Plan of Reorganization confirmed by a Final Order.
"Continuing Directors": as defined in Section 9(j).
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
material property is bound.
"Credit Agreement Obligations": the collective reference to the
unpaid principal of and interest on the Loans and the Reimbursement
Obligations and all other obligations and liabilities of the Borrower to
the Administrative Agent or the Lenders (including interest accruing at
the then applicable rate provided for herein after the maturity of the
Loans or Reimbursement Obligations and interest accruing at the then
applicable rate provided for herein after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, which may arise under, out of,
or in connection with, this Agreement, any Letter of Credit, any of the
other Loan Documents or any other document made, delivered or given in
connection herewith or therewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including all fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be paid by
the Borrower pursuant to the terms of this Agreement or any other Loan
Document).
"Credit Card Issuer": any bank or other Person which issues
credit cards and extends credit to cardholders in connection with a
Credit Card Program.
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<PAGE> 125
"Credit Card Program": a private credit card program and/or
co-branded Visa, Mastercard or other credit card program created and
operated or maintained by the Credit Card Subsidiaries pursuant to (a)
the Private Label Credit Card Agreement, dated as of January 28, 1997,
among World Financial Network National Bank, the Borrower and Service
Credit Corp. (formerly known as Service Merchandise Co. No. 80, Inc.),
or (b) the Merchant Agreement, dated as of July 18, 1999, between
Household Bank (SB) N.A. and Service Merchandise Co., Inc., or (c) any
other similar agreement or arrangement with terms and conditions
reasonably satisfactory to the Administrative Agent.
"Credit Card Subsidiaries": any direct or indirect Subsidiary of
the Borrower, and any wholly-owned Subsidiaries of such Subsidiary,
existing from time to time that are created in connection with a Credit
Card Program, as long as (i) such Subsidiaries engage in no business or
transactions other than (x) the issuance (or providing for the issuance)
of credit cards, the extension of credit to cardholders pursuant
thereto, and other transactions arising from or related thereto
(including the sale or transfer of Accounts or credit card receivables
pursuant to asset backed financing transactions) and (y) the entering
into and performance of agreements with a Credit Card Issuer that
facilitate the Credit Card Issuer's doing business in connection with a
Credit Card Program and (ii) the liabilities of the Credit Card
Subsidiaries are without recourse to the Borrower and its Restricted
Subsidiaries (other than the Credit Card Subsidiaries), provided that
the Borrower and its Restricted Subsidiaries may enter into customary
commitments and/or underwriting agreements on behalf of the Credit Card
Subsidiaries for the purpose of customary securities law or regulatory
indemnifications.
"Cumulative EBITDA": for any fiscal month, Consolidated EBITDA
for the period beginning January 1, 2000 through and including the end
of such fiscal month.4
"Current Assets": cash, accounts receivable, inventory and all
other assets (other than Fixed Assets) used in the operation of the
business of the Borrower and its Subsidiaries.
"Custody and Control Agreement": as defined in the Master
Security Agreement.
"Customer Credit Liability Amount": as of any Reserve Calculation
Date, an amount equal to 50% of the aggregate amount of gift
certificates, merchandise credits and special order deposits then
outstanding entitling the holders thereof to use all or a portion
thereof to pay all or a portion of the purchase price for any Inventory
as of such day which are not being held for escheatment or which have
not been escheated as of such day.
"Customs Broker Inventory": any Inventory which has arrived in
the United States and is located at a customs broker's warehouse
facility, so long as such Inventory (a) is fully paid and subject only
to a Lien in favor of the Administrative Agent (other than Permitted
Inventory Liens), (b) is in the possession of such customs broker, and
(c) such Inventory is reported in a Borrowing Base Certificate
separately from other Inventory included in the calculation of the
Available Inventory Amount.
"Default": any of the events specified in Section 9 which, with
the giving of notice, the lapse of time, or both, or the satisfaction of
any other condition specified in Section 9, would become an Event of
Default.
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4 To be deleted if the Effective Date is on or after January 31, 2001.
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<PAGE> 126
"Depositary Bank": each bank or financial institution at which
the Borrower or any Subsidiary Guarantor maintains any depositary
account into which Cash Proceeds are deposited, including each bank or
financial institution listed on Schedule 5.22.
"Derivative Agreements": any foreign exchange contracts, interest
rate and currency swap agreements, floors, caps, collars, swaptions and
similar derivative contracts, in each case, between the Borrower or any
Subsidiary Guarantor, on the one hand, and any Lender or any Affiliate
of any Lender, on the other hand.
"Designated Material Real Property": collectively, at any time,
all parcels of Material Real Property which are then subject to a first
priority Lien granted pursuant to the Mortgages.
"Documentation Agent": as defined in the preamble to this
Agreement.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Dollar Equivalent": at any date of determination thereof with
respect to the face amount of any Letter of Credit issued in any
currency other than Dollars or any Reimbursement Obligations in respect
of any such Letter of Credit, an amount in dollars equivalent to such
face amount calculated at the rate of exchange quoted by the
Administrative Agent on such date of determination (at the hour on such
date of determination at which it customarily makes such determination)
to prime banks in the interbank market where its foreign currency
exchange operations in respect of the currency in which such Letter of
Credit is issued are then being conducted for the spot purchase of such
currency with Dollars.
"Domestic Subsidiary": any Subsidiary of the Borrower organized
under the laws of any jurisdiction (including territories) within the
United States of America, excluding the Inactive Subsidiaries,
Securitization Entities, Excluded Subsidiaries, Special Purpose
Subsidiaries and Foreign Holding Companies.
"EBITDA": with respect to any period, Consolidated Net Income of
the Borrower and its Consolidated Subsidiaries for such period plus (a)
in each case to the extent deducted in determining such Consolidated Net
Income for such period, the sum of the following (without duplication):
(i) Consolidated Interest Expense of the Borrower and its Consolidated
Subsidiaries, (ii) consolidated income tax expense of the Borrower and
its Consolidated Subsidiaries, (iii) consolidated depreciation and
amortization expense of the Borrower and its Consolidated Subsidiaries,
and any non-cash expenses, losses or other charges resulting from the
termination of the pension plan or executive security plan of the
Borrower and its Consolidated Subsidiaries, including, without
limitation, depreciation and amortization included in selling, general
and administrative expenses of the Borrower and its Consolidated
Subsidiaries, (iv) any non-cash expenses, non-cash losses or other
non-cash charges resulting from the impairment or write-down in the
valuation of any assets, (v) any non-recurring charge, reorganization
cost or restructuring charge which was deducted in determining
Consolidated Net Income for such period, (vi) Permitted Expenses, (vii)
expenses, losses and other charges in respect of employee retention
bonuses and other payments approved by the Bankruptcy Court, (viii)
non-cash losses or gains arising from the freezing or termination of any
Plan or other employee benefit or welfare plan, and (ix) losses or gains
arising from asset dispositions, minus (b) to the extent added in
determining such Consolidated Net Income for such period, any non-cash
gains resulting from the write-up in the valuation of any assets; in
each case exclusive of any Non-Continuing EBITDA Items for such period,
provided that, to the extent that Non-Continuing EBITDA Items for such
period (exclusive of any such items covered by clauses (i) through (ix)
above) aggregate more than $(100,000,000), such additional negative
amounts will reduce EBITDA.
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"Effective Date": the date on which the conditions set forth in
subsection 6.1 are satisfied.
"Eligible Adjusted Inventory Amount": as of any Calculation Date,
(a) the Eligible Inventory Amount, plus (b) the Available GOB Inventory
Amount, minus (c) the Shrink Reserve in respect of such Eligible
Inventory Amount, in each case as of such Calculation Date.
"Eligible Assignee": as defined in subsection 11.6(c).
"Eligible Inventory Amount": as of any Calculation Date, (a) the
Inventory Value as of such Calculation Date of all Inventory of the
Borrower and the Subsidiary Guarantors that consists of finished goods,
loose diamonds or colored stones, plus (b) the Inventory Value of all
Customs Broker Inventory as of such Calculation Date, plus (c) the
Inventory Value of all Landed Inventory as of such Calculation Date,
minus (d) the sum of (i) the Ineligible Inventory Amount as of such
Calculation Date and (ii) the GOB Inventory Amount as of such
Calculation Date.
["Eligible Leasehold Interests": at any date, such leasehold
interests, if any, as the Administrative Agent deems eligible for
borrowing, but in no event in excess of the forced liquidation value at
such date of leasehold interests as determined by an appraiser
reasonably acceptable to the Administrative Agent.]5
"Eligible Mortgaged Real Property": at any time, any parcel of
Material Real Property of the Borrower or any Subsidiary Guarantor as to
which each of the following conditions has been satisfied at such time:
(a) (i) Such parcel of Material Real Property (A)
comprises a developed retail store, distribution center, shopping
center or office building with respect to which a certificate of
occupancy or temporary certificate of occupancy or the local
equivalent thereof (or any other similar proof of completion)
shall have been issued by the relevant Governmental Authority or
the Administrative Agent shall have received other evidence
reasonably satisfactory to it of the completion of such retail
store, distribution center, shopping center or office building or
(B) is undeveloped and has a book value (excluding soft costs) of
at least $1,000,000, (ii) a Lien on such parcel of Material Real
Property shall have been granted by the Borrower or such
Subsidiary Guarantor, as the case may be, in favor of the
Administrative Agent pursuant to a Mortgage, and (iii) such Lien
shall be in full force and effect in favor of the Administrative
Agent at such time.
(b) except as otherwise permitted by the Administrative
Agent, the Administrative Agent and, in the case of clause (i),
the title insurance company issuing the policy referred to in
clause (c) of this definition shall have received (i) maps or
plats of an as-built survey of the sites of the Material Real
Property certified to the Administrative Agent and such title
insurance company in a manner reasonably satisfactory to them,
dated a date reasonably satisfactory to the Administrative Agent
and such title insurance company, by an independent professional
licensed land surveyor reasonably satisfactory to the
Administrative Agent and such title insurance company, which maps
or plats and the surveys on which they are based shall be made in
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5 To be included only if the Administrative Agent determines to include
such items in the Borrowing Base (as the February 21, 2000 commitment letter
and Term Sheet permits).
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accordance with the Minimum Standard Detail Requirements for Land
Title Surveys jointly established and adopted by the American
Land Title Association and the American Congress on Surveying and
Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps, plats
or surveys the following: (A) the locations on such sites of all
the buildings, structures and other improvements and the
established building setback lines (where setback information is
readily obtainable); (B) the lines of streets abutting such sites
and the width thereof; (C) all access and other easements
appurtenant to such sites or necessary to use such sites; (D) all
roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting such
sites, whether recorded, apparent from a physical inspection of
such sites or otherwise known to the surveyor; (E) any
encroachments on any adjoining property by the building
structures and improvements on such sites; and (F) if such sites
are described as being on a filed map, a legend or other
information relating the survey to said map or (ii) in the case
of any such parcel of Material Real Property in existence on the
Effective Date, a copy of an as-built survey of such parcel of
Material Real Property if such parcel of Material Real Property
was developed as of the Effective Date or a boundary survey of
such parcel of Material Real Property if such parcel of Material
Real Property was undeveloped as of the Effective Date, in each
case prepared within ten years prior to the Effective Date.
(c) the Administrative Agent shall have received in
respect of such parcel of Material Real Property a mortgagee's
title policy (or policies) or marked-up unconditional binder (or
binders) for such insurance (or other evidence acceptable to the
Administrative Agent proving ownership thereof) dated a date
reasonably satisfactory to the Administrative Agent, and such
policy shall (A) be in an amount not less than the Mortgage Value
(as of the date such parcel of Material Real Property becomes a
parcel of Eligible Mortgaged Real Property) of such parcel of
Material Real Property, (B) be issued at ordinary rates, (C)
insure that the Lien granted pursuant to the Mortgage insured
thereby creates a valid first Lien on such parcel of Material
Real Property free and clear of all defects and encumbrances,
except such as may be approved by the Administrative Agent and
Permitted Mortgage Liens, (D) name the Administrative Agent for
the benefit of the Lenders as the insured thereunder, (E) be in
the form of ALTA Loan Policy - 1992 (or such local equivalent
thereof as is reasonably satisfactory to the Administrative
Agent), (F) contain a comprehensive lender's endorsement and (G)
be issued by Chicago Title Insurance Company, First American
Title Insurance Company, Lawyers Title Insurance Corporation or
any other title company reasonably satisfactory to the
Administrative Agent (including any such title companies acting
as co-insurers or reinsurers). The Administrative Agent shall
have received (x) evidence satisfactory to it that all premiums
in respect of each such policy have been paid and (y) a copy of
all documents referred to, or listed as exceptions to title, in
such title policy (or policies);
(d) the Administrative Agent shall have received an
Existing Appraisal with respect to such parcel of Material Real
Property;
(e) with respect to any such parcel of Material Real
Property acquired after the Effective Date, a Phase I
environmental report with respect to such parcel of Material Real
Property, dated a date not more than one year prior to the date
such parcel becomes Eligible Mortgaged Real Property under this
Agreement, showing no material condition of environmental concern
shall have been delivered to the Administrative Agent and in form
reasonably satisfactory to the Administrative Agent;
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(f) if such parcel of Material Real Property is subject to
a ground lease in favor of the Borrower or any Subsidiary
Guarantor as lessee, no consent shall be required under such
ground lease to mortgage or foreclose upon such parcel of
Material Real Property (or such consent shall have been
obtained); and
(g) such parcel of Material Real Property shall be in
compliance, or, as applicable, the Loan Party which is the owner
or lessee thereof, shall be in compliance, with all of the terms,
covenants, conditions, representations and warranties set forth
in Schedule 1.1(b), provided that, (i) if any such term,
covenant, condition, representation or warranty shall reference
any provision of this Agreement, such reference shall be read
without giving effect to any qualification or limitation
contained therein regarding a Material Adverse Effect, and (ii)
if such parcel of Material Real Property or, as applicable, the
Loan Party which is the owner or lessee thereof ceases to be in
compliance with any of the terms, covenants, conditions,
representations or warranties set forth in Schedule 1.1(b), such
parcel of Material Real Property shall cease (effective as of the
delivery of the next succeeding Borrowing Base Certificate) to be
Eligible Mortgaged Real Property during the continuation of such
non-compliance if such non-compliance could reasonably be
expected to have a material adverse effect on the value of such
parcel of Material Real Property, but such non-compliance shall
not constitute, in and of itself, a Default or Event of Default.
If a parcel of Material Real Property of the type described in clause
(a)(i)(B) of this definition becomes a parcel of Eligible Mortgaged Real
Property and is thereafter subsequently developed such that such parcel
of Eligible Mortgaged Real Property satisfies the requirements of clause
(a)(i)(A) of this definition, the Borrower may, at its option, deliver a
notice to the Administrative Agent to the effect that the Borrower
wishes to cause such parcel of Material Real Property to satisfy the
requirements of this definition as if (x) such parcel of Material Real
Property became a parcel of Material Real Property as of the date of
such notice, (y) such parcel of Material Real Property was not then a
parcel of Eligible Mortgaged Real Property and (z) if applicable, such
parcel of Material Real Property was not subject to a Lien granted
pursuant to a Mortgage as of the Effective Date. Upon delivery of any
such notice, the Administrative Agent shall commission a new appraisal
with respect to such parcel of Material Real Property. Upon satisfaction
of the conditions set forth in this definition following such date with
respect to such parcel of Material Real Property, such parcel of
Material Real Property shall, without duplication, be deemed to become a
parcel of Eligible Mortgaged Real Property as of the date such
conditions are satisfied and the Mortgage Value of such parcel of
Eligible Mortgaged Real Property shall be included in the Borrowing Base
effective as of the delivery of the Borrowing Base Certificate in
respect of the fiscal month in which such conditions are satisfied.
"Eligible Trade Accounts Percentage": as of any Accounts
Receivable Calculation Date, up to 85%, provided that, in connection
with each periodic audit or appraisal of the Accounts of the Borrower
and the Subsidiary Guarantors performed by or on behalf of the
Administrative Agent, the Administrative Agent shall have the right in
its sole discretion exercised commercially reasonably and in accordance
with customary business practices, upon at least 10 days prior written
notice to the Borrower, to change the "Eligible Trade Accounts
Percentage" to the percentage estimated to be the percentage of the
aggregate amount of the Accounts as of such Accounts Receivable
Calculation Date which satisfy each of the following criteria:
(a) such Account has been adjusted to reflect the return
or rejection of, or any loss of or damage to any of the Inventory
giving rise to such Account and is not subject to bona fide
set-offs, counterclaims, defenses, or disputes asserted with
respect to
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such Account (it being understood that such Account shall not
include material financing charges, or late or other fees);
(b) the Account Debtor with respect to such Account is not
insolvent or the subject of any bankruptcy case or insolvency
proceeding of any kind, unless such Account is due from such
Account Debtor as an administrative priority claim under the
Bankruptcy Code and the Administrative Agent, in the exercise of
its reasonable business judgment, deems the Account Debtor to be
creditworthy;
(c) the Account Debtor in respect of such an Account has a
place of business within the United States of America (excluding
Puerto Rico, the Virgin Islands and any other territory of the
United States);
(d) the Account Debtor in respect of such Account is not
the United States of America or any state, territory,
subdivision, department, or agency thereof, unless all applicable
requirements of the Assignment of Claims Act of 1940 have been
satisfied;
(e) such Account does not arise out of transactions with
an employee, officer, director, Subsidiary or Affiliate of the
Borrower or any Subsidiary Guarantor;
(f) no amount payable in respect of such Account has
remained unpaid for a period exceeding sixty days after the due
date stated on the invoice therefor (excluding the amount of any
net credit balances relating to Accounts with invoice dates more
than 60 days from the due date);
(g) such Account is owed by an Account Debtor which does
not then have balances on its Accounts which are more than 60
days past due which exceed 50% of the total balance of all such
Accounts owed by such Account Debtor;
(h) such Account has not been and is not required to be
charged off or written off as uncollectible in accordance with
the customary business practice of the Borrower and the
Subsidiary Guarantors;
(i) such Account does not arise out of any claim in tort,
is not evidenced by chattel paper, a promissory note, a
negotiable instrument, or any other instrument of any kind or, if
such Account is evidenced by chattel paper, a promissory note, a
negotiable instrument or any other instrument, such chattel
paper, promissory note, negotiable instrument or other instrument
has been delivered to the Administrative Agent and is subject to
a first priority security interest in favor of the Administrative
Agent;
(j) the amount of the face value of such Account listed on
any schedule of Accounts and shown on all invoices and statements
delivered to the Agent with respect to such Account is not
subject to any asserted bona fide retainages or holdbacks of any
type, is actually and absolutely owing, and is not contingent on
any condition, in each case, other than in respect of repurchase
or return agreements that (i) arise in the ordinary course of the
Borrower's business and (ii) are consistent with the Borrower or
such Subsidiary Guarantor's historical business practice;
(k) such Account does not arise out of a cash on delivery
sale; and
(l) such Account does not arise out of the sale of
samples.
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In addition, to the extent that any Accounts or credit card receivables
that arise in connection with a Credit Card Program are included in
Eligible Trade Accounts Receivable at the option of the Borrower, the
Eligible Trade Accounts Percentage shall include such reserves and the
Available Accounts Receivable Amount shall reflect eligibility criteria
as the Administrative Agent shall require in its sole discretion
(consistent with usual asset based lending practices) with respect to
such Accounts and credit card receivables as a separate class of
Accounts based upon the results of any periodic audit or appraisal of
the Accounts of the Borrower and the Subsidiary Guarantors performed by
or on behalf of the Administrative Agent, provided that no such Accounts
or credit card receivables shall be included in "Eligible Trade Accounts
Receivable" until a satisfactory audit or appraisal of such Accounts and
credit card receivables has been performed by or on behalf of the
Administrative Agent.
"Eligible Trade Accounts Receivable Amount": as of any Accounts
Receivable Calculation Date, an amount equal to the Eligible Trade
Accounts Percentage of the aggregate amount of all Accounts of the
Borrower and the Subsidiary Guarantors as of such Accounts Receivable
Calculation Date that satisfy all of the following criteria as of such
Accounts Receivable Calculation Date:
(a) such Account is owned solely by the Borrower or a
Subsidiary Guarantor and is evidenced by an invoice and has
arisen from the sale of goods which have been shipped or
delivered to an Account Debtor on an absolute sale basis, have
not been shipped or delivered on a consignment, approval, or
sale-return basis, and are not subject to any repurchase or
return agreement or arrangement, other than those repurchase or
return agreements or arrangements that (i) arise in the ordinary
course of the Borrower's business and (ii) are consistent with
the Borrower or such Subsidiary Guarantor's historical business
practices; and
(b) such Account is subject to a Lien in favor of the
Administrative Agent and is not subject to Liens other than
Permitted Account Liens.
"Environmental Laws": any and all foreign, federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other
Requirements of Law (including common law) regulating or imposing
liability or standards of conduct concerning protection of human health
or the environment, as are now or may at any time hereafter be in
effect.
"Environmental Reserve Amount": at any time, an amount equal to
the product of (a) $75,000 and (b) the number of parcels of Eligible
Mortgaged Real Property which are included in the Borrowing Base at such
time.
"Equipment": all equipment, machinery, chattels, tools, dies,
jigs, molds, parts, machine tools, furniture, furnishings, fixtures and
supplies, of every nature, now owned or hereafter acquired by the
Borrower or any Subsidiary Guarantor, wherever located, additions,
accessories and improvements thereto and substitutions therefor and all
parts and equipment which may be attached to or which are necessary for
the operation and use of such personal property or fixtures, whether or
not the same shall be deemed to be affixed to real property and in any
event all "equipment" (as such term is defined in the UCC), but
excluding Inventory.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
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"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors or
other Governmental Authority having jurisdiction with respect thereto)
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board of Governors)
maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate for deposits in Dollars for the period commencing on
the first day of such Interest Period and ending on the last day of such
Interest Period which appears on Telerate Page 3750 as of 11:00 A.M.,
London time, two Business Days prior to the beginning of such Interest
Period. If at least two rates appear on such Telerate Page for such
Interest Period, the "Eurodollar Base Rate" shall be the arithmetic mean
of such rates. If the "Eurodollar Base Rate" cannot be determined in
accordance with the immediately preceding sentences with respect to any
Interest Period, the "Eurodollar Base Rate" with respect to each day
during such Interest Period shall be the rate per annum equal to the
average (rounded upward to the nearest 1/100th of 1%) of the respective
rates notified to the Administrative Agent by each of the Lenders as the
rate at which such Lender is offered Dollar deposits at or about 10:00
A.M. Boston time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the eurodollar
and foreign currency and exchange operations in respect of its
Eurodollar Loans are then being conducted for delivery on the first day
of such Interest Period for the number of days comprised therein and in
an amount comparable to the amount of its Eurodollar Loan to be
outstanding during such Interest Period.
"Eurodollar Loans": Term Loans and Revolving Loans the rate of
interest applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 9
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Excepted Cash Equivalents": Cash Equivalents up to an aggregate
amount at any one time equal to the amount not required to be pledged to
the Administrative Agent by reason of subsection 8.8(b).
"Excess Availability": as of the date of determination, the
excess of the Borrowing Base on such date as reflected on the most
recently delivered Borrowing Base Certificate over the Aggregate
Outstanding Extensions of Credit on such date.
"Excluded Subsidiaries": SerPlus Assurance Co., Ltd., SMC-SPE,
Inc., SMC-SPE-2, Inc. and Service Credit Corp. and their respective
Subsidiaries.
"Existing Appraisal": with respect to any parcel of Material Real
Property, (i) until the Administrative Agent receives its initial
appraisals of Material Real Property hereunder, the most
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recent appraised value of such parcels established under the Existing
DIP Agreement and (ii) thereafter, a final complete appraisal of the
value of such parcel of Material Real Property, commissioned in
connection with this Agreement from time to time in accordance with the
provisions of subsection 7.6(b) hereof and valued on an "alternative
use" basis which in the reasonable judgment of the Administrative Agent
satisfies all applicable requirements of FIRREA and the Uniform
Standards of Professional Appraisal Practice.
"Existing DIP Agreement": is defined in the recitals hereof.
"Extension of Credit": with respect to any Lender, (a) the making
of a Loan by such Lender and (b) the issuance or extension of a Letter
of Credit in which such Lender has a participating interest.
"FRF": as defined in the preamble to this Agreement.
"Federal Funds Rate": means for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Fee Letter": the fee letter dated as of April __, 2000 between
the Borrower and the Administrative Agent, as amended and in effect from
time to time.
"Final Order": an order or judgment of the Bankruptcy Court as
entered on the docket of the Clerk of the Bankruptcy Court, that has not
been reversed, stayed, modified or amended, and as to which the time to
appeal, petition for certiorari, reargument or rehearing has expired and
no proceeding for certiorari, reargument or rehearing is pending or any
right to appeal, reargue, petition for certiorari or seek rehearing has
been waived, or if an appeal, reargument, petition for certiorari, or
rehearing thereof has been sought, the order or judgment of the
Bankruptcy Court has been affirmed by the highest court to which the
order was appealed from which the reargument or rehearing was sought, or
certiorari has been denied, and the time to take any further appeal or
to seek certiorari or further reargument or rehearing has expired.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of such lessee.
"FIRREA": the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
"Fiscal Year": each fiscal year of the Borrower. Fiscal Years are
referred to herein by reference to the calendar year in which a majority
of the days comprising such Fiscal Year fall.
"Fixed Assets": plant, machinery, equipment, furniture and
fixtures, leasehold improvements and other tangible property used in the
operation of the business of the Borrower and its Subsidiaries.
"Fleet": Fleet National Bank, a national banking association and
its successors.
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"Floor Planning Facility": as to the Borrower or any Restricted
Subsidiary, any manufacturer- or vendor-sponsored Inventory financing
program (whether directly from the manufacturer or vendor or through a
third party financing source) extending loans or trade terms to the
Borrower or such Restricted Subsidiary and secured solely by such
manufacturer's or vendor's named brand or identified Inventory, subject
to the prior approval of the Administrative Agent in its reasonable
discretion and execution and delivery of an intercreditor agreement
reasonably acceptable to the Administrative Agent.
"Foreign Holding Company": any Subsidiary organized under the
laws of any jurisdiction (including territories) within the United
States of America whose sole assets (exclusive of assets with an
aggregate book value not exceeding $5,000,000 and assets consisting of
advances or loans to the Borrower or any of its Subsidiaries) consist of
the Capital Stock of one or more Foreign Subsidiaries or other Foreign
Holding Companies.
"Foreign L/C Commitment Sublimit": at any time, the lesser of (a)
$10,000,000 and (b) the Revolving Credit Commitments then in effect.
"Foreign Subsidiary": any Subsidiary of the Borrower organized
under the law of any jurisdiction outside the United States of America,
excluding Inactive Subsidiaries, but including in any event Foreign
Holding Companies.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time, provided that, solely for
purposes of determining compliance with subsection 8.1, "GAAP" shall
mean generally accepted accounting principles in the United States of
America in effect as of the Effective Date.
"GOB Deal Shrink": an amount equal to (i) the difference between
(A) the Inventory Value of the GOB Inventory and (B) the value of the
GOB Inventory as determined by a physical inventory count taken
immediately prior to the commencement of a going-out-of-business or
similar sale at the GOB Stores, or (ii) in the absence of a physical
count of the GOB Inventory, 3% of the Inventory Value of the GOB
Inventory on the date of commencement of the going-out- of-business or
similar sales.
"GOB Discount Amount": an amount equal to (i) the weighted
average discount offered to customers during the applicable period of
the going-out-of-business or similar sale, expressed as a percentage,
multiplied by (ii) the GOB Inventory Amount.
"GOB Inventory": all Inventory located at GOB Stores as of the
Calculation Date after the date of commencement of a
going-out-of-business or similar sale at such GOB Stores.
"GOB Inventory Amount": as of any Calculation Date, the Inventory
Value of the GOB Inventory as of such Calculation Date, minus (a) the
Shrink Reserve in respect of such GOB Inventory as of such Calculation
Date, minus (b) the GOB Deal Shrink as of such Calculation Date, minus
(c) the Inventory Value of all GOB Inventory remaining at any GOB Store
on the 91st day after the commencement of the going-out-of-business or
similar sale with respect to such GOB Store.
"GOB Stores": the Borrower's and the Subsidiary Guarantors'
stores which are in the process of being liquidated and closed, other
than Store Closures.
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"Governmental Authority": 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.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), without duplication, any obligation, contingent or otherwise,
of the guaranteeing person (a) under a guarantee, reimbursement,
indemnity or similar obligation guaranteeing or in effect guaranteeing
any Indebtedness of any other Person, in any manner, whether directly or
indirectly, (b) to reimburse any other Person for drawings under undrawn
letters of credit issued by such other Person for the account of the
guaranteeing person, or (c) under a guarantee, reimbursement, indemnity
or similar obligation to the extent the obligations of the guaranteeing
person in respect thereof should be reflected as a liability in a
consolidated balance sheet of the guaranteeing person (or should be
reflected in the notes thereto) in accordance with GAAP, provided that
the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (i) an amount equal to the
stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (ii) the maximum amount for
which such guaranteeing person may be liable pursuant to the terms of
the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of
such Guarantee Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as determined by
such guaranteeing person in good faith.
