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REVOLVING CREDIT AGREEMENT
dated as of August 12, 1996
among
GANDER MOUNTAIN, INC.
AS BORROWER,
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GRS, INC. and GMO, INC.
AS GUARANTORS
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and
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS LENDER
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$25,000,000
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS; CONSTRUCTION ................................ 1
1.1 Certain Definitions. ...................................... 1
1.2 Construction. ............................................. 14
1.3 Accounting Principles. .................................... 15
ARTICLE II THE CREDITS ............................................. 15
2.1 Revolving Credit Loans. ................................... 15
(a) The Revolving Credit Commitment. ................. 15
(b) Revolving Credit. ................................ 16
2.2 Note. ..................................................... 16
2.3 Making of Loans. .......................................... 16
2.4 Reduction of Commitment; Mandatory Prepayment;
Optional Prepayment. ..................................... 17
(a) Reduction of the Commitment; Optional Reduction
of the Commitment. ................................. 17
(b) Mandatory Prepayment. ............................... 18
(c) Optional Prepayment. ................................ 18
2.5 Interest Rate. ............................................ 19
2.6 Interest Payment Dates. ................................... 19
2.7 Amortization. ............................................. 19
2.8 Payments. ................................................. 19
(a) Time, Place and Manner. ............................. 19
(b) Interest Upon Events of Default. .................... 20
(c) Facility Fee. ....................................... 20
(d) Unused Line Fee. .................................... 20
(e) Letter of Credit Fees. .............................. 20
(f) Collateral Management Fee. .......................... 21
(g) Early Termination Fee. .............................. 21
(h) Fees. ............................................... 21
2.9 Use of Proceeds. .......................................... 21
2.10 Capital Adequacy. ........................................ 21
2.11 Right of Set-Off. ........................................ 22
2.12 Taxes. ................................................... 23
ARTICLE III LETTERS OF CREDIT ...................................... 24
3.1 Letters of Credit. ........................................ 24
(a) General. ............................................ 24
(b) Request for Issuance. ............................... 28
ARTICLE IV BORROWING BASE .......................................... 28
4.1 Conditions of Lending and Assisting in Establishing or
Opening Letters of Credit. ............................. 28
4.2 Mandatory Prepayment. ..................................... 28
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4.3 Rights and Obligations Unconditional. ........... 28
4.4 Borrowing Base Certificate. ..................... 28
4.5 General Provisions. ............................. 29
ARTICLE V SECURITY; ADMINISTRATIVE PRIORITY ..................... 29
5.1 Grant of Lien and Security Interest. ............ 29
5.2 Administrative Priority. ........................ 30
5.3 Grants, Rights and Remedies Cumulative. ......... 30
5.4 No Filings Required. ............................ 30
5.5 Survival. ....................................... 31
5.6 Account Warranties and Notification. ............ 31
ARTICLE VI REPRESENTATIONS AND WARRANTIES ...................... 32
6.1 Organization and Qualification. ................. 32
6.2 Authority and Authorization. .................... 32
6.3 Execution and Binding Effect. ................... 32
6.4 Authorizations and Filings. ..................... 33
6.5 Absence of Conflicts. ........................... 33
6.6 Financial Statements. ........................... 33
(a) Historical Statements. ................... 33
(b) Projections. ............................. 34
6.7 No Event of Default. ............................ 34
6.8 Litigation. ..................................... 34
6.9 ERISA. .......................................... 34
6.10 Taxes. ......................................... 35
6.11 Financial Accounting Practices, etc. ........... 35
6.12 Power To Carry On Business. .................... 35
6.13 No Material Adverse Change. .................... 36
6.14 Existing Liens; Capitalized Leases. ............ 36
6.15 Compliance with Laws. .......................... 36
6.16 Accurate and Complete Disclosure. .............. 36
6.17 Insurance. ..................................... 36
6.18 Environmental Matters. ......................... 37
6.19 Administrative Priority; Lien Priority. ........ 37
6.20 Bankruptcy Court Order. ........................ 37
6.21 Real Property. ................................. 38
6.22 Location of Bank Accounts. ..................... 38
6.23 Use of Proceeds. ............................... 38
6.24 Subsidiaries. .................................. 38
6.25 Operating Lease Obligations. ................... 37
6.26 Schedules. ..................................... 38
6.27 Tradenames. .................................... 39
6.28 Solvency. ...................................... 38
6.29 Inventory. ..................................... 39
ARTICLE VII CONDITIONS OF CREDIT EXTENSIONS ..................... 39
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7.1 Conditions Precedent to Initial Credit Extension.....................39
7.2 Conditions Precedent to Each Credit Extension........................41
ARTICLE VIII AFFIRMATIVE COVENANTS...........................................42
8.1 Reporting and Information Requirements...............................43
(a) Annual Reports.................................................43
(b) Quarterly Reports..............................................44
(c) Monthly Reports................................................44
(d) Weekly Reports.................................................45
(e) Certain Reports................................................45
(f) Pleading, etc..................................................46
(g) Reports to Committees..........................................46
(h) Other Reports and Information..................................46
(i) Further Information............................................46
(j) Projections....................................................46
(k) Notice of Event of Default.....................................46
(l) Notice of Material Adverse Change..............................47
(m) Visitation and Verification....................................47
(n) Environmental..................................................47
8.2 Preservation of Existence and Franchises.............................47
8.3 Insurance............................................................48
8.4 Maintenance of Properties............................................48
8.5 Financial Accounting Practices, etc..................................48
8.6 Compliance with Laws.................................................49
8.7 Further Assurance....................................................49
8.8 Cash Management System...............................................49
8.9 Taxes................................................................50
8.10 Pension Plans.......................................................50
ARTICLE IX NEGATIVE COVENANTS................................................51
9.1 Interim Bankruptcy Court Order; Final Bankruptcy Court
Order; Administrative Priority; Lien Priority; Payment of
Claims............................................................51
9.2 Capital Expenditures.................................................52
9.3 Liens................................................................52
9.4 Indebtedness.........................................................53
9.5 Guarantees and Contingent Liabilities................................54
9.6 Loans, Advances and Investments......................................54
9.7 Dividends and Related Distributions..................................55
9.8 Merger, etc..........................................................55
9.9 Disposition of Assets................................................55
9.10 Subsidiaries and Affiliates.........................................56
9.11 Continuation of or Change In Business...............................56
9.12 Markup and Markdown Policies........................................56
9.13 Environmental.......................................................56
9.14 ERISA...............................................................56
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9.15 Payments.........................................................57
ARTICLE X DEFAULTS..........................................................57
10.1 Events of Default................................................57
10.2 Consequence of an Event of Default...............................60
10.3 Certain Remedies.................................................61
ARTICLE XI MISCELLANEOUS....................................................61
11.1 Holidays.........................................................61
11.2 Records..........................................................61
11.3 Amendments and Waivers...........................................61
11.4 No Implied Waiver; Cumulative Remedies...........................62
11.5 Notices..........................................................62
11.6 Expenses; Taxes; Attorneys' Fees; Indemnification................62
11.7 Application......................................................64
11.8 Severability.....................................................64
11.9 Governing Law....................................................64
11.10 Prior Understandings............................................64
11.11 Duration; Survival..............................................64
11.12 Counterparts....................................................65
11.13 Successors and Assigns; Participations..........................65
11.14 CIT as Party in Interest........................................65
11.15 Confidentiality.................................................66
11.16 Waiver of Jury Trial............................................66
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REVOLVING CREDIT AGREEMENT
THIS AGREEMENT, dated as of August 12, 1996, among GANDER MOUNTAIN, INC.,
a Wisconsin corporation (the "Borrower"), GRS, INC., a Wisconsin corporation
("GRS"), GMO, INC., a Wisconsin corporation ("GMO") and THE CIT GROUP/BUSINESS
CREDIT, INC. ("CIT").
BACKGROUND
The Borrower has filed or intends to file a petition under Chapter 11 of
Title 11 of the United States Code and is or will be the debtor in possession
in the case currently pending or to be pending in the Bankruptcy Court (defined
below). GRS and GMO are wholly owned subsidiaries of Borrower and each intends
to file or has filed a petition under Chapter 11 of Title 11 of United States
Code concurrently with Borrower. The Borrower has requested CIT to provide the
Borrower with a Twenty-Five Million Dollar ($25,000,000) revolving credit
facility, including a Three Million Dollar ($3,000,000) subfacility for the
issuance of letters of credit, which facility shall be limited to Fifteen
Million Dollars ($15,000,000) with a Three Million Dollar ($3,000,000)
subfacility for the issuance of letters of credit until the Final Bankruptcy
Court Order (as hereinafter defined) shall have been duly entered), and,
subject to the terms and conditions set forth herein, CIT has agreed to provide
such facility.
In consideration of the mutual covenants herein contained and intending to
be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.1 Certain Definitions.
In addition to other words and terms defined elsewhere in this Agreement,
as used herein the following words and terms shall have the following meanings,
respectively, unless the context hereof otherwise clearly requires:
"Accounts" shall mean: (a) accounts (as defined in the U.C.C.) and any
and all other receivables (whether or not specifically listed on schedules
furnished to CIT), including, without limitation, all accounts created by or
arising from all of the Borrower's or GRS's or GMO's sales of goods or
rendition of services to its customers, and all accounts arising from sales or
rendition of services made under any of the Borrower's trade names or styles,
or through any of the Borrower's divisions or Subsidiaries; (b) any and all
instruments (as defined in the U.C.C.), documents (as defined in the U.C.C.),
contract rights (as defined in the U.C.C.) and chattel paper (as defined in the
U.C.C.); (c) unpaid seller's rights (including rescission, replevin,
reclamation and stoppage in transit) relating to the foregoing or arising
therefrom; (d)
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rights to any goods represented by any of the foregoing, including rights to
returned or repossessed goods; (e) reserves and credit balances arising
hereunder; (f) guarantees or collateral for any of the foregoing; (g) insurance
policies or rights relating to any of the foregoing; and (h) cash and non-cash
proceeds of any and all the foregoing.
"Affiliate" of a Person shall mean any Person which directly or indirectly
controls, or is controlled by, or is under common control with, such Person.
The term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Revolving Credit Agreement as amended,
modified, supplemented or restated from time to time.
"Availability" shall mean, as of any date of determination thereof, the
amount, if any, by which the Current Commitment exceeds the sum of the
outstanding Loans and Letter of Credit Exposure.
"Availability Date" shall mean the first date on which each of the
conditions set forth in Section 7.1 shall have been satisfied.
"Bank" shall mean Chase Manhattan Bank, N.A., its successor or any other
bank designated by Borrower to CIT from time to time that is reasonably
acceptable to CIT.
"Bankruptcy Code" shall mean Title 11, United States Code, 11 U.S.C.
Section Section 101 et seq., as amended.
"Bankruptcy Court" shall mean the United States Bankruptcy Court for the
Eastern District of Wisconsin or such other court having original jurisdiction
over the Chapter 11 Case.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA and subject to Title IV of ERISA (other than a Multiemployer
Plan) in respect of which the Borrower or any ERISA Affiliate is or within the
immediately preceding six (6) years was an " employer" as defined in Section
3(5) of ERISA.
"Book Value" shall mean, as to any Inventory in respect of which such
amount is to be determined, the lower of (i) cost (as reflected in the general
ledgers of the Borrower) or (ii) market value (both cost and market value being
determined, in accordance with GAAP calculated on the first in first out basis)
in each case exclusive of capitalized costs, including capitalized freight
charges.
"Borrower" shall have the meaning given that term in the introductory
paragraph to this Agreement.
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"Borrower's Account" shall have the meaning given that term in Section 2.8
(a) hereof.
"Borrowing Base" shall mean, at any time, (a) an amount equal to 65% of
the Book Value of Eligible Inventory plus (b) eighty percent (80%) of the Book
Value of Eligible Accounts, up to a maximum of Five Hundred Thousand Dollars
($500,000.00) (which lending formulas with respect to Eligible Inventory and
Eligible Accounts may be adjusted pursuant to Section 2.1(a)) less (c) any
Borrowing Base Reserves.
"Borrowing Base Certificate" shall have the meaning given that term in
Section 4.4(a) hereof.
"Borrowing Base Reserves" shall mean, as of any date of determination,
(i) the sum of: (a) the amount of prepetition and
postpetition gift certificates and customer credits multiplied by
1.0 less the Borrower's average gross margin over the preceding
six months, which product shall be multiplied by 65%; and (b) Two
Hundred Thousand Dollars($200,000) until all credit card servicers
have signed a depository agreement;
(ii) such amounts as CIT may from time to time establish and
revise in good faith reducing the amount of Loans, Letters of
Credit and Letter of Credit Guaranties which would otherwise be
available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by CIT in good faith, do or may affect either
(i) the Collateral or any other property which is security for the
Obligations or its value, (ii) the assets, business or prospects
of Borrower or (iii) the security interests and other rights of
CIT in the Collateral (including the enforceability, perfection
and priority thereof) or (b) to reflect CIT's good faith belief
that any collateral report or financial information furnished by
or on behalf of Borrower to CIT is or may have been incomplete,
inaccurate or misleading in any material respect or (c) in respect
of any state of facts which CIT determines in good faith
constitutes an Event of Default or Potential Default or (d) with
respect to unpaid sales, payroll, or similar taxes collected by
the Company on behalf of a taxing authority or any claims with
respect to such taxes by any taxing authority or (e) any other
reserves that CIT may establish after considering factors, whether
or not similar to the foregoing, that CIT determines, in its sole
judgment, may affect the risk, credit or otherwise, of lending to
the Borrower; and
(iii) the amount of the Carveout.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banking institutions are authorized or obligated to close in
Chicago, Illinois or New York, New York.
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"Capital Expenditures" shall mean, for any period the sum, without
duplication, of (i) the aggregate amount of all expenditures, except interest
capitalized during construction, during such period which, in accordance with
GAAP, are required to be included in property, plant or equipment or similar
fixed asset account plus (ii) the entire principal amount of any debt
obligations (including obligations under leases which have been or should be,
in accordance with GAAP, recorded as capital leases, to the extent required to
be so recorded) assumed in connection with any such expenditures.
"Capitalized Lease" shall mean at any time any lease which is required
under GAAP to be capitalized on the balance sheet of the lessee at such time,
and "Capitalized Lease Obligation" of any Person at any time shall mean the
aggregate amount which is required under GAAP to be reported as a liability on
the balance sheet of such Person at such time as lessee under a Capitalized
Lease.
"Carveout" shall have the meaning given that term in the Interim
Bankruptcy Court Order or the Final Bankruptcy Court Order, whichever is then
in effect.
"Cash Concentration Account" shall mean the deposit account maintained by
CIT at the Cash Concentration Account Bank which deposit account shall be under
the sole dominion and control of CIT.
"Cash Concentration Account Bank" shall mean Bank One, Milwaukee, N.A. or
such other bank as the Borrower may select with the written approval of CIT,
pursuant to an agreement substantially in the form of Exhibit A.
"Chapter 11 Case" shall mean, individually and collectively, the
bankruptcy cases arising out of the Chapter 11 petitions filed by Borrower, GRS
and GMO.
"CIT" shall have the meaning given that term in the introductory paragraph
to this Agreement.
"CIT Account" shall mean an account in the name of CIT designated to the
Borrower from time to time into which the Borrower shall make all payments to
CIT under this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each case
as in effect from time to time. References to sections of the Code shall be
constructed also to refer to any successor sections.
"Collateral" shall have the meaning given the term in Section 5.1 hereof.
"Containment" means any waste, pollutant, hazardous substance, toxic
substance or hazardous waste, including any such substance regulated under any
Environmental Law.
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"Credit Extension" shall mean (a) the making of any Loan by CIT or (b) the
issuance, or extension of the expiration date of, any Letter of Credit which
CIT assists the Borrower in opening or establishing.
"Current Commitment" shall have the meaning given to that term in Section
2.1 hereof.
"Depository Accounts" shall mean the lock-box or depository accounts
maintained by the Borrower for the collection of the cash of the Borrower and
the proceeds from the sale of the Inventory of the Borrower.
"Depository Bank" shall have the meaning given to that term in Section
6.22.
"Designated Borrowing Officer" shall mean Ken Guerrini, Kenneth Bloom or
Ralph Freitag or such other officer as shall be designated in writing by the
Borrower to CIT.
"Designated Financial Officer" of a Person shall mean the individual
designated from time to time by the Board of Directors or governing body
performing like functions of such Person to be the chief financial officer or
Treasurer of such Person (and individuals designated from time to time by the
Board of Directors or governing body performing like functions of such Person
to act in lieu of the chief financial officer or the Treasurer).
"Disbursement Account" shall mean the deposit account in the name of the
Borrower maintained at a bank in the United States designated by the Borrower
to CIT into which there shall be deposited proceeds of Loans and funds
disbursed to the Borrower by CIT.
"Documents of Title" shall mean all present and future documents (as
defined in the U.C.C.) including, without limitation all warehouse receipts,
bills of lading, shipping documents, chattel paper, instruments and similar
documents, all whether negotiable or not and all goods and Inventory relating
thereto and all cash and non-cash proceeds of the foregoing.
"Dollar", "Dollars" and the symbol "$" shall mean lawful money of the
united States of America.
"Eligible Accounts" shall mean the gross amount of the Borrower's, GRS's
and GMO's Accounts arising from the sale of Inventory and which conform to the
warranties contained herein and at all times continue to be acceptable to CIT
in the exercise of its reasonable business judgment, less, without duplication,
the sum of (a) any returns, discounts, claims, credits and allowances of any
nature (whether issued, owing , granted or outstanding) and (b) reserve for:
(i) sales to the United States of America or to any agency, department or
division thereof; (ii) foreign sales other than sales (x) secured by stand-by
letters of credit (in form and substance satisfactory to CIT) issued or
confirmed by, and payable at, banks having a place of business in the United
States of America and payable in United States currency, or (y) to customers
residing in Canada provided such sales otherwise comply with all of the other
criteria for eligibility hereunder, and are payable in United States currency;
(iii) accounts that
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remain unpaid more than ninety (90) days from invoice date; (iv) contras; (v)
sales to any company affiliated with Borrower in any way; (vi) bill and hold
(deferred shipment) or consignment sales; (vii) sales to any customer which is
(a) insolvent, (b) the debtor in any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any federal or state
law, (c) negotiating, or has called a meeting of its creditors for purposes of
negotiating, a compromise of its debts or (d) financially unacceptable to CIT
or has a credit rating unacceptable to CIT; (viii) all sales to any customer if
fifty percent (50%) or more of either (x) all outstanding invoices or (y) the
aggregate dollar amount of all outstanding invoices, are unpaid more than
ninety (90) days from invoice date or, with respect to Borrower's "E-Z Pay"
accounts, no payment is past due without regard to extensions granted; (ix)
vendor rebates; (x) customer list rentals; (xi) any other reasons deemed
necessary by CIT in its reasonable business judgment and which are customary
either in the commercial finance industry or in the lending practices of CIT;
and (xii) an amount representing , historically, returns, discounts, claims,
credits and allowances.