"IE System": the Borrower's electronic inventory evaluation
system which tracks Inventory on a store-by-store basis.
"In-Transit Cash": as of the date of determination, the aggregate
amount of (i) cash and cash equivalents of the Borrower and the
Subsidiary Guarantors which is deposited into deposit accounts covered
by Blocked Account Agreements, plus (ii) the net amount receivable by
the Borrower and the Subsidiary Guarantors in respect of Visa,
Mastercard or other branded credit card receivables (after deduction of
discounts and fees payable to the processors of such credit card
receivables) to the extent such amounts are credited to deposit accounts
covered by Blocked Account Agreements or other arrangements acceptable
to the Administrative Agent in its sole discretion exercised
commercially reasonably, in each case prior to the transfer of such
amounts to the Collateral Account.
"Inactive Subsidiary": any Subsidiary of the Borrower which (and
only for so long as such Subsidiary) (a) does not own assets with an
aggregate book value in excess of $5,000,000 and (b) is not then engaged
in any business.
"Indebtedness": of any Person at any date (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than trade liabilities and accounts payable
incurred in the ordinary course of business and payable in accordance
with the Borrower's and its Restricted Subsidiaries' customary practices
and extensions thereof), (b) any other indebtedness of such Person which
is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations (to the extent capitalized for accounting purposes) of such
Person under Financing Leases, (d) all obligations of such Person in
respect of acceptances issued or created for the account of such Person,
(e) all obligations of the types described in the other clauses of this
definition secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the
payment thereof and (f) all obligations of such Person in respect of
interest rate and currency
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hedging agreements. For purposes of this Agreement, (x) the amount of
any Indebtedness referred to in clause (f) of the preceding sentence
shall be the net amounts (including by offset of amounts payable
thereunder), including any net termination payments, required to be paid
to a counterparty rather than any notional amount with regard to which
payments may be calculated and (y) any obligations described in clauses
(a) through (e) above denominated in a currency other than Dollars shall
be determined after giving effect to related currency swap and hedging
agreements. It is understood and agreed that "Indebtedness" of a Person
(i) shall include advances or loans to such Person under Floor Planning
Facilities and (ii) shall not include (A) obligations of such Person in
respect of letters of credit to the extent such obligations are not
reflected as liabilities on the consolidated balance sheet of such
Person (excluding the notes to such balance sheet) in accordance with
GAAP or (B) obligations of such Person in respect of consignments of
Inventory to such Person.
"Indemnified Liabilities": as defined in subsection 11.5.
"Ineligible Inventory Amount": as of any Calculation Date, the
Inventory Value of all Inventory of the Borrower and the Subsidiary
Guarantors that falls in any one or more of the following categories as
of such Calculation Date:
(a) Consignment Inventory or any other Inventory that (i)
is not owned solely by the Borrower or any such Subsidiary
Guarantor or (ii) is leased by or on consignment or
sale-or-return to the Borrower or any such Subsidiary Guarantor;
(b) Inventory that is not located at (or in transit
between) property that is owned or leased by the Borrower or any
Subsidiary Guarantor, other than Landed Inventory and Customs
Broker Inventory;
(c) Inventory that is damaged or defective or has
otherwise been segregated for return to the vendor thereof;
(d) Inventory that is not located in the United States of
America;
(e) Inventory which is not subject to a Lien in favor of
the Administrative Agent or is subject to any Lien (other than
Permitted Inventory Liens);
(f) Inventory which is subject to a Lien in connection
with Floor Planning Facilities;
(g) Inventory that is being repaired or is used in the
repair of other Inventory; and
(h) Inventory consisting of "Samples" which is not
included in the normal merchandising assortment but has been
supplied by vendors for consideration to be included in the
merchandising assortment.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245
of ERISA.
"Instrument": any "instrument" (as such term is defined in the
UCC) now owned or hereafter acquired by the Borrower or any Subsidiary
Guarantor.
"Intellectual Property": as defined in subsection 5.17.
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"Intercompany Debt": with respect to the Borrower, any
Indebtedness of the Borrower to any Subsidiary Guarantor and, with
respect to any Subsidiary Guarantor, any Indebtedness of such Subsidiary
Guarantor to the Borrower or any other Subsidiary Guarantor, including
all amounts payable in respect thereof whether in respect of principal,
interest or otherwise.
"Interest Expense": of any Person for any period, (a) the amount
of interest expense, both expensed and capitalized, of such Person and
its Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP for such period, plus, without duplication, that
portion of payments under Financing Leases of such Person attributable
to interest expense of such Person for such period in accordance with
GAAP minus (b) the amount of interest income of such Person and its
Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP for such period.
"Interest Payment Date": (a) as to any ABR Loan, the last day of
each calendar quarter, (b) as to any Eurodollar Loan having an Interest
Period of three months or less, the last day of such Interest Period,
(c) as to any Eurodollar Loan having an Interest Period longer than
three months, each day which is three months, or a whole multiple
thereof, after the first day of such Interest Period and the last day of
such Interest Period and (d) as to any Swing Line Loan, the last day of
each calendar quarter.
"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such
Eurodollar Loan and ending one, two, three or six months
thereafter (or such shorter periods as the Administrative Agent
may permit), as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given with
respect thereto; and
(b) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Eurodollar
Loan and ending one, two, three or six months thereafter (or such
shorter periods as the Administrative Agent may permit), as
selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect
thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(2) any Interest Period that would otherwise extend beyond
the Termination Date, will end on the Termination Date; and
(3) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a
calendar month.
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"Inventory": goods now owned or hereafter acquired by the
Borrower or any Subsidiary Guarantor and held for sale or lease or to be
furnished under contracts of service or so leased or furnished, and all
raw materials, work in process or materials used or consumed in a
business, and in any event including all "inventory" (as such term is
defined in the UCC) but excluding Equipment.
"Inventory Value": with respect to any Inventory of the Borrower
or any Subsidiary Guarantor reflected on the Borrower's Borrowing Base
Certificate, the value of such Inventory valued at cost on the IE System
on a basis consistent with the Borrower's or such Subsidiary Guarantor's
current and historical accounting practice (without giving effect to
markdowns, intercompany profit, rebates and discounts, accounts payable
inventory accruals and capitalized inventory costs on the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries in
respect of Inventory), plus freight charges incurred in connection
therewith, minus accruals for deferred volume rebates (it being
understood that the amount of freight charges and accruals for deferred
volume rebates shall be determined monthly as of the end of the most
recent fiscal month, notwithstanding the fact that Borrowing Base
Certificates may be delivered more frequently than monthly pursuant to
this Agreement). The value of the Inventory as set forth above will,
without duplication for any element of the Shrink Reserve, be calculated
net of the reserve established by the Borrower or any Subsidiary
Guarantor on a basis consistent with the Borrower's or such Subsidiary
Guarantor's current and historical accounting practice in respect of
lost, misplaced or stolen Inventory at such time. In addition, the value
of Inventory that is subject to a layaway purchase by any customer shall
be valued net of any deposits made by such customer therefor.
"Investment": as defined in subsection 8.8.
"Investment Securities": all Instruments and all "securities" (as
such term is defined in the UCC) now owned or hereafter acquired by the
Borrower or any Subsidiary Guarantor, other than (a) Pledged Stock, (b)
Capital Stock of any Subsidiary that is not expressly required to be
pledged pursuant to this Agreement or the Master Security Agreement, (c)
Cash Equivalents and (d) any note, debenture, bond or other Instrument
evidencing Intercompany Debt.
"Issuing Banks": initially, each Lender and each Affiliate of a
Lender specified on Schedule 1.1(a) as an Issuing Bank in its capacity
as issuer of a Letter of Credit. Additional Lenders or Affiliates of
additional Lenders may from time to time be designated as "Issuing
Banks" by the Borrower (in each case, with the consent of such Lender
and such Affiliate) by written notice to such effect from the Borrower
to the Administrative Agent, provided that if the Borrower fails to
comply with the provisions of subsection 7.2(g) hereof and such failure
is not cured within five Business Days of notice thereof from the
Administrative Agent, the Administrative Agent may notify the Borrower
that, from and after the date of such notification, no Person other than
Fleet may thereafter be an Issuing Bank. Each Affiliate of a Lender
acting as an Issuing Bank shall be deemed to have agreed to be bound by,
and shall have the benefits of, the provisions of this Agreement and the
other Loan Documents applicable to Issuing Banks and shall be deemed a
party hereto.
"Judgment Currency": as defined in subsection 11.18.
"Landed Inventory": any Inventory which has arrived in the United
States and cleared customs but which has not been delivered to property
that is owned or leased by the Borrower or any Subsidiary Guarantor as
long as such Inventory (a) is fully paid and subject only to a Lien in
favor of the Administrative Agent (other than Permitted Inventory
Liens), (b) is in the possession of the Borrower or any Subsidiary
Guarantor or any agent thereof and (c) is reported in a
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Borrowing Base Certificate separately from other Inventory included in
the calculation of the Available Inventory Amount.
"Landlord's Lien Amount": an amount equal to two months of rent
reserved under each of the Borrower's or Subsidiary Guarantors' leases
of real property in the states of Pennsylvania, Washington, Virginia, or
any other state in which a landlord is granted a Lien having priority to
that of the Administrative Agent to secure amounts due under such lease,
unless, with respect to any such lease, the Administrative Agent has
received a landlord's waiver in form and substance reasonably
satisfactory to the Administrative Agent.
"L/C Commitment": the lesser of (a) $150,000,000 and (b) the
Revolving Credit Commitments then in effect.
"L/C Fee Payment Date": the last day of each calendar quarter and
the Termination Date.
"L/C Obligations": at any time, an amount equal to the sum of (a)
the Trade Letter of Credit Outstandings at such time and (b) the Standby
Letter of Credit Outstandings at such time.
"L/C Participants": the collective reference to all the Revolving
Credit Lenders.
"Lender" and "Lenders": as defined in the preamble to this
Agreement.
"Letters of Credit": as defined in subsection 3.6(a).
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"Loan": any Term Loan, Revolving Loan or Swing Line Loan, as the
case may be.
"Loan Documents": this Agreement, the Notes, the Fee Letter, the
Master Security Agreement, the Mortgages, and all other Security
Documents, each Application, the other documents executed or delivered
pursuant to subsection 6.1 by the Borrower or any Subsidiary of the
Borrower and all other instruments, agreements and written contractual
obligations between the Borrower and any Subsidiary of the Borrower, on
the one hand, and any of the Administrative Agent or the Lenders, on the
other hand, in each case delivered to either the Administrative Agent or
such Lender before, on, or after the Effective Date pursuant to or in
connection with the transactions contemplated hereby.
"Loan Parties": the collective reference to the Borrower and the
Subsidiary Guarantors.
"Lockbox Agreement": as defined in the Master Security Agreement.
"Majority Lenders": at any time, Lenders the Voting Percentages
of which aggregate more than 50%.
"Majority Revolving Credit Lenders": at any time, Revolving
Credit Lenders the Revolving Credit Commitment Percentages of which
aggregate more than 50%.
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"Majority Term Loan Lenders": at any time, Term Loan Lenders
whose Term Loans aggregate more than 50% of the outstanding principal
amount of all Term Loans.
"Master Security Agreement": the Master Security Agreement to
be made by the Borrower and each Subsidiary Guarantor in favor of the
Administrative Agent, in substantially the form of Exhibit B, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, performance, property, or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as
a whole or (b) the ability of the Borrower or any Subsidiary
Guarantor, taken as a whole, to perform their respective obligations
under this Agreement or any of the other Loan Documents or the
material rights or remedies, of the Administrative Agent or the
Lenders hereunder or thereunder.
"Material Real Property": real property not subject to a
mortgage, deed of trust or other similar instrument (other than
pursuant hereto or any other Loan Document) that (a) (i) is owned in
fee by the Borrower or any Subsidiary Guarantor and is not subject to
a ground lease in favor of any other Person as lessee, (ii) is located
in the United States or Puerto Rico and (iii) (A) has been developed
with a retail store, distribution center, shopping center or office
building with respect to which a certificate of occupancy or temporary
certificate of occupancy or the local equivalent thereof (or any other
similar proof of completion) shall have been issued by the relevant
Governmental Authority, (B) is being developed with a retail store,
distribution center, shopping center or office building which is under
construction as of the Effective Date or (C) is undeveloped and has a
book value (excluding soft costs) of at least $1,000,000 or (b) (i)
(A) consists of a developed retail store, distribution center,
shopping center or office building with respect to which a certificate
of occupancy or temporary certificate of occupancy or the local
equivalent thereof (or any other similar proof of completion) shall
have been issued by the relevant Governmental Authority, or (B) is
being developed with a retail store, distribution center, shopping
center or office building which was under construction as of the
Effective Date, (ii) is located on property which is subject to a
ground lease in favor of the Borrower or any Subsidiary Guarantor as
lessee and no consent shall be required under such ground lease to
mortgage or foreclose upon such property (or such consent shall have
been obtained), (iii) is or, upon completion, will be classified as an
owned retail store, distribution center, shopping center or office
building by the Borrower or such Subsidiary Guarantor and (iv) is
located in the United States or Puerto Rico.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes
defined or regulated as such in or under any Environmental Law,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Mechanics' Lien Reserve Amount": with respect to any parcel
of Eligible Mortgaged Real Property at any time, an amount equal to
the excess, if any, of (a) the sum of all outstanding amounts which
are then secured by mechanics' liens on such parcel of Eligible
Mortgaged Real Property and which have been outstanding for a period
in excess of one year over (b) $200,000.
"Mortgage": a fee or ground leasehold mortgage, deed of trust
or other similar document executed and delivered in favor of the
Administrative Agent, as the same may be amended, supplemented or
otherwise modified from time to time and in effect.
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"Mortgage Value": with respect to any parcel of Eligible
Mortgaged Real Property, the lesser of (a) the maximum stated amount
secured by the Lien on such parcel of Eligible Mortgaged Real Property
granted in favor of the applicable secured mortgagee pursuant to the
relevant Mortgage and (b) the value of such parcel of Eligible
Mortgaged Real Property set forth in the Existing Appraisal delivered
with respect thereto.
"Mortgaged Property": all property of the Borrower and any
Subsidiary Guarantor in which the Administrative Agent is granted a
Lien pursuant to a Mortgage.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Income": of any Person for any period, net income of
such Person and its Consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP for such period.
"Net Recoverable Value": as to the Inventory of the Borrower
and the Subsidiary Guarantors, the amount determined based upon
periodic audits or appraisals of such Inventory to be equal to the
percentage of the cost of Inventory which could be realized (net of
disposal costs and expenses) in a liquidation sale of the Inventory at
such time.
"Non-Continuing EBITDA Items": With respect to any period,
the following (without duplication): (i) the revenues and cost of
goods sold for discontinued product lines pursuant to the Business
Plan;(ii) all other expenses associated with the clearance of such
discontinued product lines; (iii) advertising expenses and cooperative
income associated with discontinued product lines; (iv) store payroll,
benefits and other expenses that are either directly associated with
the conversion of stores pursuant to the Business Plan, or which would
not have been incurred had the conversions been completed; (v) all
expenses associated with the Orlando and Montgomery distribution
centers; (vi) all corporate payroll, benefits and other expenses
arising in connection with positions to be eliminated pursuant to the
Business Plan; and (vii) severance for employees terminated or to be
terminated as a result of the discontinued product lines, distribution
center closures and corporate downsizing; in each of the above cases
to the extent arising after February, 2000.
"Non-Excluded Taxes": as defined in subsection 4.10.
"Notes": the collective reference to any Revolving Credit
Notes, Term Notes or Swing Line Notes.
"Overdraft": at any time, the amount by which the aggregate
amount debited from any deposit, concentration, operating or
disbursement account maintained by the Borrower or any Subsidiary
Guarantor with any Lender or any Affiliate of any Lender, as a result
of processing of payment orders issued by the Borrower or such
Subsidiary Guarantor or otherwise, exceeds the aggregate funds on
deposit in such account.
"Parcel": when used in connection with any parcel of real
property, means such parcel of real property, together with all of the
structures, buildings and other improvements located thereon and all
other property associated therewith and, when used in connection with
any parcel of real property subject to a ground lease in favor of the
Borrower or any Subsidiary Guarantor as lessee, means the leasehold
interest in such ground lease.
"Participant": as defined in subsection 11.6(b).
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"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any Governmental
Authority which succeeds to the powers and functions thereof.
"Permitted Account Liens": the collective reference to Liens
permitted by subsections 8.3(a), 8.3(b), 8.3(l) and 8.3(u).
"Permitted Book-Entry Securities": securities (i) which
conform in all respects to the requirements set forth in the
definition of Cash Equivalents except that such securities are not
evidenced by a certificate and (ii) in which the Administrative Agent
shall have acquired a perfected first priority security interest or in
the security entitlement with respect thereto in the manner provided
by the UCC.
"Permitted Expenses": expenses arising from claims in the
Reorganization Cases of the following parties for the following
amounts: (i)(A) allowed professional fees and disbursements incurred
by the professionals (the "Professionals") retained, pursuant to
sections 327(a) or (e) of the Bankruptcy Code under a general retainer
(excepting ordinary course professionals) or 1103(a), by the Loan
Parties and up to two statutory committees (each, a "Committee")
appointed in the Reorganization Cases and (B) the expenses of any
member of any such Committee allowed under section 503(b)(3)(F) of the
Bankruptcy Code, and (ii) quarterly fees required to be paid to the
United States Trustee pursuant to 28 U.S.C. ss. 1930(a)(6) and any
fees payable to the Clerk of the Bankruptcy Court.
"Permitted Inventory Liens": the collective reference to
Liens permitted by subsections 8.3(a), 8.3(b), 8.3(l) and 8.3(u).
"Permitted Mortgage Liens": the collective reference to Liens
permitted by subsections 8.3(a), 8.3(b), 8.3(e), 8.3(l) and 8.3(u).
"Permitted Sale-Leaseback": as defined in subsection 8.11.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, limited liability company, Governmental Authority or other
entity of whatever nature.
"Petition Date": as defined in the recitals hereto.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Plan of Reorganization": a plan of reorganization for the
Borrower confirmed by order of the Bankruptcy Court.
"Pledged Securities": the collective reference to (i) the
Pledged Stock, (ii) all Investment Securities, (iii) all Cash
Equivalents, Permitted Book-Entry Securities and funds held or on
deposit from time to time in the Securities Accounts, and (iv) all
Proceeds thereof, except as provided for in subsection 10.9 of the
Master Security Agreement.
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"Pledged Stock": the shares of Capital Stock set forth on
Schedule 2 to the Master Security Agreement and other shares of
Capital Stock pledged thereunder from time to time pursuant to Section
4 thereof.
"Pledgors": the collective reference to the obligors parties
to the Master Security Agreement.
"Proceeds": as defined in the UCC.
"Professionals": as defined in the definition of "Permitted
Expenses".
"Protective Advance": as defined in subsection 3.16(f).
"Qualified Stock": any stock of the Borrower which does not
by its terms mature or require repurchase or redemption thereof in
whole or in part on or prior to the first anniversary of the
Termination Date.
"Real Property Amortization Amount": with respect to all
Eligible Mortgaged Real Property at any time, an amount equal to (a)
$500,000 times (b) the number of full three-month periods that have
been elapsed since the effective date of the Existing DIP Agreement.
"Register": as defined in subsection 11.6(d).
"Regulation U": Regulation U of the Board of Governors as in
effect from time to time.
"Regulation X": Regulation X of the Board of Governors as in
effect from time to time.
"Reimbursement Obligation": the obligation of the Borrower
pursuant to subsection 3.10(a) to reimburse each Issuing Bank for
amounts drawn under any Letter of Credit issued by such Issuing Bank.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reorganization Cases": the collective reference to the cases
of the Borrower and the Subsidiary Guarantors pursuant to chapter 11
of the Bankruptcy Code.
"Reportable Event": any of the events set forth in Section
4043 of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .27, .28, .29, .30, .31,
.32, .34 or .35 of PBGC Reg. ss. 4043.
"Required Lenders": at any time, Lenders the Voting
Percentages of which aggregate more than 66-2/3%.
"Requirement of Law": as to any Person, the Certificate or
Articles of Incorporation and Bylaws or other organizational or
governing documents of such Person, and any law, statute, ordinance,
code, decree, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject (including,
without limitation, laws, ordinances and regulations pertaining to the
zoning, occupancy and subdivision of real property).
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"Reserve Calculation Date": the date of the second Borrowing
Base Certificate of any month, in which Borrowing Base Certificate the
various reserve amounts shall be calculated and/or revised based upon
the operating results as of the end of the previous fiscal month,
provided that during such time that a Borrowing Base Certificate is
required to be furnished monthly only, the Reserve Calculation Date
shall be one month prior to the date of delivery of such Borrowing
Base Certificate .
"Responsible Officer": the chief executive officer, the
president, any executive vice president, the chief financial officer
or the treasurer of the Borrower or, with respect to financial
matters, the chief executive officer, the president, the executive
vice president-finance, the chief financial officer, the treasurer or
comptroller of the Borrower, provided that, for purposes of subsection
10.3(f) of the Master Security Agreement and subsection 7.7 and
Section 9(d) only, a "Responsible Officer" shall also include the
general counsel and any assistant treasurer of the Borrower.
"Restricted Payments": as defined in subsection 8.6.
"Restricted Subsidiaries": collectively, the Domestic
Subsidiaries and Foreign Subsidiaries.
"Revolving Credit Commitment": as to any Lender, the
obligation of such Lender to make Revolving Loans to and/or
participate in Swing Line Loans to and/or issue or participate in
Letters of Credit issued on behalf of the Borrower in an aggregate
principal and/or face amount at any one time outstanding not to exceed
the amount set forth opposite such Lender's name on Schedule 1.1(a)
under the heading "Revolving Credit Commitment", as such amount may be
reduced from time to time pursuant to this Agreement or as such amount
may be adjusted from time to time pursuant to subsection 11.6.
"Revolving Credit Commitment Percentage": as to any Lender
(a) at any time prior to the termination of the Revolving Credit
Commitments, the percentage of the Revolving Credit Commitments then
constituted by such Lender's Revolving Credit Commitment and (b) at
any time after the termination of the Revolving Credit Commitments,
that amount expressed as a percentage derived by dividing (i) the sum
of (x) such Lender's Revolving Loans then outstanding plus (y) the
product of such Lender's Revolving Credit Commitment Percentage
immediately prior to the termination of the Revolving Credit
Commitments (after giving effect to any permitted assignment pursuant
to subsection 11.6) times the sum of (1) the aggregate principal
amount of Swing Line Loans then outstanding plus (2) the L/C
Obligations then outstanding by (ii) the sum of (x) the aggregate
principal amount of Revolving Loans of all the Lenders then
outstanding plus (y) the aggregate principal amount of all Swing Line
Loans then outstanding plus (z) the aggregate L/C Obligations then
outstanding.
"Revolving Credit Commitment Period": the period from and
including the Effective Date to, but not including, the Termination
Date.
"Revolving Credit Extensions of Credit": as to any Lender at
any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Loans made by such Lender then outstanding and
(b) such Lender's Revolving Credit Commitment Percentage of the sum of
(i) the aggregate principal amount of Swing Line Loans then
outstanding and (ii) the L/C Obligations then outstanding.
"Revolving Credit Lender": any Lender with an unused
Revolving Credit Commitment hereunder and/or any Revolving Loans
outstanding hereunder.
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"Revolving Loans": as defined in subsection 3.1(a).
"Revolving Credit Note": as defined in subsection 4.13(d).
"Rolling 12-Month EBITDA": for any fiscal month, Consolidated
EBITDA for the consecutive twelve-fiscal month period ending with the
end of such fiscal month.
"Sale-Leaseback": as defined in subsection 8.11.
"SEC": the Securities and Exchange Commission and any
Governmental Authority which succeeds to the powers and functions
thereof.
"Secured Obligations": all of the following, in each case
whether now existing or hereafter incurred or created, except to the
extent otherwise expressly provided in the agreements or instruments
relating thereto:
(i) the Credit Agreement Obligations;
(ii) all sums payable by the Borrower and the
Subsidiary Guarantors under the Master Security Agreement,
the Mortgages, or any other Security Document;
(iii) liabilities of the Borrower or any Subsidiary
Guarantor for Overdrafts; and
(iv) liabilities and obligations of the Borrower or
any Subsidiary Guarantor under Derivative Agreements.
When used in this Agreement or any of the other Loan Documents with
respect to any of the Secured Obligations that constitute the
obligations of the Borrower or any Subsidiary Guarantor in respect of
a Letter of Credit issued on behalf of the Borrower or such Subsidiary
Guarantor or under any Derivative Agreement or any similar obligation,
the term "outstanding" shall include, at any time, without
duplication, the aggregate of the principal, interest and other
amounts then outstanding that are the subject of such Letter of Credit
or similar obligation that have not then been reimbursed by the
Borrower or the relevant Subsidiary Guarantor and the amount then
available to be drawn or demanded under such Letter of Credit or
similar obligation (assuming compliance with all conditions to
drawing) or the termination liabilities, if any, of the Borrower or
the Subsidiary Guarantor under such Derivative Agreement.
"Secured Parties": the Lenders, the Issuing Banks, the
Administrative Agent, each counterparty to any Derivative Agreement
entered into with the Borrower (if such counterparty is a Lender or an
Affiliate of a Lender) and the beneficiaries of each indemnification
obligation of any Loan Party undertaken in any Loan Document, and the
successors and assigns of each of the foregoing.
"Securitization Entity": with respect to the Borrower or any
Subsidiary, a corporation, partnership, trust, limited liability
company or other entity that is formed by the Borrower or such
Subsidiary for the purpose of effecting or facilitating a
Securitization Transaction and which engages in no business and incurs
no Indebtedness or other liabilities other than those related to or
incidental to the Securitization Transaction.
"Securitization Transaction": a transaction or series of
related transactions pursuant to which a corporation, partnership,
trust, limited liability company or other entity incurs
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obligations or issues interests, the proceeds of which are used to
finance a discrete pool (which may be fixed or revolving) of
receivables, leases or other financial assets, or a discrete portfolio
of real property or equipment, subject in each case (except as to
credit card receivable securitizations and securitizations of real
properties in compliance with the provisions of subsection 8.5(f)
hereof) to the approval of the Administrative Agent.
"Securities Account": any account which is maintained with
the Administrative Agent or any agent thereof or any instructions
delivered by the Borrower or a Subsidiary Guarantor to the
Administrative Agent or such agent in accordance with subsection
4.8(a) of the Master Security Agreement, in which all Pledged
Securities which are Cash Equivalents (other than Excepted Cash
Equivalents) are to be held by the Administrative Agent or a custodian
or other agent of the Administrative Agent, subject to release upon
request by the relevant Pledgor strictly in accordance with subsection
4.8(c) of the Master Security Agreement thereafter, and in each of
which the Administrative Agent shall have a perfected first priority
security interest.
"Security": as defined in subsection 1.1 of the Master
Security Agreement.
"Security Documents": the collective reference to the Master
Security Agreement, the Mortgages, the Blocked Account Agreements, the
Custody and Control Agreements, the Lockbox Agreements and each other
agreement entered into pursuant to subsection 11.1(b) of the Master
Security Agreement.
"Senior Notes Indenture": the Indenture, dated as of October
15, 1993, between the Borrower and State Street Bank and Trust Company
(as successor trustee to The First National Bank of Boston), as
trustee, as amended, supplemented or otherwise modified from time to
time.
"Shrink Reserve": as of any Calculation Date, an amount equal
to 1.75% of the cost of Inventory as reflected on the IE System. Such
Shrink Reserve percentage shall adjust from time to time at the
Administrative Agent's sole discretion exercised commercially
reasonably in accordance with customary business practices, based on
the results of the Borrower's cycle and physical Inventory counts.
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"SMC": Service Merchandise Company, Inc., a Tennessee
corporation.
"Special Purpose Subsidiary": any Subsidiary of the Borrower
organized solely for the purpose of (a) holding a license or permit
issued by any Governmental Authority and used in connection with the
business of the Borrower and/or its Subsidiaries or (b) providing
employee services for use in the foreign operations of the Borrower or
any of its Subsidiaries, provided that such Subsidiary shall only be a
"Special Purpose Subsidiary" for so long as such Subsidiary does not
own any assets (other than any such license or permit and other than
any assets with a book value not exceeding $5,000,000 in the
aggregate) and does not engage in any business other than holding such
license or permit or providing such employee services and, in each
case, activities directly related thereto.
"Standby L/C Fee Rate": at any time, the rate per annum on
the aggregate undrawn amount of Standby Letters of Credit equal to the
then Applicable Margin for Eurodollar Loans minus 0.25% per annum
provided that during the continuance of an Event of Default the
Standby L/C Fee Rate shall be increased by 2.0% per annum.
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"Standby Letter of Credit": as defined in subsection
3.6(b)(i).