"Eligible Inventory" shall mean the finished goods Inventory of the
Borrower and pre-petition finished goods Inventory of GRS and GMO which at the
time of determination meets all the following qualifications:
(i) it is lawfully owned by the Borrower, GRS, or GMO (as the
case may be) and not subject to any Lien, security interest or
prior assignment (other than CIT's perfected first priority
security interest), it is not held on consignment and may be
lawfully sold;
(ii) it is (a) located in the Borrower's warehouse and retail
locations listed on Schedule 1.1 hereto other than Inventory that
was subject to a reserve on the balance sheet of the Borrower for
the fiscal year ended June 29, 1996 and not included in (iv)
below; (b) Inventory listed on the Borrower's perpetual inventory
records; and (c) not outlet center Inventory, returned goods
Inventory, or supplies Inventory; provided, however, that prior to
the entry of the Final Bankruptcy Court Order, such Inventory must
located in a jurisdiction for which CIT has received UCC searches
or other evidence reasonably satisfactory to CIT establishing the
absence of any Liens on the Inventory of the Borrower in such
jurisdiction;
(iii) it is determined in the reasonable judgment of CIT to
be, when taken as a whole, substantially similar in quality and
mix to the Inventory maintained by the Borrower in recent
historical operations prior to the Filing Date;
(iv) it is Inventory that has been valued after deducting the
greater of (A) 14% of the Book Value of all Inventory of the
Borrower and (B) the aggregate amount of reserves for (1)
markdowns, (2) shrinkage, (3) lay-a-ways and pack-a-ways, (4)
displays and open stock to the extent such stock is
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the type of stock that is customarily sold in a package, (5)
rejected, damaged, aged, obsolete, slow moving or otherwise
unsalable Inventory, (6) Inventory consisting of firearms during
any "waiting period" imposed by federal or state law or during the
period any applicable licenses for the sale of firearms by
Borrower, GRS or GMO is not in full force and effect, and (7) any
Borrowing Base Reserves or adjustments required by CIT pursuant to
Section 2.1(a); and
(v) it is in transit finished goods Inventory where: (a) the
supplier of merchandise has been paid or has received payment; (b)
the Inventory has been shipped by common carrier F.O.B. shipping
point; and (c) it was sold by a supplier which is not then selling
Inventory to Borrower on open terms; provided, however, that the
Book Value of such eligible in transit Inventory shall not exceed
at any one time One Million Five Hundred Thousand Dollars
($1,500,000) or it is in transit finished goods Inventory covered
by a documentary Letter of Credit.
"Entry Date" shall mean the date the Interim Bankruptcy Court Order is
entered.
"Environmental Law" means all federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect relating to the
regulation and protection of human health, safety, the environment and natural
resources. Environmental Laws include but are not limited to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amend (42
U.S.C. Section 9601 et seq.) ("CERCLA"); the Hazardous Material Transportation
Act, as amended (49 U.S.C. Section 180 et seq.); the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Section 6901 et seq.) ("RCRA"); the Toxic
Substance Control Act, as amended (42 U.S.C. Section 7401 et seq )
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, monetary obligations, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including
all reasonable fees, disbursements and expenses of counsel, expert and
consulting and disbursements and costs of investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
claim or demand by any other Person, and which relate to any environmental
condition or a Release.
"Environmental Lien" means any Lien in favor of any Governmental Authority
for Environmental Liabilities and Costs.
"Equipment" shall mean all present and hereafter acquired equipment (as
defined in the U.C.C.) including, without limitation, all machinery, equipment,
furnishings and fixtures, and all additions, substitutions and replacements
thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all proceeds
thereof, other than Equipment with respect to which a leasing or financing
arrangement executed prior to the date hereof prohibits the granting of a Lien.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA shall be constructed also to refer to any successor sections.
"ERISA Affiliate" shall mean any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as the Borrower, (ii) partnership or other trade or business (whether
or not incorporated) under common control (within the meaning of Section 414(c)
of the Code) with the Borrower, or (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of the Code) as the Borrower, any
corporation described in clause (i) above or any partnership or trade or
business described in clause (ii) above.
"Event of Default" shall mean any of the Events of Default described in
Section 10.1 hereof.
"Filing Date" shall mean the date on which the Chapter 11 Case was
commenced.
"Final Bankruptcy Court Order" shall mean the order of the Bankruptcy
Court approving the Loans made and to be made to the Borrower in accordance
with this Agreement, substantially in the form of the Interim Bankruptcy Court
Order, as the same may be amended, modified or supplemented from time to time
with the express written joinder or consent of CIT.
"GAAP" shall mean generally accepted accounting principles as such
principles shall be in effect in the Untied States at the Relevant Date.
"General Intangibles" shall have the meaning set forth in the U.C.C. and
shall include, without limitation, all present and future right, title and
interest in and to all tradenames, trademarks (together with the goodwill
associated therewith), patents, licenses, customer lists, distribution
agreements, supply agreements and tax refunds, together with all monies and
claims for monies now or hereafter due and payable in connection with any of
the foregoing or otherwise, and all proceeds thereof.
"Governmental Authority" shall mean any nation or government, any federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"GRS Collateral" shall mean the assets and property of GRS in which GRS
has granted CIT a security interest.
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"GMO Collateral" shall mean the assets and property of GMO in which GMO
has granted CIT a security interest.
"Guarantee" of or by any Person shall mean any obligation of such Person
guaranteeing any Indebtedness of any other Person (the "primary obligor"),
directly or indirectly through an agreement (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities, or
services for the purpose of assuring the owner of such Indebtedness against
loss, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness; provided, however, that the term
Guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
"Indebtedness" shall mean as to any Person (i) indebtedness for borrowed
money: (ii) indebtedness for the deferred purchase price of property or
services (other than property including Inventory and services purchased in the
ordinary course of business); (iii) indebtedness evidenced by bonds,
debentures, notes or other similar instruments (other than performance, surety
and appeal or other similar bonds arising in the ordinary course of business);
(iv) obligations and liabilities secured by a Lien, claim or encumbrance, upon
property owned by such Person, whether or not owing by such Person and even
though such Person has not assumed or become liable for the payment thereof;
(v) obligations and liabilities directly or indirectly Guaranteed by such
Person; and (vi) obligations or liabilities created or arising under any
conditional sales contract or other title retention agreement with respect to
property used and/or acquired by such Person, even though the rights and
remedies of the lessor, seller and/or lender thereunder are limited to
repossession of such property.
"Indemnified Parties" shall have the meaning given that term in Section
11.6 hereof.
"Inactive Subsidiaries" means, collectively, MAC of Minnesota, Inc., a
Minnesota corporation, and Gander International Corporation, a Barbados
corporation.
"Interim Bankruptcy Court Order" shall mean the order of the Bankruptcy
Court with respect to the Borrower in the form of Exhibit B hereto, as the same
may be amended, modified or supplemented from time to time with the express
written joinder or consent of CIT and the Borrower.
"Inventory" shall mean all present or hereafter acquired goods and
merchandise held for sale or eventual sale in the normal course of business,
including, but not limited to, all materials and supplies used or usable in
connection with the shipping, storing, advertising or sale of such goods.
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"Law" shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award
of any Governmental Authority.
"Letter of Credit Cash Collateral Account" shall mean the deposit account
maintained at Chemical Bank in New York , New York or such other bank as CIT
may select which deposit account shall be under the sole dominion and control
of CIT.
"Letter of Credit Application:" shall have the meaning given to that term
in Section 3.1 hereof.
"Letter of Credit" shall have the meaning given to that term in Section
3.1.
"Letter of Credit Exposure" at any time shall mean the sum at such time of
(a) the aggregate amount of all Unreimbursed Draws under Letters of Credit
(whether or not such Letters of Credit are then outstanding) and (b) the
aggregate Undrawn Letter of Credit Availability under all outstanding Letters
of Credit.
"Letter of Credit Fees" shall have the meaning given to the term in
Section 2.8(d).
"Letter of Credit Guaranty" shall mean the guaranty delivered by CIT to
the Letter of Credit Issuer of the Borrower's Reimbursement Obligations under a
reimbursement agreement, Application for Letter of Credit or other like
document.
"Letter of Credit Issuer" shall mean the issuer of a Letter of Credit,
which issuer shall be mutually acceptable to CIT and the Borrower.
"Lien" shall mean any mortgage, deed or trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
"Loan" or "Loans" shall mean any and all loan or loans (including
Unreimbursed Draws) made by CIT to the Borrower under this Agreement.
"Material Adverse Effect" shall mean a material adverse effect upon (i)
the business, operations or condition (financial or otherwise) of the Borrower;
(ii) the ability of the Borrower to perform its obligations hereunder or under
the Note or any other Related Document, or (iii) the legality, validity or
enforceability of this Agreement or any Related Document.
"Monthly Compliance Certificate" shall have the meaning given that term in
Section 8.1I(c) hereof.
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"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a) (3) of ERISA and subject to Title IV of ERISA which is, or
within the immediately preceding six (6) years was, contributed to by the
Borrower or any ERISA Affiliate.
"Note" shall mean the promissory note of the Borrower, substantially in
the form attached hereto as Exhibit C, executed and delivered under this
Agreement, as modified or restated from time to time and any promissory note or
notes issued in exchange or replacement thereof, including all extensions,
renewals, refinancing or refunds thereof in whole or part.
"Obligations" shall mean all post-Filing Date indebtedness, obligations
and liabilities of the Borrower to CIT incurred under or related to this
Agreement, the Note or any other Related Document, whether such indebtedness,
obligations or liabilities are direct or indirect, secured or unsecured, joint
or several, absolute or contingent, due or to become due, whether for payment
or performance, now existing or hereafter arising, which are described in
either of the following clauses (i) or (ii):
(i) All indebtedness, obligations (including Reimbursement
Obligations and all obligations to cash collateralize Letters of
Credit) and liabilities of any nature whatsoever, including
amounts due under Section 11.6 hereof and similar agreements
contained in the other Related Documents, from time to time
arising under or in connection with or evidenced or secured by
this Agreement, the Note, the Letters of Credit or any other
related Document, including by not limited to the principal amount
of Loans outstanding, together with interest thereon, the amount
of the Letter of Credit Exposure, together with interest thereon
and all expenses, fees and indemnities hereunder or under any
other Related Document. Without limitation, such amounts include
all Loans and interest thereon and the amount of all Letter of
Credit Exposure whether or not such Loans were made or any Letters
of Credit to which such Letter of Credit Exposure relates were
issued in compliance with the terms and conditions hereof or in
excess of CIT's obligation to lend and arrange for the issuance of
Letters of Credit hereunder. If and to the extent any amounts in
any account constituting Collateral are applied to Obligations
hereunder, and CIT is subsequently obligated to return or repay
any such amounts to any Person for any reason, the amount so
returned or repaid shall be deemed a Loan hereunder and shall
constitute an Obligation.
(ii) All indebtedness, obligations and liabilities from time
to time arising under or in connection with any account from time
to time maintained by the Borrower with CIT, including but not
limited to all Reimbursement Obligations, service charges and
interest in connection with any overdrafts or returned items from
time to time arising in connection with any investment services,
cash management services or other services from time
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to time performed by CIT pursuant to or in connection with this
Agreement or any other Related Document.
"Office" when used in connection with CIT shall mean its office located at
1211 Avenue of the Americas, New York, New York 10036 or at such other office
or offices of CIT as may be designated in writing from time to time by CIT to
the Borrower and when used in connection with the Bank or the Letter of Credit
Issuer shall mean the office of such entity designated in writing from time to
time by CIT to the Borrower. In the event Chemical Bank shall be the Bank or
the Letter of Credit Issuer, the Office for such entity shall until further
written notice from CIT to the Borrower be its office located at 55 Water
Street, New York, New York 10004.
"Other Collateral" shall mean all cash or cash equivalents and now owned
and hereafter acquired deposit accounts maintained with any bank or financial
institutions (other than those accounts, if any, which may be established to
hold trust fund taxes in accordance with the requirements of the Interim
Bankruptcy Court Order); all cash and other monies and property in the
possession or control of CIT; all books, records, ledger cards, disks and
related data processing software at any time evidencing or containing
information relating to any of the Collateral described herein or otherwise
necessary or helpful in the collection thereof or realization thereon, and all
cash and non-cash proceeds of the foregoing.
"PBGC" shall mean the Pension Benefit Guaranty corporation or any
successor thereto.
"Permitted Liens" shall have the meaning given that term in Section 9.3
hereof.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, government
(including political subdivisions), Governmental Authority or agency, or any
other entity.
"Plan" shall mean an employee benefit plan defined in Section 3(3) of
ERISA in respect of which the Borrower, or any ERISA Affiliate is, or within
the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Potential Default" shall mean any event or condition which with notice or
passage of time, or any combination of the foregoing, would constitute an Event
of Default.
"Prime Rate" shall have the meaning given that term in Section 2.5 hereof.
"Reimbursement Obligation" shall mean the obligation of the Borrower to
reimburse CIT for amounts payable by CIT under a Letter of Credit Guaranty in
respect of any drawings made under any Letter of Credit issued by the Letter of
Credit Issuer, together with interest thereon.
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"Related Documents" or "Loan Document" means this Agreement, the Note, the
Letters of Credit, each Letter of Credit Application, the Interim Bankruptcy
Court Order, the Final Bankruptcy Court Order, the Subsidiary Guaranties, the
Subsidiary Security Agreements, the other documents, instruments and agreements
referred to in Section 7.1 hereof, and all other instruments, agreements and
documents from time to time delivered in connection with or otherwise relating
to any Related Document.
"Release" means, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration by such Person of a Contaminant into the indoor or outdoor
environment or into or out of any property owned by such Person or any of its
subsidiaries, including the movement of contaminants through or in the air,
soil, surface water, ground water or property.
"Relevant Date" shall mean the time a relevant computation or
determination is to be made or the date of relevant financial statements.
"Remedial Action" means all actions required by a Governmental Authority
to (i) clean up, remove, treat or in any other way address contaminants in the
indoor or outdoor environment; (ii) prevent a Release or condition that is
reasonably likely to result in a Release or minimize further release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (iii) perform
pre-remedial studies and investigations and post-remedial monitoring and care,
unless such action shall have been stayed or enjoined by a court of competent
jurisdiction.
"Reportable Event" shall mean any of the events described in Sections
4043(b) of ERISA (other than events for which the notice requirements have been
waived).
"Revolving Credit Commitment" shall mean the commitment of CIT to make
Loans to the Borrower pursuant to Section 2.1(a) hereof (i) during the period
when the Interim Bankruptcy Court Order is in effect, in an aggregate principal
amount not to exceed Fifteen Million Dollars ($15,000,000) and (ii) during the
period when the Final Bankruptcy Court Order is in effect, in an aggregate
principal amount not to exceed Twenty Five Million Dollars ($25,000,000), as
such amount may be reduced pursuant to the terms of this Agreement.
"Stated Amount" of a Letter of Credit shall mean the fact amount thereof,
drawn or undrawn, regardless of the existence or satisfaction of any conditions
or limitations on drawing.
"Subsidiary" means, with respect to any Person, any corporation, limited
or general partnership, trust, association or other business entity of which an
aggregate of 50% or more of the outstanding stock or other interests entitled
to vote in the election of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency), managers, trustees or other controlling persons,
or an equivalent
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controlling interest therein, of such Person is, at the time, directly or
indirectly, owned or controlled by such Person and/or one or more of such
Person.
"Subsidiary Guaranties" shall mean the guaranties, substantially in the
form of Exhibit D hereto, made by each of GRS and GMO in favor of CIT, as
modified and supplemented and in effect from time to time.
"Subsidiary Security Agreements" shall mean the security agreements,
substantially in the form of Exhibit E, executed by each of GRS and GMO in
favor of CIT, as modified and supplemented and in effect from time to time.
"Termination Date" shall have the meaning given that term in Section
2.1(a) hereof.
"Termination Event" shall mean (i) a reportable event (under Section 4043
of ERISA) with respect to any Benefit Plan, other than the commencement of the
Chapter 11 Case; (ii) the withdrawal of the Borrower or any ERISA Affiliate
from a Benefit Plan during a plan year in which the Borrower or any ERISA
Affiliate was a "substantial employer" as defined in Section 4001(a) (2) of
ERISA; (iii) the imposition of an obligation on the Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written
notice of intent to terminate a Benefit Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the entry of an order of the
Bankruptcy Court or other Court of competent jurisdiction authorizing or
directing the termination of a Benefit Plan.
"U.C.C." means the Illinois Uniform Commercial Code.
"Undrawn Letter of Credit Availability" with respect to a Letter of Credit
at any time shall mean the maximum amount available to be drawn under such
Letter of Credit at such time, regardless of the existence or satisfaction of
any conditions or limitations on drawing.
"Unreimbursed Draws" with respect to a Letter of Credit at any time shall
mean the aggregate amount at such time of all payments made by a Letter of
Credit Issuer or payments made by CIT under a Letter of Credit Guaranty in
respect of such payments under such Letter of Credit, to the extent not repaid
by the Borrower.
"Unused Line Fee" shall have the meaning given to that term in Section
2.8(c).
"WARN" shall mean the Worker Adjustment and Retraining Notification Act,
as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time.
1.2 Construction.
Unless the context of this Agreement otherwise clearly requires,
references to the plural include the singular, the singular the plural and the
part the whole and "or" has the inclusive meaning represented by the phrase
"and/or." References in this Agreement to
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"determination" by CIT include good faith estimates by CIT (in the case of
quantitative determinations) and good faith beliefs by CIT (in the case of
qualitative determinations). The words "hereof," "herein," "hereunder" and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. The Section and other headings
contained in this Agreement and the Table of Contents preceding this Agreement
are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
Section, subsection and exhibit references are to this Agreement unless
otherwise specified.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and
prepared in accordance with GAAP (including principles of consolidation were
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP.
ARTICLE II
THE CREDITS
2.1 Revolving Credit Loans.
(a) The Revolving Credit Commitment.