"Standby Letter of Credit Outstandings": at any time, an
amount equal to the sum of (a) the aggregate then undrawn and
unexpired amount of the then outstanding Standby Letters of Credit
issued in Dollars, (b) the Dollar Equivalent of the aggregate then
undrawn and unexpired amount of then outstanding Letters of Credit
issued in currencies other than Dollars (such Dollar Equivalent to be
determined as of the date of issuance of such Standby Letter of
Credit), (c) the aggregate amount of Reimbursement Obligations in
respect of Standby Letters of Credit issued in Dollars which have not
then been paid pursuant to subsection 3.10(a) and (d) (i) the Dollar
Equivalent of the aggregate amounts of Reimbursement Obligations in
respect of Standby Letters of Credit issued in currencies other than
Dollars which have not been reimbursed pursuant to subsection 3.10(a)
(such Dollar Equivalent to be calculated as of the date such
Reimbursement Obligation becomes due and payable) and which have not
been converted into Dollars in accordance with subsection 3.10(a) and
(ii) the aggregate amount of Reimbursement Obligations in respect of
Standby Letters of Credit issued in currencies other than Dollars
which have not been reimbursed pursuant to subsection 3.10(a) and
which have been converted into Dollars in accordance with such
subsection.
"Store Closures": Liquidations and/or closures of the
Borrower's and Restricted Subsidiaries' stores (including, without
limitation, the equipment associated therewith) and the complete
Inventory therein not to exceed $125,000,000 of Inventory Value in the
aggregate from and after the date of the Existing DIP Agreement.
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantor": each Subsidiary set forth on Schedule
5.13 under the heading "Initial Subsidiary Guarantors", together with
each other Subsidiary that becomes a party to the Master Security
Agreement in compliance with subsection 7.11.
"Swing Line Commitment": the lesser of (a) $50,000,000 and
(b) the Revolving Credit Commitments then in effect.
"Swing Line Lender": FRF and any other Lender acceptable to
the Administrative Agent that agrees to be a Swing Line Lender.
"Swing Line Loans": as defined in subsection 3.14.
"Swing Line Note": as defined in subsection 4.13(f).
"Tax Code": the Internal Revenue Code of 1986, as amended
from time to time.
"Telerate Page 3750": the display page currently so
designated on the Dow Jones Telerate Service (or such other page as
may replace that service for the purpose of displaying comparable
rates or prices).
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"Term Loan": as defined in subsection 2.1.
"Term Loan Lender": any Lender with Term Loans outstanding
hereunder.
"Term Note": as defined in subsection 4.13(e).
"Termination Date": the earlier of (i) April __, 2004, and
(ii) the date of termination in whole of the Revolving Credit
Commitments pursuant to subsection 3.4 or Section 9.
"Trade L/C Fee Rate": at any time the rate per annum on the
aggregate undrawn amount of Trade Letters of Credit equal to 1.25%,
provided that during the continuance of any Event of Default, the
Trade L/C Fee Rate shall be 3.25% per annum.
"Trade Letter of Credit": as defined in subsection 3.6(b)(i).
"Trade Letter of Credit Outstandings": at any time, an amount
equal to the sum of (a) the aggregate then undrawn and unexpired
amount of the then outstanding Trade Letters of Credit issued in
Dollars, (b) the Dollar Equivalent of the aggregate then undrawn and
unexpired amount of the then outstanding Trade Letters of Credit
issued in currencies other than Dollars (such Dollar Equivalent to be
calculated as of the date of issuance of such Letters of Credit), (c)
the aggregate amount of Reimbursement Obligations in respect of Trade
Letters of Credit issued in Dollars which have not then been paid
pursuant to subsection 3.10(a), and (d) (i) the Dollar Equivalent of
the aggregate amount of Reimbursement Obligations in respect of Trade
Letters of Credit issued in currencies other than Dollars which have
not then been paid pursuant to subsection 3.10(a) (such Dollar
Equivalent to be calculated as of the date such Reimbursement
Obligation becomes due and payable) and which have not been converted
into Dollars in accordance with subsection 3.10(a), and (ii) the
aggregate amount of Reimbursement Obligations in respect of Trade
Letters of Credit issued in currencies other than Dollars which have
not been reimbursed pursuant to subsection 3.10(a) and which have been
converted into Dollars in accordance with such subsection.
"Tranche": the collective reference to Eurodollar Loans, the
then current Interest Periods with respect to all of which begin on
the same date and end on the same later date (whether or not such
Eurodollar Loans shall originally have been made on the same day).
"Transferee": as defined in subsection 11.6(f).
"Transaction Costs": the fees, costs and expenses payable by
the Borrower to the Administrative Agent or any Lender (as provided in
subsection 11.5 hereof) in connection with the execution, delivery and
performance of the Loan Documents and the transactions contemplated
thereby.
"Type": as to any Term Loan or Revolving Loan, its nature as
an ABR Loan or a Eurodollar Loan.
"UCC": the Uniform Commercial Code as in effect in the
Commonwealth of Massachusetts from time to time or, where applicable
as to specific Collateral, any other relevant state.
"UCC Filing Collateral": Collateral (other than fixtures) as
to which filing financing statements under the UCC of the applicable
jurisdiction is an appropriate method of perfection of a security
interest in such Collateral.
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"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and the International Standby Practices - ISP98,
International Chamber of Commerce Publication No. 590, each as the
same may be amended or revised from time to time.
"Voting Percentage": as to any Lender (a) at any time prior
to the termination of the Revolving Credit Commitments, that amount
expressed as a percentage derived by dividing (i) the sum of (x) such
Lender's Revolving Credit Commitment plus (y) the outstanding
principal amount of such Lender's Term Loan by (ii) the sum of (x) the
Revolving Credit Commitments of all the Lenders, plus (y) the
aggregate principal amount of Term Loans of all the Lenders then
outstanding and (b) at any time after the termination of the Revolving
Credit Commitments, that amount expressed as a percentage derived by
dividing (i) the sum of (x) the principal amount of such Lender's
Loans (other than Swing Line Loans) then outstanding plus (y) the
product of such Lender's Revolving Credit Commitment Percentage times
the L/C Obligations and Swing Line Loans then outstanding by (ii) the
sum of (x) the aggregate principal amount of Loans of all the Lenders
then outstanding plus (y) the aggregate L/C Obligations of all the
Lenders then outstanding.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in
this Agreement shall have the defined meanings when used in any Loan Document
or any certificate or other document made or delivered pursuant hereto or
thereto.
(b) As used herein and in any other Loan Document, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under
GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The word "including" shall mean "including, without
limitation" unless the context otherwise requires.
(e) The meanings given to defined terms herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNTS AND TERMS OF TERM LOANS
2.1 TERM LOANS. On the Effective Date the Term Loan Lenders shall
make Term Loans to the Borrower in an aggregate principal amount not to exceed
the balance of the term loans under the Existing DIP Agreement, the proceeds of
which will be used to repay such term loans under the Existing DIP Agreement.
After giving effect to such Term Loans under this Agreement, each Term Loan
Lender shall have outstanding a Term Loan owing to it by the Borrower in a
principal amount equal to the amount set forth opposite such Lender's name on
Schedule 1.1(a). The Term Loans may from time to time be (i) Eurodollar Loans,
(ii) ABR Loans or (iii) a combination thereof, as determined by the Borrower
and notified to the Administrative Agent in accordance with subsection 4.2.
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2.2 REPAYMENT OF TERM LOANS. The Borrower hereby agrees to pay
interest on the unpaid principal amount of the Term Loans from time to time
outstanding from the Effective Date until payment in full thereof at the rates
per annum, and on the dates, set forth in subsection 4.4. The principal amount
of the Term Loans shall be prepaid in accordance with the provisions of
subsection 3.4. The outstanding principal amount of the Term Loans shall be
payable on the Termination Date.
section 3. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS AND
THE INTERIM FACILITY
3.1 REVOLVING CREDIT COMMITMENTS.
(a) Subject to the terms and conditions hereof, each
Revolving Credit Lender severally agrees to make revolving credit loans
("Revolving Loans") to the Borrower from time to time during the Revolving
Credit Commitment Period in an aggregate principal amount at any one time
outstanding which, when added to such Revolving Credit Lender's Revolving
Credit Commitment Percentage of an amount equal to the sum of (i) the aggregate
principal amount of Swing Line Loans then outstanding plus (ii) the then
outstanding L/C Obligations (in each case, after giving effect to the use of
proceeds of such Revolving Loans), does not exceed the amount of such Revolving
Credit Lender's Revolving Credit Commitment, provided that no Revolving Credit
Lender shall be required to make a Revolving Loan to the extent that, after
giving effect thereto, the Aggregate Outstanding Extensions of Credit at such
time would exceed the Borrowing Base. During the Revolving Credit Commitment
Period, the Borrower may use the Revolving Credit Commitments by borrowing,
prepaying and reborrowing the Revolving Loans in whole or in part, all in
accordance with the terms and conditions hereof.
(b) The Revolving Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Administrative Agent in accordance with
subsections 3.2 and 4.2.
3.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give
the Administrative Agent irrevocable notice (which notice must be received by
the Administrative Agent (a) prior to 12:00 Noon, Boston time, two Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Revolving Loans are to be initially Eurodollar Loans or (b) prior to 3:00 p.m.,
Boston time, on the requested Borrowing Date, otherwise), which notice may be
given by telephone (to be promptly confirmed in writing, including by
facsimile), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR
Loans or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the respective amounts of each such Type of Loan
and the respective lengths of the initial Interest Periods therefor. Each
borrowing under the Revolving Credit Commitments shall be in an amount equal to
(x) in the case of ABR Loans (except as otherwise provided in subsection
3.16(a)), $1,000,000 or a whole multiple of $1,000,000 in excess thereof (or,
if the then Available Revolving Credit Commitments are less than $1,000,000,
such lesser amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a
whole multiple of $l,000,000 in excess thereof. Upon receipt of any such notice
from the Borrower, the Administrative Agent shall promptly notify each
Revolving Credit Lender thereof. Each Revolving Credit Lender will make the
amount of its pro rata share of each borrowing available to the Administrative
Agent for the account of the Borrower at the office of the Administrative Agent
specified in subsection 11.2 prior to 1:00 P.M., Boston time, (a) with respect
to Eurodollar Loans, on the Borrowing Date requested by the Borrower in
Dollars, and (b) with respect to ABR Loans, on the Business Day after the
Borrowing Date, in each case in funds immediately available to the
Administrative Agent. Such borrowing will be made available to the Borrower
promptly (but, in
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the case of Eurodollar Loans, no event later than 1:00 P.M.,
Boston time) by the Administrative Agent crediting the account of the Borrower
on the books of such office of the Administrative Agent with the aggregate of
the amounts made available to the Administrative Agent by the Revolving Credit
Lenders and in like funds as received by the Administrative Agent.
3.3 COMMITMENT FEE. The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
non-refundable commitment fee for the period from and including the first day
of the Revolving Credit Commitment Period to but not including the Termination
Date, computed at a rate per annum equal to the Applicable Commitment Fee Rate
then in effect on the average daily amount of the Available Revolving Credit
Commitment of such Revolving Credit Lender during the period for which payment
is made, payable quarterly in arrears on the last day of each calendar quarter
and on the Termination Date (whether by stated maturity or otherwise) or such
earlier date as the Revolving Credit Commitments shall terminate as provided
herein, commencing on the first of such dates to occur after the Effective
Date.
3.4 TERMINATION OR REDUCTION OF COMMITMENTS. The Borrower shall
have the right, upon not less than two Business Days' notice to the
Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments,
provided that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Loans made on the
effective date thereof, the aggregate principal amount of the Revolving Loans
then outstanding, when added to the then outstanding L/C Obligations and the
aggregate principal amount of then outstanding Swing Line Loans, would exceed
the Revolving Credit Commitments then in effect; and provided further that at
the time of any such reduction or termination, the Borrower also prepays the
Term Loans in full (in the event of a termination of the Revolving Credit
Commitments) or prepays the principal of the Term Loans by an amount equal to
the same percentage of the Term Loans which is equal to the percentage
reduction of the Revolving Credit Commitments. Any such reduction shall be in
an amount equal to $10,000,000 or a whole multiple of $l,000,000 in excess
thereof and shall reduce permanently the Revolving Credit Commitments then in
effect. Upon receipt of any notice pursuant to this subsection 3.4, the
Administrative Agent shall promptly notify each Revolving Credit Lender
thereof.
3.5 REPAYMENT OF REVOLVING LOANS. The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Revolving Credit Lender the then unpaid principal amount of each Revolving
Loan of such Revolving Credit Lender on the Termination Date (or such earlier
date on which the Revolving Loans become due and payable pursuant to Section
9). The Borrower hereby further agrees to pay interest on the unpaid principal
amount of the Revolving Loans from time to time outstanding from the Effective
Date until payment in full thereof at the rates per annum, and on the dates,
set forth in subsection 4.4.
3.6 L/C COMMITMENT.
(a) Subject to the terms and conditions hereof, each Issuing
Bank, in reliance on the agreements of the other Lenders set forth in
subsection 3.9(a), agrees to issue letters of credit ("Letters of Credit") for
the account of the Borrower on any Business Day during the Revolving Credit
Commitment Period in such form as may be approved from time to time by such
Issuing Bank; provided that no Issuing Bank shall have any obligation to issue
any Letter of Credit if, after giving effect to such issuance, (i) the L/C
Obligations at such time would exceed the L/C Commitment, (ii) the Standby
Letter of Credit Outstandings at such time would exceed $125,000,000, (iii) the
Aggregate Revolving Credit Outstandings at such time would exceed the aggregate
amount of the Revolving Credit Commitments at such time, (iv) in the case of
Letters of Credit issued in currencies other than Dollars only, the L/C
Obligations in respect of Letters of Credit issued in currencies other than
Dollars would exceed the
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Foreign L/C Commitment Sublimit at such time, or (v) the Aggregate Outstanding
Extensions of Credit at such time would exceed the Borrowing Base at such time.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars or such other currency
that as of the date of issuance thereof is in the reasonable judgment
of the relevant Issuing Bank (which shall be binding on the L/C
Participants) freely convertible or exchangeable into Dollars as the
Borrower, the relevant Issuing Bank and the Administrative Agent may
from time to time agree, and shall be either (A) a standby letter of
credit issued to support obligations of the Borrower or a Subsidiary,
contingent or otherwise (a "Standby Letter of Credit"), or (B) a
commercial letter of credit issued in respect of the purchase of
inventory or other goods or services by the Borrower and its
Subsidiaries in the ordinary course of business (a "Trade Letter of
Credit"), and
(ii) expire no later than the earlier of (A) five
Business Days prior to the Termination Date (unless the Administrative
Agent has received and maintains cash Collateral in an amount equal to
103% of the maximum amount available to be drawn under any such Letter
of Credit for which the Borrower has requested an expiry date after
the Termination Date, in which event the expiry of any such Letter of
Credit may extend beyond the Termination Date) and (B) one year after
the date of issuance thereof, provided that, subject to clause (A)
above, any Letter of Credit may, at the request of the Applicant as
set forth in the applicable Application, be automatically renewed on
each anniversary of the issuance thereof for an additional period of
one year or less unless the Issuing Bank which issued such Letter of
Credit shall have given at least sixty days prior written notice to
the Borrower and the beneficiary of such Letter of Credit that such
Letter of Credit will not be renewed, in which case such Letter of
Credit may, at the option of the Borrower, provide that the
beneficiary of such Letter of Credit will be entitled to draw on such
Letter of Credit at any time during the thirty days prior to the
expiry thereof.
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the law of the
Commonwealth of Massachusetts.
(d) No Issuing Bank shall at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
such Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
(e) On the Effective Date, all letters of credit and the
reimbursement obligations attendant thereto issued pursuant to or under the
Existing DIP Agreement which are then outstanding shall be, from and after such
date, deemed to be and shall become for all purposes, Letters of Credit with
Reimbursement Obligations attendant thereto issued pursuant to and outstanding
under this Agreement.
3.7 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. An Applicant may
from time to time request that an Issuing Bank issue a Letter of Credit by
delivering (a) to such Issuing Bank at its address for notices specified herein
in such manner as may be agreed by or be reasonably acceptable to such Issuing
Bank (including by electronic transmission) an Application therefor, completed
to the satisfaction of such Issuing Bank, and such other certificates,
documents and other papers and information as such Issuing Bank may reasonably
request and (b) a notice to the Administrative Agent that such Letter of Credit
has been requested. Upon receipt of any Application, each Issuing Bank agrees
to process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall such Issuing Bank be required to issue any
Letter of
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Credit earlier than two Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by such Issuing Bank
and the Borrower. Each Issuing Bank shall furnish a copy of each Letter of
Credit issued by such Issuing Bank to the Borrower and the Administrative Agent
promptly following the issuance thereof.
3.8 LETTER OF CREDIT FEES, COMMISSIONS AND OTHER CHARGES.
(a) The Borrower shall pay to the relevant Issuing Bank with
respect to each Letter of Credit issued by such Issuing Bank under this
Agreement, for the account of such Issuing Bank, a fronting fee with respect to
the period from the date of issuance of such Letter of Credit to the expiration
or termination date of such Letter of Credit, computed at a rate per annum
equal to 0.125% on the average aggregate amount available to be drawn under
such Letter of Credit during the period for which such fee is calculated. Such
fronting fee shall be payable quarterly in arrears on each L/C Fee Payment Date
to occur after the issuance of such Letter of Credit and on the Termination
Date or on such earlier date as the Revolving Credit Commitments shall
terminate as provided herein and shall be nonrefundable.
(b) The Borrower shall pay to the Administrative Agent, for
the account of the L/C Participants, a letter of credit commission with respect
to each Trade Letter of Credit issued under this Agreement with respect to the
period from the date of issuance of such Trade Letter of Credit to the
expiration or termination date of such Letter of Credit, computed at a rate per
annum equal to the Trade L/C Fee Rate in effect from time to time on the
average aggregate amount available to be drawn under such Trade Letter of
Credit during the period for which such fee is calculated. Such commission
shall be shared ratably among the L/C Participants in accordance with their
respective Revolving Credit Commitment Percentages. Such commission shall be
payable in arrears on each L/C Fee Payment Date to occur after the issuance of
such Letter of Credit and on the Termination Date (or on such earlier date as
the Revolving Credit Commitments shall terminate as provided herein) and shall
be nonrefundable.
(c) The Borrower shall pay to the Administrative Agent, for
the account of the L/C Participants, a letter of credit commission with respect
to each Standby Letter of Credit with respect to the period from the date of
issuance of such Standby Letter of Credit to the expiration or termination date
of such Letter of Credit, computed at a rate per annum equal to the Standby L/C
Fee Rate in effect from time to time on the average aggregate amount available
to be drawn under such Standby Letter of Credit during the period for which
such fee is calculated. Such commission shall be shared ratably among the L/C
Participants in accordance with their respective Revolving Credit Commitment
Percentages. Such commission shall be payable in arrears on each L/C Fee
Payment Date to occur after the issuance of such Letter of Credit and on the
Termination Date (or on such earlier date as the Revolving Credit Commitments
shall terminate as provided herein) and shall be nonrefundable.
(d) In addition to the foregoing fees and commissions, the
Borrower shall pay or reimburse each Issuing Bank for such normal and customary
costs and expenses as may be agreed upon by the Borrower and such Issuing Bank
in connection with issuing, effecting payment under, amending or otherwise
administering any Letter of Credit issued by such Issuing Bank.
(e) The Administrative Agent shall, promptly following its
receipt thereof, distribute to each Issuing Bank and the L/C Participants all
fees and commissions received by the Administrative Agent for their respective
accounts pursuant to this subsection.
3.9 L/C Participations.
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(a) Each Issuing Bank irrevocably agrees to grant and hereby
grants to each L/C Participant (other than such Issuing Bank), and, to induce
such Issuing Bank to issue Letters of Credit hereunder, each such L/C
Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from such Issuing Bank, on the terms and conditions hereinafter
stated, for such L/C Participant's own account and risk an undivided interest
equal to such L/C Participant's Revolving Credit Commitment Percentage in such
Issuing Bank's obligations and rights under each Letter of Credit issued by
such Issuing Bank hereunder and the amount of each draft paid by such Issuing
Bank thereunder. Each such L/C Participant unconditionally and irrevocably
agrees with each Issuing Bank that, if a draft is paid under any Letter of
Credit issued by such Issuing Bank for which such Issuing Bank is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Administrative Agent for the
account of such Issuing Bank upon demand an amount equal to such L/C
Participant's Revolving Credit Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to any Issuing Bank pursuant to subsection 3.9(a) in respect of any
unreimbursed portion of any payment made by such Issuing Bank under any Letter
of Credit issued by such Issuing Bank is paid to such Issuing Bank within three
Business Days after the date such payment is due, such L/C Participant shall
pay to such Issuing Bank on demand an amount equal to the product of (i) such
amount, times (ii) the daily average Federal Funds Rate, during the period from
and including the date such payment is required to the date on which such
payment is immediately available to such Issuing Bank, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360. If any such amount required to be paid by any
L/C Participant pursuant to subsection 3.9(a) is not in fact made available to
any Issuing Bank by such L/C Participant within three Business Days after the
date such payment is due, such Issuing Bank shall be entitled to recover from
such L/C Participant, on demand, such amount with interest thereon calculated
from such due date at the rate per annum applicable to Revolving Credit Loans
that are ABR Loans hereunder. A certificate of any Issuing Bank submitted to
any L/C Participant with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after any Issuing Bank has made
payment under any Letter of Credit issued by such Issuing Bank and has received
from any L/C Participant its pro rata share of such payment in accordance with
subsection 3.9(a), such Issuing Bank receives any payment related to such
Letter of Credit (whether directly from the Borrower or otherwise, including
proceeds of collateral applied thereto by such Issuing Bank), or any payment of
interest on account thereof, such Issuing Bank will distribute to such L/C
Participant its pro rata share thereof.
(d) If any payment received by any Issuing Bank pursuant to
subsection 3.10 with respect to any Letter of Credit issued by it shall be
required to be returned by such Issuing Bank, each L/C Participant shall pay to
such Issuing Bank its pro rata share thereof.
3.10 LETTER OF CREDIT REIMBURSEMENT OBLIGATIONS.
(a) The Borrower agrees to reimburse each Issuing Bank for
the amount of (i) any draft paid by such Issuing Bank under any Letter of
Credit issued by such Issuing Bank and (ii) any taxes, fees, charges or other
costs or expenses reasonably incurred by such Issuing Bank in connection with
such payment (including any such costs and expenses related to any conversion
of any such amount into Dollars as contemplated by the next succeeding
sentence). Except as otherwise agreed by the Borrower and the relevant Issuing
Bank, each such payment shall be made to the relevant Issuing Bank at its
address for notices specified herein in the currency in which the relevant
Letter of Credit was issued in immediately available funds in such currency,
provided that if the Borrower does not reimburse the relevant Issuing Bank for
any draft paid by such Issuing Bank under any Letter of Credit issued by such
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Issuing Bank in a currency other than Dollars on the date required pursuant to
subsection 3.10(b), such Issuing Bank shall convert such amount into Dollars at
the rate of exchange then available to such Issuing Bank in the interbank
market where its foreign currency exchange operations in respect of such
currency are then being conducted and the Borrower shall thereafter be required
to reimburse in Dollars such Issuing Bank for such amount with interest
pursuant to subsection 3.10(b).
(b) If any draft shall be presented for payment under any
Letter of Credit issued by any Issuing Bank, such Issuing Bank shall promptly
notify the Borrower of the date and amount thereof. The Borrower shall
reimburse each Issuing Bank pursuant to subsection 3.10(a) with respect to any
drawing under any Letter of Credit issued by such Issuing Bank on (i) the
Business Day on which such drawing is paid by such Issuing Bank, if notice of
such drawing is given to the Borrower by such Issuing Bank prior to 12:00 Noon,
Boston time, on the date such drawing is paid, or (ii) the first Business Day
after notice of such drawing is given to the Borrower by the Issuing Bank, if
such notice is given after 12:00 Noon, Boston time, on the date such drawing is
paid, and, if such drawing is reimbursed after the date of such drawing,
interest shall be payable on the amount of such drawing for the period from the
date such drawing is paid by the Issuing Bank until reimbursed by the Borrower
at the rate then applicable to Revolving Credit Loans that are ABR Loans
hereunder. If any amount payable under this subsection is not paid when due,
interest shall be payable on such amount from the date such amount becomes
payable under this subsection until payment in full thereof at the rate which
would be payable on any outstanding ABR Loans which were then overdue.
(c) On the thirtieth day prior to the Termination Date, the
Borrower shall either (a) deposit in a cash Collateral Account opened by the
Administrative Agent an amount equal to 103% of the aggregate then undrawn and
unexpired amount of all outstanding Letters of Credit, or (b) furnish the
Administrative Agent with a "back to back" letter of credit in form and
substance and issued by a bank reasonably satisfactory to the Administrative
Agent in an amount equal to 103% of the aggregate then undrawn and unexpired
amount of all outstanding Letters of Credit. The Borrower hereby grants to the
Administrative Agent, for the benefit of each Issuing Bank and the L/C
Participants, a security interest in any such cash Collateral to secure all
obligations of the Borrower under this Agreement and the other Loan Documents.
Amounts held in such cash Collateral Account and drawings made under such "back
to back" letter of credit shall be applied by the Administrative Agent to the
payment of drafts drawn under such Letters of Credit. The unused portion of any
such cash Collateral after all such Letters of Credit shall have expired or
been fully drawn upon, if any, shall be applied to repay other obligations of
the Borrower hereunder and under the Notes. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations
shall have been satisfied and all other obligations of the Borrower hereunder
and under the Notes shall have been paid in full, the balance, if any, in such
cash Collateral Account shall be returned to the Borrower and/or the "back to
back" letter of credit shall be returned to the Borrower. The Borrower shall
execute and deliver to the Administrative Agent, for the account of each
Issuing Bank and the L/C Participants, such further documents and instruments
as the Administrative Agent may reasonably request to evidence the creation and
perfection of the security interest in such cash Collateral Account.
3.11 OBLIGATIONS ABSOLUTE.
(a) The Borrower's obligations under this Section 3 in
respect of Letters of Credit shall be absolute and unconditional under any and
all circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower or any Applicant may have or have had against any
Issuing Bank or any beneficiary of any Letter of Credit.
(b) The Borrower also agrees with each Issuing Bank that such
Issuing Bank shall not be responsible for, and the Borrower's Reimbursement
Obligations shall not be affected by, among
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other things, (i) the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or (ii) any dispute between or among the
Borrower, any Applicant and any beneficiary of any Letter of Credit or any
other party to which such Letter of Credit may be transferred or (iii) any
claims whatsoever of the Borrower or any Applicant against any beneficiary of
such Letter of Credit or any such transferee.
(c) No Issuing Bank shall be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit issued by
such Issuing Bank, except for errors or omissions caused by such Issuing Bank's
gross negligence or willful misconduct.
(d) The Borrower agrees that any action taken or omitted by
any Issuing Bank under or in connection with any Letter of Credit issued by
such Issuing Bank or the related drafts or documents, if done in the absence of
gross negligence or willful misconduct and in accordance with the standards of
care specified in the UCC and the Uniform Customs, shall be binding on the
Borrower and shall not result in any liability of such Issuing Bank to the
Borrower.
3.12 LETTER OF CREDIT PAYMENTS. The responsibility of each Issuing
Bank to the Borrower in connection with any draft presented for payment under
any Letter of Credit issued by such Issuing Bank shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with
such Letter of Credit.
3.13 LETTER OF CREDIT APPLICATIONS. To the extent that any
provision of any Application related to any Letter of Credit is inconsistent
with the provisions of this Section 3 or any other terms of this Agreement or
any other Loan Document, the provisions of this Section 3 shall apply and such
inconsistent provision of such Application shall be of no force and effect.
3.14 SWING LINE COMMITMENT. Subject to the terms and conditions
hereof, each Swing Line Lender, in reliance on the agreements of the other
Lenders set forth in subsection 3.16, agrees to make swing line loans ("Swing
Line Loans") to the Borrower from time to time during the Revolving Credit
Commitment Period, provided that (a) no Swing Line Lender shall have any
obligation to make a Swing Line Loan if, after giving effect to any such Swing
Line Loans and the use of proceeds thereof, (i) the aggregate principal amount
of Swing Line Loans then outstanding would exceed the Swing Line Commitment,
(ii) the Aggregate Revolving Credit Outstandings at such time would exceed the
Revolving Credit Commitments in effect at such time or (iii) the Aggregate
Outstanding Extensions of Credit at such time would exceed the Borrowing Base
at such time, and (b) all borrowings and prepayments of Swing Line Loans shall
be made such that the aggregate principal amount of Swing Line Loans of each
Swing Line Lender outstanding at any time shall be equal. During the Revolving
Credit Commitment Period, the Borrower may use the Swing Line Commitment by
borrowing, prepaying and reborrowing the Swing Line Loans in whole or in part,
all in accordance with the terms and conditions hereof. All Swing Line Loans
shall be ABR Loans.
3.15 PROCEDURE FOR SWING LINE BORROWING. The Borrower may borrow
under the Swing Line Commitment during the Revolving Credit Commitment Period
on any Business Day, provided that the Borrower shall give the relevant Swing
Line Lender and the Administrative Agent irrevocable notice (which notice may
be given by telephone (to be promptly confirmed in writing, including by
facsimile) and must be received by the Swing Line Lender prior to 3:00 P.M.
Boston time) on the requested Borrowing Date specifying the amount of the
requested Swing Line Loan which shall be in an aggregate minimum amount of
$l,000,000 or a whole multiple of $100,000 in excess thereof (or, if less, the
unused portion of the Swing Line Commitment). The proceeds of the Swing Line
Loan will be made available by the relevant Swing Line Lender to the Borrower
at the office of the Swing Line Lender by 4:00 P.M.,
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Boston time, on the Borrowing Date by crediting the account of the Borrower at
such office with such proceeds. The Borrower may at any time and from time to
time, subject to subsection 3.14, prepay the Swing Line Loans, in whole or in
part, without premium or penalty, by notifying (which notice may be given by
telephone (to be promptly confirmed in writing, including by facsimile)) the
relevant Swing Line Lender and the Administrative Agent prior to 2:00 P.M.,
Boston time, on any Business Day of the date and amount of prepayment. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein. Partial prepayments shall be in an
aggregate principal amount of $100,000 or a whole multiple of $100,000 in
excess thereof.
3.16 REFUNDING OF SWING LINE LOANS; PARTICIPATIONS IN SWING LINE
LOANS.
(a) Except as otherwise provided in subsection 3.16(f), in
the event that (i) the aggregate average daily outstanding principal amount of
Swing Line Loans during any weekly period ending on Thursday (or, in the event
Thursday is not a Business Day, on the next succeeding Business Day) of any
week exceeds $30,000,000, and (ii) the principal amount of Swing Line Loans
outstanding on the last day of such period exceeds $30,000,000, the Borrower
shall, or the Administrative Agent may, on behalf of the Borrower (which hereby
irrevocably authorizes the Administrative Agent to act on its behalf in such
regard) request each Revolving Credit Lender to make a Revolving Loan (which
shall be an ABR Loan) in an amount equal to such Lender's Revolving Credit
Commitment Percentage of the amount by which the aggregate outstanding
principal amount of Swing Line Loans on the last day of such period exceeds
$20,000,000, regardless of whether the conditions set forth in subsection 7.2
have been satisfied in connection therewith. The Swing Line Lenders may, on
behalf of the Borrower (which hereby authorizes the Swing Line Lenders to act
on its behalf in such regard), at any time request each Revolving Credit Lender
(including the Swing Line Lenders) to make a Revolving Credit Loan (which shall
be an ABR Loan) in an amount equal to such Lender's Revolving Credit Commitment
Percentage of the aggregate principal amount of Swing Line Loans then
outstanding, regardless of whether the conditions set forth in subsection 6.2
have been satisfied in connection therewith. Unless any of the events described
in paragraph (n) or (o) of Section 9 shall have occurred with respect to the
Borrower (in which event the procedures of paragraph (c) of this subsection
3.16 shall apply) each Lender shall make the proceeds of its Revolving Loan
available to the Administrative Agent for the account of the relevant Swing
Line Lender at the Administrative Agent's office specified in or pursuant to
subsection 11.2 prior to 12:00 noon, Boston time, in funds immediately
available in Dollars on the Business Day next succeeding the date such notice
is given. The proceeds of such Revolving Loans shall be immediately applied to
repay the relevant Swing Line Loan. Effective on the day such Revolving Loans
are made, the relevant Swing Line Loan so paid shall no longer be outstanding
as a Swing Line Loan and shall no longer be due under the Swing Line Note. The
Borrower authorizes each Swing Line Lender, upon written notice to the
Borrower, to charge the Borrower's accounts with such Swing Line Lender (up to
the amount available in each such account) in order to immediately pay the
amount of its outstanding Swing Line Loans to the extent amounts received from
the Lenders are not sufficient to repay in full such outstanding Swing Line
Loans.
(b) Notwithstanding anything herein to the contrary, and
except as provided in subsection 3.16(f), no Swing Line Lender shall make any
Swing Line Loans if the Swing Line Lender has received written notice that the
conditions set forth in subsection 6.2 have not been satisfied in connection
with the making of such Swing Line Loans and no Swing Line Lender shall
otherwise be required to determine that, or take notice whether, the conditions
precedent set forth in subsection 6.2 have been satisfied in connection with
the making of any Swing Line Loan.
(c) If prior to the making of a Revolving Loan pursuant to
subsection 3.16(a) one of the events described in paragraph (n) or (o) of
Section 9 shall have occurred and be continuing with respect to the Borrower,
each Lender will, on the date such Revolving Loan was to or would have been
made pursuant to the notice in subsection 3.16(a), purchase an undivided
participating interest in the
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outstanding Swing Line Loans in an amount equal to (i) its Revolving Credit
Commitment Percentage times (ii) the aggregate principal amount of Swing Line
Loans then outstanding. Each Lender will immediately transfer to the Swing Line
Lender, in immediately available funds, the amount of its participation.
(d) Whenever, at any time after any Lender has purchased a
participating interest in a Swing Line Loan, any Swing Line Lender receives any
payment on account thereof, such Swing Line Lender will distribute to such
Lender its participating interest in such amount (appropriately adjusted, in
the case of interest payments, to reflect the period of time during which such
Lender's participating interest was outstanding and funded), provided that, in
the event that such payment received by such Swing Line Lender is required to
be returned, such Lender will return to such Swing Line Lender any portion
thereof previously distributed by such Swing Line Lender to it.
(e) Each Lender's obligation to make the Revolving Loans
referred to in subsection 3.16(a) and to purchase participating interests
pursuant to subsection 3.16(c) shall be absolute and unconditional and shall
not be affected by any circumstance, including, without limitation, (i) any
setoff, counterclaim, recoupment, defense or other right which such Lender or
the Borrower may have against the relevant Swing Line Lender, the Borrower or
any other Person for any reason whatsoever, (ii) the occurrence or continuance
of a Default or an Event of Default, (iii) any adverse change in the condition
(financial or otherwise) of the Borrower, (iv) any breach of this Agreement or
any other Loan Document by the Borrower, any Subsidiary or any other Lender, or
(v) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(f) (i) The Administrative Agent may, as a Swing Line Lender
hereunder, from time to time, after the occurrence and during the continuance
of any Default or Event of Default, and subject to clause (C) of this
subsection 3.16(f), and notwithstanding the requirements of subsections 6.2(a)
and 6.2(b), make such disbursements and advances pursuant to the Loan
Documents, in the form of Swing Line Loans, which the Administrative Agent, in
its sole discretion, deems necessary or desirable to preserve or protect the
Collateral or any portion thereof or to enhance the likelihood or maximize the
amount of repayment of the Loans and other Credit Agreement Obligations;
provided that, after giving effect to any such Swing Line Loans and the use of
proceeds thereof, (A) the aggregate principal amount of Swing Line Loans then
outstanding would not exceed the Swing Line Commitment, (B) the Aggregate
Revolving Credit Outstandings at such time would not exceed the Revolving
Credit Commitment in effect at such time and (C) the Aggregate Outstanding
Extensions of Credit at such time would not exceed the Borrowing Base at such
time (collectively, "Protective Advances"). The Administrative Agent shall
notify the Borrower and each Lender in writing of such Protective Advance. All
outstanding principal of, and interest on, the Protective Advances shall
constitute Credit Agreement Obligations secured by the Collateral until paid in
full by the Borrower.
3.17 OTHER FEES. The Borrower agrees to pay to the Administrative
Agent the Agent's Fee in the amounts and on the dates set forth in the Fee
Letter.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF
CREDIT
4.1 OPTIONAL AND MANDATORY PREPAYMENTS.
(a) The Borrower may, at any time and from time to time,
prepay the Loans, in whole or in part, without premium or penalty (except, with
respect to Eurodollar Loans that are prepaid on a date other than the last day
of the Interest Period with respect thereto, as provided under subsection
4.11), upon (i) in the case of prepayments of Eurodollar Loans, at least three
Business Days' irrevocable notice (which notice may be given by telephone (to
be promptly confirmed in writing, including by facsimile) to the Administrative
Agent and (ii) in the case of prepayments of ABR Loans (other than Swing Line
Loans), irrevocable notice (which notice may be given by telephone (to be
promptly confirmed in writing, including by
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facsimile)) to the Administrative Agent prior to 11:30 A.M., Boston time, on
the date of such prepayment, in each case specifying the date and amount of
prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each. Upon receipt of any such notice the Administrative Agent shall promptly
notify each affected Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified
therein, together with any amounts payable pursuant to subsection 4.11 in
connection therewith and, in the case of prepayments of the Term Loans only,
accrued interest to such date on the amount prepaid. Amounts prepaid on account
of the Term Loans may not be reborrowed and will be applied to the installments
thereof in the scheduled order of maturity thereof. Partial prepayments under
this subsection 4.1(a) shall be, in the case of Eurodollar Loans, in an
aggregate principal amount of $1,000,000 or a whole multiple of $1,000,000 in
excess thereof and in the case of ABR Loans, in an aggregate principal amount
of $1,000,000 or a whole multiple of $1,000,000 in excess thereof.
(b) If, at any time, the Aggregate Outstanding Extensions of
Credit at such time exceed the Borrowing Base at such time, the Borrower shall,
without notice or demand, immediately repay Swing Line Loans then outstanding
and/or, after the Swing Line Loans have been paid in full, Revolving Loans in
an aggregate principal amount equal to the lesser of (i) the amount of such
excess and (ii) the aggregate principal amount of Swing Line Loans and
Revolving Loans then outstanding, together with interest accrued to the date of
such payment or prepayment on the principal so prepaid and any amounts payable
under subsection 4.11 in connection therewith. To the extent that after giving
effect to any prepayment of Swing Line Loans and Revolving Loans required by
the preceding sentence, the Aggregate Outstanding Extensions of Credit at such
time exceed the Borrowing Base at such time, the Borrower shall, without notice
or demand, immediately deposit in the Collateral Account upon terms reasonably
satisfactory to the Administrative Agent an amount equal to the lesser of (i)
the aggregate then outstanding L/C Obligations and (ii) the amount of such
remaining excess. The Administrative Agent shall apply any cash deposited in
the Collateral Account (to the extent thereof) to pay any Reimbursement
Obligations which become due thereafter. To the extent that after giving effect
to any prepayment of the Revolving Loans and cash deposits required by the
preceding sentences, the Aggregate Outstanding Extensions of Credit at such
time exceed the Borrowing Base at such time, the Borrower shall, without notice
or demand, immediately repay the Term Loans in the scheduled order of maturity
thereof in an aggregate principal amount equal to the lesser of (i) the amount
of such excess and (ii) the aggregate principal amount of Term Loans then
outstanding, together with interest accrued to the date of such payment or
prepayment on the principal so prepaid and any amounts payable under subsection
4.11 in connection therewith. The Borrower shall also prepay the Revolving
Loans to the extent required to comply with subsection 3.16.
(c) After the occurrence, and during the continuation, of a
Cash Dominion Period (as defined in the Master Security Agreement), the
Borrower shall deposit in the Collateral Account or a Depositary Account (i)
except as otherwise provided in subsection 5.1(f) of the Master Security
Agreement, all Asset Sale Proceeds within three Business Days after the receipt
by the Borrower or any Restricted Subsidiary thereof, and (ii) all other
amounts required by the Master Security Agreement.6
(d) The Borrower agrees that prior to the delivery of a
Notice of Acceleration (as defined in the Master Security Agreement) all
available funds in the Collateral Account shall be applied,
- --------
6 The Master Security Agreement will provide that these cash control
provisions will be applicable only in the event of a Cash Dominion
Period (as defined in the February 21, 2000 commitment letter and Term
Sheet)
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as long as a Cash Dominion Period is in effect, first, to pay amounts due and
payable under this Agreement and the other Loan Documents (other than ABR Loans
and Eurodollar Loans)including, without limitation, interest and fees then due,
second, pro rata, to the amount of the Swing Line Loans and any Reimbursement
Obligations then outstanding, third to the outstanding principal amount of the
Revolving Loans, fourth, to any principal amounts then due on account of the
Term Loans, and fifth, after all amounts payable under clauses first through
and including fourth have been paid, (i) on any Business Day that no Default or
Event of Default has occurred and is continuing, the Borrower may direct the
Administrative Agent to transfer to the Borrower's disbursement account the
balance of the available funds, or (ii) on any Business Day that a Default or
Event of Default has occurred and is continuing, to cash collateralize Letters
of Credit outstanding in an amount equal to 103% of the maximum amount
available to be drawn under such Letters of Credit and thereafter, the Borrower
may direct the Administrative Agent to transfer to the Borrower's disbursement
account the balance of the available funds. During the continuance of a Cash
Dominion Period, the Borrower shall utilize funds on deposit in, or transferred
from, the Collateral Account that are available to it pursuant to the terms
hereof (other than funds the Borrower is entitled to retain in accordance with
the provisions of subsection 5.1(f) of the Master Security Agreement) prior to
requesting Revolving Loans to be made hereunder. All amounts from the
Collateral Account to be applied to ABR Loans and Eurodollar Loans shall be
applied first to reduce outstanding ABR Loans, and second, to cash
collateralize, or at the Borrower's option reduce, outstanding Eurodollar Loans
until the expiration of the Interest Period therefor (with the Borrower being
obligated to pay any breakage fees associated with a reduction of Eurodollar
Loans). All amounts in the Collateral Account shall be applied or released as
described above as of the day immediately following receipt; in that regard the
Borrower shall indemnify Fleet, the Administrative Agent and the Lenders
against, and shall pay on demand, the amount of any provisional items credited
to the Credit Agreement Obligations or released to the Borrower which are not
paid. Absent the delivery of a Notice of Acceleration or the continuation of a
Cash Dominion Period, all amounts in the Collateral Account shall be applied
(whether to the Obligations or otherwise) as the Borrower may direct from time
to time.
4.2 CONVERSION AND CONTINUATION OPTIONS.
(a) The Borrower may, subject to paragraph (b) below, elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent irrevocable notice of such election prior to 1:00 P.M.,
Boston time, two Business Days prior to the date of conversion, which notice
may be given by telephone (to be promptly confirmed in writing, including by
facsimile), provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent irrevocable notice of such election prior to 1:00
P.M., Boston time, two Business Days prior to the date of conversion, which
notice may be given by telephone (to be promptly confirmed in writing,
including by facsimile). Any such notice of conversion to Eurodollar Loans
shall specify the length of the initial Interest Period or Interest Periods
therefor. Upon receipt of any such notice the Administrative Agent shall
promptly notify each affected Lender thereof. All or any part of outstanding
Eurodollar Loans and ABR Loans may be converted as provided herein, provided
that (i) no ABR Loan may be converted into a Eurodollar Loan when any Event of
Default has occurred and is continuing and (ii) no ABR Loan may be converted
into a Eurodollar Loan after the date that is one month prior to the
Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection
1.1, of the length of the next Interest Period to be applicable to such
Eurodollar Loans, which notice may be given by telephone (to be promptly
confirmed in writing, including by facsimile), provided that no Eurodollar Loan
may be continued as such (i) when any Event of Default has occurred and is
continuing and the
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Administrative Agent has notified the Borrower that it has determined that such
a continuation is not appropriate or (ii) after the date that is one month
prior to the Termination Date, and provided further, that if the Borrower shall
fail to give such notice or if such continuation is not permitted such
Eurodollar Loans shall be automatically converted to ABR Loans on the last day
of such then expiring Interest Period. Upon receipt of any notice pursuant to
this subsection 4.2(b), the Administrative Agent shall notify each affected
Lender thereof.
4.3 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All
borrowings, conversions and continuations of Eurodollar Loans hereunder and all
selections of Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of Eurodollar Loans comprising each Tranche shall be equal to
$10,000,000 or a whole multiple of $l,000,000 in excess thereof. In no event
shall there be more than 15 Tranches outstanding at any time.
4.4 INTEREST RATES AND PAYMENT DATES.
(a) Each Eurodollar Loan shall bear interest for each day
during each Interest Period with respect thereto at a rate per annum equal to
the Eurodollar Rate determined for such Interest Period plus the Applicable
Margin.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to the ABR plus the Applicable Margin.
(c) Each Swing Line Loan shall bear interest at a rate per
annum equal to the ABR plus the Applicable Margin for ABR Loans.
(d) Notwithstanding the rate of interest specified in this
subsection 4.4 or elsewhere herein, upon the occurrence of any Event of Default
and for so long thereafter as such Event of Default is continuing, at the
Administrative Agent's discretion or at the request of the Required Lenders,
upon notice to the Borrower, the principal balance of all Loans shall bear
interest at a rate per annum which is equal to the greater of (x) the rate that
would otherwise be applicable thereto pursuant to this Agreement plus 2% per
annum, or (y) the aggregate of ABR plus 2% per annum. If all or a portion of
(i) any interest payable on any Loan, (ii) any commitment fee or (iii) any
other amount payable hereunder shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), any such overdue interest,
commitment fee or other amount shall bear interest at a rate per annum which is
the rate described in paragraph (b) of this subsection plus 2%, in each case
from the date of such non-payment until such overdue interest, commitment fee
or other amount is paid in full (as well after as before judgment).
(e) Interest shall be payable in arrears on each Interest
Payment Date, provided that (i) interest accruing pursuant to subsection 4.4(d)
shall be payable from time to time on demand and (ii) interest on the Term
Loans shall also be payable on the Termination Date (or such earlier date on
which the Term Loans become due and payable pursuant to Section 9) and (iii)
interest on the Revolving Loans shall also be due and payable on the
Termination Date (or such earlier date on which the Revolving Loans become due
and payable pursuant to Section 9).
4.5 COMPUTATION OF INTEREST AND FEES.
(a) Commitment fees and, whenever it is calculated on the
basis of Fleet's base rate, interest shall be calculated on the basis of a 365-
(or 366-, as the case may be) day year for the actual days elapsed; and
otherwise interest and fees and commissions in respect of Letters of Credit
shall be calculated on the basis of a 360-day year for the actual days elapsed.
The Administrative Agent shall as soon as practicable notify the Borrower and
the affected Lenders of each determination of a Eurodollar
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Rate. Any change in the interest rate on a Loan resulting from a change in the
ABR or the Eurocurrency Reserve Requirements shall become effective as of the
opening of business on the day on which such change becomes effective. The
Administrative Agent shall as soon as practicable notify the Borrower and the
affected Lenders of the effective date and the amount of each such change in
interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
presumed correct in the absence of manifest error.
(c) Each Lender shall use its best efforts to furnish
quotations of rates to the Administrative Agent as contemplated hereby. If any
of the Lenders shall be unable or shall otherwise fail to supply such rates to
the Administrative Agent upon its request, the rate of interest shall, subject
to the provisions of this subsection 4.5, be determined on the basis of the
quotations of the remaining Lenders or Lender.
4.6 INABILITY TO DETERMINE INTEREST RATE. If prior to the first
day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest
Period, or
(b) the Administrative Agent shall have received notice from
any Lender that the making or continuation of any Eurodollar Loan has become
impracticable as a result of a contingency occurring after the date hereof which
materially and adversely affects the London interbank market, the Administrative
Agent shall give facsimile or telephonic notice thereof to the Borrower and the
affected Lenders as soon as practicable thereafter. If such notice is given (x)
any Eurodollar Loans requested to be made on the first day of such Interest
Period shall be made as ABR Loans, (y) any ABR Loans that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as ABR Loans and (z) any outstanding Eurodollar Loans which the
Borrower has requested to continue as such pursuant to subsection 4.2(b) shall
be converted, on the first day of such Interest Period, to ABR Loans, provided
that, in the case of clause (b) above, only the Eurodollar Loan of a Lender
which delivers a notice pursuant to such clause shall be subject to this
sentence and the following sentence. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans shall be made or continued as
such, nor shall the Borrower have the right to convert ABR Loans to Eurodollar
Loans.
4.7 PRO RATA TREATMENT AND PAYMENTS.
(a) Except as otherwise provided in subsections 3.6 through
3.16, all payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without set off or counterclaim and shall be made prior to 1:00 P.M.,
Boston time, on the due date thereof to the Administrative Agent, for the
account of the Revolving Credit Lenders or the Term Loan Lenders, as the case
may be, at the Administrative Agent's office specified in or pursuant to
subsection 11.2 (except as otherwise provided herein) in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders entitled to receive the same promptly upon receipt in
like funds as received. If any payment hereunder (other than payments on
Eurodollar Loans) becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day, and, with
respect to payments of principal. Interest thereon shall be payable at the then
applicable rate during such extension. If any payment on a Eurodollar Loan
becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day (and, with
respect to payments of
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principal, interest thereon shall be payable at the then applicable rate during
such extension) unless the result of such extension would be to extend such
payment into another calendar month, in which event such payment shall be made
on the immediately preceding Business Day. Each payment (including each
prepayment) by the Borrower on account of principal of and interest on the Term
Loans shall be made pro rata according to the respective outstanding principal
amounts of the Term Loans then held by the Term Loan Lenders.
(b) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make
the amount that would constitute its portion of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Rate for
the period until such Lender makes such amount immediately available to the
Administrative Agent. A certificate of the Administrative Agent submitted to
any Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's portion of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to ABR Loans hereunder, on demand, from the Borrower.
(c) Each borrowing by the Borrower of Revolving Loans shall
be made ratably from the Revolving Credit Lenders in accordance with their
respective and Revolving Credit Commitment Percentages. Any reduction of the
Revolving Credit Commitments shall be made ratably among the Lenders, in
accordance with their respective Revolving Credit Commitment Percentages. Each
payment (including each prepayment) by the Borrower on account of principal of
and interest on the Revolving Loans shall be made pro rata according to the
respective outstanding principal amounts of the Revolving Loans then held by
the Revolving Credit Lenders.
4.8 ILLEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, such Lender shall give
prompt notice thereof to the Borrower and the Administrative Agent and
thereafter (a) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar
Loans shall forthwith be suspended during the period of illegality and (b) such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 4.11.
4.9 REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof 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 date hereof
shall increase the cost to such Lender, by an amount which such Lender deems to
be material, of making, converting into, continuing or maintaining Eurodollar
Loans or issuing or participating in Letters of Credit or reduce any amount
receivable hereunder in respect thereof including any such cost or reduced
amount receivable resulting from (i) any tax of any kind whatsoever with
respect to this Agreement, any Note, any Eurodollar Loan, any Letter of Credit
issued or participated in
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by it or any Application, or change the basis of taxation of payments to such
Lender in respect thereof (except for Non-Excluded Taxes covered by subsection
4.10 and changes in the rate of tax on the overall gross or net income of such
Lender) or (ii) any reserve, special deposit, compulsory loan or singular
requirement against assets held by deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not otherwise
included in the determination of the Eurodollar Rate hereunder, then, in any
such case, within 15 days after demand therefor (accompanied by the certificate
contemplated by subsection 4.9(c) with respect thereto) the Borrower shall pay
such Lender such additional amount or amounts as will compensate such Lender
for such increased cost or reduced amount receivable.
(b) If any 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 or compliance by such Lender or any
corporation 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 date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter
of Credit to a level below that which such Lender or such corporation could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, within 15 days after demand therefor (accompanied by the
certificate contemplated by subsection 4.9(c) with respect thereto), the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection 4.9, it shall promptly notify the Borrower
(with a copy to the Administrative Agent) of the event by reason of which it
has become so entitled, provided that no Lender shall be entitled to claim any
such additional amount (i) with respect to the period which is more than 180
days prior to the delivery of such notice or (ii) if such Lender shall not seek
as a result of such event payment of any similar amounts from at least one
other borrower to whom it has extended credit. A certificate as to any
additional amounts payable pursuant to this subsection 4.9 submitted by such
Lender to the Borrower (with a copy to the Administrative Agent) setting forth
in reasonable detail the calculation of such amounts and the basis therefor
shall be conclusive in the absence of manifest error. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
4.10 INDEMNIFICATION FOR TAXES.
(a) All payments made by the Borrower under this Agreement
and any Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise and excise
taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent
or any Lender as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Administrative Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder or
under any Note, the amounts so payable to the Administrative Agent or such
Lender shall be increased to the extent necessary to yield to the
Administrative Agent or such Lender (after payment of all Non-Excluded Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement, provided, that
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the Borrower shall not be required to increase any such amounts payable to any
Lender that is not organized under the laws of the United States of America or a
state thereof if such Lender fails to comply with the requirements of paragraph
(b) of this subsection 4.10. Whenever any Non-Excluded Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for its own account or for the account of such Lender, as
the case may be, a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Administrative Agent and
the Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof shall:
(i) in the case of a Lender or a Transferee that is a
"bank" under Section 881(c)(3)(A) of the Tax Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Participant, on or before the
date such Participant becomes a Participant hereunder),
deliver to the Borrower and the Administrative Agent (I) two
duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as
the case may be, and (II) an Internal Revenue Service Form W-8
or W-9, or successor applicable form, as the case may be;
(B) deliver to the Borrower and the Administrative
Agent two further copies of any such form or certification on
or before the date that any such form or certification expires
or becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrower; and
(C) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Administrative Agent; and
(ii) in the case of a Lender or a Transferee that is not a
"bank" under Section 881(c)(3)(A) of the Tax Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Participant, on or before the
date such Participant becomes a Participant hereunder),
deliver to the Borrower and the Administrative Agent (I) a
statement under penalties of perjury that such Lender or
Transferee (x) is not a "bank" under Section 881(c)(3)(A) of
the Tax Code, is not subject to regulatory or other legal
requirements as a bank in any jurisdiction, and has not been
treated as a bank for purposes of any tax, securities law or
other filing or submission made to any Governmental Authority,
any application made to a rating agency or qualification for
any exemption from tax, securities law or other legal
requirements, (y) is not a 10-percent shareholder within the
meaning of Section 881(c)(3)(B) of the Tax Code and (z) is not
a controlled foreign corporation receiving interest from a
related person within the meaning of Section 881(c)(3)(C) of
the Tax Code and (II) a properly completed and duly executed
internal Revenue Service Form W-8 or applicable successor
form;
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(B) deliver to the Borrower and the
Administrative Agent two further properly completed and duly
executed copies of such Form W-8, or any successor applicable
form, on or before the date that any such Form W-8 expires or
becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrower or upon the request of the
Borrower; and
(C) obtain such extensions of time for filing
and completing such forms or certifications as may be
reasonably requested by the Borrower or the Administrative
Agent;
unless in any such case an event (including, without limitation, any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Each Lender that is not incorporated
under the laws of the United States of America or a state thereof shall certify
(i) in the case of a Form 1001 or 4224, that it is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes and (ii) in the case of a Form W- 8 or W-9 provided
pursuant to subsection 4.10(b)(i)(A)(II) that it is entitled to an exemption
from United States backup withholding tax. Each Person that shall become a
Lender or a Participant pursuant to subsection 11.6 shall, upon the
effectiveness of the related transfer, be required to provide all of the forms
and statements required pursuant to this subsection, provided that in the case
of a Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.
4.11 INDEMNITY. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or reasonable expense which such Lender
may sustain or incur as a consequence of (a) default by the Borrower in making
a borrowing of, conversion into or continuation of Eurodollar Loans, after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of a Eurodollar Loan, after the Borrower has given a notice thereof
in accordance with the provisions of this Agreement or (c) the making of a
prepayment or conversion of Eurodollar Loans on a day which is not the last day
of an Interest Period with respect thereto, which loss shall be equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
amount so prepaid or converted, or not so borrowed, converted or continued, for
the period from the date of such prepayment or conversion or of such failure to
borrow, convert or continue to the last day of such Interest Period (or
proposed Interest Period), respectively, in each case at the applicable
Eurodollar Rate (exclusive of any Applicable Margin) for such Eurodollar Loans
provided for herein over (ii) the amount of interest (as reasonably determined
by such Lender) which would have accrued to such Lender on such amount by
placing such amount on deposit for a comparable period with leading banks in
the interbank eurodollar market (it being understood that the Borrower shall
not be required to indemnify any Lender for lost profits). A certificate as to
any amounts payable pursuant to this subsection 4.11 submitted by any Lender to
the Borrower (with a copy to the Administrative Agent) shall be conclusive in
the absence of manifest error. This covenant shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
4.12 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes any
demand for payment under subsection 4.9 or 4.10(a), or if any adoption or
change of the type described in subsection 4.8 shall occur with respect to it,
it will 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, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under subsection 4.9 or
4.10(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 4.8.
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4.13 EVIDENCE OF DEBT.
(a) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to such
Lender resulting from the Loans of such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time under
this Agreement.
(b) The Administrative Agent shall maintain the Register
pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) the amount of each Loan made hereunder, the Type
thereof and each Interest Period (if any) applicable thereto, (ii) the amount
of any principal or interest due and payable or to become due and payable from
the Borrower to each Lender hereunder and (iii) both the amount of any sum
received by the Administrative Agent hereunder from the Borrower and each
Lender's share thereof.
(c) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 4.13(a) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, that the failure of any
Lender or the Administrative Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the obligation of
the Borrower to repay (with applicable interest) the Loans in accordance with
the terms of this Agreement.