Subject to the terms and conditions and relying upon the representations
and warranties herein set forth and subject to the Interim Bankruptcy Court
Order and the Final Bankruptcy Court Order, CIT agrees to make loans to the
Borrower (the "Loans") at any time and from time to time on or after the date
hereof and to, but not including, the Termination Date (as defined below), in
an aggregate principal amount not exceeding at any one time outstanding CIT's
Current Commitment at such time. CIT's "Current Commitment" at any time shall
be equal to the lesser of (A) the Revolving Credit Commitment, as such amount
may have been reduced under Section 2.4(a) hereof at such time, and (B) the
Borrowing Base. CIT may, in its discretion, from time to time, (i) reduce the
lending formula with respect to Eligible Accounts to the extent that CIT
determines in good faith that: (A) the dilution with respect to the Accounts
for any period (based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the aggregate amount
of total sales) has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or (B)
the general creditworthiness of account debtors has declined or (ii) reduce the
lending formula(s) with respect to Eligible Inventory to the extent that CIT
determines that: (A) the number of days of the turnover of the Inventory for
any period has changed in any material respect or (B) the liquidation value of
the Eligible Inventory, or any category thereof, has decreased, or (C) the
nature and quality of the Inventory has deteriorated. In determining whether
to reduce the lending formula(s), CIT may consider events, conditions,
contingencies or risks which are also considered in determining Eligible
Accounts, Eligible Inventory or in establishing Borrowing Base Reserves. CIT
shall have no
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obligation to make Loans hereunder or arrangement for the issuance of Letters
of Credit on or after the Termination Date or which, when added to the
aggregate amount of all outstanding and contemporaneous Loans and the Letter of
Credit Exposure at such time, would cause the amount of all Loans and the
Letter of Credit Exposure at any time to exceed the Current Commitment at such
time. The Termination Date means the date on which the Revolving Credit
Commitment expires, which shall be the earliest of (i) three years after the
Entry Date, (ii) 30 days from the Entry Date if the Final Bankruptcy Court
Order shall not have been entered during such 30 day period, (iii) the
effective date of a plan of reorganization in the Chapter 11 Case that has been
confirmed by an order of the Bankruptcy Court, and (iv) the date CIT elects to
terminate the Revolving Commitment if any Event of Default occurs, provided
that (a) if Borrower prepays all Obligations, including the Early Termination
Fee, Borrower may terminate this Agreement at any time upon not less than ten
(10) days prior notice and (b) unless otherwise terminated or expiring under
clauses (i), (iii), (iv), (v) or (a) above, beginning on the third anniversary
of the Entry Date, the Termination Date shall be automatically extended on each
anniversary of the Entry Date to the next following anniversary of the Entry
Date unless CIT notifies Borrower that the Termination Date will not be
extended, which notice shall be given no later than sixty (60) days prior to
the then scheduled Termination Date..
(b) Revolving Credit.
Within the limits of time and amount set forth in this Section 2.1, and
subject to the provisions of this Agreement, the Borrower may borrow, repay and
reborrow hereunder.
2.2 Note.
The obligation of the Borrower to repay the unpaid principal amount of
the Loans made to it by CIT and to pay interest thereon shall be evidenced in
part by the note dated the date of the first Credit Extension with the blanks
appropriately filled in. The executed Note shall be delivered by the Borrower
to CIT on the Entry Date.
2.3 Making of Loans.
(a) Whenever the Borrower desires that CIT make a Loan, the
Borrower shall provide notice to CIT not later than 11:30 p.m.,
Chicago time on any Business Day setting forth: (a) the date
which shall be a Business Day, on which such Loan is to be made,
(b) the principal amount of such Loan and (c) the account
information where such Loan is to be received. Such notice shall
be given by telephone or in writing, by a Designated Borrowing
Officer; provided, however, that if requested by CIT, such
telephone notice shall be confirmed in writing by delivery to CIT
promptly (but in no event later than 12:30 p.m. (Chicago time) on
the date on which such Loan is to be made), a notice containing
the original or facsimile signature of a Designated Borrowing
Officer. On the date specified in such notice, CIT shall, subject
to the terms and conditions of this Agreement, make such amount
available to the Borrower not later than 2:30 p.m. (Chicago time),
on the date specified in such
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notice in immediately available funds by (i) depositing such
proceeds in the Disbursement Account if the Disbursement Account
is located at the Bank and (ii) initiating a wire transfer if the
Disbursement Account is not located at the Bank.
(b) CIT shall be entitled to rely conclusively on the
Designated Borrowing Officer's authority to request a Loan on
behalf of the Borrower until CIT receives written notice to the
contrary. CIT shall have no duty to verify the authenticity of
the signature appearing on any written notice of borrowing and
with respect to an oral request for a Loan, CIT shall have no duty
to verify the identity of any Person representing himself as a
Designated Borrowing Officer.
(c) CIT shall not incur any liability to the Borrower in
acting upon any telephonic notice referred to above which CIT
believes in good faith to have been given by a Designated
Borrowing Officer or for otherwise acting in good faith under this
Section 2.3 and, upon the funding of a Loan by CIT in accordance
with this Agreement pursuant to any such telephonic notice, the
Borrower shall have effected a Loan hereunder.
(d) Any notice of borrowing pursuant to this Section 2.3
shall be irrevocable and the Borrower shall be bound to make a
borrowing in accordance therewith.
2.4 Reduction of Commitment; Mandatory Prepayment; Optional
Prepayment.
(a) Reduction of the Commitment; Optional Reduction of the
Commitment.
The Borrower may at any time or from time to time and without
penalty or premium reduce the Revolving Credit Commitment to an amount
(which may be zero) not less than the sum of the unpaid principal amount of all
Loans then outstanding plus the principal amount of all Loans not yet made as
to which notice has been given by the Borrower under Section 2.3 hereof plus
the Letter of Credit Exposure plus the Stated Amount of all Letters of Credit
not yet issued as to which a request has been made unless the request is
withdrawn and the Letter of Credit is not issued by the Letter of Credit Issuer
under Section 3.1 hereof. Any reduction shall be in an amount which is an
integral multiple of Five Million Dollars ($5,000,000). Reduction of the
Revolving Credit Commitment shall be made by providing not less than two
Business Days' written notice (which notice shall be irrevocable) to such
effect to CIT. Reductions of the Revolving Credit Commitment are irrevocable
and may not be reinstated. No such reduction in the Revolving Credit Commitment
shall reduce or effect Borrower's obligation to pay the Early Termination Fee.
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(b) Mandatory Prepayment.
(i) Exceeding Current Commitment. If at any time the Current
Commitment is less than the aggregate unpaid principal amount of
the Loans then outstanding plus the Letter of Credit Exposure at
such time, the Borrower shall immediately prepay the Loans in an
amount of not less than the amount of such difference or, if the
Loans then outstanding are less than the amount of such
difference, provide cash collateral to CIT in an amount equal to
105% of such excess, which cash collateral shall be deposited and
held in the Letter of Credit Cash Collateral Account until such
time as such excess no longer exists. Concurrently with any
notice of reduction of the Revolving Credit Commitment, the
Borrower shall give notice to CIT of any mandatory prepayment
which notice shall specify a prepayment date no later than the
effective date of such reduction of the Revolving Credit
Commitment.
(ii) Failure to Obtain Final Bankruptcy Court Order. Without
limiting any other provision of this Agreement or any other
Related Document permitting or requiring prepayment of the Loans
in whole or part, the Borrower shall prepay the Loans in whole
without premium or penalty on the thirtieth (30th) day following
the Entry Date in the event the Final Bankruptcy Court Order shall
not have been entered on or before such date and shall provide
cash collateral to CIT in an amount equal to 105% of the stated
amount of all outstanding Letters of Credit, which cash collateral
shall be deposited and held in the Letter of Credit Cash
Collateral Account until all Obligations have been paid in full in
cash.
(iii) Asset Sales. Simultaneously with the consummation of
any sale or disposition of assets permitted under Section 9.4(b)
or (c) hereof, whether by the Borrower or its Subsidiaries, the
Borrower shall prepay the Loans in an aggregate principal amount
equal to 100% of the net proceeds of such sale or disposition.
(iv) Other Mandatory Prepayments. CIT shall on each Business
Day apply all funds deposited in the CIT Account to the payment,
in whole or in part, of the Obligations outstanding.
(c) Optional Prepayment.
Borrower may without penalty or premium (except as provided
in Section 2.8(g)) at any time or from time to time prepay, in
whole or in part, any or all Loans then outstanding. Any such
prepayment (A) shall be in an amount which is an integral multiple
of Fifty Thousand Dollars ($50,000) and (B) shall not reduce the
Revolving Credit Commitment.
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2.5 Interest Rate.
Subject to Section 2.8(b), each Loan shall bear interest for each day
until paid at a rate per annum for each day equal to the Prime Rate for such
day, plus one and one half percent (1.50%). "Prime Rate", as used herein,
shall mean the interest rate per annum publicly announced from time to time by
Chase Manhattan Bank in New York, New York or its successors as its Prime Rate,
such interest rate to change automatically from time to time effective as of
the announced effective date of each change in the Prime Rate. The Prime Rate
is not intended to be the lowest rate of interest charged by Chase Manhattan
Bank to its borrowers.
2.6 Interest Payment Dates.
Borrower shall pay interest on the unpaid principal amount of each Loan
from the date of such Loan until such principal amount shall be paid in full,
which interest shall be payable monthly in arrears on the first Business Day of
each month, commencing September 1, 1996. After maturity of any principal
amount of any Loan (by acceleration, at scheduled maturity or otherwise),
interest on such amount shall be due and payable on demand.
2.7 Amortization.
To the extent not due and payable earlier pursuant to the terms of this
Agreement, the entire unpaid principal amount of each of the Loans shall be due
and payable on the Termination Date.
2.8 Payments.
(a) Time, Place and Manner.
Except as otherwise provided in Section 2.4(b) hereof, all payments and
prepayments to be made in respect of principal, interest, the facility fee, the
collateral management fee, the unused line fee, or other amounts due from the
Borrower hereunder or under the Note or any other Related Document shall be
payable at or before 11:00 a.m., Chicago time, on the day when due without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived. Such payments shall be made to CIT at the CIT Account in
Dollars in funds immediately available at the Office without setoff,
counterclaim or other deduction of any nature. CIT shall maintain a separate
loan account (the "Borrower's Account") on its books in the Borrower's name in
which the Borrower will be charged with Loans made by CIT to it hereunder and
with any other Obligations. The Borrower hereby authorizes CIT to, and CIT
may, from time to time charge the Borrower's Account with any interest, fees or
expenses that are due and payable under this Agreement. The Borrower confirms
that any charges which CIT may so make to the Borrower's Account as herein
provided will be made as an accommodation to the Borrower and solely at CIT's
discretion. CIT agrees to promptly notify the Borrower after any such charges
are made by CIT, provided that the failure to give such notice shall not affect
the validity of such charges. The Borrower's
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Account will be credited upon receipt of "good funds" in the CIT Account with
all amounts actually received by CIT from the Borrower or others for the
Borrower's account. Interest on all Loans and all fees that accrue on a per
annum basis shall be computed on the basis of the actual number of days elapsed
in the period during which interest or such fee accrues and a year of 360 days.
In computing interest on any Loan, the date of the making of such Loan shall
be included and the date of payment shall be excluded; provided, however, that
if a Loan is repaid on the same day in which it is made, one day's interest
shall be paid on such Loan.
(b) Interest Upon Events of Default.
To the extent permitted by law, after there shall have occurred and so
long as there is continuing an Event of Default pursuant to Section 10.1 of
this Agreement, any principal, interest, commitment fee, facility fee,
indemnity or any other amounts due from the Borrower hereunder, under the Note
or any other Related Document (and including interest accrued under this
Section 2.8(b)) shall compound on a daily basis as provides in this Section
2.8(b) and shall bear interest for each day until paid (before and after
judgment), payable on demand, at a rate per annum of 4% above the Prime Rate
for such day, such interest rate to change automatically from time to time
effective as of the announced effective date of each change in the Prime Rate.
(c) Facility Fee.
The Borrower shall pay to CIT a loan facility fee equal to One Hundred
Twenty Five Thousand Dollars ($125,000.00), which fee shall be due and payable
concurrently with the execution and delivery of this Agreement by Borrower.
(d) Unused Line Fee.
The Borrower shall pay to CIT an unused line fee (the "Unused Line Fee")
accruing at the rate of three-eighths of one percent (.0375%) per annum from
and after the Entry Date until the Termination Date, on the excess, if any, of
$20,000,000.00 over the sum of the Loans and Letter of Credit Exposure
outstanding from time to time. All Unused Line Fees accruing after the Entry
Date shall be payable monthly in arrears on the first day of each month
commencing September 1, 1996.
(e) Letter of Credit Fees.
The Borrower shall pay to CIT a letter of credit fee (the "Letter of
Credit Fee") equal to one and one half percent (1.50%) of the Stated Amount of
each Letter of Credit due and payable on the date of issuance of such Letter of
Credit. The Borrower shall also pay the normal and customary letter of credit
fees and charges of the Letter of Credit Issuer for the administration,
issuance and processing of any Letters of Credit issued by such Letter of
Credit Issuer.
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(f) Collateral Management Fee.
The Borrower shall pay to CIT an annual collateral management fee of
Twenty-five Thousand Dollars ($25,000.00) payable annually in advance on the
Entry Date and each anniversary of the Entry Date.
(g) Early Termination Fee.
If this Agreement is terminated by Borrower, Borrower shall pay to CIT
an amount equal to one percent (1%) of all outstanding Loans then being prepaid
and all outstanding Letters of Credit then being cash collateralized in
connection with such termination, unless CIT is providing replacement financing
for this facility, in which case said early termination fee will not be
payable.
(h) Fees.
All fees required to be paid pursuant to any Related Document shall be
paid as required therein. All fees under this Agreement or the other Related
Documents are non-refundable under all circumstances.
2.9 Use of Proceeds.
The Borrower hereby covenants, represents and warrants that the proceeds
of the loans made to it will be used solely to pay Bank One, as agent, to
satisfy Borrower's pre-petition secured working capital debt and to fund
working capital in the ordinary course of the Borrower's, GRS's, and GMO's
businesses and for other general corporate purposes (including, without
limitation, payments of fees and expenses to professionals under Sections 330
and 331 of the Bankruptcy Code and administrative expenses of the kind
specified in Section 503(b) of the Bankruptcy Code incurred in the ordinary
course of business) of the Borrower, GRS, and GMO. Nothing herein shall limit
the right of CIT under Section 11.14 hereof to object to any use or proposed
use of proceeds of Loans; provided, however, CIT shall not object to any use of
proceeds of Loans if such use is in all respects consistent with the terms of
this Agreement.
2.10 Capital Adequacy.
(i) If CIT shall have reasonably determined that the
applicability of any law, rule, regulation or guideline adopted
pursuant to or arising out of the July 1988 report on the Basle
Committee on Banking Regulations and Supervisory Practices
entitled "International Convergence of Capital Measurement and
Capital Standards", including, without limitation, the capital
adequacy guidelines adopted by the Federal Reserve Board and the
Comptroller of the Currency on January 27, 1989, or the adoption
after the date hereof of any other law, rule, regulation or
guideline regarding capital adequacy, or any change in any of the
foregoing or in the interpretation or administration of any of the
foregoing by any Governmental Authority, central
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Bank or comparable agency charged with the interpretation or
administration thereof, or compliance by CIT (or any lending
office of CIT) of CIT's holding company with any request or
directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of
return on CIT's capital or on the capital of CIT's holding company
as a consequence of its obligations hereunder to a level below
that which CIT or CIT's holding company could have achieved but
for such adoption, change or compliance (taking into consideration
CIT's policies and the policies of CIT's holding company with
respect to capital adequacy) by an amount deemed by CIT to be
material, then from time to time the Borrower shall pay to CIT, on
demand, such additional amount or amounts as will compensate CIT
or CIT's holding company for any such reduction suffered.
(ii) In the event that any amounts are owing by the Borrower
to CIT pursuant to this Section 2.10, CIT shall promptly upon
determining such amounts deliver to the Borrower a certificate, in
reasonable detail, explaining the basis upon which such amounts
have been determined to be owing, which determination shall be
conclusive absent manifest error, and CIT's certification that it
is using reasonable efforts to collect comparable amounts from
similarly situated borrowers having similar credit relationships
with CIT under documentation which give CIT substantially the same
rights with respect to such increased costs or reductions or
payments with respect to capital adequacy as set forth in this
Section 2.10.
(iii) Failure on the part of CIT to demand compensation for
any reduction in return on capital for any period shall not
constitute a waiver of CIT's rights to demand compensation for any
reduction in return on capital during any other period. The
protection of this Section shall be available to CIT regardless of
any possible contention of invalidity or inapplicability of the
law, regulation or condition which shall have been imposed. The
covenants of the Borrower contained in this Section 2.10 shall
survive termination of this Agreement and payment in full of its
Obligations hereunder.
2.11 Right of Set-Off.
Upon the occurrence and during the continuance of an Event of
Default, CIT is hereby authorized at any time and from time to time, to the
fullest extent permitted by law and without further order of or application to
the Bankruptcy Court, to set off and apply any and all deposits (general or
special, time or demand, provision or final and including, without limitation,
any deposits or funds in the Cash Concentration Account and the Letter of
Credit Cash Collateral Account) at any time held and other indebtedness at any
time owing by CIT to or for the credit or the account of the Borrower against
any and all of the Obligations of the Borrower now or hereinafter existing
under this Agreement or the Related Documents,
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irrespective of whether or not CIT shall have made any demand under this
Agreement or any Related Document and although such Obligations may be
unmatured. CIT agrees promptly to notify the Borrower after any such set-off
and application made by CIT, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
CIT under this Section 2.11 are in addition to other rights and remedies which
CIT may have upon the occurrence of an Event of Default.
2.12 Taxes.
(a) All payments made by the Borrower hereunder, under the
Note or under any Loan Document will be made without setoff,
counterclaim, deduction or other defense. All such payments shall
be made free and clear of and without deduction for any present or
future income, franchise, sales, use, excise, stamp or other
taxes, levies, imposts, deductions, charges, fees, withholdings,
restrictions or conditions of any nature now or hereafter imposed,
levied, collected, withheld or assessed by any jurisdiction
(whether pursuant to United States Federal, state, local or
foreign law) or by an political subdivision or taxing authority
thereof or therein, and all interest, penalties or similar
liabilities, excluding taxes on the overall net income of the
Lenders or the Letter of Credit Issuer (such nonexcluded taxes are
hereinafter collectively referred to as the "Taxes"). If the
Borrower shall be required by law to deduct or to withhold any
Taxes from or in respect of any amount payable hereunder, (i) the
amounts so payable shall be increased to the extent necessary so
that after making all required deductions and withholdings
(including Taxes on amounts payable to the Lenders or the Letter
of Credit Issuer pursuant to this sentence) the Lenders or the
Letter of Credit Issuer receive an amount equal to the sum they
would have received had no such deductions or withholdings been
made (ii) the Borrower shall make such deductions or withholdings,
and (iii) the Borrower shall pay the full amount deducted or
withheld to the relevant taxation authority in accordance with
applicable law. Whenever any Taxes are payable by the Borrower,
as promptly as possible thereafter, the Borrower shall send CIT
and the Letter of Credit Issuer an official receipt showing
payment. In addition, the Borrower agrees to pay any present or
future taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery,
performance, recordation or filing of, or otherwise with respect
to, this Agreement, the Notes, the Letters of Credit or any other
Loan Document (hereinafter referred to as "Other Taxes").