(d) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender a promissory note of the Borrower evidencing the Revolving Loans of
such Lender, substantially in the form of Exhibit C-1 (each, "Revolving Credit
Note"), payable to the order of such Lender. Each Lender is hereby authorized
to record the date, Type and amount of each Revolving Loan of such Lender, the
date and amount of each payment or prepayment of principal thereof, each
continuation of all or a portion thereof as the same Type, each conversion of
all or a portion thereof to another Type and, in the case of Eurodollar Loans,
the length of each Interest Period and Eurodollar Rate with respect thereto, on
the schedule (or any continuation of the schedule) annexed to and constituting
a part of its Revolving Credit Note, as the case may be, and any such
recordation shall, to the extent permitted by applicable law, constitute prima
facie evidence of the accuracy of the information so recorded, provided that
the failure to make any such recordation (or any error therein) shall not
affect the obligation of the Borrower to repay (with applicable interest) the
Revolving Loans in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Term Loan Lender, the Borrower will execute and
deliver to such Term Loan Lender a promissory note of the Borrower evidencing
the Term Loan of such Term Loan Lender, substantially in the form of Exhibit
C-2 (a "Term Note"), payable to the order of such Term Loan Lender and in a
principal amount equal to, the outstanding Term Loan of such Term Loan Lender.
Each Term Loan Lender is hereby authorized to record the date, Type and amount
of the Term Loan of such Term Loan Lender, the date and amount of each payment
or prepayment of principal thereof, each continuation of all or portion thereof
as the same Type, each conversion of all or a portion thereof to another Type
and, in the case of Eurodollar Loans, the length of each Interest Period and
Eurodollar Rate with respect thereto, on the schedule (or any continuation of
the schedule) annexed to and constituting a part of its Term Note, as the case
may be, and any such recordation shall, to the extent permitted by applicable
law, constitute prima facie evidence of the accuracy of the information so
recorded, provided that the failure to make any such recordation (or any error
therein) shall not affect the obligation of the Borrower to repay (with
applicable interest) the Term Loans in accordance with the terms of this
Agreement.
(f) The Borrower agrees that, upon the request to the
Administrative Agent by any Swing Line Lender, the Borrower will execute and
deliver to such Swing Line Lender a promissory note of
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the Borrower evidencing the Swing Line Loans of such Swing Line Lender,
substantially in the form of Exhibit D (a "Swing Line Note"), payable to the
order of such Swing Line Lender and in a principal amount equal to the Swing
Line Commitment. Each Swing Line Lender is hereby authorized to record the date
and amount of each Swing Line Loan made by it and the date and amount of each
payment or prepayment of principal thereof on the schedule (or any continuation
of the schedule) annexed to and constituting a part of its Swing Line Note, as
the case may be, and any such recordation shall, to the extent permitted by
applicable law, constitute prima facie evidence of the accuracy of the
information so recorded, provided that the failure to make any such recordation
(or any error therein) shall not affect the obligation of the Borrower to repay
(with applicable interest) the Swing Line Loans in accordance with the terms of
this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make or continue to make the Extensions of Credit, the
Borrower hereby represents and warrants to the Administrative Agent and each
Lender that:
5.1 FINANCIAL CONDITION. The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at December ______7 and the
related consolidated statements of income and retained earnings and cash flows
for the Fiscal Year ended on such date, reported on by Deloitte & Touche,
copies of which have heretofore been furnished to each Lender, are complete and
correct in all material respects and present fairly the consolidated financial
condition of the Borrower and its Consolidated Subsidiaries as at such date,
and the consolidated results of their operations and their consolidated cash
flows for the Fiscal Year then ended. The unaudited consolidated balance sheet
of the Borrower and its consolidated Subsidiaries as at ____________ and the
related unaudited consolidated statements of, financial condition, income and
retained earnings and cash flows for the____-month period ended on such date,
certified by a Responsible Officer, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly the
consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the nine-month period then ended (subject
to normal year-end audit adjustments). All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved
by such accountants or Responsible Officer, as the case may be, and as
disclosed therein). Except as set forth on Schedule 5.1, as permitted by the
Existing DIP Agreement, or as contemplated by the Business Plan or the Plan of
Reorganization, neither the Borrower nor any of its Consolidated Subsidiaries
had, at the date of the most recent balance sheet referred to above, any
material Guarantee Obligation not permitted under subsection 8.2, material
contingent liability or liability for taxes, or any material long-term lease or
unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto. Except as set
forth on Schedule 5.1, as permitted by the Existing DIP Agreement, or as
contemplated by the Business Plan or the Plan of Reorganization, during the
period from December ______ to and including the date hereof, there has been no
sale, transfer or other disposition by the Borrower or any of its Consolidated
Subsidiaries of any material part of its business or property and no purchase
or other acquisition of any business or property (including any capital stock
of any other Person) material in relation to the consolidated financial
condition of the Borrower and its Consolidated Subsidiaries at December ______.
- --------
7 The date to be inserted shall be the most recent fiscal year end of
the Borrower prior to the Effective Date for which the Borrower was
obligated under the Existing DIP Agreement to have delivered annual
financial statements.
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5.2 NO CHANGE. Except as set forth on Schedule 5.2 and other than
pursuant to the Plan of Reorganization or the Business Plan, since
____________, there has been no development or event which has had or could
reasonably be expected to have a Material Adverse Effect.
5.3 EXISTENCE; Compliance with Law. Each of the Borrower and its
Restricted Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
power and authority, and the legal right, to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which
it is currently engaged, (c) is duly qualified as a foreign corporation,
foreign limited liability company or foreign limited partnership, as the case
may be, and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law, including the requirements of the WARN Act, except, in each case, where
the failure to be so organized, existing, in good standing or qualified, or the
failure to have such power or authority or to so comply, could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.4 POWER; AUTHORIZATION; Enforceable Obligations. Each of the
Borrower and its Restricted Subsidiaries has the power and authority, and the
legal right, to make, deliver and perform the Loan Documents to which it is a
party and (in the case of the Borrower) to borrow and obtain the other
Extensions of Credit hereunder and has taken all necessary corporate or other
action to authorize the Extensions of Credit on the terms and conditions of
this Agreement and any Notes and to authorize the execution, delivery and
performance of the Loan Documents to which it is a party. No consent or
authorization of, filing with, notice to, or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
Extensions of Credit hereunder or with the execution, delivery, performance,
validity or enforceability of the Loan Documents to which the Borrower or any
of its Restricted Subsidiaries is a party except as may be necessary to perfect
the Liens created pursuant to the Security Documents, except as described on
Schedule 5.4 and except those which have been obtained, made or waived. This
Agreement has been, and each other Loan Document will be, duly executed and
delivered on behalf of the Borrower and each of its Restricted Subsidiaries
that is a party thereto. This Agreement constitutes, and each other Loan
Document when executed and delivered will constitute, a legal, valid and
binding obligation of the Borrower and each of its Restricted Subsidiaries that
is a party thereto enforceable against the Borrower and each such Restricted
Subsidiary in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
5.5 NO LEGAL BAR. The execution, delivery and performance of the Loan
Documents to which the Borrower or any of its Restricted Subsidiaries is a
party, the Extensions of Credit hereunder and the use of the proceeds thereof
will not violate any Requirement of Law or Contractual Obligation of the
Borrower or of any of its Restricted Subsidiaries and will not result in, or
require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation (other than pursuant to the Loan Documents), except to
the extent (a) that any such violations (individually or in the aggregate)
could not reasonably be expected to have a Material Adverse Effect and (b) that
any such Liens would otherwise be permitted under subsection 8.3.
5.6 NO MATERIAL LITIGATION. Except as set forth on Schedule 5.6, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against the Borrower or any of its Restricted Subsidiaries or
against any of its or their respective properties or revenues (a) with respect
to any of the Loan Documents or any of the transactions contemplated hereby or
thereby or (b) which, unless resolved or fully reserved for under the Plan of
Reorganization, could reasonably be expected to have a Material Adverse Effect.
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5.7 NO DEFAULT. As of any date after the Effective Date, except as set
forth on Schedule 5.7, (i) neither the Borrower nor any of its Restricted
Subsidiaries is in default under or with respect to any Contractual Obligation
in respect of Indebtedness or other obligations greater than $1,000,000, and
(ii) no other party is in default under or with respect to any Contractual
Obligation in respect of Indebtedness or other obligations greater than
$1,000,000 owed to the Borrower or any of its Restricted Subsidiaries, in each
case which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
5.8 NO BURDENSOME RESTRICTIONS. Except as set forth on Schedule 5.8,
no Requirement of Law or Contractual Obligation of the Borrower or any of its
Restricted Subsidiaries could reasonably be expected to have a Material Adverse
Effect.
5.9 TAXES. Each of the Borrower and its Restricted Subsidiaries has
filed or caused to be filed all tax returns which, to the knowledge of the
Borrower, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property (including, without limitation, any Material Real Property) and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any such tax returns, taxes, fees or other
charges (i) the amount or validity of which are then being contested in good
faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Borrower or its
Subsidiaries, as the case may be, or (ii) which, if not paid or filed, could
not reasonably be expected to have a Material Adverse Effect); no tax Lien has
been filed, and, to the knowledge of the Borrower, no claim is being asserted,
with respect to any such tax, fee or other charge (other than with respect to
any such tax, fee or other charge the amount or validity of which is then being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the
Borrower or its Subsidiaries, as the case may be) which could reasonably be
expected to have a Material Adverse Effect.
5.10 FEDERAL REGULATIONS. No part of the proceeds of any Extension of
Credit will be used in violation of Regulation U and in no event shall "margin
stock" constitute 25% or more of the assets of the Borrower and its Restricted
Subsidiaries that are subject to the restrictions contained in Section 8.
5.11 ERISA. Other than the Reorganization Cases and the termination of
the Borrower's pension plan and, to the extent subject to ERISA, if at all, the
Borrower's executive security plan, neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Tax
Code or Section 302 of ERISA) which could reasonably be expected to have a
Material Adverse Effect has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan. Each Plan has complied in all material respects with the applicable
provisions of ERISA and the Tax Code, except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect. No
termination of a Single Employer Plan has occurred, except where such a
termination could not reasonably be expected to have a Material Adverse Effect,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plan) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits, except to the extent any such excess (individually or in
the aggregate) could not reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, except where such
withdrawal could not reasonably be expected to have a Material Adverse Effect,
and neither the Borrower nor any Commonly Controlled Entity would become subject
to any liability under ERISA if the Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made, except where such liability could not reasonably be
expected to have a Material
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Adverse Effect. No such Multiemployer Plan is in Reorganization or Insolvency,
except to the extent any such Reorganization or Insolvency could not reasonably
be expected to have a Material Adverse Effect.
5.12 INVESTMENT COMPANY ACT; Other Regulations. The Borrower is not
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. To the
best knowledge of the Borrower, the Borrower is not subject to regulation under
any federal or state statute or regulation (other than Regulation X) which
limits its ability to incur Indebtedness.
5.13 SUBSIDIARIES. Schedule 5.13 sets forth all the Subsidiaries of
the Borrower at the date hereof.
5.14 ENVIRONMENTAL MATTERS. To the knowledge of the Borrower,
except as set forth on Schedule 5.14:
(a) The Mortgaged Properties do not contain any Materials of
Environmental Concern in amounts or concentrations or under such conditions
which (i) constitute a violation of, or (ii) could reasonably be expected to
give rise to liability under, any Environmental Law, except in either case
insofar as such violation or liability, or any aggregation thereof, could not
reasonably be expected to have a Material Adverse Effect.
(b) The Mortgaged Properties and all operations at the
Mortgaged Properties are in compliance, and have within the periods covered by
the applicable statute of limitations been in compliance, in all material
respects with all applicable Environmental Laws, and there is no contamination
at, under or about the Mortgaged Properties or violation of any Environmental
Law with respect to the Mortgaged Properties or the business operated by the
Borrower or any of its Restricted Subsidiaries at the Mortgaged Properties (the
"Business"), except for any such noncompliance, contamination or violation (or
any aggregation thereof) which could not reasonably be expected to have a
Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, noncompliance, liability
or potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Mortgaged Properties or the
Business, nor does the Borrower have knowledge or reason to believe that any
such notice will be received or is being threatened, except insofar as such
notice or threatened notice, or any aggregation thereof, does not involve a
matter or matters that could reasonably be expected to have a Material Adverse
Effect.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Mortgaged Properties in violation of, or in
a manner or to a location which could reasonably be expected to give rise to
liability under, any Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or under any of
the Mortgaged Properties in violation of, or in a manner that could reasonably
be expected to give rise to liability under, any applicable Environmental Law
except insofar as any such violation or liability referred to in this
paragraph, or any aggregation thereof, could not reasonably be expected to have
a Material Adverse Effect.
(e) No judicial proceeding or governmental or administrative
action is pending or threatened under any Environmental Law to which the
Borrower or any Restricted Subsidiary is or could reasonably be expected to be
named as a party with respect to the Mortgaged Properties or the Business, nor
are there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Mortgaged
Properties or the Business except insofar as such proceeding, action, decree,
order or other requirement, or any aggregation thereof, could not reasonably be
expected to have a Material Adverse Effect.
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(f) There has been no release or threat of release of Materials
of Environmental Concern at or from the Mortgaged Properties, or arising from or
related to the operations of the Borrower or any
(g) Each of the representations and warranties set forth in
subsections 5.14(a) through (f) is true and correct with respect to each parcel
of real property owned or operated by the Borrower or any of its Restricted
Subsidiaries (other than the Mortgaged Properties) except to the extent that the
facts and circumstances giving rise to any such failure to be so true and
correct could not reasonably be expected to have a Material Adverse Effect.
5.15 THE SECURITY DOCUMENTS. The provisions of the Master Security
Agreement and the Mortgages, as the case may be, are effective to create in
favor of the Administrative Agent a legal and valid security interest in all
right, title and interest of the Borrower and each Subsidiary Guarantor party
thereto in the collateral described therein, and the Administrative Agent has a
fully perfected Lien on all right, title and interest of the Borrower and each
Subsidiary Guarantor in all Mortgaged Property and security interest in all
right, title and interest of the Borrower or such Subsidiary Guarantor, as the
case may be, in all "accounts", "chattel paper", "inventory", "investment
property", "equipment", "goods", "fixtures" and "general intangibles" (each as
defined in the applicable UCC) in each case superior in right to any Liens of
any third person against such collateral or interests therein, subject only to
Liens permitted under subsection 8.3, by the Mortgages or by the Master
Security Agreement.
5.16 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and each
Restricted Subsidiary has good title in fee simple to, or valid ground
leasehold interests in, their respective Material Real Properties and has good
title in fee simple to their other owned real property and valid ownership
interests in their owned personal property, in each case that is material to
the operation of their respective businesses, subject to defects in title and
leasehold and other interests which are not material to the business,
operations and financial condition of the Borrower and its Restricted
Subsidiaries taken as a whole and other than those items referred to in the
applicable Mortgages or in the schedules to the applicable Mortgages, and none
of such property is subject to any Lien other than Liens permitted under
subsection 8.3.
5.17 INTELLECTUAL PROPERTY. The Borrower and each of its Restricted
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which could not reasonably be expected to have a Material Adverse Effect (the
"Intellectual Property"). Except as set forth on Schedule 5.17, no claim has
been asserted and is pending by any Person challenging or questioning the use
of any such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, which could reasonably be expected to have a Material
Adverse Effect, nor does the Borrower know of any valid basis for any such
claim. Except as set forth on Schedule 5.17, to the Borrower's knowledge, the
use of such Intellectual Property by the Borrower and its Restricted
Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
5.18 PLEDGED STOCK. As of the date hereof, the shares of Capital Stock
listed on Schedule A to the Master Security Agreement will constitute all the
issued and outstanding shares of Capital Stock of the issuers thereof listed on
said Schedule that are owned by the Borrower or the Subsidiary Guarantors party
to the Master Security Agreement; all such shares have been duly and validly
issued and are fully paid and nonassessable; the relevant Pledgor of said
shares is the record and beneficial owner of said shares; and said shares are
free of any Liens or options in favor of, or claims of, any other Person,
except the Lien of the Master Security Agreement (subject to Section 14
thereof) and Liens permitted under subsection 8.3(a).
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5.19 REAL ESTATE MATTERS. The real property described on Schedule
5.19 constitutes all of the Material Real Property of the Borrower or any
Subsidiary Guarantor on the date hereof.
5.20 PURPOSE OF LOANS; USE OF PROCEEDS. The proceeds of the
Revolving Loans and the Term Loans made on the Effective Date will be used to
repay all obligations outstanding under the Existing DIP Agreement and
Transaction Costs and other general corporate purposes, and the proceeds of all
other Revolving Loans and all Swing Line Loans made after the Effective Date
will be used to provide working capital from time to time for the Borrower and
its Subsidiaries and for other general corporate purposes.
5.21 ACCURACY OF INFORMATION. All statements and other information
(other than statements and information constituting projections or
forward-looking statements) contained in any written documents or other
materials provided to the Administrative Agent and the Lenders by the Borrower
are, when taken as a whole, correct in all material respects and do not contain
any untrue statements of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements were made.
All statements and other information constituting projections which are
contained in any written documents or other materials provided to the
Administrative Agent and the Lenders by the Borrower were prepared based on good
faith estimates and assumptions of the Borrower believed to be reasonable at the
time such projections were prepared.
5.22 DEPOSITARY ACCOUNTS. Schedule 5.22 sets forth a true and
complete list of all bank accounts maintained by the Borrower and its Restricted
Subsidiaries as of the date hereof.
SECTION 6. CONDITIONS
6.1 CONDITIONS TO EFFECTIVENESS. This Agreement shall become
effective upon satisfaction or waiver of the following conditions:
(a) Plan of Reorganization; Bankruptcy Court Order.
(i) The Bankruptcy Court shall have entered an
order confirming the Borrower's Plan of Reorganization, which shall
have been certified by the Clerk of the Bankruptcy Court as having been
duly entered. Such order shall not have been reversed, modified,
amended, vacated, or stayed, and, unless otherwise agreed by the
Administrative Agent, all appeal periods relating to the confirmation
order shall have expired, and no appeals from the confirmation order
shall be outstanding. All conditions precedent to confirmation and to
the "Effective Date" under and as defined in the Plan of Reorganization
shall have been met (or the waiver thereof shall have been consented to
by the Administrative Agent, such consent not to be unreasonably
withheld) and the "Effective Date" and Consummation Date of the Plan of
Reorganization shall have occurred or shall be scheduled to occur but
for such initial extension of credit under this Agreement.
(ii) The Borrower's Plan of Reorganization and
the order of the Bankruptcy Court confirming such plan of
Reorganization shall be reasonably satisfactory in form and substance
to the Administrative Agent. Without limiting the generality of the
foregoing, the capital structure of the Borrower shall be reasonably
satisfactory to the Administrative Agent in all respects and the terms
of any Indebtedness and Capital Stock of the Borrower shall be
reasonably satisfactory to the Administrative Agent in all respects,
and the Plan of Reorganization must provide for the settlement of the
Borrower's pre-petition Indebtedness in a manner that ensures that
Excess Availability on a pro forma basis exceeds $50,000,000 as of the
end of each fiscal month during the term of this Agreement based on
projections of the Borrower that are substantially the same as those
delivered to the Administrative Agent in connection with the Existing
DIP Agreement or that are otherwise reasonably acceptable to the
Administrative Agent.
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(b) Execution of Loan Documents. The Administrative Agent
shall have received (i) this Agreement, executed and delivered by a duly
authorized officer of the Borrower, with a counterpart for the Administrative
Agent and each Lender and (ii) the Master Security Agreement and the Mortgages,
executed and delivered by a duly authorized officer of each Loan Party that is a
party thereto, with a copy for each Lender, and (iii) all other Security
Documents executed and delivered by a duly authorized officer of each Loan Party
that is a party thereto.
(c) Closing Certificate. The Administrative Agent shall
have received, with a copy for each Lender, a certificate of the Borrower, dated
the Effective Date, substantially in the form of Exhibit F, with appropriate
insertions and attachments, executed by the President, the Chief Executive
Officer, the Chief Financial Officer, or any Vice President and the Secretary or
any Assistant Secretary of the Borrower.
(d) Corporate Proceedings of the Borrower. The
Administrative Agent shall have received, with a copy for each Lender, a copy of
the resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of the Borrower authorizing (i)
the execution, delivery and performance of this Agreement and the other Loan
Documents to which it is a party (ii) the Extensions of Credit contemplated
hereunder and (iii) the granting by it of the Liens created pursuant to the
Security Documents, certified by the Secretary or an Assistant Secretary of the
Borrower as of the Effective Date, which certificate shall be in form and
substance reasonably satisfactory to the Administrative Agent and shall state
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded.
(e) Borrower Incumbency Certificate. The Administrative
Agent shall have received, with a copy for each Lender, a certificate of the
Borrower, dated the Effective Date, as to the incumbency and signature of the
officers of the Borrower executing any Loan Document reasonably satisfactory in
form and substance to the Administrative Agent, executed by the President, the
Chief Executive Officer or any Vice President and the Secretary or any Assistant
Secretary of the Borrower.
(f) Corporate Proceedings of Subsidiaries. The
Administrative Agent shall have received, with a copy for each Lender, a copy of
the resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors or sole shareholder of each
Restricted Subsidiary which is a party to a Loan Document authorizing (i) the
execution, delivery and performance of the Loan Documents to which it is a party
and (ii) the granting by it of the Liens created pursuant to the Security
Documents to which it is a party certified by the Secretary or an Assistant
Secretary of each such Subsidiary as of the Effective Date, which certificate
shall be in form and substance reasonably satisfactory to the Administrative
Agent and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(g) Subsidiary Incumbency Certificates. The
Administrative Agent shall have received, with a copy for each Lender, a
certificate of each Restricted Subsidiary of the Borrower which is a party to a
Loan Document, dated the Effective Date, as to the incumbency and signature of
the officers of such Subsidiary acknowledging and consenting to the execution
and delivery of this Agreement by the Borrower, reasonably satisfactory in form
and substance to the Administrative Agent, executed by the President, the Chief
Executive Officer or any Vice President and the Secretary or any Assistant
Secretary of such Subsidiary.
(h) Transaction Costs. The Administrative Agent and each
Lender shall have received or concurrently receive the Transaction Costs payable
on or prior to the Effective Date and the Administrative Agent shall have been
reimbursed for all reimbursable expenses for which invoices have been presented
to the Borrower.
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(i) Legal Opinions. The Administrative Agent shall have
received, with a copy for each Lender, (i) the executed legal opinion of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Borrower and the other
Loan Parties, substantially in the form of Exhibit G; and (ii) such other legal
opinions as the Administrative Agent may reasonably require.
(j) Lien Perfection. The Administrative Agent shall have
filed (or arrangements therefor reasonably satisfactory to the Administrative
Agent shall have been made for the filing of) all such financing statements and
mortgages or deeds of trust, and notices as may be necessary for the
Administrative Agent to perfect its security and mortgage interests in the
Collateral consisting of UCC Filing Collateral, real property, and domestic
Intellectual Property and to assure its first priority status (subject to
Permitted Liens) and the Administrative Agent shall have received, or shall be
satisfied with the arrangements for the delivery of, title insurance policies
with respect to the real properties owned by the Borrower and the Subsidiary
Guarantors, containing such endorsements and in such form, as may be reasonably
acceptable to the Administrative Agent;
(k) No Material Adverse Change. Except as set forth on
Schedule 5.2 and other than the Reorganization Cases and the events related to
the Reorganization Cases or the Business Plan, there shall have occurred no
material adverse change in the business, condition (financial or otherwise),
operations, performance or properties of the Borrower and its subsidiaries since
___________.
(l) No Litigation. There shall exist no action, suit,
investigation, litigation or proceeding pending or threatened in any court or
before any arbitrator or governmental instrumentality that could reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise), operations, performance, properties or prospects of the Borrower
and its subsidiaries.
(m) Consents and Approvals. All governmental and third
party consents and approvals necessary in connection with this Agreement and the
grant of security interests shall have been obtained (without the imposition of
any conditions that are not reasonably acceptable to the Lenders) and shall
remain in effect; and no law or regulation shall be applicable in the reasonable
judgment of the Lenders that restrains, prevents or imposes materially adverse
conditions upon the transactions contemplated hereby.
(n) Insurance and Bonding. The Lenders shall be satisfied
with the amount, types and terms and conditions of all insurance and bonding
maintained by the Borrower and its subsidiaries, and the Lenders shall have
received endorsements naming the Administrative Agent, on behalf of the Lenders,
as an additional insured and loss payee under all insurance policies to be
maintained with respect to the properties of the Borrower and its Subsidiaries
forming part of the Lenders' Collateral.
(o) Flood Insurance. To the extent required by applicable
law, the Administrative Agent shall have received (i) evidence of a policy of
flood insurance which (A) covers any parcel of Material Real Property subject to
a first priority Mortgage located in an area identified as an area having
special flood hazards by the Secretary of Housing and Urban Development or other
applicable agency, and (B) otherwise complies with such applicable law and (ii)
confirmation that the Borrower has received the notice required pursuant to
Section 208(e)(3) of Regulation H of the Board of Governors.
(p) Financial Information. The Administrative Agent shall
have received all information (financial or otherwise) reasonably requested by
it, including, without limitation, at least 30 days prior to the entry of an
order confirming the Borrower's Plan of Reorganization, a detailed three year
financial projection and the business assumptions with respect thereto, and such
information shall be substantially the same as those delivered in connection
with the Existing DIP Agreement or otherwise reasonably satisfactory be in form
and substance to the Administrative Agent. The financial condition and financial
projections, including cash flow, of the Borrower shall be substantially the
same as those set forth
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in the projections delivered to the Administrative Agent in connection with the
Existing DIP Agreement or otherwise reasonably satisfactory to the
Administrative Agent.
(q) Intercreditor Agreements. The Administrative Agent
shall have received, or shall be satisfied with the arrangements for the
delivery of, duly executed originals of each of the following, in form and
substance reasonably satisfactory to the Administrative Agent:
(i) A Blocked Account Agreement and if,
applicable, a Lockbox Agreement with each Depository Bank; and
(ii) Such other intercreditor agreements as the
Administrative Agent may reasonably require.
(r) Trade Credit. All undisputed outstanding trade credit
must be reasonably paid to date within the respective terms of each vendor as
agreed to by the Borrower or provisions for the payment thereof reasonably
satisfactory to the Administrative Agent shall have been made.
(s) Rolling 12-Month EBITDA. The Borrower shall have
achieved Rolling 12-Month EBITDA for the most recently ended fiscal month of at
least the following:
(i) if prior to the fiscal month ending on or
about December 31, 2001, the following:
January, 2001 $7,000,000
February, 2001 $6,000,000
March, 2001 $9,000,000
April, 2001 $12,000,000
May, 2001 $15,000,000
June, 2001 $18,000,000
July, 2001 $22,000,000
August, 2001 $26,000,000
September, 2001 $28,000,000
October, 2001 $33,000,000
November, 2001 $35,000,000
December, 2001 $50,000,000
or (ii) if after the fiscal month ending on or about
December 31, 2001, $50,000,000.
(t) Excess Availability. After giving effect to the
making of the Term Loan and the initial Revolving Loans hereunder, the payment
of all fees and expenses required hereunder and the issuance of all Letters of
Credit to be issued upon or immediately subsequent to the Effective Date, the
Borrower shall have Excess Availability of at least the following:
Fiscal Month of Effective Date Required Availability
------------------------------ ---------------------
January $ 80,000,000
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February $ 65,000,000
March $ 65,000,000
April $ 65,000,000
May $ 50,000,000
June $ 50,000,000
July $ 50,000,000
August $ 50,000,000
September $ 50,000,000
October $ 50,000,000
November $ 65,000,000
December $ 100,000,000
(u) Cash Management. The Borrower shall have established
a cash management system as described herein and in the Master Security
Agreement reasonably satisfactory to the Administrative Agent.
(v) Payoff of Existing DIP Agreement. The Administrative
Agent shall have received a payoff letter from the administrative agent under
the Existing DIP Agreement in form reasonably satisfactory to the Administrative
Agent.
(w) No Defaults. No Default or Event of Default shall
exist under the Existing DIP Agreement (other than as a result of any change in
control of the Capital Stock or the Borrower's board of directors, as
contemplated by the Plan of Reorganization) and the commitments under the
Existing DIP Agreement shall not have been terminated prior to the Effective
Date.
(x) Additional Matters. All corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received such
other documents and legal opinions in respect of any aspect or consequence of
the transactions contemplated hereby or thereby as it shall reasonably request.
6.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender to make any Extension of Credit requested to be made by it on any date
(including, without limitation, its initial Extension of Credit) is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Loan Parties in or pursuant to
Section 5 and in or pursuant to the other Loan Documents shall be true and
correct in all material respects and as of such date as if made on and as of
such date, except to the extent such representations and warranties related to a
specific earlier date (i.e. those in subsections 5.1, 5.13, 5.18, 5.19, and 5.22
of this Agreement and subsections 7.4, 7.5, 7.7(a), (c) and (d), and 7.8(a),
(b), and (c) of the Master Security Agreement) in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date, provided, that if such earlier date is the
"date hereof", such representation and warranty shall also be true and correct
in all material respects on and as of the Effective Date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the Extension
of Credit requested to be made on such date.
(c) Borrowing Base. After giving effect to the Extensions
of Credit requested to be made on any such date and the use of proceeds thereof,
the Aggregate Outstanding Extensions of Credit at such time shall not exceed the
Borrowing Base at such time.
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(d) No Legal Impediment. The making of the Loans on such
date does not violate any Requirement of Law and is not enjoined, temporarily,
preliminarily or permanently.
(e) Borrowing Base Certificate. The Administrative Agent
shall have received a Borrowing Base Certificate, executed and delivered by a
duly authorized officer of the Borrower.