(b) The Borrower will indemnify CIT and the Letter of Credit
Issuer for the amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by an jurisdiction on
amounts payable under this Section 2.12) paid by any Lender or the
Letter of Credit Issuer and any liability (including penalties,
interest and expenses for nonpayment, late payment or otherwise)
arising therefrom or with respect thereto, whether or not
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such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be paid within 30 days from the date on
which such Lender or such Letter of Credit Issuer makes written
demand.
ARTICLE III
LETTERS OF CREDIT
3.1 Letters of Credit.
(a) General.
In order to assist the Borrower in establishing or opening documentary
and standby letters of credit, which shall not have expiration dates that exceed
one year from the date of issuance (the "Letters of Credit") with the Letter of
Credit Issuer, the Borrower has requested CIT to join in the applications for
such Letters of Credit, and/or guarantee payment or performance of such Letters
of Credit and any drafts or acceptances thereunder through the issuance of
letters of credit guaranty, thereby lending CIT's credit to the Borrower, and
CIT has agreed to do so. These arrangements shall be handled by CIT subject to
the terms and conditions set forth below. CIT shall have no obligation to
arrange for the issuance of Letters of Credit on or after the Termination Date
on which, when added to the aggregate amount of all outstanding and
contemporaneous Loans and the Letter of Credit Exposure at such time, would
cause the amount of all Loans and the Letter of Credit Exposure at any time to
exceed the Current Commitment at such time. In addition, CIT shall not be
required to be the issuer of any Letter of Credit. The Letter of Credit Issuer
shall be a bank mutually acceptable to CIT and the Borrower. The Borrower will
be the account party for any application for a Letter of Credit, which shall be
substantially in the form of Exhibit F hereto or such other form as may from
time to time be approved by the Letter of Credit Issuer, CIT and the Borrower,
and shall be duly completed in a manner reasonably acceptable to CIT, together
with such other certificates, documents and other papers and information as the
Letter of Credit Issuer or CIT may request (the "Letter of Credit
Application").
(i) The aggregate Letter of Credit Exposure shall not at any
time exceed Three Million Dollars ($3,000,000.00). Documentary
Letters of Credit shall only be for the benefit of the Borrower's
trade creditors in connection with the importation of Inventory
from foreign suppliers. In addition, the amount, purpose and
extent of the Letters of Credit and changes or modifications
thereof by the Borrower and/or the Letter of Credit Issuer shall
in all respects be subject to the prior approval of CIT in the
exercise of its reasonable discretion, provided, however, that (A)
the expiration date of all Letters of Credit shall be no later
than 15 days prior to the Termination Date unless on or prior to
15 days prior to the Termination Date such Letters of Credit shall
be cash collateralized in an amount equal to 105% of the face
amount of such Letters of Credit, which cash collateral shall be
deposited and held in the Letter of Credit Cash Collateral Account
until all Obligations have
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been paid in full in cash, (B) the Letters of Credit and all
documentation in connection therewith shall be in form and
substance satisfactory to CIT and the Letter of Credit Issuer, and
(C) aggregate Letter of Credit Exposure shall not exceed One
Million Five Hundred Dollars ($1,500,000.00) with respect to the
issuance of Letters of Credit for purposes other than the purchase
of merchandise Inventory.
(ii) CIT shall have the right, without notice to the
Borrower, to charge the Borrower's Account with the amount of any
and all indebtedness, liability or obligation of any kind
(including indemnification for capital adequacy charges) incurred
by CIT under the Letter of Credit Guaranty at the earlier of (A)
payment by CIT under the Letters of Credit Guaranty, or (B) with
respect to any Letter of Credit which is not cash collateralized
as provided in this Agreement, the occurrence of an Event of
Default. Any amount charged to the Borrower's Account shall be
deemed a Loan hereunder. Any charges, fees, commissions, costs
and expenses charged to CIT for the Borrower's account by the
Letter of Credit Issuer in connection with or arising out of
Letters of Credit issued pursuant to this Agreement or out of
transactions relating thereto will be charged to the Borrower's
Account in full when charged to or paid by CIT and any such
charges by CIT to the Borrower's Account shall be conclusive on
the Borrower absent manifest error.
(iii) The Borrower unconditionally indemnifies CIT and holds
CIT harmless from any and all loss, claim or liability incurred by
CIT arising from any transactions or occurrences relating to
Letters of Credit established or opened for the Borrower's
account, and any drafts or acceptances thereunder, and all
Obligations thereunder, including any such loss or claim due to
any action taken by the Letter of Credit Issuer, other than for
any such loss, claim or liability arising out of the gross
negligence or willful misconduct of CIT as determined by a final
judgment of a court of competent jurisdiction. The Borrower
further agrees to hold CIT harmless from any errors or omission,
negligence or misconduct by the Letter of Credit Issuer. The
Borrower's unconditional obligation to CIT hereunder shall not be
modified or diminished for any reason or in any manner whatsoever,
other than as a result of CIT's gross negligence or willful
misconduct as determined by a final judgment of a court of
competent jurisdiction. The Borrower agrees that any charges
incurred by CIT for the Borrower's account by the Letter of Credit
Issuer shall be conclusive on the Borrower absent manifest error
and may be charge to the Borrower's Account.
(iv) CIT shall not be responsible for the existence,
character, quality, quantity, condition, packing value or delivery
of the goods purporting to be represented by any documents; any
difference or variation in the character, quality, quantity,
condition, packing, value or delivery of the goods from that
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expressed in the documents; the validity, sufficiency or
genuineness of any documents or of any endorsements thereof even
if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; the time,
place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any of all of
the goods referred to in the Letters of Credit or documents; any
deviation from instructions; delay, default, or fraud by the
shipper and/or anyone else in connection with the shipping
thereof; or any breach of contract between the shipper or vendors
and the Borrower. Furthermore, without being limited by the
foregoing, CIT shall not be responsible for any act or omission
with respect to or in connection with any goods covered by Letters
of Credit.
(v) The Borrower agrees that any action taken by CIT, if
taken in good faith, or any action taken by the Letter of Credit
Issuer, under or in connection with the Letters of Credit, the
guarantees, the drafts or acceptances, shall be binding on the
Borrower (with respect to the Letter of Credit Issuer and CIT) and
shall not put CIT in any resulting liability to the Borrower. In
furtherance thereof, CIT shall have the full right and authority
to clear and resolve any questions of non-compliance of documents;
to give any instructions as to acceptance or rejection of any
documents or goods; to execute any and all steamship or airways
guaranties (and applications therefore), indemnities or delivery
orders; to grant any extensions of the maturity of, time of
payment for, or time of presentation of, any drafts, acceptances,
or documents; and to agreed to any amendments, renewals,
extension, modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letters of Credit,
drafts or acceptances; all in CIT's sole name, provided that (A)
CIT shall be entitled to exercise the rights set forth in the
second sentence of this paragraph (v) only if and to the extent
that the Letter of Credit Issuer is entitled to exercise such
rights under the Letter of Credit Application and (B) CIT shall
give the Borrower notice of any such permitted action promptly
thereafter and the Letter of Credit Issuer shall be entitled to
comply with and honor any and all such documents or instruments
executed by or received solely from CIT, all without any notice to
or any consent from the Borrower.
(vi) Without CIT's express consent and endorsement in
writing, the Borrower agrees: (A) not to execute any applications
for steamship or airway guaranties, indemnities or delivery
orders; to grant any extensions of the maturity of time of payment
for, or time of presentation of, any drafts, acceptances or
documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or
conditions of any of the Letter of Credit Applications, Letters of
Credit, drafts or acceptances; and (B) after the occurrence of any
Event of Default which is not cured within any applicable grace
period, if any, or waived by CIT, not to
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(x) clear and resolve any questions of non-compliance of
documents, or (y) give any instructions as to acceptances or
rejection of any documents of goods.
(vii) The Borrower agrees that any necessary and material
import, export or other license or certificates for the import or
handling of Inventory will have been promptly procured; all
foreign and domestic material governmental laws and regulations in
regard to the shipment and importation of Inventory or the
financing thereof will have been promptly and fully complied with,
in each case, where the failure to obtain such certificate or
license or the failure to comply with such laws would result in a
Material Adverse Effect; and any certificates in that regard that
CIT may at any time reasonable request will be promptly furnished.
In this connection, the Borrower warrants and represents that all
shipments made under any such Letters of Credit are in accordance
with the laws and regulations of the countries in which the
shipments originate and terminate, and are not prohibited by any
such laws and regulations. As between the Borrower, on the one
hand, and CIT and the Letter of Credit Issuer, on the other hand,
the Borrower assumes all risk, liability and responsibility for,
and agrees to pay and discharge, all present and future local,
state and federal or foreign taxes, duties, or levies. As between
the Borrower, on the one hand, and CIT and the Letter of Credit
Issuer, on the other hand, any embargo, restriction, laws, customs
or regulations of any country, state, city, or other political
subdivision, where such Inventory is or may be located, or wherein
payments are to be made, or wherein drafts may be drawn,
negotiated, accepted, or paid, shall be solely the Borrower's
risk, liability and responsibility.
(viii) Upon any payments made to the Letter of Credit Issuer
under the Letter of Credit Guaranty, CIT shall without prejudice
to its rights under this Agreement (including that such
Unreimbursed payments shall constitute Loans hereunder), acquire
by subrogation, any rights, remedies, duties or obligations
granted or undertaken by the Borrower to the Letter of Credit
Issuer in any application for Letters of Credit, any standing
agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to CIT and apply in all
respects to CIT and shall be in addition to any rights remedies,
duties or obligations contained herein.
(ix) In the event that the Borrower is required to provide
cash collateral for any Letter of Credit, the Borrower shall
deposit such cash collateral in the Letter of Credit Cash
Collateral Account, which cash collateral shall be held in the
Letter of Credit Cash Collateral Account until such Letter of
Credit has been paid in full in cash or has expired.
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(b) Request for Issuance.
The Borrower may from time to time, upon notice not later than
11:00 a.m., Chicago time, at least three (3) Business Days in advance, request
CIT to assist the Borrower in establishing or opening a Letter of Credit by
delivering to CIT, with a copy to the Letter of Credit Issuer, a Letter of
Credit Application, together with any necessary related documents.
ARTICLE IV
BORROWING BASE
4.1 Conditions of Lending and Assisting in Establishing or Opening
Letters of Credit.
CIT shall have no obligations to make any Loan or assist in
establishing or opening any Letter of Credit to the extent that the
aggregate unpaid principal amount of the Loans plus the Letter of Credit
Exposure exceeds, or after giving effect to a requested Loan or Letter of
Credit would exceed, the Current Commitment at such time.
4.2 Mandatory Prepayment.
Concurrently with the delivery of any Borrowing Base Certificate, the
Borrower shall give notice to CIT of any mandatory prepayment pursuant to
Section 2.4(b) (i) which notice shall specify a prepayment date no later than
the earlier of the date on which such Borrowing Base Certificate is given and
the date on which such Borrowing Base Certificate is required to be provided to
CIT.
4.3 Rights and Obligations Unconditional.
Without limitation of any other provision of this Agreement, the
rights of CIT and the obligations of the Borrower under this Article IV
are absolute and unconditional, and CIT shall not be deemed to have waived the
condition set forth in Section 4.1 hereof or its right to payment in accordance
with Section 4.2 hereof in any circumstance whatever, including but not limited
to circumstances wherein CIT (knowingly or otherwise) makes an advance
hereunder in excess of the Borrowing Base.
4.4 Borrowing Base Certificate.
(a) By 12:00 noon, Chicago time (i) two (2) Business Days
after the Friday of each week and (ii) twenty-five (25) days after
the end of each fiscal month (and on any other date on which CIT
reasonably requests), the Borrower shall furnish to CIT a
certificate ("Borrowing Base Certificate") substantially in the
form attached hereto as Exhibit G, executed by a Designated
Financial Officer of the Borrower, setting forth the Borrowing
Base and the other information required therein as of the
Borrower's close of business on the Saturday of the preceding week
(in the case of the weekly
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Borrowing Base Certificates), or as of the Borrower's close of business
on the last day of each fiscal month (in the case of subsequent monthly
Borrowing Base Certificates), in each case together with such other
information with respect to the Inventory of the Borrower as CIT may
reasonably request. The weekly Borrowing Base Certificate may be
prepared based upon a good faith estimate by the Borrower of its
Inventory.
(b) In the event of any dispute about the eligibility of any
asset for inclusion in the Borrowing Base or the valuation
thereof, CIT's good faith reasonable judgment shall control.
(c) The Borrowing Base set forth in a Borrowing Base
Certificate shall be effective from and including the date such
Borrowing Base Certificate is duly received by CIT to but not
including the date on which a subsequent Borrowing Base
Certificate is duly received by CIT, unless CIT disputes the
eligibility of any asset for inclusion in the Borrowing Base or
the valuation thereof by notice of such dispute to the Borrower,
in which case the value of such asset shall, at the discretion of
the Borrower, either not be included in the Borrowing Base or be
included in the Borrowing Base with a value reasonably acceptable
to CIT.
(d) Each Borrowing Base Certificate shall be accompanied by
backup schedules showing the derivation thereof and containing
such detail and such other and further information as CIT may
reasonably request from time to time.
4.5 General Provisions.
Notwithstanding anything to the contrary in this Article IV, in no event
shall any single element of value or asset be counted twice in determining the
Borrowing Base.
ARTICLE V
SECURITY; ADMINISTRATIVE PRIORITY
5.1 Grant of Lien and Security Interest.
(a) To secure all Obligations of the Borrower to CIT under
this Agreement and the Related Documents, the Borrower hereby,
assigns, pledges, transfers, grants, bargains and sells, conveys,
confirms and sets over unto CIT, and hereby grants and creates in
favor of CIT a security interest in and to, all right, title and
interest of the Borrower in and to all of its present or hereafter
acquired Accounts, Inventory, Equipment, General Intangibles,
Documents of Title, Other Collateral, all capital stock of GRS and
GMO and all of Borrower's interest in or under the Letter of
Credit Cash Collateral Account, all funds held therein from time
to time and all certificates and instruments, if
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any, from time to time representing or evidencing the same, all proceeds
and profits of any of the foregoing, and all real property
interests, including leasehold estates, owned by Borrower (all property
of the Borrower subject to the security interest referred to in this
Section 5.1 and, unless the context otherwise requires, the GRS
Collateral and the GMO Collateral being hereinafter referred to
collectively as the "Collateral").
(b) The lien and security interest in favor of CIT referred
to in Section 5.1(a) hereof shall be a valid and perfected lien
and security interest, prior to all other liens and interests
hereafter arising. Such lien and security interest and its
priority shall remain in effect until all Obligations have been
repaid and performed in full.
5.2 Administrative Priority.
The Borrower hereby agrees that the Obligations of the Borrower shall
constitute allowed administrative expenses in the Chapter 11 Case having
priority over all administrative expenses and unsecured claims against the
Borrower now existing or hereafter arising, of any kind or nature whatsoever,
including without limitation all administrative expenses of the kind specified
in Sections 503(b) and 507(b) of the Bankruptcy Code, other than those expenses
constituting the "Carveout".
5.3 Grants, Rights and Remedies Cumulative.
The lien and security interest granted pursuant to Section 5.1
hereof and administrative priority granted pursuant to Section 5.2 hereof
may be independently granted by the Related Documents and by other Related
Documents hereafter entered into. This Agreement, the Interim Bankruptcy Court
Order, the Final Bankruptcy Court Order and such other Related Documents
supplement each other, and the grants, priorities, rights and remedies of CIT
hereunder and thereunder are cumulative.
5.4 No Filings Required.
The lien and security interest referred to in Section 5.1 hereof
and in the Related Documents shall be deemed valid and perfected by entry of
the Interim Bankruptcy Court Order and the Final Bankruptcy Court Order, as
the case may be, and entry of the Interim Bankruptcy Court Order shall have
occurred on or before the date of the initial Credit Extension hereunder.
Borrower shall execute such financing statements as CIT shall request, but CIT
shall not be required to file any financing statements, notices of lien or
similar instruments in any jurisdiction or filing office or to take any other
action in order to validate or perfect the lien and security interest granted
by or pursuant to this Agreement, the Interim Bankruptcy Court Order, the Final
Bankruptcy Order or any other Related Document.
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5.5 Survival.
The Lien, lien priority, administrative priorities and other rights
and remedies granted to CIT pursuant to this Agreement, the Interim Bankruptcy
Court Order, the Final Bankruptcy Court Order and the other Related Documents
(specifically including but not limited to the existence, perfection and
priority of the lien and security interest provided herein and therein, and the
administrative priority provided herein and therein) shall not be modified,
altered or impaired in any manner by any other financing or extension of credit
or incurrence of debt by the Borrower (pursuant to Section 364 of the
Bankruptcy Code or otherwise), or by any dismissal or conversion of the Chapter
11 Case, or by any other act or omission whatever. Without limitation,
notwithstanding any such order, financing, extension, incurrence, dismissal,
conversion, act or omission:
(a) no costs or expenses of administration which have been or
may be incurred in the Chapter 11 Case or any conversion of the
same or in any other proceedings related thereto, and no priority
claims, are or will be prior to or on a parity with any claim of
CIT against the Borrower in respect of any Obligation, other than
those expenses constituting the "Carveout".
(b) the Lien in favor of CIT set forth in Section 5.1 hereof
and in the Related Documents shall constitute a valid and
perfected first priority Lien, and shall be prior to all other
liens and interests, now existing or hereafter arising, in favor
of any other creditor or any other Person whatever, and
(c) the Lien in favor of CIT set forth in Section 5.1(a)
hereof and in the Related Documents shall continue valid and
perfected without the necessity that CIT file financing statements
or otherwise perfect its Lien under applicable nonbankruptcy law,
whether or not any such financing statements are filed.