Each Extension of Credit to the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date thereof that, except
to the extent waived in accordance with this Agreement, the conditions contained
in this subsection have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any Letter of Credit remains outstanding or any amount is owing to any
Lender or the Administrative Agent hereunder or under any other Loan Document,
the Borrower shall and (except in the case of delivery of financial information,
reports and notices) shall cause each of its Restricted Subsidiaries to:
7.1 FINANCIAL STATEMENTS. Furnish to the Administrative Agent with
a copy for each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each Fiscal Year of the Borrower, a copy of the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of
such year and the related consolidated statements of income and retained
earnings and of cash flows for such year, setting forth in each case in
comparative form the figures as of the end of and for the previous Fiscal Year,
reported on without a qualification as to the scope of the audit, by Deloitte &
Touche or other independent certified public accountants of nationally
recognized standing, together with a copy of the Borrower's Form 10-K filed with
the SEC for such Fiscal Year;
(b) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of each
Fiscal Year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at the end of such quarter and the
related unaudited consolidated statements of income and retained earnings and of
cash flows of the Borrower and its Consolidated Subsidiaries for such quarter
and the portion of the Fiscal Year through the end of such quarter, setting
forth in each case in comparative form the figures for the previous Fiscal Year
as set forth in the Borrower's Form 10-Q filed with the SEC for such quarterly
period, certified by a Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than
30 days after the end of each fiscal month (other than January of each year, for
which such financial information shall be furnished not later than 60 days after
the end of such fiscal month) (i) for each fiscal month other than a fiscal
month which is also the end of a quarterly period, an unaudited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries in summary form
as at the end of such fiscal month and the related unaudited consolidated
statement of income of the Borrower and its Consolidated Subsidiaries in summary
form for such fiscal month, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit adjustments)
and (ii) for each fiscal month a statement setting forth the Cumulative EBITDA
or Rolling 12-Month EBITDA, as applicable, of the Borrower and its Consolidated
Subsidiaries for such fiscal month.
All such financial statements referred to in paragraphs (a) and (b) above shall
be complete and correct in all material respects (subject to, in the case of the
financial statements referred to in paragraph (b) above, normal year-end
adjustments) and shall be prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein and with
prior periods (except as approved by such
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accountants or officer, as the case may be, and disclosed therein). The
financial statements referred to in paragraph (c) above shall be prepared in
summary form and otherwise in a manner consistent with the Borrower's current
internal reporting practices.
7.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Administrative
Agent with a copy for each Lender (which the Administrative Agent shall promptly
distribute to such Lenders):
(a) concurrently with the delivery of the financial
statements referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating that
in making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default under subsection 8.1, except as specified in such
certificate;
(b) (i) concurrently with the delivery of the financial
statements referred to in subsections 7.1(a) and (b), a certificate of a
Responsible Officer stating that such Responsible Officer has obtained no
knowledge of any Default or Event of Default with respect to the period covered
by such financial statements except as specified in such certificate and (ii)
concurrently with the delivery of the financial statements referred to in
subsections 7.1(a), (b) and (c), a certificate of a Responsible Officer setting
forth, in reasonable detail, a calculation of the financial covenants set forth
in subsection 8.1 for the period corresponding to such financial statements;
(c) on or prior to Thursday of each week (or more
frequently in the Borrower's discretion), an officer's certificate as of the
previous Sunday (or another day within four days of the date of delivery
thereof) substantially in the form of Exhibit H (a "Borrowing Base
Certificate"), certified by a Responsible Officer as true and correct, provided
that any reserves of the types described in the definition of "Borrowing Base"
shall be calculated and/or revised in each Borrowing Base Certificate delivered
on the Reserve Calculation Date, and provided, further, that as to each
Borrowing Base Certificate, (A) Available Cash Equivalents shall be calculated
as of the date of delivery of the Borrowing Base Certificate, and (B) In-
Transit Cash shall be calculated as of the date immediately preceding the date
of delivery of the Borrowing Base Certificate; and provided, further, that as
long as Excess Availability is and remains at least equal to $150,000,000, a
Borrowing Base Certificate shall be required to be furnished only monthly on the
first Thursday after each month end;
(d) concurrently with the delivery of the financial
statements referred to in subsections 8.1(a) and (b), a certificate of a
Responsible Officer setting forth a list of all stores and distribution centers
owned or leased and classified as owned by the Borrower or any of its Restricted
Subsidiaries for which a certificate of occupancy or a temporary certificate of
occupancy has been issued during the period covered by such financial
statements;
(e) not later than (i) 90 days after the beginning of
each Fiscal Year of the Borrower, a copy of the projections by the Borrower of
the operating budget and cash flow budget of the Borrower and its Subsidiaries
for such Fiscal Year, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been prepared on
the basis of assumptions believed to have been reasonable when made and (ii) 45
days after the first day of the third fiscal quarter of such fiscal year, a
certificate of a Responsible Officer updating such projections and budgets for
any significant changes since the delivery thereof;
(f) promptly after the same are sent, copies of all
financial statements and reports which the Borrower sends to its stockholders,
and promptly after the same are filed, copies of all reports on Form 8-K which
the Borrower may make to, or file with, the SEC;
(g) promptly after the issuance of a Letter of Credit by
an Issuing Bank other than Fleet, an officer's certificate, certified by a
Responsible Officer as true and correct, setting forth the name of the
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Issuing Bank, the amount and beneficiary of the Letter of Credit, and such other
information as the Administrative Agent may reasonably require; and
(h) promptly, such additional financial, Collateral and
other information and business reports as the Administrative Agent (on its own
behalf or on behalf of any Lender) may from time to time reasonably request.
7.3 PAYMENT OF OBLIGATIONS. Except as set forth on Schedule 7.3,
pay, discharge or otherwise satisfy (whether by exchange, compromise, settlement
or similar satisfaction of such obligations) at or before maturity or before
they become delinquent, as the case may be, all its obligations of whatever
nature, except where (i) the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the Borrower
or its Subsidiaries, as the case may be, or (ii) the failure to so pay,
discharge or otherwise satisfy such obligation could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
7.4 MAINTENANCE OF EXISTENCE; COMPLIANCE WITH CONTRACTUAL
OBLIGATIONS AND REQUIREMENTS OF LAW. Except as set forth on Schedule 7.4,
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except as otherwise
permitted pursuant to subsection 8.4 and except where the failure to maintain
such rights, privileges and franchises could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect; comply with all post-petition
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, be reasonably expected
to have a Material Adverse Effect.
7.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep its property
necessary in its business in good working order and condition, ordinary wear and
tear excepted, if the failure to do so could reasonably be expected to have a
Material Adverse Effect; maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and against at
least such risks as are usually insured against in the same general area by
similar companies of comparable size engaged in the same or a similar business
and owning or operating similar properties in localities where the Borrower and
its Restricted Subsidiaries operate and furnish upon the written request of the
Administrative Agent information as to the insurance carried.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS;
APPRAISALS.
(a) Keep proper books of records and account in which
full, true and correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and transactions in relation to its business
and activities; and, upon reasonable prior written notice, permit
representatives of the Administrative Agent or the Majority Lenders to visit and
inspect any of its properties and examine and make abstracts from the books of
account of the Borrower and its Restricted Subsidiaries at any reasonable time
and as often as may reasonably be desired and, during normal business hours, to
discuss the business, operations, properties and financial and other condition
of the Borrower and its Restricted Subsidiaries with officers and employees of
the Borrower and its Restricted Subsidiaries and, in the presence of a
Responsible Officer, with its independent certified public accountants.
(b) Permit the Administrative Agent to obtain, and to
cooperate with the Administrative Agent, to the extent it so requests, in
obtaining (i) other than during the occurrence of an Event of Default, updated
real estate appraisals on all Eligible Mortgaged Real Property bi-annually, at
the Borrower's expense, (ii) without duplication of appraisals pursuant to
clause (i) hereof, updated real estate evaluations (not constituting a full
appraisal) on all Eligible Mortgaged Real Property annually, at the Borrower's
expense, and (c) during the occurrence of an Event of Default, updated real
estate appraisals and evaluations
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on all Eligible Mortgaged Real Property and environmental site assessments with
respect thereto, at the Borrower's expense, at reasonable intervals. (8)
(c) Permit the Administrative Agent to obtain, and to
cooperate with the Administrative Agent, to the extent it so requests, in
obtaining appraisals of the Borrower's or any Subsidiary Guarantor's Inventory
at the Borrower's expense, (i) no more than three times in any fiscal year (or
such greater number as the Borrower may reasonably request) if no Event of
Default has occurred and is continuing, and (ii) at such intervals as may be
reasonably required by the Administrative Agent during the continuance of an
Event of Default.
7.7 NOTICES. Promptly upon a Responsible Officer becoming aware
thereof, give notice to the Administrative Agent (which shall promptly give
notice thereof to each Lender) of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of the Borrower or any of its Restricted Subsidiaries
which could reasonably be expected to have a Material Adverse Effect or (ii)
litigation, investigation or proceeding which may exist at any time between the
Borrower or any of its Subsidiaries and any Governmental Authority, which could
reasonably be expected to have a Material Adverse Effect;
(c) any claims, litigation or proceeding affecting the
Borrower or any of its Subsidiaries in which the amount involved is $20,000,000
or more to the extent not covered by insurance or in which injunctive or similar
relief is sought which, in any such case, could reasonably be expected to have a
Material Adverse Effect;
(d) the following events, as soon as administratively
practicable and in any event within 30 days after the Borrower knows or has
reason to know thereof: (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan
or any withdrawal from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan which, in any case, could reasonably be expected to have a
Material Adverse Effect or (ii) the institution of proceedings or the taking of
any other action by the PBGC or the Borrower or any Commonly Controlled Entity
or any Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan which, in any case, could
reasonably be expected to have a Material Adverse Effect; and
(e) if the Borrower or any of the Subsidiary Guarantors
cease to perform cycle counts in accordance with historical practices.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
7.8 ENVIRONMENTAL LAWS.
(a) Comply with all applicable Environmental Laws and obtain
and comply in all material respects with and maintain any and all licenses,
approvals, notifications, registrations or permits
- --------
(8) To the extent that leaseholds will be included in the Borrowing
Base, these provisions will be modified to permit appraisals of such leaseholds
in a similar manner as set forth in the Existing DIP Agreement.
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required by applicable Environmental Laws except in any such case to the extent
that failure to do so could not be reasonably expected to have a Material
Adverse Effect.; and
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions required under
Environmental Laws, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect, and promptly comply in all material
respects with all lawful orders and directives of all Governmental Authorities
regarding Environmental Laws except to the extent that the same are being
contested in good faith by appropriate proceedings and the pendency of such
proceedings could not be reasonably expected to have a Material Adverse Effect.
7.9 FURTHER ASSURANCES. Upon the request of the Administrative
Agent at any time, promptly perform or cause to be performed any and all acts
and execute or cause to be executed any and all documents which are necessary
or, in the reasonable opinion of the Administrative Agent, advisable to maintain
in favor of the Administrative Agent Liens on the Collateral that are duly
perfected (to the extent that the same are contemplated to be so perfected under
the terms of the Loan Documents) in accordance with all applicable Requirements
of Law.
7.10 APPLICATION OF PROCEEDS. The Borrower shall use the entire
amount of the proceeds of each Loan in accordance with subsection 5.20.
7.11 ADDITIONAL COLLATERAL.
(a) With respect to any Person that, subsequent to the
Effective Date, becomes a Domestic Subsidiary (other than a Credit Card
Subsidiary) promptly: (i) execute and deliver to the Administrative Agent a new
pledge agreement or such amendments to the Master Security Agreement as the
Administrative Agent shall deem necessary or advisable to grant to the
Administrative Agent a Lien on the Capital Stock of such Domestic Subsidiary
which is owned by the Borrower or any of its Subsidiaries, (ii) deliver to the
Administrative Agent the certificates representing such Capital Stock, together
with undated stock powers executed and delivered in blank by a duly authorized
officer of the pledgor thereof, (iii) cause such new Domestic Subsidiary (A) to
become a party to the Master Security Agreement and if, applicable, a Mortgage,
in each case pursuant to documentation which is in form and substance
satisfactory to the Administrative Agent, and (B) to take all actions reasonably
deemed necessary or advisable by the Administrative Agent to cause the Lien
created by the Master Security Agreement and, if applicable, the Mortgage, to be
duly perfected (to the extent contemplated therein and in the other Loan
Documents) in accordance with all applicable Requirements of Law, including,
without limitation, the filing of financing statements in such jurisdictions as
may be requested by the Administrative Agent (it being agreed that for any such
Domestic Subsidiary that is not a debtor-in-possession, no action shall be
required pursuant to this clause (iii) to perfect a Lien in assets that would
not constitute UCC Filing Collateral or in assets constituting UCC Filing
Collateral if such perfection relates to assets constituting UCC Filing
Collateral with an aggregate book value of less than $2,500,000) and (iv) with
respect to assets of any such Domestic Subsidiary with a book value in excess of
$2,500,000 that are perfected under the laws of any jurisdiction, if requested
by the Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i), (ii) and (iii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the
Effective Date, becomes a Foreign Subsidiary with a net worth in excess of
$2,500,000 or Inventory with a book value in excess of $2,500,000, promptly upon
the request of the Administrative Agent: (i) execute and deliver to the
Administrative Agent a new pledge agreement or such amendments to the Master
Security Agreement as the Administrative Agent shall deem necessary or advisable
to grant to the Administrative Agent a Lien on the Capital Stock of such
Subsidiary which is owned by the Borrower or any of its Subsidiaries (provided
that in no event shall more than 65% of the Capital Stock of any such Subsidiary
be required to be so pledged) and (ii) deliver to the
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Administrative Agent any certificates representing such Capital Stock, together
with undated stock powers executed and delivered in blank by a duly authorized
officer of the Borrower or such Subsidiary, as the case may be, and take or
cause to be taken all such other actions under the law of the jurisdiction of
organization of such Foreign Subsidiary as may be necessary or advisable to
perfect such Lien on such Capital Stock.
(c) If the Borrower or any Subsidiary Guarantor shall
acquire any Investment Securities (other than Investment Securities of any
issuer aggregating less than $2,500,000) such Loan Party shall deliver
certificates representing such Investment Securities to the Administrative Agent
or its agent or custodian (or otherwise "transfer" such Investment Security
(within the meaning of the applicable UCC) to the Administrative Agent or its
agent or custodian (or take such other action as shall be required to perfect
the security interest of the Collateral in accordance with the applicable UCC)),
together with, when necessary or appropriate, undated powers as provided in
subsection 4.1(b) of the Master Security Agreement, to be held by the
Administrative Agent (or its agent or custodian) as Pledged Securities, subject
to the terms of the Master Security Agreement, as collateral security for the
Secured Obligations.
7.12 DEPOSITARY ACCOUNT AND PAYMENTS SYSTEM; CASH DOMINION. The
Borrower has established a depositary account and payment system under the
Master Security Agreement pursuant to which, subject to the terms of the Loan
Documents, the Administrative Agent possesses sole dominion and control over the
Borrower's and the Subsidiary Guarantors' cash. Except as set forth in the Loan
Documents, neither the Borrower nor any Subsidiary Guarantor, nor any Person or
entity claiming by, through or under the Borrower nor any Subsidiary Guarantor
shall, during a Cash Dominion Period, have any control over the use of, or any
right to effect a withdrawal from, any such depositary account and such payment
system. The Borrower shall maintain such depositary account and payment system
and shall, contemporaneously with the execution hereof (or at such later time as
may be acceptable to the Administrative Agent), cause each Depositary Bank to
execute and deliver to the Administrative Agent a Blocked Account Agreement and
Lockbox Agreement, as applicable, in accordance with the terms of the Master
Security Agreement (failing which the Borrower shall promptly close the account
with such Depositary) and shall deliver to each Depositary Bank instructions
reasonably satisfactory to the Administrative Agent informing and directing each
such Depositary Bank that all of the Loan Parties' cash continue to be sent to
the Administrative Agent pursuant to the cash dominion arrangements.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any Letter of Credit remains outstanding or any amount is owing to any
Lender or the Administrative Agent hereunder or under any other Loan Document,
the Borrower shall not, and (except in the case of subsection 9.1) shall not
permit any of its Restricted Subsidiaries to, directly or indirectly:
8.1 FINANCIAL CONDITION COVENANTS.
(a) EBITDA. Permit Excess Availability to be less than
$50,000,000 at any time or alternatively, in the event Excess Availability is
less than $50,000,000, permit Cumulative EBITDA or Rolling 12-Month EBITDA, as
applicable, based upon the statements that have been most recently delivered
pursuant to subsection 7.1(c)(ii), to be less than the amount set forth below:
<TABLE>
<CAPTION>
MINIMUM CUMULATIVE
QUARTER ENDING EBITDA
-------------- ------------------
<S> <C>
June 30, 2000 $(60,000,000)
</TABLE>
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<TABLE>
<S> <C>
September 30, 2000 $(72,000,000)
December 31, 2000 $(12,000,000)
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDING ROLLING 12-MONTH EBITDA
-------------- -----------------------
<S> <C>
March 31, 2001 $(11,000,000)
June 30, 2001 $(2,000,000)
September 30, 2001 $8,000,000
December 31, 2001 $32,000,000
March 31, 2002 $46,000,000
June 30, 2002 $60,000,000
September 30, 2002 $70,000,000
December 31, 2002 $84,000,000
March 31, 2003 and at all $85,000,000
times thereafter
</TABLE>
In the event that Excess Availability is less than $50,000,000 at any fiscal
month end between the quarterly periods set forth in the foregoing tables,
EBITDA shall be tested as of such fiscal month end, and shall be required to be
at the level provided for the immediately preceding quarter end.
(b) Capital Expenditures. Make aggregate Capital
Expenditures in excess of (i) in the case of the 2000 and 2001 Fiscal Years,
subject to the provisions of the following sentences, $150 million in the
aggregate for such two Fiscal Years, and (ii) in the case of the 2002, 2003 and
2004 Fiscal Years, the sum of $50,000,000 per Fiscal Year, plus any unused
permitted Capital Expenditures for the immediately preceding Fiscal Year. In
Fiscal Year 2000, Capital Expenditures shall not exceed the sum of (A)
$70,000,000, plus (B) for all times after August 31, 2000, an amount equal to
$650,000 for each store in excess of sixty-five for which subleases are executed
(whether executed before, on or after August 31, 2000). Capital Expenditures for
Fiscal Year 2001 shall not exceed $150,000,000 less the actual amount of Capital
Expenditures made or incurred in Fiscal Year 2000. Notwithstanding the
foregoing, no Capital Expenditures (except for maintenance) shall be made if,
before or after giving effect to the making of such Capital Expenditure, an
Event of Default then exists or thereafter would exist.
8.2 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) the Guarantee Obligations in the Master Security
Agreement and any Guarantee Obligations arising under any of the other Loan
Documents;
(b) Guarantee Obligations (i) in existence on the
effective date of the Existing DIP Agreement and set forth on Schedule 8.2(b) or
(ii) otherwise not exceeding $5,000,000 in the aggregate;
(c) Guarantee Obligations of the Borrower or any
Restricted Subsidiary of obligations of any Restricted Subsidiary or the
Borrower which obligations are otherwise permitted under this Agreement;
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(d) Guarantee Obligations entered into in connection with
surety, appeal, payment and performance bonds (and other obligations of a like
nature) incurred in the ordinary course of business;
(e) subject to subsection 8.8(e), Guarantee Obligations
of the Borrower or any Restricted Subsidiary of Indebtedness or other
obligations incurred in the ordinary course of business of Subsidiaries that are
not Subsidiary Guarantors (including, without limitation, obligations in respect
of indemnifications on behalf of Credit Card Subsidiaries as contemplated by the
proviso to the definition of Credit Card Subsidiaries, to the extent such
obligations constitute Guarantee Obligations); provided that the aggregate
amount of the Indebtedness or other obligations shall not exceed at any time
outstanding (i) in the case of Indebtedness and other obligations in respect of
non-Credit Card Program obligations, together with outstanding Investments
permitted pursuant to subsection 8.8(e), $10,000,000 and (ii) in the case of
Indebtedness and other obligations in respect of Credit Card Program
obligations, together with Investments permitted pursuant to subsection 8.8(h),
$25,000,000;
(f) Guarantee Obligations in respect of obligations of
vendors to the Borrower and its Restricted Subsidiaries created in the ordinary
course of business;
(g) Guarantee Obligations of the Borrower or any
Restricted Subsidiary of Indebtedness or other obligations of Securitization
Entities incurred in connection with Securitization Transactions;
(h) Guarantee Obligations in respect of (i) obligations
in respect of trade letters of credit and (ii) other obligations in respect of
standby letters of credit, provided that the aggregate outstanding amount of all
such Guarantee Obligations (not otherwise permitted pursuant to this subsection
8.2) shall at no time exceed, in the case of clause (i) $100,000,000, and in the
case of clause (ii) $10,000,000; and
(i) Guarantee Obligations of the Borrower or any
Restricted Subsidiary incurred in the ordinary course of business in respect of
obligations (other than Indebtedness) of others and other Guarantee Obligations
(in each case not otherwise permitted pursuant to this subsection 8.2) incurred
after the Effective Date, provided that the aggregate amount of all such
Guarantee Obligations for the Borrower and its Restricted Subsidiaries shall not
exceed $15,000,000 at any one time outstanding.
8.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of
Foreign Subsidiaries, generally accepted accounting principles in effect from
time to time in their respective jurisdictions of incorporation);
(b) carriers', warehousemen's, mechanics', landlord's,
materialmen's, repairmen's or other like Liens (including statutory Liens and
other Liens arising by operation of law) arising in the ordinary course of
business securing amounts which do not in the aggregate impair the use thereof
in the operation of the business of the Borrower and its Restricted
Subsidiaries, which are not overdue for a period of more than 60 days or which
are being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property or assets
subject to any such Lien;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements and Liens granted to banks in the ordinary course of
business in connection with deposit, disbursement or concentration accounts
(other than in connection with borrowed money) maintained with such banks on
funds and other items in such accounts;
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(d) Liens granted and deposits made in connection with
the performance of bids, trade arrangements and real estate related contracts
entered into in the ordinary course of business (in each case, other than for
borrowed money), utilities, leases, statutory obligations, surety, appeal and
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(e) easements, rights-of-way, restrictions, subdivisions,
parcelizations and other similar encumbrances incurred in the ordinary course of
business which do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Borrower or such Restricted Subsidiary;
(f) Liens (i) in existence on the effective date of the
Existing DIP Agreement and listed on Schedule 8.3(f) securing Indebtedness or
other obligations described on such Schedule or (ii) otherwise securing
Indebtedness or other obligations not exceeding $8,000,000 in the aggregate;
(g) Liens securing Indebtedness or other obligations of
the Borrower and its Restricted Subsidiaries incurred after the effective date
of the Existing DIP Agreement to finance the acquisition, construction or
completion of fixed or capital assets (whether pursuant to a loan, a Financing
Lease or otherwise), including, without limitation, improvements, provided that
(i) such Liens are created within 180 days after such acquisition, construction
or completion and (ii) such Liens do not at any time encumber any property other
than the property financed by such Indebtedness or other obligations and the
proceeds thereof; and the Indebtedness or other obligations secured by such
Liens do not exceed a principal amount of $35,000,000 in the aggregate.
(h) Liens on assets of any Foreign Subsidiary securing
Indebtedness of such Foreign Subsidiary and other obligations incurred in the
ordinary course of business;
(i) Liens on the Fixed Assets of a corporation which
becomes a Restricted Subsidiary after the Effective Date and Liens existing on
Fixed Assets acquired by the Borrower or a Restricted Subsidiary after the
Effective Date, in either case securing Indebtedness or other obligations,
provided that no such Liens shall cover any Current Assets (including Accounts
or Inventory) of the Borrower or any Restricted Subsidiary, the Capital Stock of
any Subsidiary (including, without limitation, any Securitization Entity or
Credit Card Subsidiary) or any Indebtedness of the Borrower or any Subsidiary,
and provided, further, that (A) such Liens existed at the time such corporation
became a Restricted Subsidiary or such fixed asset was acquired and were not
created in anticipation thereof, (B) any such Lien is not spread to cover any
additional property or assets of such corporation after the time such
corporation becomes a Restricted Subsidiary or such fixed asset is acquired, and
(C) the amount of Indebtedness or other obligations secured thereby is not
increased;
(j) Liens securing Indebtedness or other obligations
which refunds, refinances extends or otherwise restructures any other
Indebtedness or other obligations to the extent such refunded or refinanced
Indebtedness or other obligation was originally permitted to be secured pursuant
to this subsection, provided that the principal amount of such Indebtedness is
not increased (other than by an amount equal to any costs and expenses incurred
in connection with such refunding or refinancing) and that no such Lien is
spread to cover additional property;
(k) Liens (not otherwise permitted hereunder) which
secure Indebtedness or other obligations not exceeding (as to the Borrower and
all its Restricted Subsidiaries) $25,000,000 in aggregate principal or face
amount at any time outstanding, provided that no such Liens shall cover any
Current Assets (including Accounts or Inventory) of the Borrower or any
Restricted Subsidiary, the Capital Stock of any Subsidiary (including, without
limitation, any Securitization Entity or Credit Card Subsidiary) or any
Indebtedness of the Borrower or any Subsidiary and provided further that the
Person holding such
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Indebtedness secured by a lien subordinate to that of the Administrative Agent
executes an intercreditor agreement reasonably acceptable to the Administrative
Agent;
(l) Liens created pursuant to the Security Documents;
(m) Liens created in favor of any Person who delivers
goods under a consignment to the Borrower or a Restricted Subsidiary, provided
that the Borrower or such Restricted Subsidiary treats and designates on its
books and records such goods as "goods on consignment" for all purposes and such
goods are not included as Inventory of the Borrower or such Restricted
Subsidiary, as the case may be, on the books of the Borrower or such Restricted
Subsidiary, as the case may be;
(n) Subject to execution and delivery of intercreditor
agreements reasonably satisfactory to the Administrative Agent, Liens granted to
secure the Borrower's or any Restricted Subsidiary's obligations under any Floor
Planning Facility, provided that such Liens are limited to the goods financed
pursuant to such Floor Planning Facility and the proceeds of such goods;
(o) Liens covering Accounts, credit card receivables and
related assets owned or that may be deemed owned by the Borrower and its
Restricted Subsidiaries in connection with a Credit Card Program or as a result
of a Securitization Transaction;
(p) Liens arising from offsets, deposits or restricted
assets granted by any Credit Card Subsidiary in respect of a Credit Card Program
or a Securitization Transaction;
(q) Liens on real property (and related fixtures and
leases) now or hereafter owned or leased by the Borrower or any Restricted
Subsidiary, including Designated Material Real Property, securing Indebtedness
of the Borrower and such Restricted Subsidiary, provided that with respect to
any such Liens involving any Eligible Mortgaged Real Property, the net proceeds
therefrom shall be in an amount at least equal to 54.5% of the alternate use
appraised value thereof as set forth in the Existing Appraisal for such
property;
(r) Liens arising under or in connection with Permitted
Sale-Leasebacks;
(s) Liens (including possessory Liens) on cash (and
corresponding Liens on cash collateral accounts and all investments of amounts
on deposit therein), commercial documents relating to goods financed under the
relevant facility or trade letters of credit, such goods and the proceeds
thereof, in each case securing obligations in respect of trade letters of
credit, provided that no such Lien may extend to or cover such commercial
documents, goods or related proceeds after such goods are delivered to a
warehouse, distribution center or store owned or leased by the Borrower or a
Restricted Subsidiary (it being understood that the Administrative Agent may
(and, to the extent the same is reasonably satisfactory to it, shall) enter into
one or more intercreditor agreements with respect to trade letters of credit
with respect to the foregoing);
(t) Liens arising out of the deposit arrangement
described on Schedule 5.22; and
(u) Liens to secure Indebtedness permitted pursuant to
Section 8.7(c) hereof;
provided that, notwithstanding the foregoing, no Lien created, incurred, assumed
or suffered to exist pursuant to this subsection 8.3 (other than Permitted
Inventory Liens, Permitted Account Liens, and Liens permitted under subsections
8.3(h), 8.3(m), 8.3(n), 8.3(o) and 8.3(s)) shall be a Lien on Inventory or
Accounts of the Borrower or any of its Restricted Subsidiaries.
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8.4 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets except:
(a) any Restricted Subsidiary of the Borrower may be
merged or consolidated with or into the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or with or into any one or
more wholly owned Subsidiaries of the Borrower (provided that a Subsidiary
Guarantor or wholly owned Restricted Subsidiary or Restricted Subsidiaries shall
be the continuing or surviving corporation and provided, further, that if one of
the parties to such transaction (i) is a Subsidiary Guarantor then the
continuing or surviving corporation shall be a Subsidiary Guarantor or (ii) is
not a Restricted Subsidiary, no Default shall result therefrom);
(b) any Restricted Subsidiary may convey, sell, lease,
transfer, assign or otherwise dispose of any or all of its assets (upon
voluntary liquidation or otherwise) to the Borrower or any Subsidiary Guarantor
or any wholly owned Restricted Subsidiary of the Borrower (provided that if such
selling Restricted Subsidiary is a Subsidiary Guarantor then the acquiring
Restricted Subsidiary shall be a Subsidiary Guarantor); and
(c) any Restricted Subsidiary may be merged or
consolidated with or into, or convey, sell, lease, transfer, assign or otherwise
dispose of any or all of its assets to, any Person to the extent that the sale
or other disposition of the assets of such Restricted Subsidiary would be
permitted under subsection 8.5.