5.6 Account Warranties and Notification.
The Borrower hereby represents and warrants that: each trade
Account is based on an actual bona fide sale and delivery of goods or rendition
of services to customers, made by the Borrower in the ordinary course of
its business; the goods and Inventory being sold and the Accounts thereby
created are the exclusive property of the Borrower and are not and shall not be
subject to any Lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever, other than the Permitted Liens; the invoices
evidencing such trade Accounts are in the name of the Borrower; and the
customers of the Borrower have accepted the goods or services, owe and are
obligated to pay the full amounts stated in the invoices according to their
terms, without dispute, offset, defense, counterclaim or contra, except for
disputes and other matters arising in the ordinary course of business with
respect to which the Borrower has complied with the notification requirements
set forth below. The Borrower confirms to CIT that any and all taxes or fees
relating to its business, its sales, the trade Accounts or goods relating
thereto, are its sole responsibility and that same will be paid by the
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Borrower when due and that none of said taxes or fees represent a lien on or
claim against the Accounts. The Borrower agrees to notify CIT promptly of
any matters materially affecting the value, enforceability or collectibility of
any Account and of all material customer disputes, offsets, defenses,
counterclaims, returns, rejections and all reclaimed or repossessed merchandise
or goods. Upon the occurrence of an Event of Default and until such time as
such Event of Default is waived in writing by CIT or cured to CIT's
satisfaction and on notice from CIT the Borrower agrees that all returned,
reclaimed or repossessed merchandise or goods shall be set aside by the
Borrower, marked with CIT's name and held by the Borrower for CIT's account as
owner and assignee.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to CIT as follows (each such
representation and warranty being made as to each of Borrower, GRS, and GMO as
if specifically referred to in such representation and warranty):
6.1 Organization and Qualification.
The Borrower is a corporation, duly organized, validly existing and in
good standing under the laws of the state of Wisconsin. The Borrower is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to qualify would have a Material Adverse Effect on the Borrower.
Schedule 6.1 hereto correctly sets forth as of the date hereof the
jurisdictions in which the Borrower is qualified to do business.
6.2 Authority and Authorization.
The Borrower has all necessary corporate power to execute and deliver this
Agreement and the other Related Documents to which it is or is to be a party.
As of the Entry Date, the Borrower will have the power and authority to perform
its obligations hereunder and thereunder, and all such actions has been duly
and validly authorized by all necessary corporate and judicial action during
the period between the Entry Date and the date of the Final Bankruptcy Court
Order.
6.3 Execution and Binding Effect.
As of the Entry Date, this Agreement and each of the other Related
Documents required to be executed and delivered on or prior to the date hereof
have been duly and validly executed and delivered by the Borrower and,
constitute legal, valid and binding obligations of the Borrower enforceable in
accordance with the terms hereof or thereof, except as enforceability thereof
may be limited by any applicable bankruptcy, reorganization, insolvency or
other laws affecting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in equity or at
law. Each Related Document that is not required to be executed and delivered
by the Borrower prior to the Entry Date, when executed and delivered, will be
validly executed and delivered by the Borrower and will
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constitute legal, valid and binding obligations of the Borrower enforceable in
accordance with the terms thereof, except as enforceability thereof may be
limited by any applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in equity or at law.
6.4 Authorizations and Filings.
No authorization, consent, approval, license, exemption or other action
by, and no registration, qualification, designation, declaration or filing
with, any Governmental Authority is or will be necessary in connection with the
execution and delivery by the Borrower of this Agreement or the other Related
Documents, consummation of the transactions herein or therein contemplated,
performance of or compliance with the terms and conditions hereof or thereof or
to ensure the legality, validity, enforceability and admissibility in evidence
hereof or thereof, except for the Interim Bankruptcy Court Order and the Final
Bankruptcy Court Order.
6.5 Absence of Conflicts.
Neither the execution and delivery of this Agreement or the other Related
Documents to which the Borrower is a party nor consummation of the transactions
herein or therein contemplated nor performance of or compliance with the terms
and conditions hereof or thereof will (a) violate any Law, (b) conflict with or
result in a breach of or default under its charter or by-laws, or any material
agreement or instrument to which the Borrower is a party or by which it or any
of its properties (now owned or hereafter acquired) may be subject or bound
(other than conflicts, breaches and defaults the enforcement of which will be
stayed by virtue of the filing of the Chapter 11 Case and with respect to any
required landlord consents to collateral assignment to Lender of Borrower's
real property leases) or (c) result in the creation or imposition of any Lien
upon any property (now owned or hereafter acquired) of the Borrower, except the
Lien in favor of CIT with respect to the Collateral.
6.6 Financial Statements.
(a) Historical Statements.
The Borrower has heretofore furnished to CIT a balance sheet of the
Borrower and its Subsidiaries as of July 1, 1995 and the related statements of
operations and cash flows for the fiscal year then ended, as examined and
reported on by Price, Waterhouse, LLC, independent certified public
accountants, and a balance sheet and related statements of operations and cash
flows of the Borrower for and as of the end of the twelve (12) month period
ending June 29, 1996, as certified by a Designated Financial Officer. Such
financial statements (in the case of the statements as of July 1, 1995,
including the notes thereto) present fairly, in all material respects, the
financial condition of the Borrower and its Subsidiaries as of the end of such
fiscal year and as of the end of such period and the results of their
operations and the cash flows for the fiscal year and months then ended, all in
conformity with GAAP applied on a basis consistent with that of the preceding
fiscal year, subject (in the case of the interim financial statements) to
year-end adjustments. Except as disclosed therein, the
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Borrower does not have any material contingent liabilities (including
liabilities for taxes), unusual forward or long term commitments or unrealized
or anticipated losses from unfavorable commitments.
(b) Projections.
The Borrower has heretofore furnished to CIT projections for the fiscal
year ending June 1997 and such projections have been prepared in accordance
with the standard set forth in the second sentence of Section 6.16 hereof .
6.7 No Event of Default.
No event has occurred and is continuing and no condition exists which
constitutes an Event of Default or Potential Default. The Borrower is not in
violation of any term of its charter or by-laws.
6.8 Litigation.
Except as set forth in the financial statements referred to in Section 6.6
hereof and Schedule 6.8 hereof (which has previously been delivered to CIT),
there is not, to the best knowledge of the Borrower, any pending or threatened
proceeding by or before any Governmental Authority, arbitrator or grand jury
against or affecting the Borrower or any ERISA Affiliate, with respect to any
Environmental Law or ERISA law, which, if adversely decided, can reasonably be
expected to have a Material Adverse Effect.
6.9 ERISA.
Schedule 6.9 correctly sets forth a complete list of all Benefit Plans and
Multiemployer Plans. Neither the Borrower nor any ERISA Affiliate nor any
fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged in a
nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of
the Code or (ii) has taken any action which would constitute or result in a
Termination Event which in each case would have a Material Adverse Effect on or
before the Termination Date. Neither the Borrower nor any ERISA Affiliate has
made a complete or partial withdrawal under Section 4203 or 4205 of ERISA from
a Multiemployer Plan in either case which would have a Material Adverse Effect
on or before the Termination Date. Except as required by Section 4980B of the
Code, no welfare benefit plan (as defined in Section 3(1) of ERISA) provides
benefits or coverage beyond an employee's termination of employment other than
severance or plans that would not have a Material Adverse Effect on or before
the Termination Date. The Borrower has no unfunded benefit liabilities (as
defined in Section 4001(a) (18) of ERISA) as of the date of the most recent
actuarial report for all Benefit Plans of the Borrower and its ERISA
Affiliates. The contributions required under Section 412 of the code for each
Benefit Plan have been made when due and no event has occurred which could
result in the imposition of a Lien under Section 412(n) of the Code. Neither
the Borrower nor any ERISA Affiliate has any outstanding
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waivers or variances from the minimum funding requirements under Section 412 of
the Code with respect to any Benefit Plan.
6.10 Taxes.
All tax returns required to be filed by the Borrower have been
properly prepared, executed and filed. All taxes, assessments, fees and other
governmental charges upon the Borrower or upon any of its properties, income,
or sales are paid, except as set forth in Schedule 6.10. The reserves and
provisions for taxes, if any, on the books of the Borrower are adequate for all
open years and for its current fiscal period. The Borrower does not know of
any proposed additional assessment or basis for any material assessment for
additional taxes (whether or not reserved against). The federal income tax
liabilities of the Borrower have been finally determined for all fiscal periods
ending on or prior to June 29, 1984 and all such liabilities (including all
deficiencies assessed following audit) have been satisfied. The federal income
liabilities for all subsequent fiscal years remain open only for the purpose of
determining Borrower's refund claims and there are no claims for deficiencies
for any of said fiscal years.
6.11 Financial Accounting Practices, etc.
(a) The Borrower makes and keeps books, records and accounts
which, in reasonable detail, accurately and fairly reflect their
respective transactions and dispositions of their respective
assets and each maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary (A) to
permit preparation of financial statements in conformity with GAAP
except as previously disclosed to CIT and (B) to maintain
accountability for assets, and (iii) the recorded accountability
for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(b) The Borrower maintains a system of internal procedures
and controls sufficient to provide reasonable assurance that the
information required to be set forth in each Borrowing Base
Certificate (including, without limitation, information relating
to the identification of assets which are Inventory as provided
herein and the valuation thereof) is accurate.
6.12 Power To Carry On Business.
The Borrower has all the requisite power and authority to own and
operate its properties and to carry on its business as now conducted and as
presently planned to be conducted (subject to Bankruptcy Court approval
with respect to transactions outside the ordinary course of business).
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6.13 No Material Adverse Change.
Between July 19, 1996 and the date hereof there has not occurred any event
which may be reasonably expected to have a Material Adverse Effect, other than
events that customarily occur as a result of events leading up to or following
the commencement of the Chapter 11 case.
6.14 Existing Liens; Capitalized Leases.
There are no Liens on any assets of the Borrower other than (a) the Lien
created as of the Entry Date in favor of CIT hereunder and under the other
Related Documents, and (b) Permitted Liens.
6.15 Compliance with Laws.
The Borrower is not in violation of or otherwise liable under any Law
(including but not limited to violations pertaining to the conduct of its
business or the use, maintenance or operation of the real and personal
properties owned or possessed by it), except for violations which in the
aggregate do not have a Material Adverse Effect and violations or any
enforcement actions which will be stayed by virtue of the filing of the Chapter
11 Case.
6.16 Accurate and Complete Disclosure.
No representation or warranty made by the Borrower under this Agreement or
any other Related Document and no written statement made by the Borrower in any
financial statement (furnished pursuant to this Agreement or otherwise),
certificate, report, exhibit or document furnished by the Borrower to CIT
pursuant to or in connection with this Agreement or any other Related Document
is or was or will be, when delivered, when taken together with all other
information supplied by the Borrower to CIT, false or misleading in any
material respect (including by omission of material information necessary to
make such representation, warranty or statement, in light of the circumstances
under which it was made, not misleading). To the extent the Borrower furnishes
any projections of the financial position and results of operations of the
Borrower for, or as at the end of, certain future periods such projections were
believed at the time furnished to be reasonable, have been or will have been
prepared on a reasonable basis and in good faith by the Borrower, and have been
or will be based on assumptions believed by the Borrower to be a reasonable at
the time made and upon the best information then reasonably available to the
Borrower. The Borrower has disclosed to CIT in writing every fact which to the
best of its knowledge is reasonably likely to result in a Material Adverse
Effect.
6.17 Insurance.
The Borrower maintains with financially sound and reputable insurers
adequate insurance with respect to its properties and businesses and those of
its Subsidiaries. Schedule
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6.17 hereto sets forth a list of all insurance currently maintained by the
Borrower and its Subsidiaries.
6.18 Environmental Matters.
(a) the Borrower is in compliance in all material respects
with all applicable Environmental Laws;
(b) the Borrower has obtained all material permits,
approvals, authorizations and licenses required by Environmental
Laws necessary for its operations, and all such permits,
approvals, authorizations and licenses are in good standing and
the Borrower is in material compliance with all material terms and
conditions of such permits, approvals, authorizations and
licenses;
(c) the Borrower and its currently owned or leased property
or operations is not subject to any outstanding written order from
or agreement with any Governmental Authority or other Person or is
subject to any judicial or docketed administrative proceeding
respecting (i) Environmental Laws, (ii) Remedial Action or (iii)
any Environmental Liabilities and Costs arising from a Release or
threatened Release except for any such order or proceeding which
would not reasonably be expected to have a Material Adverse
Effect; and
(d) the Borrower has not received any written notice or claim
to the effect that it is or is reasonably expected to be liable to
any Person as a result of the Release that can reasonably be
expected to have a Material Adverse Effect.
6.19 Administrative Priority; Lien Priority.
(a) After the Entry Date, the Obligations of the Borrower
will constitute allowed administrative expenses in the Chapter 11
Case having priority over all administrative expenses and
unsecured claims against the Borrower now existing or hereafter
arising, of any kind or nature whatsoever, including without
limitation all administrative expenses of the kind specified in
Sections 503(b) and 507(b) of the Bankruptcy Code, except for the
Carveout.
(b) The Lien on the Collateral shall be a valid and perfected
first priority Lien.
6.20 Bankruptcy Court Order.
The Interim Bankruptcy Court Order or the Final Bankruptcy Court Order, as
the case may be, is in full force and effect, and has not been reversed,
stayed, modified or amended absent the joinder and consent of CIT and the
Borrower.
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6.21 Real Property.
Schedule 6.21 hereto sets forth a complete and accurate description and
list as of the date hereof of the location, by state and street address, and
the current monthly rental (including passthroughs for taxes and operating
expenses) of all of the real property leased by the Borrower. The Borrower
does not own any real estate.
6.22 Location of Bank Accounts.
Schedule 6.22 hereto sets forth a complete and accurate list as of the
date hereof of all deposit accounts including all Depository Accounts,
maintained by the Borrower together with a description thereof (i.e. the bank
at which such deposit account is maintained and the account number and the
purpose thereof); and a list of each Person with whom Borrower has a credit
card relationship. The bank at which any depository account of Borrower or any
of its Subsidiaries is now or at any time hereafter is maintained is referred
to as a "Depository Bank".
6.23 Use of Proceeds.
The Borrower will use the proceeds of the Loans and the Letters of Credit,
respectively, in accordance with Section 2.9 hereof.
6.24 Subsidiaries.
Schedule 6.24 hereto is a complete and correct description of the name,
jurisdiction of incorporation and ownership of the outstanding capital stock of
each Subsidiary of the Borrower in existence on the Closing Date. All shares
of such stock owned by the Borrower or one or more of its Subsidiaries, as
indicated in such Schedule, are owned free and clear of all Liens, except for
the Liens in favor of the Agent that secure payment of the Obligations. There
are no options, warrants or other rights to acquire shares of capital stock of
any Subsidiary of the Borrower. The Inactive Subsidiaries have no assets or
liabilities and do not conduct any business.
6.25 Operating Lease Obligations.
On the Entry Date, the Borrower and its Subsidiaries do not have any
obligations as lessee for the payment of rent for any real or personal property
other than the operating lease obligations set forth in Schedule 6.25 hereto
and the real property lease obligations set forth in Schedule 6.21 hereto.
6.26 Schedules.
All of the information which is required to be scheduled to this Agreement
is set forth on the Schedules attached hereto, is correct and accurate in all
material respects and does not omit to state any information material thereto.
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6.27 Tradenames.
Schedule 6.27 hereto sets forth a complete and accurate list as of
the Closing Date of all tradenames used by the Borrower and its Subsidiaries.
6.28 Inventory.
There is no location at which the Borrower, GRS or GMO has any
Inventory (except for Inventory in transit) other than those locations listed
on Schedule 1.1 hereto and any other locations approved in writing by CIT.
Schedule 1.1 hereto contains a true, correct and complete list, as of the Entry
Date, of the legal names and addresses of each warehouse at which Inventory of
the Borrower is stored. None of the receipts received by the Borrower from any
warehouse states that the goods covered there by are to be delivered to bearer
or to the order of a named Person or to a named Person and such named Person's
assigns.
ARTICLE VII
CONDITIONS OF CREDIT EXTENSIONS
7.1 Conditions Precedent to Initial Credit Extension.
The obligation of CIT to make the initial Credit Extension hereunder
(whether such Credit Extension shall consist of the making of a Loan or
assistance to the Borrower in establishing or opening Letters of Credit) is
subject to the satisfaction on or before the date thereof of each of the
following conditions, in addition to the conditions set forth in Section 7.2:
(a) The Bankruptcy Court shall have entered an order
authorizing the joint administration of the chapter 11 cases of
Borrower, GRS, and GMO..
(b) The Interim Bankruptcy Court Order or the Final
Bankruptcy Court Order, as the case may be, shall have been
entered by the Bankruptcy Court, and CIT shall have received a
certified copy of the same, and such order shall not have been
reversed, stayed, modified, amended or appealed.
(c) The Borrower shall have executed and delivered to CIT the
Note, substantially in the form of Exhibit C hereto, and all
Related Documents required by CIT, each of which shall be dated
the Entry Date, and GRS and GMO have executed this Agreement, the
Subsidiary Guaranties and the Subsidiary Security Agreements and
all other documents required by CIT to evidence or perfect a first
perfected lien and security interest in all real and personal
property of GRS and GMO.
(d) The Borrower shall have paid to CIT all fees when due and
other amounts due and payable to CIT when due, including but not
limited to amounts due under Section 2.8 or 11.6 hereof. The
Borrower shall have paid
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to counsel to CIT all reasonable fees and other client charges due
to such counsel on the date of the initial Credit Extension.
(e) CIT shall have received certificates satisfactory in form
and substance to it from the Borrower, signed by the Designated
Borrowing Officer, certifying as to (i) true copies of Borrower's,
GRS's and GMO's charter and by-laws, (ii) true copies of all
corporate action taken by the Borrower, GRS and GMO, respectively,
relative to the Related Documents and the transactions
contemplated thereby (which shall designate one or more Designated
Financial Officers and Designated Borrowing Officers), (iii) the
true signatures and incumbency of the Designated Borrowing
Officers and (iv) such other matters as CIT may reasonably
request.
(f) CIT shall have received a certified copy of the initial
Borrowing Base Certificate satisfactory to CIT showing
Availability of not less than Five Million Dollars
($5,000,000.00), after giving affect to the Loans and Letters of
Credit to be issued as part of the initial funding and deducting
all post-petition debts and payables which will not be paid with
such Loans.
(g) The Lien in favor of CIT with respect to the Collateral
shall be a valid and perfected first priority Lien prior to all
other Liens in the Collateral, and Borrower shall have executed
and delivered such UCC financing statements as CIT may request.
(h) The Borrower shall have caused all property insurance
policies, including those relating to the GRS Collateral and the
GMO Collateral, to show CIT as loss payee as its interest may
appear and, with respect to Inventory, all such policies shall
name CIT as first payee.