8.5 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Restricted Subsidiary,
issue or sell any shares of such Restricted Subsidiary's Capital Stock to any
Person (in each case, other than the Borrower or any Subsidiary Guarantor or, if
such Restricted Subsidiary is not (x) a wholly-owned Restricted Subsidiary,
pro-rata to the owners of the equity securities of such Restricted Subsidiary or
(y) a Subsidiary Guarantor, to any Restricted Subsidiary), except:
(a) the sale or other disposition of uneconomical,
obsolete, surplus or worn out assets in the ordinary course of business,
including, without limitation, in connection with store closures and real estate
development or divestiture activities;
(b) the sale or other disposition of Inventory and other
Current Assets in the ordinary course of business (including sales of Inventory
and other Current Assets in connection with closed stores or stores to be closed
or sold and sales of discontinued Inventory) and transfers of assets among the
Borrower and the Subsidiary Guarantors pursuant to reasonable business
requirements;
(c) the sale or discount of accounts receivable arising
in the ordinary course of business in connection with the compromise or
collection thereof and sales or other dispositions of Cash Equivalents in the
ordinary course of business in each case at fair market value and on
commercially reasonable terms;
(d) as permitted by subsection 8.4(b);
(e) the lease, sublease or other transfer of space (by
assignment of leases or otherwise) in the Borrower's and the Restricted
Subsidiaries' respective stores in furtherance of the Business Plan and leases
of space at the Borrower's headquarters;
(f) Asset Sales of any assets (other than, directly or
indirectly, Inventory) in connection with Permitted Sale-Leasebacks or
Securitization Transactions, provided that in the case of an Asset Sale
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in connection with a Permitted Sale-Leaseback to the extent otherwise permitted
hereunder (other than an Asset Sale in connection with a Securitization
Transaction), the proceeds of any such Permitted Sale-Leaseback shall be
entirely in cash and shall be not less than 100% of the fair market value of the
assets being sold (as determined by the Borrower in good faith) and in the case
of an Asset Sale in connection with a Securitization Transaction (which may be
in the form of a capital contribution to the relevant Securitization Entity),
the purchase price (including the Capital Stock of any Securitization Entity
owned by the Borrower or any Restricted Subsidiary) with respect to the assets
sold or disposed shall be not less than the fair market value of such assets (as
determined by the Borrower in good faith), provided that in addition to the
foregoing requirements, with respect to any Securitization Transaction involving
any Eligible Mortgaged Real Property, the Asset Sale Proceeds shall be in an
amount at least equal to 54.5% of the alternate use appraised value thereof as
set forth in the Existing Appraisal for such property;
(g) the sale or other disposition of the Borrower's and
its Subsidiaries' Brentwood headquarters, Montgomery distribution center and/or
Orlando distribution center, provided that if any such sale or disposition
involves any Eligible Mortgaged Real Property, the Asset Sale Proceeds shall be
in an amount at least equal to 54.5% of the alternate use appraised value
thereof as set forth in the Existing Appraisal for such property;
(h) the sale or other disposition of any property (other
than, directly or indirectly, Inventory and other Current Assets, and other than
any sale or other disposition which is otherwise permitted under this subsection
8.5), provided that at the time of and after giving effect to such sale or
disposition, the aggregate fair market value of all assets so sold or disposed
of in any Fiscal Year pursuant to this paragraph (h) shall not exceed an amount
equal to $125,000,000;
(i) subject to the other terms and provisions hereof,
leases or subleases (or assignments of leases) or licenses or sublicenses (or
assignments of licenses or sublicenses) of any assets in the ordinary course of
business;
(j) sales and other dispositions of assets in connection
with Investments (other than Investments received in respect of the sale or
disposition of Fixed Assets) permitted under subsection 8.8;
(k) sales or other dispositions of Accounts, credit card
receivables and related assets in connection with a Credit Card Program;
(l) issuances, sales and other dispositions of Capital
Stock by any Credit Card Subsidiary to any Person so long as after giving effect
thereto, such Credit Card Subsidiary remains a Subsidiary; and
(m) sales and dispositions of assets pursuant to Store
Closures;
provided that the foregoing limitations are not intended to prevent
the Borrower or any of its Restricted Subsidiaries from terminating leases or
contracts in the ordinary course of business.
8.6 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other
than those payable solely in common stock or Qualified Stock of the Borrower or
options or warrants with respect thereto) on, or make any payment (other than
those payable solely in common stock or Qualified Stock of the Borrower or
options or warrants with respect thereto) on account of, or set apart assets for
a sinking or other analogous fund for, the purchase redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock
(including Qualified Stock) of the Borrower or any warrants or options to
purchase any such Stock, whether now or hereafter outstanding, or make any other
distribution (other than those payable solely in common stock or Qualified Stock
of the Borrower or options or warrants with respect thereto) in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
the Borrower or any
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Restricted Subsidiary (such declarations, payments, setting apart, purchases,
redemptions, defeasances, retirements, acquisitions and distributions being
herein called "Restricted Payments"), except that the Borrower may (i) purchase
or exchange then-existing employee stock options for consideration consisting
solely of (subject to subsection 8.14) Capital Stock of the Borrower, (ii) may
purchase or redeem up to $1,000,000 in the aggregate from and after the
effective date of the Existing DIP Agreement in Capital Stock solely for the
purpose of purchasing minority interests in order for such Subsidiaries to
become wholly owned Subsidiaries of the Borrower, and (iii) repurchase Capital
Stock from officers and employees pursuant to stock option plans or in
connection with the cessation of their employment in an amount not to exceed
$2,500,000 in the aggregate in any fiscal year.
8.7 LIMITATION ON INDEBTEDNESS. The Borrower shall not create or
suffer to exist, or permit any Restricted Subsidiary to create or suffer to
exist, any Indebtedness except:
(a) the Credit Agreement Obligations;
(b) Guarantee Obligations permitted by subsection 8.2;
(c) Indebtedness of the Borrower to Back Bay Capital
Funding, LLC (or such other lenders reasonably acceptable to the Administrative
Agent) in connection with a term loan facility up to an amount not to exceed
$50,000,000 and otherwise on terms and conditions reasonably acceptable to the
Administrative Agent. Without limitation, such term loan facility shall be
subject to an intercreditor agreement reasonably satisfactory to the
Administrative Agent, which shall provide, among other things, that the term
loan facility shall be repaid only after payment in full of the Credit Agreement
Obligations and shall be limited to a specified percentage of the appraised
value of the Borrower's Inventory.
(d) Intercompany Debt and Indebtedness of the Borrower to
any Excluded Subsidiary, provided that such Indebtedness to an Excluded
Subsidiary is (i) at all times junior and subordinate in right of payment to the
Secured Obligations and (ii) not paid until after the repayment in full of the
Credit Agreement Obligations;
(e) Indebtedness secured by Liens permitted by subsection
8.3, including without limitation, in respect of Floor Planning Facilities
permitted under subsection 8.3(o);
(f) Indebtedness outstanding on the effective date of the
Existing DIP Agreement and listed on Schedule 8.7(f) and refinancings thereof to
the extent permitted under subsection 8.9;
(g) Indebtedness of the Borrower arising pursuant to
Derivative Agreements entered into with any Lender for the purpose of hedging
the Borrower's interest rate exposure and not for speculative purposes, and
Indebtedness in respect of cash management obligations;
(h) Indebtedness payable under the Borrower's Plan of
Reorganization; and
(i) Other Indebtedness in an amount not to exceed
$200,000,000 in the aggregate outstanding at any time.
8.8 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of any Person or consummate
any Acquisition (an "Investment"), except for:
(a) extensions of trade credit and prepaid expenses made
in the ordinary course of business;
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(b) Investments in Cash Equivalents; provided that (A)
the maximum amount of cash and Cash Equivalents held in accounts (other than
Consignment Inventory Accounts) over which the Administrative Agent does not
have a valid and perfected Lien shall not exceed $15,000,000 at any time
outstanding and (B) the maximum amount of cash and Cash Equivalents held in
Consignment Inventory Accounts shall not exceed the amounts due to suppliers of
Consignment Inventory consisting of (i) the cost of the Consignment Inventory
actually sold plus (ii) other expenses due and payable to such suppliers of
Consignment Inventory;
(c) (i) loans to officers of the Borrower or any
Subsidiary, (ii) loans and advances to employees of the Borrower or its
Subsidiaries for travel, entertainment and relocation expenses in the ordinary
course of business, and (iii) loans by the Borrower to its employees (other than
to officers of the Borrower or any Subsidiary) in connection with management
incentive plans, provided that the aggregate outstanding principal amount of all
such loans and advances shall not exceed $5,000,000 at any time;
(d) Investments by the Borrower in Subsidiary Guarantors
and Investments by Restricted Subsidiaries in the Borrower and in Subsidiary
Guarantors;
(e) Investments not otherwise permitted hereunder by the
Borrower and Restricted Subsidiaries in Subsidiaries that are not Subsidiary
Guarantors, provided that, after giving effect to such Investments, the
aggregate then outstanding amount of all such Investments (including Investments
in such Subsidiaries in the nature of sales and transfers of assets (including,
pursuant to a transaction permitted under subsection 8.4) for less than fair
market value and outstanding Guarantee Obligations pursuant to subsection
8.2(e)) made subsequent to the Effective Date pursuant to this paragraph (e),
together with outstanding Guarantee Obligations permitted pursuant to subsection
8.2(e), shall not exceed $10,000,000, provided, further, that the conversion of
any Indebtedness owed to the Borrower or any Restricted Subsidiary by any
Subsidiary into equity of such Subsidiary shall not constitute an additional
Investment in such Subsidiary by the Borrower or such Restricted Subsidiary for
purposes of the limitation contained in the immediately preceding proviso;
(f) Investments received in connection with the creation
and collection of accounts receivable in the ordinary course of business;
(g) Investments received as consideration in connection
with any Asset Sale or other disposition of assets permitted hereunder;
(h) Investments not otherwise permitted hereunder in
Credit Card Subsidiaries in an amount, together with Guaranteed Obligations
permitted pursuant to subsection 8.2(e), not to exceed $25,000,000 outstanding
at any time;
(i) Investments by Credit Card Subsidiaries in connection
with the Credit Card Program;
(j) loans and advances to suppliers in the ordinary
course of business consistent with past practice but in any event not in excess
of an outstanding principal amount of $500,000;
(k) purchases of Accounts, credit card receivables and
related assets by Credit Card Subsidiaries in connection with the Credit Card
Program;
(l) Acquisitions and other Investments not otherwise
permitted hereunder made by the Borrower or any of its Restricted Subsidiaries,
provided that, after giving effect thereto (including, without limitation, any
effect on the Borrowing Base), (i) Excess Availability shall be equal to or
greater than $35,000,000, and (ii) the aggregate outstanding amount of all such
Investments (other than Acquisitions)
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made at any time after the Effective Date, shall not exceed the sum of
$10,000,000 and (iii) the aggregate outstanding amount of all such Acquisitions
(including assumed Indebtedness and the fair market value of Capital Stock
issued) and other Investments made at any time after the effective date of the
Existing DIP Agreement shall not exceed the sum of $40,000,000; and
(m) Capital Expenditures permitted by subsection 8.1(b)
hereof.
8.9 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS. At any time:
(a) make any optional payment or prepayment on or
optionally redeem or purchase any Indebtedness (other than the Loans and
Indebtedness of the Borrower or any Restricted Subsidiary to the Borrower or any
Restricted Subsidiary) of the Borrower or any Subsidiary, or
(b) amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms relating to the payment or
prepayment of principal of or interest on, any Indebtedness described in clause
(a) (unless such amendment, modification or change does not shorten the maturity
or increase the amount of any payment of principal thereof or would not increase
the rate or shorten the date for payment of interest thereon), provided, that
the Borrower and its Restricted Subsidiaries may prepay Indebtedness permitted
hereunder:
(i) from the proceeds of new Indebtedness
incurred to refinance such Indebtedness and permitted hereunder to be
incurred,
(ii) under Financing Leases for stores and other
property no longer occupied or used by the Borrower or such Restricted
Subsidiary in connection with the settlement, termination or assignment
of such Financing Lease,
(iii) secured by assets in connection with any
sale or other disposition of such assets permitted under subsection
8.5,
(iv) consisting of Floor Planning Facilities,
(v) incurred after the Effective Date and
otherwise permitted hereunder to the extent such prepayment is financed
with the proceeds of other Indebtedness (other than Loans) permitted
hereunder,
(vi) consisting of Financing Leases as long as
such Financing Leases are paid in full in connection with any such
prepayment and such prepayment is made in connection with the closure
or sale of a parcel of real property subject to such Financing Lease,
(vii) secured by a Lien on any parcel of Material
Real Property so long as such Indebtedness is paid in full in
connection with any such prepayment and such prepayment is financed
with the proceeds of other Indebtedness (other than Loans) permitted
hereunder,
(viii) that is short term Indebtedness and
unsecured, and
(ix) from proceeds of the issuance of Capital
Stock, but only if after giving effect to such issuance, no Default or
Event of Default would have occurred and be continuing.
8.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Except as set
forth on Schedule 8.10, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is (a) otherwise
permitted under this
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Agreement or (b) upon fair and reasonable terms no less favorable to the
Borrower or such Restricted Subsidiary, as the case may be, than it would obtain
in a comparable arm's length transaction with a Person which is not an
Affiliate.
8.11 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Restricted
Subsidiary of real or personal property (other than Capital Stock) which has
been or is to be sold or transferred by the Borrower or such Restricted
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Restricted Subsidiary (such arrangement, a
"Sale-Leaseback"), except for (a) Sale-Leasebacks in the ordinary course of the
Borrower's or such Restricted Subsidiary's business, consistent with past
practice and at market rates and subject to compliance with subsection 8.5(f),
in each case on terms and conditions acceptable to the Administrative Agent in
its sole discretion, exercised commercially reasonably and in accordance with
its customary criteria, (b) Sale-Leasebacks in connection with Securitization
Transactions, (c) Sale-Leasebacks of the Borrower's and its Restricted
Subsidiaries' Brentwood headquarters, Montgomery distribution center and/or
Orlando distribution center, subject to compliance with Section 8.5(f), and (d)
Sale-Leasebacks solely among the Borrower and the Subsidiary Guarantors
("Permitted Sale-Leasebacks"). For the avoidance of doubt, Sale-Leasebacks that
result in a Financing Lease shall be treated as Indebtedness for all purposes of
this Agreement.
8.12 FISCAL YEARS AND QUARTERS. Change the last day of the Fiscal
Year of the Borrower (other than to a day on or about January 31 of any calendar
year) or permit any Fiscal Year to be less than a period of approximately 365
days or permit any fiscal quarter to be less than a period of approximately 90
days.
8.13 LIMITATION ON CONDUCT OF BUSINESS. Enter into any business
either directly or through any Restricted Subsidiary except for businesses in
which the Company and its Subsidiaries are engaged on the date of this Agreement
and businesses related or similar thereto or entered into in connection with any
of the foregoing.
8.14 LIMITATION ON ISSUANCES OF CAPITAL STOCK. Issue (a) any
preferred stock or (b) any class of redeemable common stock, provided, however,
that the Borrower may issue Qualified Stock.
8.15 FOREIGN HOLDING COMPANIES, INACTIVE SUBSIDIARIES AND SPECIAL
PURPOSE SUBSIDIARIES. Permit the aggregate book value of the assets of all
Foreign Holding Companies (exclusive of assets consisting of advances or loans
to the Borrower or any of its Subsidiaries and Capital Stock of Foreign
Subsidiaries and other Foreign Holding Companies), Inactive Subsidiaries and
Special Purpose Subsidiaries (exclusive of assets consisting of licenses or
permits) which are not Subsidiary Guarantors to exceed $25,000,000 at any time.
SECTION 9. EVENTS OF DEFAULT.
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any
Loan when due in accordance with the terms hereof; or the Borrower shall fail to
pay any Reimbursement Obligation within two Business Days after such
Reimbursement Obligation becomes due in accordance with the terms hereof; or the
Borrower shall fail to pay any interest on any Loan, or any other amount payable
hereunder, within five days after any such interest or other amount becomes due
in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by
the Borrower or any other Loan Party herein or in any other Loan Document or
which is contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or any
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such other Loan Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or
performance of any agreement contained in subsection 7.7(a) or 7.12 or Section
8, or the Borrower shall fail to deliver a Borrowing Base Certificate pursuant
to subsection 7.2(c) within two Business Days after such Borrowing Base
Certificate was due pursuant to such subsection; or
(d) The Borrower or any other Loan Party shall default in
the observance or performance of any other agreement contained in this Agreement
or any other Loan Document (other than as provided in paragraphs (a) through (c)
of this Section), and such default shall continue unremedied for a period of 30
days after the earlier of (i) the date upon which written notice thereof is
given to the Borrower by the Administrative Agent or the Majority Lenders or
(ii) the date upon which a Responsible Officer becomes aware of such default; or
(e) The Borrower or any of its Restricted Subsidiaries
shall (i) default in any payment of principal of or interest on any Indebtedness
(other than the Loans) or in the payment of any Guarantee Obligation, beyond the
period of grace, if any, provided in the instrument or agreement under which
such Indebtedness or Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required (but after the expiration of all
grace periods applicable thereto), such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become payable, provided that
(x) no Default or Event of Default shall exist under this paragraph (A) unless
the aggregate amount of Indebtedness (other than Indebtedness in respect of
Floor Planning Facilities) and/or Guarantee Obligations in respect of which any
default or other event or condition referred to in this paragraph shall have
occurred shall be equal to at least $10,000,000 or (B) unless the aggregate
amount of Indebtedness in respect of Floor Planning Facilities in respect of
which any default or other event or condition referred to in this paragraph
shall have occurred shall be equal to at least $20,000,000 and (y) clause (ii)
above shall not apply to Indebtedness that becomes due solely as a result of the
voluntary sale or transfer of property or assets or prepayments that become due
as a result of any issuance of Capital Stock or incurrence of Indebtedness (in
each case to the extent such, sale, transfer, issuance or incurrence is
permitted by the terms of such Indebtedness); or
(f) The termination or resignation of both the chief
executive officer and the president of the Borrower or the failure of both the
chief executive officer and the president to perform substantially the same
duties which they perform as of the date hereof (unless they succeed to a
position of greater responsibility and maintain such position), provided that
the foregoing shall not constitute an Event of Default is the Borrower engages
at least one replacement officer reasonably satisfactory to the Administrative
Agent within ninety (90) days after such termination, resignation or failure; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Tax
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined
in Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Majority Lenders, likely to result
in the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower
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or any Commonly Controlled Entity shall, or in the reasonable opinion of the
Majority Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could reasonably be
expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered
against the Borrower or any of its Restricted Subsidiaries involving in the
aggregate a liability (to the extent not paid or covered by insurance) of
$15,000,000 or more, and such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or
(i) (i) For any reason (other than any act on the part of
the Administrative Agent or any Lender or any act or failure to act (except to
the extent such act or failure to act constitutes a breach of the relevant
Blocked Account Agreement or Lockbox Agreement on the part of any Depositary
Bank) the Master Security Agreement, any Mortgage, or any Security Document
ceases to be or is not in full force and effect in any material respect and such
default shall continue unremedied for 30 days after the earlier of receipt by
the Borrower of notice of such default from the Administrative Agent or actual
knowledge of such default by a Responsible Officer, (ii) the Borrower or any of
its Restricted Subsidiaries shall assert in writing that the Master Security
Agreement, any Mortgage, or any Security Document has ceased to be or is not in
full force and effect or (iii) the Lien created by any of the Security Documents
shall cease to be enforceable or of the same effect and priority purported to be
created thereby except to the extent contemplated hereunder and under the other
Loan Documents; or
(j) (i) Except as contemplated by the Borrower's Plan of
Reorganization, any Person or "group" (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended) (A) shall have
acquired beneficial ownership of 50% or more of any outstanding class of Capital
Stock having ordinary voting power in the election of directors of the Borrower
or (B) shall obtain the power (whether or not exercised) to elect a majority of
the Borrower's directors, or (ii) (A) the Board of Directors of the Borrower
shall not consist of a majority of Continuing Directors; "Continuing Directors"
shall mean the directors of the Borrower on the Effective Date and each other
director, if such other director's nomination for election to the Board of
Directors of the Borrower is recommended by a majority of the then Continuing
Directors and (B) the Chief Executive Officer and the President of the Borrower
shall resign or be removed during the period commencing three months prior to
the date the Board of Directors shall not consist of a majority of Continuing
Directors and ending six months after such date; or
(k) Any provision of any Loan Document shall for any
reason cease to be valid and binding on the Loan Party party thereto other than
by reason of the application of applicable bankruptcy, insolvency,
reorganization or other similar laws or the application of equitable principles
relating to or limiting creditors' rights generally, or such Loan Party shall so
state in writing; or
(l) Any Loan Party shall fail to comply with the terms of
the Plan of Reorganization in any material respect and such failure continues
for 15 days after notice from the Administrative Agent (or for such longer
period as the Administrative Agent may agree); or
(m) The Bankruptcy Court shall enter an order amending,
supplementing vacating or otherwise modifying the Final Order approving the Plan
of Reorganization without the consent of the Administrative Agent; or
(n) an involuntary proceeding shall be commenced or an
involuntary petition shall have been filed in a court of competent jurisdiction
seeking (i) relief in respect of the Borrower or any Subsidiary Guarantor, or of
a substantial part of the property or assets of the Borrower or any Subsidiary
Guarantor, under the Bankruptcy Code or under any other federal, state or
foreign bankruptcy, insolvency, receivership
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or similar law, (ii) the appointment of a receiver, trustee, custodian,
conservator or similar official for the Borrower or any Subsidiary Guarantor or
for a substantial part of the property or assets of the Borrower or any
Subsidiary Guarantor, or (iii) the winding up or liquidation of the Borrower or
any Subsidiary Guarantor; and such proceeding shall continue undismissed or
undischarged for 45 days or an order or decree approving or ordering any of the
foregoing shall be entered; or
(o) The Borrower or any Subsidiary Guarantor shall (i)
voluntarily commence any proceeding or file any petition seeking relief under
the Bankruptcy Code or under any other federal, state or foreign bankruptcy,
insolvency, receivership or similar law, (ii) consent to the institution or fail
to contest in a timely and appropriate manner any proceeding or the filing of a
petition described in subsection (n) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, conservator or similar official
for the Borrower or any Subsidiary Guarantor or for a substantial part of the
property or assets of the Borrower or any Subsidiary Guarantor, or (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability, or fail generally to pay its
debts as they become due, or (vii) take any formal corporate, partnership or
other entity action for the purpose of effecting any of the foregoing;
then, and in any such event (other than an event described in subsection (n) or
(o) above), either or both of the following actions may be taken: (i) with the
consent of the Majority Lenders, the Administrative Agent may, or upon the
request of the Majority Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the
Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement (including, without limitation, all amounts
of L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) to be
due and payable forthwith, whereupon the same shall immediately become due and
payable; and in any event described in subsection (n) or (o) above, the
Commitments shall automatically terminate, and the Loans (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) shall automatically become due and payable. Presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
In addition, the Administrative Agent and the Lenders shall be entitled to
exercise their respective rights under the Master Security Agreement, any
Mortgage or any other Security Document.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrower shall at such time deposit in a cash
Collateral Account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of each
Issuing Bank and the L/C Participants, a security interest in such cash
Collateral to secure all obligations of the Borrower under this Agreement and
the other Loan Documents. Amounts held in such cash Collateral Account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrower hereunder and under the Notes. After all
such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower hereunder and under the Notes shall have been paid in full, the
balance, if any, in such cash Collateral Account shall be returned to the
Borrower. The Borrower shall execute and deliver to the Administrative Agent,
for the account of each Issuing Bank and the L/C Participants, such further
documents and instruments as the Administrative Agent may reasonably request to
evidence the creation and perfection of the security interest in such cash
Collateral Account.
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SECTION 10. THE ADMINISTRATIVE AGENT
10.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably authorizes
the Administrative Agent, in such capacity, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto,
including, without limitation, all powers, rights and remedies provided in the
Master Security Agreement and the Mortgages. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein, or
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 the the
Administrative Agent.
10.2 DELEGATION OF DUTIES. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Administrative Agent shall not 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 the Borrower.
10.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
facsimile, telex or teletype message, statement, order 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, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of Lenders entitled to so act in accordance
with the terms of this Agreement as it deems appropriate or it shall first be
indemnified to its satisfaction by the 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. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of Lenders entitled to so act in
accordance with the terms of this Agreement, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Loans.
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10.5 NOTICE OF DEFAULT. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall promptly give notice thereof to the Lenders. The Administrative
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by Lenders entitled to so act in accordance with
the terms of this Agreement; provided that unless and until the Administrative
Agent shall have received such directions, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interests of the Lenders.
10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent 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 analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Borrower. Except for notices, reports, financial
statements and other documents furnished to the Administrative Agent by the
Borrower or any Subsidiary Guarantor hereunder (as to which the Administrative
Agent shall furnish copies to each Lender requesting same), the Administrative
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the
Borrower which may come into the possession of the Administrative Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Voting Percentages in effect on the date
on which indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. The agreements in
this subsection shall survive the payment of the Loans and all other amounts
payable hereunder. The Administrative Agent shall have the right to deduct any
amount owed to it by any Lender under this Agreement from any payment made by it
to such Lender hereunder.
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10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from and generally engage in any kind
of business with the Borrower as though the Administrative Agent were not an
agent hereunder and under the other Loan Documents. With respect to the Loans
made by it or any Letter of Credit issued or participated in by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not an agent hereunder, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 25 Business Days' notice to the Borrower and
the Lenders. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Majority Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent (provided that it shall have been approved by the Borrower),
shall succeed to the rights, powers and duties of the Administrative Agent
hereunder. Effective upon such appointment and approval, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
10.10 CO-AGENTS; DOCUMENTATION AGENT. Notwithstanding the provisions
of this Agreement or any of the other Loan Documents, the Co-Agents and the
Documentation Agent, in their capacities as such, shall have no powers, rights,
duties, responsibilities or liabilities with respect to this Agreement and the
other Loan Documents.
SECTION 11. MISCELLANEOUS
11.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Majority Lenders may, or, the Administrative Agent, with the written consent of
the Majority Lenders may, from time to time, (a) enter into with the applicable
Loan Party or Parties written amendments, supplements or modifications hereto
and to the other Loan Documents for the purpose of adding, deleting or revising
any provisions to this Agreement or the other Loan Documents or changing in any
manner the rights of the Lenders or of the Borrower hereunder or thereunder or
(b) waive, on such terms and conditions as the Majority Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall:
(a) reduce the amount or extend the scheduled date of
maturity of any Loan or of any installment thereof, or reduce the stated rate of
any interest or fee payable hereunder, or extend the scheduled date of any
payment thereof, increase the amount or extend the expiration date of any
Lender's Commitments, in each case without the consent of each Lender adversely
affected thereby,
(b) amend, modify or waive any provision of this
subsection or consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement and the other Loan Documents or
any other provision of any other Loan Document, or, except as set forth in the
Master Security Agreement or any Mortgage or for sales or dispositions permitted
under this Agreement, each as amended and in effect from time to time, release
or subordinate the interest of the Administrative Agent in the Collateral or the
Subsidiary Guarantors, without the written consent of all the Lenders, or
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(c) reduce the percentage specified in the definition of
Majority Lenders or Required Lenders without the written consent of all the
Lenders,
(d) increase any percentage set forth in the definition
of Borrowing Base, Available Inventory Amount or Available Accounts Receivable
Amount or Available L/C Amount without the consent of all the Lenders, provided,
the Administrative Agent may increase the percentages set forth in the
definition of Borrowing Base, Available Inventory Amount, Available Accounts
Receivable Amount or Available L/C Amount by up to an additional 5% above the
percentages as of the Effective Date with the consent of the Required Lenders,
the amount set forth in the proviso to the first sentence of the definition of
Borrowing Base without the consent of the Required Lenders or the maximum
aggregate amount of Commitments hereunder without the consent of the Required
Lenders,
(e) amend, modify or waive any provision of Section 2
without the written consent of the Majority Term Loan Lenders or reduce the
percentage specified in the definition of Majority Term Loan Lenders without the
consent of all the Term Loan Lenders,
(f) modify the provisions of subsection 8.5 so as to
increase the amount of assets permitted to be sold or disposed of thereunder
without the written consent of the Majority Term Loan Lenders, unless the
increased cash amounts realized are utilized to prepay principal of the Term
Loans in an amount equal to the product of such amounts and a fraction, the
numerator of which is the aggregate outstanding principal amount of the Term
Loans and the denominator of which is the sum of the principal amount of the
Term Loans and the then Revolving Credit Commitments, and the balance utilized
to reduce the outstanding Revolving Loans (but not reduce the Revolving Credit
Commitments),
(g) amend or modify the definitions of Majority Lenders
or Required Lenders without the consent of all the Lenders;
(h) amend, modify or waive any provision of Section 3 or
of subsection 6.2 without the prior written consent of the Majority Revolving
Credit Lenders or reduce the percentage specified in the definition of Majority
Revolving Credit Lenders without the consent of all the Revolving Credit
Lenders,
(i) amend, modify or waive any provision of subsection
4.7(c) of this Agreement or of subsection 3.6(a) or 3.6(b) of the Master
Security Agreement without the written consent of the Majority Term Loan Lenders
and the Majority Revolving Credit Lenders,
(j) amend, modify or waive any provision of subsections
3.6 through 3.13 without the consent of each Issuing Bank adversely affected in
any material respect thereby,
(k) amend, modify or waive any provision of subsections
3.14, 3.15 or 3.16 without the consent of the Swing Line Lender, or
(l) amend, modify or waive any provision of Section 10
without the written consent of the Administrative Agent.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Borrower, the
Lenders, the Administrative Agent and all future holders of the Loans. In the
case of any waiver, the Borrower, the Lenders, and the Administrative Agent
shall be restored to their former positions and rights hereunder and under the
other Loan Documents, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon. If, in
connection with any proposed amendment, supplement, modification, consent or
waiver of any provisions
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of this Agreement or any other Loan Documents as contemplated by this subsection
11.1, the consent of Lenders whose Voting Percentages aggregate at least 90% is
obtained but the consent of one or more of the other Lenders is not obtained,
then the Borrower may replace each such non-consenting Lender or Lenders with
one or more replacement Lenders pursuant to subsection 11.7 so long as at the
time of such replacement, each replacement Lender consents to the proposed
amendment, supplement, modification, consent or waiver, provided that the
Borrower shall not have the right to replace any Lender solely as a result of
the exercise of such Lender's rights (and the withholding of any required
consent of such Lender) pursuant to clauses (a), (b) or (c) of the first proviso
of this subsection 11.1.