(i) CIT shall have received copies of the most recent Annual
Report (Form 5500), including Schedule B thereto, and the most
recent actuarial report for each Benefit Plan. In addition, CIT
shall have received evidence in the form of an officer's
certificate, in form and substance reasonably satisfactory to CIT,
of the Borrower's compliance with all Environmental Laws, ERISA,
labor and WARN matters.
(j) CIT shall have received from counsel to the Borrower, a
favorable opinion substantially in the form of Exhibit H hereto,
and covering, among other things, entry of the Interim Bankruptcy
Court Order and notice having been given in accordance with the
applicable provisions of the Bankruptcy Code, the Bankruptcy Rules
and any order of the Bankruptcy Court.
(k) CIT shall have received certified copies of current Form
UCC-11s or reports from a reporting company satisfactory to CIT,
listing all effective UCC financing statements, tax liens and
judgment liens in each of the
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jurisdictions listed on Schedule 1.1 hereto, which name as debtor
the Borrower, together with copies of such financing statements,
none of which (other than those consented to by CIT), shall cover
any of the Collateral, unless such financing statements will be
terminated in connection with the repayment of Borrower's
prepetition working capital facility.
(l) The Borrower shall provide CIT with a certified audit of
the Inventory conducted by an independent certified public
accountant acceptable to CIT.
(m) CIT shall be satisfied with Borrower's financial
condition and no material adverse change in Borrower's financial
condition, business, prospects, profitability, assets or
operations shall have occurred since July 19, 1996 or which were
not reflected in the statements or projections submitted to CIT.
(n) CIT shall have received a satisfactory appraisal of the
Inventory.
(o) CIT shall have received a satisfactory twelve (12) month
cash budget projection.
(p) All legal proceedings in connection with the transactions
contemplated by this Agreement and the other Related Documents
shall be satisfactory to CIT and CIT shall have received all such
counterpart originals or certified or other copies of such
documents and proceedings in connection with such transactions, in
form and substance reasonably satisfactory to CIT, as CIT may from
time to time request.
7.2 Conditions Precedent to Each Credit Extension.
The obligation of CIT to make any Credit Extension hereunder
(whether such Credit Extension shall consist of the making of a loan or
assisting Borrower in establishing or opening Letters of Credit) is subject to
the performance by the Borrower of its obligations to be performed hereunder
and under the Related Documents on or before the date of such Credit Extension
and to the satisfaction of the following further conditions:
(a) The representations and warranties of the Borrower
contained in Articles V and VI hereof and in each Related Document
shall be true in all material respects and as of the date of each
Credit Extension hereunder with the same effect as though made on
and as of each such date.
(b) No Event of Default and no Potential Default shall have
occurred and be continuing or exist or shall occur or exist after
giving effect to such Credit Extension and this Agreement and all
Related Documents and all terms and provisions thereof shall be in
full force and effect.
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(c) On the date of such Credit Extension, the Interim
Bankruptcy Court Order or the Final Bankruptcy Court Order, as the
case may be, shall have been entered by the Bankruptcy Court, and
CIT shall have received a certified copy of the same and such
order shall be in full force and effect and shall not have been
reversed, stayed, modified, amended or appealed.
(d) The aggregate unpaid principal amount of the Loans and
the Letter of Credit Exposure shall not exceed, and after giving
effect to the requested Credit Extension will not exceed, the
Current Commitment.
(e) CIT shall have received from the Borrower a written or an
oral (in the case of any oral notice, if requested by CIT,
promptly confirmed in writing as set forth in Section 2.3(a) of
this Agreement) notice of borrowing from a Designated Borrowing
Officer specifying the date, which shall be a Business Day, on
which such Loan is to be made, the principal amount of such Loan
and the account information where such Loan is to be received and
a completed Letter of Credit Application, as appropriate.
(f) With respect to any Credit Extension on or after the
thirtieth day following the Entry Date, the Final Bankruptcy Court
Order shall be in full force and effect and shall not have been
reversed, stayed, modified, amended or appealed.
(g) All legal proceedings in connection with the transactions
contemplated by this Agreement and the other Related Documents
shall be reasonably satisfactory to CIT and CIT shall have
received all such counterpart originals or certified or other
copies of such documents and proceedings in connection with such
transactions, in form and substance reasonably satisfactory to
CIT, as CIT may from time to time reasonably request.
Any oral or written request by the Borrower for any Credit Extension hereunder
shall constitute a representation and warranty by the Borrower that the
conditions set forth in this Section 7.2 have been satisfied as of the date of
such request. Failure of CIT to receive notice from the Borrower to the
contrary before such Credit Extension is made shall constitute a further
representation and warranty by the Borrower that the conditions set forth in
this Section 7.2 (other than those set forth in clause (g)) have been satisfied
as of the date of such Credit Extension.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower covenants to CIT as follows, subject to waiver by CIT as
provided herein:
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8.1 Reporting and Information Requirements.
(a) Annual Reports.
(i) As soon as practicable and in any event within ninety (90) days
after the close of each fiscal year of the Borrower (except with
respect to the fiscal year ending June 29, 1996, as provided below), the
Borrower shall furnish to CIT a consolidated and consolidating statement
of operations, and cash flows of the Borrower and its Subsidiaries as of
the close of such fiscal year and a balance sheet of the Borrower and its
Subsidiaries as of the close of such fiscal year, and notes to each, all
in reasonable detail, setting forth in comparative form the corresponding
figures for the preceding fiscal year, with such statements and balance
sheet to be certified by Price, Waterhouse, LLC or other independent
certified public accountants of recognized national standing selected by
the Borrower and reasonably satisfactory to CIT. Certified year-end
statements and a balance sheet for the Borrower's 1996 fiscal year shall
be delivered to CIT no later than December 15, 1996. The certificate or
report of such accountants shall be free of exceptions or qualifications
(except with respect to the Chapter 11 Case) with respect to such
statements and balance sheet being prepared in compliance with GAAP and
shall in any event contain a written statement of such accountants
substantially to the effect that (A) such accountants examined such
statements and balance sheet in accordance with generally accepted
auditing standards and accordingly made such tests of accounting records
and such other auditing procedures as such other auditing procedures as
such accountants considered necessary in the circumstances and (B) in the
opinion of such accountants such statements and balance sheet present
fairly, in all material respects, the financial position of the Borrower
and its Subsidiaries as of the end of such fiscal year and the results of
its operations and the changes in financial position for such fiscal year,
in conformity with GAAP applied on a basis consistent with that of the
preceding fiscal year (except for changes in application in which such
accountants concur). A copy of the certificate or report of the
accountant signed by such independent public accountants shall be
delivered to CIT. As soon as it becomes available, the Borrower shall
notify CIT that any management letter received by the Borrower from its
independent public accountants has been prepared and, upon the request of
CIT, the Borrower shall make such letter available for review by CIT at
the chief executive office of the Borrower.
(ii) Each set of statements and balance sheets delivered pursuant to
this Section 8.1(a) shall be accompanied by a certificate or report dated
the date of such statements and balance sheet by the accountants who
certified or reported on such statements and balance sheet stating in
substance that they have reviewed this Agreement and that in making the
examination necessary for their certification of such statements and
balance sheet they did not become
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aware of any Event of Default on Potential Default based upon any
financial covenant, or if they did become so aware, such certificate or
report shall state the nature and period of existence thereof, if
determinable. In addition, each set of statements and balance sheets
delivered pursuant to Section 8.1(a) (i) shall be accompanied by a
certificate certified by the Designated Financial Officer of the Borrower
stating that the Borrower has complied with the Capital Expenditures
covenant set forth in Sections 9.2 in form and substance satisfactory to
CIT.
(b) Quarterly Reports.
(i) As soon as practical and in any event within forty-five (45) days
after the close of each of the first three fiscal quarters of each of the
Borrower's fiscal years, the Borrower shall furnish to CIT unaudited
statements of operations and cash flows of the Borrower and its
Subsidiaries and a balance sheet of the Borrower and its Subsidiaries as
of the close of such fiscal quarter, all in reasonable detail setting
forth in comparative form the corresponding fiscal quarter for the
preceding fiscal year, and certified by a Designated Financial Officer of
the Borrower as presenting fairly, in all aterial respects, the financial
position of the Borrower and its Subsidiaries as of the end of such
quarter and the results of its operations and the changes in financial
position for such quarter, in conformity with GAAP applied in a manner
consistent except as otherwise disclosed therein with that of the most
recent audited financial statements furnished to CIT, subject to year-end
adjustments.
(ii) Each set of statements and balance sheets delivered pursuant to
Section 8.1(b) shall be accompanied by a certificate dated the date of
such statements and balance sheet by a Designated Financial Officer
stating in substance that to his knowledge he did not become aware of any
Event of Default or Potential Default, or if he did become so aware, such
certificate shall state the nature and period of existence thereof, if
determinable.
(c) Monthly Reports.
(i) As soon as practicable and in any event within twenty-five (25)
days after the end of each fiscal month (including the fiscal month in
which this Agreement is executed), the Borrower shall furnish to CIT
unaudited statements of operations and cash flows for the Borrower and its
Subsidiaries for such fiscal month and for the period from the beginning
of such fiscal year to the end of such fiscal month, and an unaudited
balance sheet of the Borrower and its Subsidiaries as of the end of such
fiscal month, all in reasonable detail, setting forth in comparative form
the corresponding figures for the same periods during the preceding fiscal
year (except for the balance sheet, which shall set forth in comparative
form the corresponding balance
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sheet as of the prior fiscal year end), and certified by a
Designated Financial Officer of the Borrower as presenting fairly,
in all material respects, the financial position of the Borrower
and its Subsidiaries as of the end of such fiscal month and the
results of its operations and cash flows for such fiscal month, in
conformity with GAAP applied in a manner consistent except as
otherwise disclosed therein with that of the most recent adjusted
financial statements furnished to CIT, subject to year-end
adjustments.
(ii) Each set of statements and balance sheets delivered
pursuant to Section 8.1(c) shall be accompanied by a certificate
dated the date of such statements and balance sheet by a
Designated Financial Officer stating in substance that he has
reviewed this Agreement and that to the best of his knowledge he
did not become aware of any Event of Default or Potential Default,
or if he did become so aware, such certificate shall state the
nature and period of existence thereof, if determinable.
(iii) As soon as practicable and in any event within
twenty-five (25) days after the end of each fiscal month
(including the fiscal month in which this Agreement is executed),
the Borrower shall furnish to CIT a monthly inventory report and
Borrowing Base Certificate in form and substance reasonably
satisfactory to CIT, and certified by a Designated Financial
Officer of the Borrower, which shall be accompanied by a
reconciliation from the weekly inventory report and Borrower Base
Certificate delivered by the Borrower to CIT pursuant to Section
8.1(d).
(d) Weekly Reports.
As soon as practicable and in any event within two (2) Business Days after
the end of each week (including the week in which this Agreement is executed),
the Borrower shall furnish to CIT weekly sales reports in form and substance
reasonably satisfactory to CIT, and certified by a Designated Financial Officer
of the Borrower. As soon as practicable and in any event within two (2)
Business Days after the end of each week (including the week in which this
Agreement is executed), the Borrower shall furnish to CIT a weekly inventory
report and Borrowing Base Certificate in form and substance reasonably
satisfactory to CIT, and certified by a Designated Financial Officer of the
Borrower.
(e) Certain Reports.
Upon the reasonable request of CIT, the Borrower shall provide CIT with
copies of all consultants' reports, investment bankers' reports, final business
plans, and similar documents. The Borrower shall not be obligated to provide
copies of any documents (i) which are subject to an evidentiary privilege and
as to which disclosure to CIT would cause such privilege to be waived, but if
the Borrower claims that any document is so privileged, it shall promptly
provide CIT with a letter describing the document and stating the basis for
such claim of privilege, and (ii) consultants' reports, investment bankers'
reports, final business plans and
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similar documents prepared in connection with the formulation and negotiation
of a plan or plans of reorganization.
(f) Pleading, etc.
The Borrower shall give or cause to be given or served on CIT and its
counsel copies of all pleadings, motions, applications, financial information
and other papers and documents filed by the Borrower in the Chapter 11 Case.
(g) Reports to Committees.
Promptly after the sending thereof, the Borrower shall give CIT copies of
all written reports given by the Borrower to any official or unofficial
creditors' committee in the Chapter 11 Case.
(h) Other Reports and Information.
Promptly upon their becoming available, the Borrower shall deliver to CIT
a copy of (i) all reports, financial statements or other information delivered
by the Borrower to its shareholders, (ii) all reports, proxy statements,
financial statements and other information generally distributed by the
Borrower to its creditors or the financial community in general and (iii) any
audit or other reports submitted to the Borrower by independent accountants in
connection with any annual, interim or special audit of the Borrower.
(i) Further Information.
The Borrower will promptly furnish to CIT such other information and in
such form as CIT may reasonably request.
(j) Projections.
The Borrower has heretofore furnished CIT with financial projections,
which projections were prepared in accordance with the standard set forth in
the second sentence of Section 6.16 hereof. Promptly after any revisions are
made to such financial projections, the Borrower shall provide to CIT such
revised financial projections for the remaining portion of such period. As
soon as practicable but in no event later than sixty (60) days prior to end of
each fiscal year of Borrower, Borrower shall furnish CIT with financial
projections for the then forthcoming fiscal year. Such revised and all annual
projections shall be prepared in accordance with the standard set forth in
Section 6.16 hereof.
(k) Notice of Event of Default.
Promptly upon an officer of the Borrower becoming aware of any Event of
Default or Potential Default, the Borrower shall give CIT notice thereof,
together with a written
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statement of a Designated Financial Officer of the Borrower setting forth the
details thereof and any action with respect thereto taken or contemplated to be
taken by the Borrower.
(l) Notice of Material Adverse Change.
Promptly upon an officer of the Borrower becoming aware thereof, the
Borrower shall give CIT notice of any event or condition giving rise to a
Material Adverse Effect.
(m) Visitation and Verification.
The Borrower shall permit CIT or such professionals or other Persons
as CIT may designate, at Borrower's cost, (i) to examine and inspect the
books and records of the Borrower and take copies and extracts therefrom at
reasonable times and during normal business hours upon the reasonable request
of CIT, (ii) to verify materials, leases, notes, receivables, deposit accounts
and other assets of the Borrower from time to time, and (iii) to conduct a
physical Inventory count and/or valuation at the warehouse and retail stores of
the Borrower, provided that the Borrower shall cause to be conducted at least
one physical Inventory count in the twelve month periods commencing on each of
(A) the Entry Date and (B) each anniversary of the Entry Date, and shall
promptly after it becomes available provide to CIT a copy of the written
results of such physical Inventory count. In addition to the physical
Inventory counts referred to in the preceding sentence, the Borrower shall not
be obligated to pay for more than two such additional counts and/or valuations
in such twelve month periods, provided, however that (x) any such additional
count and/or valuation shall be conducted upon the reasonable request of CIT
(y) shall be based upon a representative random sample of the physical
Inventory and (z) the limitation contained in this sentence shall not apply
after the occurrence of an Event of Default.
(n) Environmental.
The Borrower shall notify CIT in writing, promptly upon, and in any
event within 10 days after, an officer of the Borrower learns of any of the
following:
(i) the receipt by the Borrower of notification that any real
or personal property of the Borrower is subject to any
Environmental Lien;
(ii) notice of violation of any Environmental Law which could
reasonably be expected to subject the Borrower to Environmental
Liabilities and Costs of $10,000 or more; and
(iii) notice of the commencement of any judicial or
administrative proceeding or investigation alleging a violation by
the Borrower of any Environmental Law, which if adversely
determined could reasonably be expected to have a Material Adverse
Effect.
8.2 Preservation of Existence and Franchises.
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Subject to Section 9.9 hereof, the Borrower shall maintain
(which may be by virtue of the stay imposed in the Chapter 11 Case) its
corporate existence, as the case may be, rights and franchise in full force and
effect in its jurisdiction of incorporation. The Borrower shall qualify and
remain qualified (which may be by virtue of the stay imposed in the Chapter 11
Case) as a foreign corporation in each jurisdiction in which failure to qualify
would have a Material Adverse Effect.
8.3 Insurance.
The Borrower shall maintain insurance on the Collateral at the
levels currently in effect with financially sound and reputable insurers as
listed on Schedule 6.17 hereto and promptly cause all such policies to show
CIT as loss payee or additional insured as its interest may appear on such
policies and with respect to all Collateral, all relevant policies shall name
CIT as loss payee on such policies. Upon the request of CIT, the Borrower
shall promptly, but in any event not later than fifteen days after any such
request, provide to CIT a copy of each such policy listed on Schedule 6.17.
8.4 Maintenance of Properties.
The Borrower shall, (i) maintain or cause to be maintained in
good repair, working order and condition all property now or hereafter owned
by it and (ii) make or cause to be made all needful and proper repairs,
renewals, replacements and improvements thereto to the extent required so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times, and (iii) maintain all leased property
in compliance with the requirements of any applicable lease, in each case other
than sales of property or rejection of leases approved by the Bankruptcy Court
and otherwise permitted by the terms of this Agreement.
8.5 Financial Accounting Practices, etc.
(a) The Borrower shall make and keep books, records and
accounts which, in reasonable detail, accurately and fairly
reflect their transactions and dispositions of their assets and
maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization,
(ii) transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with GAAP and
(B) to maintain accountability for assets, and (iii) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect
to any differences.
(b) The Borrower shall maintain a system of internal
procedures and controls sufficient to provide reasonable assurance
that the information
required to be set forth in each Borrowing Base Certificate
(including, without limitation, information relating to the
identification of assets which are
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Eligible Accounts or Eligible
Inventory as provided herein and the valuation thereof) is
accurate in all material respects.
8.6 Compliance with Laws.
The Borrower shall comply with all applicable Laws (including but not
limited to compliance in respect of products that they sell or service or
operation of real and personal properties owed or possessed by them) with
respect to which failure to comply would have a Material Adverse Effect.
8.7 Further Assurance.
The Borrower promptly shall do, execute, acknowledge, deliver, record,
file, register and perform any and all such further acts, deeds, conveyances,
estoppel certificates, assurances and other instruments as CIT may reasonably
request from time to time in order (a) to carry out more effectively the
purposes of this Agreement or any other Related Document, (b) to create a valid
and perfected first priority lien on all Collateral, (c) to perfect and
maintain the validity, effectiveness and priority of any of the Related
Documents and the Lien intended to be created thereby, and (d) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm unto CIT
the rights granted or now or hereafter intended to be granted to CIT under any
Related Document. The assurance contemplated by this Section 8.7 shall be
given under applicable nonbankruptcy Law as well as the Bankruptcy Code, it
being the intention of the parties that CIT may request assurances under
applicable nonbankruptcy Law, and such request shall be complied with (if
otherwise made in good faith by CIT) whether or not the Interim Bankruptcy
Court Order other Final Bankruptcy Court Order, as the case may be, is in force
and whether or not dismissal of the Chapter 11 Case or any other action by the
Bankruptcy Court is imminent, likely or threatened.