11.2 NOTICES. Unless otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by facsimile transmission) and shall be
deemed to have been duly given or made (a) in the case of delivery by hand
(including by overnight courier), when delivered, (b) in the case of delivery by
mail, three days after being deposited in the mails, postage prepaid, or (c) in
the case of delivery by facsimile transmission, when sent and receipt has been
confirmed, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule 11.2 in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
The Borrower: Service Merchandise Company, Inc.
7100 Service Merchandise Drive
Brentwood, TN 37027
Attention: Treasurer and Chief Financial Officer
Fax: (615) 660-3667
Telephone: (615) 660-3440
With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Attention: John Wm. Butler, Jr., Esq.
Lawrence Frishman, Esq.
Fax: (212) 735-2000
Telephone: (212) 735-3000
The Administrative
Agent: Fleet Retail Finance Inc.
40 Broad Street
Boston, Massachusetts 02109
Attention: Betsy Ratto
Fax: (617) 434-4339
Telephone: (617) 434-4113
With a copy to: Riemer & Braunstein, LLP
Three Center Plaza
Boston, Massachusetts 02108
Attention: David S. Berman, Esquire
Fax: (617) 880-3456
Telephone: (617) 523-9000
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsections 3.2, 3.4, 3.6, 3.15, 4.1, 4.2 or 4.7
shall not be effective until received. Whenever the Administrative Agent sends a
notice by mail, the Administrative Agent will use reasonable efforts to also
send such notice by one of the other means of notice permitted hereunder,
provided that the failure to do so
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shall not affect in any way the validity of any delivery by mail pursuant to
this subsection or otherwise result in any liability to the Administrative Agent
or the Lenders.
11.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
11.5 PAYMENT OF EXPENSES AND TAXES; INDEMNITY. The Borrower agrees
(a) to pay or reimburse the Administrative Agent for all
its reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of one counsel for the
Administrative Agent,
(b) to pay or reimburse the Administrative Agent for all
its reasonable out-of-pocket costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other Loan
Documents and any such other documents, including, without limitation, costs and
expenses which the Administrative Agent may incur in enforcing or protecting its
Liens on or rights and interest in the Collateral, and the fees and
disbursements of counsel to the Administrative Agent, and
(c) to pay or reimburse each Lender for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the other Loan
Documents and any such other documents following the occurrence and during the
continuation of a Default or an Event of Default, including, without limitation,
the fees and disbursements of counsel to each Lender,
(d) to pay, indemnify, and hold each Lender and the
Administrative Agent (and their respective directors, officers, employees and
agents) harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise (other than excise taxes imposed in lieu of net income taxes) and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation or administration
of any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the other Loan Documents and any such other documents, and
(e) to pay, indemnify, and hold each Lender and the
Administrative Agent (and their respective directors, officers, employees and
agents) harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits and reasonable
out-of-pocket costs, expenses or disbursements (including, without limitation,
the reasonable fees and expenses of the same counsel for all of the Lenders or
the Administrative Agent (absent a conflict of interest or inability to join the
relevant actions or proceedings, in which additional counsel may be retained by
the Administrative Agent and Lenders)) of any kind or nature whatsoever with
respect to any claim, litigation, investigation or
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<PAGE> 203
proceeding relating to the execution, delivery, enforcement, performance and
administration of this Agreement and the other Loan Documents and any such other
documents or any use of any of the Extensions of Credit, including, without
limitation, any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Borrower, any of its Subsidiaries or any of the Properties (all the
foregoing in this clause (d), collectively, the "Indemnified Liabilities"),
provided that the Borrower shall have no obligation hereunder to the
Administrative Agent or any Lender (or their respective directors, officers,
employees or agents) with respect to Indemnified Liabilities arising from the
bad faith, gross negligence or willful misconduct of the Administrative Agent or
any such Lender (or their respective directors, officers, employees or agents,
as the case may be), provided, however, that in connection with the enforcement
or preservation of any rights under this Agreement or the other Loan Documents,
the Borrower shall not be required to pay or reimburse the Lenders for more than
one counsel to all of the Lenders and for one counsel to the Administrative
Agent. The agreements in this subsection shall survive the termination of this
Agreement and the repayment of the Loans and all other amounts payable
hereunder.
11.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Agents and their respective successors
and assigns, except that the Borrower may not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent of
each Lender.
(b) Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any time
sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any interest of such Lender in any
Letter of Credit, any Commitment of such Lender or any other interest of such
Lender hereunder and under the other Loan Documents. In the event of any such
sale by a Lender of a participating interest to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Loan for
all purposes under this Agreement and the other Loan Documents, and the Borrower
and the Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. No Lender shall be entitled to create in
favor of any Participant, in the participation agreement pursuant to which such
Participant's participating interest shall be created or otherwise, any right to
vote on, consent to or approve any matter relating to this Agreement or any
other Loan Document except for those specified in clauses (a) and (b) of the
proviso to subsection 11.1. The Borrower agrees that if amounts outstanding
under this Agreement are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff 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 that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in subsection 11.8(a) as fully as if it were a
Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of subsections 4.9, 4.10 and 4.11 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if it were a Lender; provided that, in the case of subsection 4.10, such
Participant shall have complied with the requirements of said subsection and
provided, further, that the aggregate amounts payable to a Participant and the
transferor Lender pursuant to any such subsection shall not exceed the amounts
the transferor Lender would have been entitled to receive had no such transfer
occurred. Each Lender promptly shall notify the Administrative Agent in writing
of the sale of any participating interest in a Loan to any Participant.
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<PAGE> 204
(c) Any Lender may, in the ordinary course of its
business of making or investing in loans and in accordance with applicable law,
at any time and from time to time assign to any Lender or any Affiliate thereof
or, with the consent of the Administrative Agent and, if no Event of Default
then is continuing, except as expressly provided herein, the Borrower (which
consent shall not be unreasonably withheld), to an additional bank, financial
institution or other entity that is then engaged in the business of lending
money or for the purposes of the Term Loans, engaged in the business of
investing in loans (an "Assignee") all or any part of its rights and obligations
under this Agreement and the other Loan Documents pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit A, executed by such Assignee
and such assigning Lender (and, in the case of an Assignee that is not then a
Lender or an affiliate thereof, by the Borrower and the Administrative Agent)
and delivered to the Administrative Agent for its acceptance and recording in
the Register, with a copy thereof to the Borrower, provided that (a) in the case
of any such assignment (other than to a Lender or an Affiliate of a Lender), the
sum of the aggregate principal amount of the Loans, the aggregate amount of the
L/C Obligations and the aggregate amount of the unused Commitments being
assigned and, if such assignment is of less than all of the rights and
obligations of the assigning Lender, the sum of the aggregate principal amount
of the Loans, the aggregate amount of the L/C Obligations and the aggregate
amount of the unused Commitments remaining with the assigning Lender are each
not less than $10,000,000 (or such lesser amount as may be agreed to by the
Borrower and the Administrative Agent), (b) assignments shall not be required to
be made on a ratable basis between the Commitments and/or Loans held by any
Lender, (c) assignments by a Revolving Credit Lender of all or a portion of its
Revolving Loans and/or Revolving Credit Commitment must be to either (i) a
commercial bank having total assets in excess of $5,000,000,000 or any of its
Affiliates, or (ii) a finance company, insurance company or other financial
institution or fund which is regularly engaged in the making of, purchasing or
investing in loans and having total assets in excess of $300,000,000 ("Eligible
Assignee"), (d) any Lender may make an assignment consisting solely of Term
Loans (without regard to the requirements of clause (a) above) so long as the
aggregate principal amount of Term Loans so assigned (if less than the
Assignor's entire interest) is at least $5,000,000, (e) the consent of the
Borrower shall be required in connection with any assignment to a Lender or an
Affiliate of a Lender solely to the extent that after giving effect thereto such
Lender or Affiliate would be entitled to receive any greater payment under
subsection 4.9, 4.10 or 4.11 at such time than the assigning Lender is entitled
to receive at such time, (f) the consent of the Administrative Agent and the
Borrower shall not be required in connection with any bulk assignment by a
Lender of its entire loan portfolio (including its rights and obligations under
this Agreement and the other Loan Documents) to an Eligible Assignee, and (g)
the Administrative Agent shall at all times hold at least (i) $30,000,000 of the
Commitments minus (ii) its Commitment Percentage of any reductions of the
Commitments applicable to all Lenders. Upon such execution, delivery, acceptance
and recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder with a Commitment as set forth therein,
and (y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, 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,
such assigning Lender shall cease to be a party hereto).
(d) The Administrative Agent, on behalf of the Borrower,
shall maintain at the address of the Administrative Agent referred to in
subsection 11.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the names and addresses of the
Lenders and the Commitments of, and principal amounts of the Loans owing to,
each Lender from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrower, the Administrative Agent and
the Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder shall be effective only upon appropriate entries with
respect thereto being made in the Register.
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<PAGE> 205
The Register shall be available for inspection by the Borrower or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an Assignee (and, in the case of an Assignee
that is not then a Lender or an Affiliate thereof, by the Borrower and the
Administrative Agent) together with payment to the Administrative Agent of a
registration and processing fee of $3,000, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower; provided, however, that no such registration and processing fee
shall be paid in connection with the initial syndication of the Loans.
(f) The Borrower authorizes each Lender to disclose to
any Participant or Assignee (each, a "Transferee") and any prospective
Transferee, subject to the provisions of subsection 11.16, any and all financial
information in such Lender's possession concerning the Borrower and its
Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection do not prohibit any pledge or
assignment by a Lender of any Loan or Note to any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors or other applicable law
or the creation of a security interest by any Lender other than a commercial
bank.
(h) So long as no Default or Event of Default shall have
then occurred and be continuing, no assignment by a Lender pursuant to this
subsection 11.6 shall be permitted without the consent of the Administrative
Agent and the Borrower if, after giving effect thereto, any Lender other than
the Administrative Agent would hold in excess of 20% of the aggregate Voting
Percentages at any such time.
11.7 REPLACEMENT OF LENDERS UNDER CERTAIN CIRCUMSTANCES. The
Borrower shall be permitted to replace any Lender which (a) requests
reimbursement for amounts owing pursuant to subsection 4.9 or 4.10, (b) has
received a written notice from the Borrower of an impending change in law that
would entitle such Lender to payment of additional amounts under subsection 4.9
or 4.10(a), unless such Lender designates a different lending office before such
change in law becomes effective and such alternate lending office obviates the
need for the Borrower to make payments of additional amounts under subsection
4.9 or 4.10(a), (c) is affected in the manner described in subsection 4.6(b) or
4.8 and as a result thereof any of the actions described in subsection 4.6 or
4.8, as the case may be, are required to be taken, (d) does not consent to any
proposed amendment, supplement, modification, consent or waiver of any
provisions of this Agreement or any other Loan Document as contemplated by the
last sentence of subsection 11.1, or (e) defaults in its obligation to make
Loans or issue, or participate in, any Letter of Credit, provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement,
(iii) the Borrower shall repay (or the replacement bank or institution shall
purchase, at par) all Loans and other amounts owing to such replaced Lender
prior to the date of replacement, (iv) the Borrower shall be liable to such
replaced Lender under subsection 4.11 if any Eurodollar Loan owing to such
replaced Lender shall be prepaid (or purchased) other than on the last day of
the Interest Period relating thereto, (v) the replacement bank or institution,
if not already a Lender, and the terms and conditions of such replacement, shall
be reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions of
subsection 11.6 (provided that the Borrower or replacement Lender shall be
obligated to pay the registration and processing fee referred to therein), (vii)
until such time as such replacement shall be consummated, the Borrower shall pay
all additional amounts (if any) required pursuant to subsection 4.9 or 4.10, as
the case
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<PAGE> 206
may be, and (viii) any such replacement shall not be deemed to be a waiver of
any rights which the Borrower, the Administrative Agent or any other Lender
shall have against the replaced Lender.
11.8 ADJUSTMENTS. If any Lender (a "benefited Lender") shall at any
time receive any payment of all or part of its Loans or the Reimbursement
Obligations owing to it, or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by set-off, or
otherwise), and, after giving effect to any such payment or the receipt of any
such collateral, such benefited Lender shall have received a greater
proportionate payment (determined in accordance with subsection 4.7) or interest
in collateral than that received by any other relevant Lender, if any, in
respect of such other relevant Lender's relevant Loans or, if applicable, the
Reimbursement Obligations owing to it, or interest thereon, such benefited
Lender shall purchase for cash from the other relevant Lenders a participating
or other similar interest in such portion of each such other relevant Lender's
relevant Loans or, if applicable, the Reimbursement Obligations owing to it, or
shall provide such other relevant Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders entitled to the same under this
subsection, provided, however, that if all or any portion of such excess payment
or benefits is thereafter recovered from such benefited Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.
11.9 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
11.10 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.11 INTEGRATION. This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to the subject matter hereof or thereof not
expressly set forth or referred to herein or in the other Loan Documents.
11.12 TERMINATION. This Agreement shall terminate when the
Commitments have terminated or expired, no Loan or Letter of Credit is
outstanding (other than Letters of Credit which have been cash collateralized or
supported by a "back to back" letter of credit, in each case in a manner
substantially the same as the manner described pursuant to the penultimate
paragraph of Section 3.10(c)) and the other then unpaid or accrued Credit
Agreement Obligations have been paid in full.
11.13 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS.
11.14 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
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<PAGE> 207
(b) neither the Administrative Agent nor any Lender has
any fiduciary relationship with or fiduciary duty to the Borrower arising out of
or in connection with this Agreement or any of the other Loan Documents, and the
relationship between the Administrative Agent and the Lenders, on the one hand,
and the Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other
Loan Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrower and the Lenders or among the
Borrower and the Administrative Agent.
11.15 WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.16 CONFIDENTIALITY. Each of the Administrative Agent and the
Lenders agrees to keep confidential all information provided to it by the
Borrower or the Administrative Agent pursuant to or in connection with this
Agreement that is designated by the Borrower in writing as confidential (the
"Confidential Information"); provided that nothing herein shall prevent any
Lender or the Administrative Agent from disclosing any such Confidential
Information (i) to the Administrative Agent or any other Lender, (ii) to any
Transferee or prospective Transferee which receives such Confidential
Information having been made aware of the confidential nature thereof and which
has agreed in writing to be bound by the terms of this subsection 11.16, (iii)
to its directors, officers, employees, employees of affiliates, examiners and
professional advisers who have a need to know such Confidential Information in
accordance with customary banking practices and who receive such Confidential
Information having been made aware of the restrictions of this subsection and,
in the case of professional advisers, having agreed to be bound thereby, (iv)
upon the request or demand of any Governmental Authority having jurisdiction
over such Lender, (v) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (vi) in connection with the exercise of any remedy
hereunder, (vii) which is now or hereafter becomes generally available to the
public other than as a result of a disclosure by such Lender or the
Administrative Agent or a disclosure known to such Lender or the Administrative
Agent to have been made by any person or entity to which such Lender or the
Administrative Agent has delivered such Confidential Information, (viii) which
was available to such Lender or the Administrative Agent prior to its disclosure
to such Lender or the Administrative Agent by the Borrower, or (ix) which
becomes available to such Lender or the Administrative Agent from a source other
than the Borrower, provided that such source is not (1) known to such Lender or
the Administrative Agent to be bound by a confidentiality agreement with the
Borrower or (2) known to such Lender or the Administrative Agent to be otherwise
prohibited from transmitting the information to such Lender or the
Administrative Agent by a contractual, legal or fiduciary obligation.
11.17 SECTION HEADINGS. The Section and subsection headings in this
Agreement are for convenience in reference only and shall not deemed to alter or
affect the interpretation of any provisions hereof.
11.18 JUDGMENT CURRENCY. The obligation of the Borrower under this
Agreement to make payments in respect of each Reimbursement Obligation in the
currency in which it is outstanding (the "Agreement Currency") shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any other currency (the "Judgment Currency")
except to the extent that such tender or recovery of the Judgment Currency
results in the effective receipt by the Lenders or the relevant Issuing Banks,
as the case may be, of the full amount of the Agreement Currency payable under
this Agreement and the Borrower agrees to indemnify the Lenders or the relevant
Issuing Banks, as the case may be (and the Lenders or the relevant Issuing
Banks, as the case may be, shall have an additional legal claim)
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<PAGE> 208
for any difference between such full amount and the amount effectively received
by such Lenders or such Issuing Banks, as the case may be, pursuant to any such
tender or recovery. Each Lender's or Issuing Bank's determination of amounts
effectively received by such Lender or Issuing Bank shall be presumed correct
absent manifest error. If a judgment in respect of the obligations of the
Borrower hereunder is rendered in a currency other than the Agreement Currency
and if, upon receipt of the full amount of such judgment in such currency and
the conversion into, and receipt of such amount in the Agreement Currency, such
amount of the Agreement Currency exceeds the obligations of the Borrower
hereunder, such excess amount shall be remitted to the Borrower by the Lenders
or the relevant Issuing Banks, as the case may be. The obligations of the
Borrower under this subsection shall survive the termination of this Agreement
and the repayment of the Loans and all other amounts payable hereunder.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE> 209
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS EXIT FACILITY
CREDIT AGREEMENT TO BE DULY EXECUTED AND DELIVERED BY THEIR PROPER AND DULY
AUTHORIZED OFFICERS AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.
SERVICE MERCHANDISE COMPANY, INC.,
AS THE BORROWER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
FLEET RETAIL FINANCE INC.
AS ADMINISTRATIVE AGENT, AS A LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
FLEET NATIONAL BANK,
AS AN ISSUING BANK
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
FOOTHILL CAPITAL CORPORATION,
AS CO-AGENT AND LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
NATIONAL CITY COMMERCIAL FINANCE INC.,
AS CO-AGENT AND LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
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<PAGE> 210
JACKSON NATIONAL LIFE INSURANCE COMPANY
AS CO-AGENT AND LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
HELLER FINANCIAL INC.,
AS DOCUMENTATION AGENT AND LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
CONGRESS FINANCIAL CORPORATION (SOUTHERN)
AS LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
DEBIS FINANCIAL SERVICES, INC.
AS LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
GUARANTY BUSINESS CREDIT CORPORATION
AS LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
FINOVA CAPITAL CORPORATION
AS LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
GMAC BUSINESS CREDIT, INC.
AS LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
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<PAGE> 211
IBJ WHITEHALL BUSINESS CREDIT CORPORATION
AS LENDER
BY:
---------------------------------------
NAME:
-------------------------------------
TITLE:
------------------------------------
LASALLE BUSINESS CREDIT, INC.
AS LENDER
BY:
---------------------------------------
NAME:
-------------------------------------
TITLE:
------------------------------------
ORIX BUSINESS CREDIT, INC.
AS LENDER
BY:
---------------------------------------
NAME:
-------------------------------------
TITLE:
------------------------------------
SOVEREIGN BANK
AS LENDER
BY:
---------------------------------------
NAME:
-------------------------------------
TITLE:
------------------------------------
THE PROVIDENT BANK
AS LENDER
BY:
---------------------------------------
NAME:
-------------------------------------
TITLE:
------------------------------------
GMAC COMERICAL CREDIT, LLC
AS LENDER
BY:
---------------------------------------
NAME:
-------------------------------------
TITLE:
------------------------------------
FOOTHILL INCOME TRUST, L.P.
AS LENDER
BY:
------------------------------------
NAME:
----------------------------------
TITLE:
---------------------------------
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<PAGE> 212
SCHEDULE 1.1(A)
TO CREDIT AGREEMENT
COMMITMENTS
<TABLE>
<CAPTION>
LENDER TOTAL REVOLVER TERM LOAN
=========================================================================================================
<S> <C> <C> <C>
FLEET RETAIL FINANCE INC.
- ---------------------------------------------------------------------------------------------------------
FOOTHILL CAPITAL CORPORATION
- ---------------------------------------------------------------------------------------------------------
NATIONAL CITY COMMERCIAL
FINANCE INC.
- ---------------------------------------------------------------------------------------------------------
JACKSON NATIONAL LIFE
INSURANCE COMPANY
- ---------------------------------------------------------------------------------------------------------
HELLER FINANCIAL INC.
- ---------------------------------------------------------------------------------------------------------
CONGRESS FINANCIAL
CORPORATION
- ---------------------------------------------------------------------------------------------------------
DEBIS FINANCIAL SERVICES, INC.
- ---------------------------------------------------------------------------------------------------------
GUARANTY BUSINESS CREDIT
CORPORATION
- ---------------------------------------------------------------------------------------------------------
FINOVA CAPITAL CORPORATION
- ---------------------------------------------------------------------------------------------------------
GMAC BUSINESS CREDIT LLC
- ---------------------------------------------------------------------------------------------------------
IBJ WHITEHALL BUSINESS CREDIT
CORPORATION
- ---------------------------------------------------------------------------------------------------------
LASALLE BUSINESS CREDIT, INC.
- ---------------------------------------------------------------------------------------------------------
ORIX BUSINESS CREDIT, INC.
- ---------------------------------------------------------------------------------------------------------
SOVEREIGN BANK
- ---------------------------------------------------------------------------------------------------------
THE PROVIDENT BANK
- ---------------------------------------------------------------------------------------------------------
GMAC COMMERCIAL CREDIT,
LLC
- ---------------------------------------------------------------------------------------------------------
FOOTHILL INCOME TRUST, L.P.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 213
Schedule 11.2
TO CREDIT AGREEMENT
ADDRESS OF OTHER PARTIES
<TABLE>
<CAPTION>
Name of Lender Address for Notices Contact
============================================= ================================== =================================
<S> <C> <C>
Foothill Capital Corporation 11111 Santa Monica Blvd. Michael Baranowski
Suite 1500
Los Angeles, CA 90025
- --------------------------------------------- ---------------------------------- ---------------------------------
National City Commercial 1965 East Sixth Street, Carla Kehres
Finance Inc. Suite 400
Cleveland, OH 44114
- --------------------------------------------- ---------------------------------- ---------------------------------
Jackson National Life Insurance c/o PPM America, Inc. Michael Williams
Company 225 West Wacker Drive,
Suite 1100
Chicago, IL 60606
- --------------------------------------------- ---------------------------------- ---------------------------------
Heller Financial Inc. 150 East 42nd Street Thomas Bukowski
New York, NY 10017
- --------------------------------------------- ---------------------------------- ---------------------------------
Congress Financial Corporation 1133 Avenue of the Robert Milhorat
(Southern) Americas
New York, NY 10036
============================================= ================================== =================================
debis Financial Services, Inc. 89 Headquarters Plaza Chris Esposito
North, Suite 1444, Room
1417
Morristown, NJ 07960
============================================= ================================== =================================
Guaranty Business Credit d/b/a Fidelity Funding James Johnson
Corporation 8333 Douglas Avenue,
Suite 530
Dallas, TX 75225
============================================= ================================== =================================
FINOVA Capital Corporation 311 S. Wacker Drive, Thomas Gibbons
Suite 4400
Chicago, IL 60606
============================================= ================================== =================================
LaSalle Business Credit, Inc. 565 Fifth Avenue, 27th Anthony J. Veith
Floor
New York, NY 10017
============================================= ================================== =================================
GMAC Business Credit, LLC 630 Fifth Avenue, 30th Richard E. Peller
Floor
New York, NY 10104
============================================= ================================== =================================
IBJ Whitehall Business Credit One State Street, 6th Floor Thomas Bayer
Corporation New York, NY 10004
============================================= ================================== =================================
ORIX Business Credit, Inc. 846 East Algonquin Road, Kevin R. Kirsten
Suite 101
Schaumburg, IL 60173
============================================= ================================== =================================
Sovereign Bank 50 Rowes Wharf Joseph Becker
Suite 430
Boston, MA 02110
============================================= ================================== =================================
</TABLE>
Schedule 11.2 to
SERVICE MERCHANDISE COMPANY, INC.
POST PETITION CREDIT AGREEMENT
<PAGE> 214
<TABLE>
<S> <C> <C>
The Provident Bank One East Fourth Street, Jose Garde
249A
Cincinnati, OH 45202
============================================= ================================== =================================
GMAC Commercial Credit, LLC 1290 Avenue of the David Duffy
Americas
New York, NY 10104
============================================= ================================== =================================
Foothill Income Trust, L.P. 11111 Santa Monica Michael Bohannon
Boulevard
Suite 1500
Los Angeles, CA 90025
============================================= ================================== =================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SERVICE
MERCHANDISE COMPANY, INC. FORM 10-Q FOR QUARTERLY PERIOD ENDED APRIL 2, 2000 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS DETAILED
IN PART I OF THE FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-03-2000
<PERIOD-END> APR-02-2000
<CASH> 29,513
<SECURITIES> 0
<RECEIVABLES> 23,614
<ALLOWANCES> 17,479
<INVENTORY> 644,368
<CURRENT-ASSETS> 704,190
<PP&E> 346,340
<DEPRECIATION> 377,099
<TOTAL-ASSETS> 1,110,067
<CURRENT-LIABILITIES> 309,561
<BONDS> 526,094
0
0
<COMMON> 99,976<F1>
<OTHER-SE> (105,444)
<TOTAL-LIABILITY-AND-EQUITY> 1,110,067
<SALES> 343,029
<TOTAL-REVENUES> 343,029
<CGS> 255,895
<TOTAL-COSTS> 255,895
<OTHER-EXPENSES> 114,628<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,892
<INCOME-PRETAX> (38,386)
<INCOME-TAX> 0
<INCOME-CONTINUING> (38,386)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,386)
<EPS-BASIC> (0.38)
<EPS-DILUTED> (0.38)
<FN>
<F1>AMOUNT REPRESENTS THE NUMBER OF SHARES OF $0.50 PAR VALUE COMMON STOCK AND
OUTSTANDING.
<F2>AMOUNT INCLUDES I) DEPRECIATION AND AMORTIZATION II) SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES III) OTHER INCOME, NET IV) RESTRUCTURING CHARGE AND V)
REORGANIZATION ITEMS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SERVICE
MERCHANDISE COMPANY, INC. FORM 10-Q FOR QUARTERLY PERIOD ENDED APRIL 4, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS DETAILED
IN PART I OF THE FORM 10-Q.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> APR-04-1999
<CASH> 80,956
<SECURITIES> 0
<RECEIVABLES> 20,456
<ALLOWANCES> 870
<INVENTORY> 739,267
<CURRENT-ASSETS> 918,434
<PP&E> 406,471
<DEPRECIATION> 541,258
<TOTAL-ASSETS> 1,392,368
<CURRENT-LIABILITIES> 304,839
<BONDS> 638,599
0
0
<COMMON> 100,167<F1>
<OTHER-SE> 1,247
<TOTAL-LIABILITY-AND-EQUITY> 1,392,368
<SALES> 511,695
<TOTAL-REVENUES> 511,695
<CGS> 414,407
<TOTAL-COSTS> 414,407
<OTHER-EXPENSES> 232,186<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,102
<INCOME-PRETAX> (160,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (160,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 7,851
<CHANGES> 6,566
<NET-INCOME> (174,417)
<EPS-BASIC> (1.75)
<EPS-DILUTED> (1.75)
<FN>
<F1>AMOUNT REPRESENTS THE NUMBER OF SHARES OF $0.50 PAR VALUE COMMON STOCK AND
OUTSTANDING.
<F2>AMOUNT INCLUDES I) DEPRECIATION AND AMORTIZATION II) SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES III) OTHER INCOME, NET IV) RESTRUCTURING CHARGE AND V)
REORGANIZATION ITEMS.
</FN>
</TABLE>