8.8 Cash Management System.
As soon as possible and in no event later than August 31, 1996, the
Borrower shall establish or cause to be established and maintain until the
Revolving Credit Commitment has been terminated and all Obligations have been
paid in full in cash a cash management system in all respects satisfactory to
CIT and consistent with this Section 8.8, which shall include all cash and
other proceeds of the Accounts and Inventory of GRS and GMO. During the period
prior to August 31, 1996, the Borrower shall cause all collections and cash
proceeds of the Collateral to be wired on a daily basis to the CIT Account.
The Borrower agrees that the cash management system established pursuant to the
first sentence in this Section 8.8 will require, among other things, that the
Borrower (i) cause all cash and all proceeds from Accounts and the sale of
Inventory to be deposited into the Depository Accounts in the ordinary course
of business of the Borrower consistent with past practice, (ii) cause all
remittances on credit card sales to be transferred into the Cash Concentration
Account on a daily basis (or as often as the credit card company will remit
such sums) and use Borrower's best efforts to
deliver to CIT a credit card bank depository agreement in form satisfactory to
CIT executed by Borrower and each credit card servicer or provider with which
Borrower has a credit card
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relationship, (iii) cause all funds (other than
those covering returned checks) in the Depository Accounts to be transferred
into the Cash Concentration Account on a daily basis and cause all funds in the
Cash Concentration Account to be transferred into the CIT Account on a daily
basis, (iv) instruct CIT to cause all funds transferred to the CIT Account to
be credited to the Borrower's Account and applied to reduce the Obligations
outstanding from time to time, (vi) take all such actions as CIT deems
necessary or advisable to send all cash, all proceeds from the sale of
Inventory, all remittances or other proceeds of Collateral to the CIT Account
to be applied to the Obligations, (vii) execute and deliver to CIT on or before
the Closing Date an original notice letter for each Depository Bank listed on
Schedule 6.22 in form satisfactory to CIT, which will be sent to each such
Depository Bank, and cause each Depository Bank to enter into an agreement (a
"Depository Account Agreement") substantially in the form of Exhibit I hereto,
and (v) take such actions as CIT deems necessary or advisable to grant to CIT
dominion and control over the funds in the Cash Concentration Account. Upon
receipt by the Borrower of collections of cash and any proceeds of the sale of
Inventory, the Borrower shall immediately deposit all such payments into the
Cash Concentration Account or any Depository Account. The Borrower shall
promptly notify CIT of the creation of any new Depository Account and shall use
its best efforts to promptly cause the Depository Bank maintaining such new
Depository Account to enter into a Depository Account Agreement with CIT.
8.9 Taxes.
The Borrower shall pay and discharge, to the extent consistent with
the rights and obligations of the Borrower as a debtor-in-possession under the
Bankruptcy Code, all post-petition taxes, assessments and governmental charges
upon it, its income and its properties, which arise from or relate to
operations of the Borrower or other events occurring after the Filing Date,
prior to the date on which penalties are attached thereto, unless and to the
extent only that (a) such taxes, assessments and governmental charges shall be
contested in good faith and by appropriate proceedings by the Borrower and (b)
adequate reserves are maintained by the Borrower with respect thereto.
8.10 Pension Plans.
(a) The Borrower and each ERISA Affiliate will furnish to CIT
forthwith upon filing or receipt, as the case may be, copy of (A)
any notice by the Borrower or any ERISA Affiliate of a Benefit
Plan termination sent to the PBGC under Section 4041 of ERISA, or
(B) any notice sent or received by the Borrower or any ERISA
Affiliate under Section 4041, 4042, 4043, 4063, 4065, 4066 or 4068
or ERISA.
(b) The Borrower will notify CIT within ten (10) Business
Days after it knows or has reason to know that a prohibited
transaction (defined in Section 406 of ERISA and 4975 of the Code)
has occurred with respect to a
Plan and shall send a statement of the chief financial officer of
the Borrower
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describing such transaction and the action which the
Borrower has taken, is taking or proposes to take with respect
thereto.
(c) The Borrower shall notify CIT within ten (10) Business
Days after receipt by the Borrower or any ERISA Affiliate of a
notice from a Multiemployer Plan regarding the imposition of
withdrawal liability and shall send copies of each such notice.
(d) The Borrower shall notify CIT within ten (10) Business
Days after it sends notice of a plant closing or mass layoff (as
defined in WARN) to employees.
(e) The Borrower and each ERISA Affiliate will furnish to CIT
as soon as practicable upon filing a copy of each Annual Report
(Form 5500) in respect of each Benefit Plan.
8.11 Subsidiaries.
Each of the covenants set forth in this Article VIII (except Section
8.1) shall apply to each Subsidiary of Borrower as if each such Subsidiary were
specifically referred to in such covenant, and except for Section 8.2 with
respect to the Inactive Subsidiaries, which Borrower may dissolve.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants to CIT as follows, subject to waiver by CIT as
provided herein:
9.1 Interim Bankruptcy Court Order; Final Bankruptcy Court Order;
Administrative Priority; Lien Priority; Payment of Claims.
(a) The Borrower shall not at any time seek, consent to or
suffer to exist any modification, stay, vacation or amendment of
the Interim Bankruptcy Court Order or the Final Bankruptcy Court
Order except for modifications and amendments agreed to by CIT.
(b) The Borrower shall not at any time suffer to exist a
priority for any administration expense or unsecured claim against
the Borrower (now existing or hereafter arising of any kind or
nature whatsoever, including without limitation any administrative
expenses of the kind specified in Sections 503(b) and 507(b) of
the Bankruptcy Code) equal or superior to the priority of CIT in
respect of the Obligations, except for the Carveout.
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(c) The Borrower shall not at any time suffer to exist any
Lien on the Collateral having a priority equal or superior to the
Lien and in favor of CIT in respect of the Collateral, or any
Liens except for Permitted Liens.
(d) Prior to the date on which the Obligations have been paid
in full in cash and the Revolving Credit Commitment has been
terminated, the Borrower shall not pay any administrative expense
claims except: (1) administrative expense claims incurred in the
ordinary course of the business of the Borrower; and (2) those
expenses constituting the "Carveout".
9.2 Capital Expenditures.
The Borrower and its Subsidiaries on a consolidated basis shall not
permit Capital Expenditures for any fiscal year of the Borrower to exceed One
Million Dollars ($1,000,000).
9.3 Liens.
The Borrower shall not, at any time create, incur, assume or suffer
to exist Liens on any of its properties or assets, tangible or intangible, now
owned or hereafter acquired, or agree or become liable to do so, except for the
following ("Permitted Liens"):
(a) the Lien in favor of CIT with respect to the Collateral
and the Lien in favor of the Letter of Credit Issuer in connection
with the issuance of Letters of Credit by the Letter of Credit
Issuer in connection with this Agreement;
(b) Liens which were in existence on the Filing Date (other
than the Liens of Borrower's prepetition working capital lenders)
and are listed on Schedule 9.3 hereof;
(c) Deposits or pledges to secure utility and similar
services, to secure workmen's compensation, unemployment
insurance, old age benefits or other social security obligations,
or in connection with or to secure the performance of bids,
tenders, trade contracts or leases, or to secure statutory
obligations, or stay, surety, appeal or custom bonds, or other
pledges or deposits of like nature, and all in the ordinary course
of business;
(d) Liens on property to be used by the Borrower in the
ordinary course of its business, securing payment of all or part
of the purchase price thereof, and Liens with respect to equipment
leases which equipment is used by the Borrower in the ordinary
course of its business, provided that the aggregate amount of
Indebtedness at any one time outstanding incurred after the Filing
Date and secured by such Liens shall not exceed Two Hundred
Thousand Dollars ($200,000), and further provided that such Liens
are
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confined solely to the property so purchased, leased, improvements
thereto and proceeds thereof;
(e) Zoning restrictions, rights of way, consents, covenants,
reservations, encumbrances, easements, minor restrictions on the
use of real property, minor irregularities in title thereto and
other minor Liens, charges and encumbrances that do not secure the
payment of money or the performance of an obligation and that do
not in the aggregate materially detract from the value of a
property or asset to, or materially impair its use in the business
of, the Borrower;
(f) Nonconsensual Liens of warehousemen, materialmen,
mechanics, carriers and landlords and other like Persons, which
Liens arise in the ordinary course of the Borrower's business;
(g) Liens in connection with any taxes, assessments, charges,
levies or claims that are not yet due and payable or which the
Borrower is contesting in good faith and by appropriate
proceedings diligently conducted, so long as reserves or other
appropriate provisions as may be required by GAAP have been made
therefor and so long as the failure to pay the same does not have
a Material Adverse Effect;"
(h) extensions, renewals or replacements of any Lien
permitted pursuant to clauses (a) - (g) above; provided that the
principal amount of the obligation secured thereby is not
increased and that any such extension, renewal or replacement is
limited to the property originally encumbered thereby; and
(i) the Liens of (i) Harris Trust and Savings Bank ("Harris")
with respect to One Million Six Hundred Thousand Dollars
($1,600,000) or such lesser amounts as may be held by Harris from
time to time as security for credit card chargebacks and (ii) the
Contingent Bank One Secured Obligations as defined in the Interim
Bankruptcy Court Order.
9.4 Indebtedness.
The Borrower shall not create, incur, assume or suffer to exist any
Indebtedness, except for the following ("Permitted Indebtedness"):
(a) Indebtedness in favor of CIT and to any Letter of Credit
Bank under any Letter of Credit Application;
(b) Indebtedness secured by a Permitted Lien;
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(c) Pre-petition Indebtedness subject to the automatic stay
under Section 362 of the Bankruptcy Code; and;
(d) accounts payable and accrued expenses arising out of
transactions (other than borrowings) in the ordinary course of
business.
9.5 Guarantees and Contingent Liabilities.
The Borrower shall not at any time be or become liable under any
Guarantee, except:
(a) Guarantees in favor of CIT;
(b) Guarantees in existence on the Filing Date and listed on
Schedule 9.5 hereto; and
(c) contingent liabilities arising from the endorsement of
negotiable or other instruments for deposit or collection or
similar transactions in the ordinary course of business.
9.6 Loans, Advances and Investments.
Except as otherwise expressly permitted by this Section 9.6 and
Section 9.10, the Borrower shall not at any time make any loan or advance to,
or purchase or acquire any stock, bond, note or security of, or any partnership
interest (whether general or limited) in, or any other interest in, or make any
capital contribution to, any other Person. By way of illustration, and without
limitation of the foregoing, it is understood that the Borrower will be deemed
to have made an advance to a Person: (x) to the extent that the Borrower
performs any service for such Person (including but not limited to management
services), or transfers any property to such Person, and is not reimbursed for
such service or property and (y) to the extent that the Borrower pays any
obligation on behalf of such Person. The amount of such advance shall be
deemed to be the fair value of the services so performed or property so
transferred (in the case of clause (x)) or the amount so paid by the Borrower
(in the case of clause (y)).
The following are excepted from the operation of this Section 9.6:
(a) advances to employees to meet expenses incurred by such
employees or with respect to salary advances and other similar
advances, in each case to non-Affiliates and in the ordinary
course of business;
(b) the Letter of Credit Cash Collateral Account and the
other accounts permitted or required to be maintained pursuant
hereto, any investment of funds on deposit in the foregoing to the
extent expressly permitted hereunder, subject to the provisions of
11 U.S.C. Section 345 or as otherwise authorized by the
Bankruptcy Court; and
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(c) management and computer services provided to GRS and GMO
in connection with the operations thereof.
9.7 Dividends and Related Distributions.
The Borrower shall not declare, make, pay or agree to pay, any
dividend or other distribution of any nature (whether in cash, property,
securities or otherwise) on account of the purchase, redemption, retirement
or acquisition of any partnership interests or shares of capital stock (or
warrants, options or rights therefor).
9.8 Merger, etc.
The Borrower shall not merge with or into or consolidate with any
other Person, or sell, lease (as lessor) or otherwise dispose of all or a
substantial portion of its assets (whether in one transaction or in a
series of transactions), or agree to do any of the foregoing.
9.9 Disposition of Assets.
The Borrower shall not sell, convey, assign, lease, abandon or
otherwise transfer or dispose of, voluntarily or involuntarily (any of
the foregoing being referred to in this Section 9.9 as a "transaction" and any
series of related transactions constituting but a single transaction), any of
its properties or assets, tangible or intangible (including but not limited to
sale, assignment, discount or other disposition of accounts, contract rights,
chattel paper or general intangibles with or without recourse), except:
(a) transactions in the ordinary course of business;
(b) (i) the disposition of assets in connection with store
closings as a result of lease expirations, (ii) dispositions of
assets (other than dispositions permitted by clauses (i) and (iii)
of this Section 9.9(b)), other than Inventory, for fair market
value, provided that the Book Value of the assets disposed of
pursuant to this clause (ii) plus the Book Value of the equipment
or fixtures sold under paragraph (c) of this Section 9.9, in the
aggregate, do not exceed $4,000,000, (iii) dispositions of
Inventory in connection with store closings other than as set
forth in (i) above, provided that the Borrower shall use its best
efforts to maximize the proceeds of the Inventory disposed of in
connection with such store closings, (iv) dispositions of
Inventory that was subject to a reserve on the balance sheet of
the Borrower for the fiscal year ended June 29, 1996, and (v)
disposition of assets approved by CIT in its sole judgment
exercised reasonably, provided, further, that (A) not more than
two (2) stores, in the aggregate, shall be closed pursuant to
clauses (i) and (iii) of this Section 9.9(b) and (B) the Borrower
shall promptly report each such transaction under this Section
9.9(b) to CIT; and
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(c) sales of equipment or fixtures which are worn out or
obsolete, provided that the Book Value of such equipment and
fixtures plus the Book Value of the assets disposed of under
clauses (ii) of paragraph (b) of this Section 9.9, in the
aggregate , do not exceed $4,000,000.
9.10 Subsidiaries and Affiliates.
Borrower will not permit title to any hereafter acquired
Inventory to pass to any Subsidiary or permit any Subsidiary to acquire
Inventory. The Borrower will not provide funds to any Subsidiary or
Affiliate except: (a) to pay wages, salaries, directors' fees and related
benefits and may make expense reimbursements to Subsidiaries in the ordinary
course of business, and (b) for the payment of the normal and customary
operating expenses of such Subsidiaries.
9.11 Continuation of or Change In Business.
The Borrower shall continue to engage in its business
substantially as conducted and operated during the present and preceding fiscal
year (other than catalogue sales), and the Borrower will not engage in
any other business.
9.12 Markup and Markdown Policies.
The Borrower shall not engage in policies or procedures with
respect to markups or markdowns of Inventory which policies and procedures,
including the timing, amount and implementation of such markups and
markdowns, are inconsistent in any material respect with the past practices of
the Borrower absent the prior written consent of CIT, which shall not be
unreasonably withheld or delayed.
9.13 Environmental.
The Borrower shall not dispose of any Contaminant by placing it in
or on the ground or waters of any property owned or leased by the Borrower
if, as the consequence of all such disposals, the Borrower would incur
Environmental Liabilities and Costs in excess of $10,000.
9.14 ERISA.
The Borrower will not, so long as any of the Obligations are
outstanding and this Agreement has not been terminated:
(a) engage in any prohibited transaction described in Section
406 of ERISA or 4975 of the Code for which a statutory or class
exemption is not available or a private exemption has not
previously been obtained from the Department of Labor;
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(b) permit, or permit any ERISA Affiliate to permit, any
enforceable Lien from arising under Section 412(n) of the Code;
(c) amend or permit any ERISA Affiliate to amend any Benefit
Plan in a manner that would require security under Section 307 of
ERISA; or
(d) request or permit any ERISA Affiliate to request a waiver
of the minimum funding requirements under Section 412 of the Code
in respect of any Benefit Plan.
9.15 Payments.
The Borrower shall not make any payment of principal or interest or
otherwise on account of any Indebtedness or trade payable incurred prior to the
Filing Date, provided that such payments may be made: (i) to the holders of, or
in respect of, wage, salary, commission and employees benefit obligations
(including expense reimbursements) which arose prior to the Filing Date; (ii)
to landlords in connection with the assumption of unexpired leases under
Section 365 of the Bankruptcy Code in an aggregate amount not to exceed Two
Hundred Seventy-Five Thousand Dollars ($275,000); (iii) to other lessors and
non-debtor parties to executory contracts in connection with the assumption of
such leases and contracts under Section 365 of the Bankruptcy Code; (iv) to
holders of secured indebtedness of the Borrower in such amounts as are
determined by the Bankruptcy Court, not to exceed the amounts set forth in
Schedule 9.15 hereto; and (v) to other Persons in an aggregate amount not to
exceed $20,000, in each case after prior written notice of such payment has
been given by the Borrower to CIT and subject to approval of the Bankruptcy
Court. Nothing contained in this Section 9.17 shall prevent the Borrower from
effecting the payment of or otherwise issuing goods or refunds in connection
with payroll taxes, trust fund taxes, sales taxes, gift certificates and
layaways.
9.16 Subsidiaries.
Each of the covenants set forth in this Article IX (except Sections
9.2 and 9.10) shall apply to each Subsidiary of Borrower as if such
Subsidiary were specifically referred to in such covenant.
ARTICLE X
DEFAULTS
10.1 Events of Default.
An Event of Default shall mean the occurrence or existence of one
or more of the following events or conditions (whatever the reason for such
Event of Default and whether voluntary, involuntary or effected by operation of
Law):
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(a) The Borrower shall fail to make any payment of principal
under this Agreement or any Reimbursement Obligation when due; or
the Borrower shall fail to pay when due any other amount payable
under this Agreement or any other Related Document (including but
not limited to the making of deposits in the Depository Accounts,
the Cash Concentration Account or the Letter of Credit Cash
Collateral Account), including any interest or fee due hereunder
or any other Related Document and such failure shall continue
unremedied for more than five Business Days; or
(b) Any representation or warranty made by the Borrower or by
GRS or GMO under this Agreement or any other Related Document or
any statement made by the Borrower in any financial statement,
certificate, report, or document furnished to CIT pursuant to or
in connection with this Agreement or any other Related Document,
shall prove to have been false or misleading in any material
respect as of the time when made (including by omission of
information necessary to make such representation, warranty or
statement, in light of the circumstances under which it was made,
not misleading); or
(c) The Borrower, GRS or GMO shall default in the performance
or observance of any covenant contained in Sections 8.3 and 8.8
and Article IX hereof;
(d) The Borrower shall default in the performance or
observance of (i) the covenants contained in Section 8.1 and such
default shall have continued unremedied for a period of five days,
or (ii) any other covenant, agreement or duty under this Agreement
or any other Related Document (to the extent not otherwise set
forth in this Section 10.1) and such default shall have continued
unremedied for a period of thirty (30) days; or
(e) An order with respect to the Chapter 11 Case shall be
entered by the Bankruptcy Court, or the Borrower, GRS or GMO, as
applicable, shall file an application for an order with respect to
the Chapter 11 Case, (i) appointing a trustee under Section 1104,
or (ii) appointing an examiner with enlarged powers (beyond those
set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code)
relating to the operation of the business under Section 1106(b) of
the Bankruptcy Code; or
(f) An order with respect to the Chapter 11 Case shall be
entered by the Bankruptcy Court converting such Chapter 11 Case to
a Chapter 7 Case; or
(g) An order shall be entered by the Bankruptcy Court
confirming a plan of reorganization in the Chapter 11 Case which
does not contain a provision for termination of the Revolving
Credit Commitment and payment in full in cash of all Obligations
of the Borrower hereunder and under the other
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Related Documents on or before the effective date of such plan or
plans upon entry thereof; or
(h) An order shall be entered by the Bankruptcy Court
dismissing the Chapter 11 Case which does not contain a provision
for termination of the Revolving Credit Commitment and payment in
full in cash of all Obligations of the Borrower hereunder and
under the other Related Documents upon entry thereof; or
(i) An order with respect to the Chapter 11 Case shall be
entered by the Bankruptcy Court without the express prior written
consent of CIT, (i) to revoke, reverse, stay, modify, supplement
or amend the Interim Bankruptcy Court Order or the Final
Bankruptcy Court Order or (ii) to permit any administrative
expense or any claim (now existing or hereafter arising, of any
kind or nature whatsoever) to have administrative priority as to
the Borrower equal or superior to the priority of CIT in respect
of the Obligations (except those expenses constituting the
"Carveout", or (iii) to grant or permit the grant of a Lien (other
than those Liens referred to in Section 9.3(d), on any of the
Collateral; or
(j) An application for any of the orders described in clauses
(e), (f), (g), (h) or (i) above shall be made by a Person other
than the Borrower, GRS or GMO and such application is not
contested by the Borrower, GRS or GMO, as applicable, in good
faith and the relief requested is granted in an order that is not
stayed pending appeal; or
(k) An order shall be entered by the Bankruptcy Court that is
not stayed pending appeal granting relief from the automatic stay
to any creditor of the Borrower, GRS or GMO, as applicable, with
respect to any claim in an amount equal to or exceeding $100,000
in the aggregate; provided, however, that it shall not be an Event
of Default if relief from the automatic stay is granted (i) solely
for the purpose of allowing such creditor to determine the
liquidated amount of its claim against the Borrower, GRS or GMO,
as applicable, (ii) to permit a secured creditor of the Borrower,
GRS or GMO, as applicable, to foreclose upon its collateral, or
(iii) to permit the commencement of and/or prosecution of a
proceeding to collect against an insurance company; or
(l) The Borrower, GRS or GMO, as applicable, shall have
entered into any consent or settlement decree or agreement or
similar arrangement with a Governmental Authority or any judgment,
order, decree or similar action shall have been entered against
the Borrower, GRS or GMO, as applicable, based on or arising from
the violation of or pursuant to any Environmental Law, or the
generation, storage, transportation, treatment, disposal or
Release of any
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Contaminant and, in connection with all of the foregoing, the
Borrower, GRS or GMO, as applicable, incurs Environmental
Liabilities and Costs which are unstayed, due and owing in an
amount in excess of $10,000; or
(m) Any Termination Event occurs which CIT believes would
reasonably likely obligate the Borrower to make payment on or
before the Termination Date in an amount in excess of $500,000.
10.2 Consequence of an Event of Default.
If an Event of Default shall occur and be continuing or shall exist, CIT
may, unless specifically prohibited by the Interim Bankruptcy Court Order or
the Final Bankruptcy Court Order, by notice to the Borrower, exercise one or
more of the following remedies
(a) declare the Revolving Credit Commitment terminated,
whereupon the Commitment will terminate immediately and any fees
hereunder shall be immediately due and payable without further
order of or application to the Bankruptcy Court, presentment,
demand, protest or further notice of any kind, all of which are
hereby expressly waived, and an action therefor shall immediately
accrue;
(b) declare the unpaid principal amount of the Note, interest
accrued thereon, the total amount of the Letter of Credit Exposure
that is not cash collateralized in accordance with this Agreement
and all other amounts owing by the Borrower hereunder or under the
Note to be immediately due and payable without further order of or
application to the Bankruptcy Court, presentment, demand, protest
or further notice of any kind, all of which are hereby expressly
waived, and an action therefor shall immediately accrue;
(c) give notice to the Borrower of the occurrence and
continuance of an Event of Default;
(d) at any time when there are no Loans outstanding, maintain
cash collateral (to the extent the Borrower has or receives cash)
equal to 105% of all outstanding Letters of Credit;
(e) apply all funds deposited in the Cash Concentration
Account and in the Letter of Credit Cash Collateral Account to the
payment, in whole or in part, of the Obligations;
(f) set-off amounts in the Cash Concentration Account, the
Letter of Credit Collateral Account and apply such amounts to the
Obligations of the Borrower hereunder and in the Related
Documents;
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(g) notify all account debtors to make payment of the
Accounts directly to CIT, and/or
(h) foreclose on the Collateral or portions thereof.
10.3 Certain Remedies.
If an Event of Default occurs, CIT and the Bank may each exercise all
rights and remedies which CIT and the Bank may each have hereunder or under any
other Related Document or at law (including but not limited to the Bankruptcy
Code and the Uniform Commercial Code) or in equity or otherwise. All such
remedies shall be cumulative and not exclusive.
ARTICLE XI
MISCELLANEOUS
11.1 Holidays.
Except as otherwise provided herein, whenever any payment or action
to be made or taken hereunder or under the Note shall be stated to be due on
a day which is not a Business Day, such payment or action shall be made or
taken on the next following Business Day and such extension of time shall be
included in computing interest or fees, if any, in connection with such payment
or action.
11.2 Records.
The unpaid principal amount of the Note, the unpaid interest accrued
thereon, the interest rate or rates applicable to such unpaid principal amount,
the duration of such applicability, CIT's Current Commitment, the Stated Amount
of each Letter of Credit, the principal amount of all Reimbursement
Obligations, the Letter of Credit Exposure, and the accrued and unpaid
commitment fee, facility fee, Unused Line Fee, administration fee and Letter of
Credit fees shall at all times be ascertained from the records of CIT, which
shall be conclusive absent manifest error.
11.3 Amendments and Waivers.
CIT and the Borrower may from time to time enter into agreements
amending, modifying or supplementing this Agreement or the Note or any
other Related Document, and CIT may from time to time grant waivers or consents
to a departure from the due performance of the obligations of the Borrower
hereunder or thereunder. Any such agreement, waiver or consent must be in
writing and shall be effective only to the extent specifically set forth in
such writing. In the case of any such waiver or consent relating to any
provision hereof any Event of Default or Potential Default so waived or
consented to shall be deemed to be cured and not continuing, but no such waiver
or consent shall extend to any other or subsequent Event of Default or
Potential Default or impair any right consequent thereto.
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11.4 No Implied Waiver; Cumulative Remedies.
No course of dealing and no delay or failure of CIT in exercising any
right, power or privilege under this Agreement, the Note or any other Related
Document shall affect any other or future exercise thereof or exercise of any
other right, power or privilege. The rights and remedies of CIT under this
Agreement, the Note and the other Related Documents are cumulative and not
exclusive of any rights or remedies which CIT has thereunder or at law or in
equity or otherwise. CIT may exercise its rights and remedies against the
Borrower and the Collateral as CIT may elect, and regardless of the existence
or adequacy of any other right or remedy.
11.5 Notices.
(a) All notices, requests, demands, directions and other
communications (collectively "notices") under the provisions of
this Agreement or the Note shall be in writing (including telexed
and telecopied communication) unless otherwise expressly permitted
hereunder and shall be sent by first-class or first-class express
mail, or by telex or telecopy with confirmation in writing mailed
first-class, or by overnight courier, or by personal delivery, in
all cases with charges prepaid. Any properly given notice shall
be effective when received. All notices shall be sent to the
applicable party at the address stated on the signature page
hereof together with, in the case of a letter of credit request
and Letter of Credit Application sent pursuant to Section 3.1(a),
a copy to CIT at the address for CIT provided on the signature
page hereof, or in accordance with the last unrevoked written
direction from such party to the other parties hereto.
(b) Nothing in this Agreement or in any other Related
Document shall be construed to limit or affect the obligation of
the Borrower or any other Person to serve upon CIT in the manner
prescribed by the Bankruptcy Code any pleading or notice required
to be given to CIT pursuant to the Bankruptcy Code.
(c) CIT may rely, and shall be fully protected in relying, on
any notice purportedly made by or on behalf of the Borrower, and
CIT shall have no duty to verify the identity or authority of any
Person giving such notice. The preceding sentence shall apply to
all notices whether or not made in a manner authorized or required
by this Agreement or any other Related Document.
11.6 Expenses; Taxes; Attorneys' Fees; Indemnification.
The Borrower agrees to pay or cause to be paid, on demand, and to
save CIT harmless against liability for the payment of, all reasonable
out-of-pocket expenses, regardless of whether the transactions contemplated
hereby are consummated, including but not limited to reasonable fees and
expenses of counsel for CIT, accounting, due diligence, periodic field
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audits, investigation, monitoring of assets, miscellaneous disbursements,
examination, reasonable travel, reasonable lodging and meals, incurred by CIT
from time to time arising from or relating to: (a) the negotiation,
preparation, execution, delivery, performance and administration of this
Agreement and the other Related Documents, including filing fees and
post-filing search costs for all financing statements required by CIT, (b) any
requested amendments, waivers or consents to this Agreement or the other
Related Documents whether or not such documents become effective or are given,
(c) the administration, preservation and protection of any of CIT's rights
under this Agreement or the other Related Documents, (d) the representation of
CIT in the Chapter 11 Case or in any superseding case under chapter 7 of the
Bankruptcy Code, (e) the defense of any claim or action asserted or brought
against CIT by any Person that arises from or relates to this Agreement, any
other Related Document, CIT's claims against the Borrower, or any and all
matters in connection therewith, (f) the commencement or defense of, or
intervention in, any court proceeding arising from or related to this Agreement
or any other Related Document, (g) the filing of any petition, complaint,
answer, motion or other pleading by CIT, or the taking of any action in respect
to Collateral or other security, in connection with this Agreement or any other
Related Document, (h) the protection, collection, lease, sale, taking
possession of or liquidation of, any Collateral or other security in connection
with this Agreement or any other Related Document, (i) any attempt to enforce
any lien or security interest in any Collateral or other security in connection
with this Agreement or any other Related Document, (j) any attempt to collect
from the Borrower, (k) the receipt of any advice with respect to any of the
foregoing, (l) all Environmental Liabilities and Costs arising from or in
connection with the past present or future operations of the Borrower involving
any damage to real or personal property or natural resources or harm or injury
alleged to have resulted from any Release of Contamination on, upon or into
such property; (m) any costs or liabilities incurred in connection with the
investigation, removal, cleanup and/or remediation of any Contaminant present
or arising out of the operations of any facility of the Borrower; or (n) any
costs or liabilities incurred in connection with any Environmental Lien.
Without limitation of the foregoing or any other provision of any Related
Document: (x) the Borrower agrees to pay all search, stamp, document, transfer,
recording or filing taxes or fees and similar impositions now or hereafter
determined by CIT to be payable in connection with this Agreement or any other
Related Document, and the Borrower agrees to save CIT harmless from and against
any and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
impositions, and (y) if the Borrower fails to perform any covenant or agreement
contained herein or in any other Related Document, CIT may itself perform or
cause performance of such covenant or agreement, and the expenses of CIT
incurred in connection therewith shall be reimbursed on demand by the Borrower.
The Borrower agrees to indemnity and defend CIT and its directors, officers,
agents, employees and affiliates (collectively the "Indemnified Parties") from,
and hold each of them harmless against, any and all losses, liabilities,
claims, damages, costs or expenses of any nature whatsoever (including
reasonable attorneys' fees and amounts paid in settlement) incurred by, imposed
upon or asserted against any of them arising out of or by reason of any
investigation, litigation or other proceeding brought or threatened relating
to, or otherwise arising out of or relating to, the execution of this Agreement
or any other Related
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Document, the transactions contemplated hereby or thereby or any Loan or
proposed Loan or Letter of Credit or proposed Letter of Credit hereunder
(including, but without limitation, any use made or proposed to be made by the
Borrower of the proceeds of any thereof, or the delivery or use or transfer of
or the payment or failure to pay under any Loan or Letter of Credit) but
excluding any such losses, liabilities, claims, damages, costs or expenses to
the extent finally judicially determined to have resulted from the gross
negligence or willful misconduct of the Indemnified Parties.
11.7 Application.
Except to the extent, if any, expressly set forth in the Related
Documents, CIT shall have the right to apply any payment received or applied by
it in connection with the Obligations to such of the Obligations then due and
payable as it may elect.
11.8 Severability.
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability thereof in any
other jurisdiction or the remaining provisions hereof in any jurisdiction.
11.9 Governing Law.
This Agreement and the Note shall be deemed to be contracts under the laws
of the State of Illinois, without regard to choice of law principles, and for
all purposes shall be governed by and construed and enforced in accordance with
the laws of said State except as the law is governed by the Bankruptcy Code.
11.10 Prior Understandings.
This Agreement supersedes all prior understandings and agreements, whether
written or oral, among the parties hereto relating to the transactions provided
for herein.
11.11 Duration; Survival.
All representations and warranties of the Borrower contained herein or
made in connection herewith shall survive the making of and shall not be waived
by the execution and delivery of this Agreement, the Note or any other Related
Document, any investigation by or knowledge of CIT, the making of any Loan
hereunder, or any other event whatever. All covenants and agreements of the
Borrower contained herein shall continue in full force and effect from and
after the date hereof so long as the Borrower may borrow hereunder and until
the Obligations have been paid in full and no Letters of Credit remain
outstanding. Without limitation, it is understood that all obligations of the
Borrower, GRS and GMO to make payments to or indemnify CIT (including, without
limitation, obligations arising under Section
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11.6 hereof) shall survive the payment in full of the Note and all
Reimbursement Obligations and of all other obligations of the Borrower, GRS and
GMO thereunder and hereunder, termination of this Agreement and all other
events whatsoever and whether or not any Loans are made or Letters of Credit
issued hereunder.
11.12 Counterparts.
This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.
11.13 Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the
benefit of CIT, the Borrower and their respective successors and
assigns, except that the Borrower may not assign or transfer any
of its rights hereunder without the prior written consent of CIT.
Except as provided in this Section 11.13, this Agreement shall not
inure to the benefit of any party other than the Borrower and CIT.
(b) CIT may at any time sell, assign or participate all or
any portion of the Loans and Reimbursement Obligations with
respect to the Letters of Credit without the consent of the
Borrower; provided, however, that (i) CIT agrees to act as the
agent on behalf of any assignees of any interest in this
Agreement, and (ii) the Borrower shall not be responsible for the
fees and expenses incurred by CIT in connection with any
syndication of this Agreement. The Borrower shall provide Notes
and agree to any amendment and/or restatement of this Agreement
and the Related Documents as may be requested by CIT to reflect
any such sales or assignments.
11.14 CIT as Party in Interest.
The Borrower hereby stipulate and agree that CIT is and shall
remain a party in interest in the Chapter 11 Case and shall have the
right to participate, object and be heard in any motion or proceeding in
connection therewith. Nothing in this Agreement or any other Related Document
shall be deemed to be a waiver of any of CIT's rights or remedies under
applicable law or documentation. Without limitation of the foregoing, CIT
shall have the right to make any motion or raise any objection it deems to be
in its interest (specifically including but not limited to objections to use of
proceeds of the Loans, use of Letters of Credit, to payment of professional
fees and expenses or the amount thereof, to sales or other transactions outside
the ordinary course of business or to assumption or rejection of any executory
contract or lease), provided that CIT will not exercise such right if the
action or inaction by the Borrower which is the subject of such motion or
objection is expressly permitted by any covenant or provision of this
Agreement.
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11.15 Confidentiality.
Upon delivering to CIT, or permitting CIT to inspect, any written
information pursuant to this Agreement, CIT shall treat such information as
confidential in accordance with its customary practices to the extent such
information is conspicuously marked confidential or the Borrower has otherwise
notified CIT that such information is confidential. CIT agrees to hold such
information in confidence from the date of disclosure thereof. Subject to the
other provisions of this Section 11.15, CIT may disclose confidential
information to its officers, directors, employees, attorneys, accountants or
other professionals engaged by CIT in connection with the transaction
contemplated by its Agreement and then only after such third party has agreed
to hold such information in confidence to the same extent as if it were CIT.
Notwithstanding the foregoing, the provisions of this Section 11.15 shall not
apply to information within any one of the following categories or any
combination thereof: (information the substance of which, at the time of
disclosure by CIT, has been disclosed to or is known to any creditor or
official or unofficial creditors' committee (other than information as to which
such creditor or creditor's committee is then under an obligation of
nondisclosure), or any committee is then under an obligation of nondisclosure),
or any Person other than (A) a director, officer, employee or agent of the
Borrower or a professional engaged by the Borrower and (B) a Person who is then
under an obligation of nondisclosure (otherwise than as a consequence of a
wrongful act of CIT), (ii) information which CIT had in its possession prior to
receipt thereof from the disclosing party, or (iii) information received by CIT
from a third party having no obligations of nondisclosure with respect thereto.
Nothing contained in this Section 11.15 shall prevent any disclosure: (x)
believed in good faith by CIT to be required by any Law or guideline or
interpretation or application thereof by any Governmental Authority, arbitrator
or grand jury charged with the interpretation or administration thereof or
compliance with any request or directive of any Governmental Authority,
arbitrator or grand jury (whether or not having the force of law), (y)
determined by counsel for CIT to be necessary or advisable in connection with
its obligations to any Governmental Authority or the enforcement or
preservation of rights under or in connection with this Agreement or any other
Related Document or (z) of any information which has been made public by a
Person other than CIT. CIT shall have the right to disclose any confidential
information described in this Section 11.15 to a Letter of Credit Issuer and to
a participant or assignee or prospective participant or assignee in Loans
hereunder, provided that CIT shall have obtained from such participant or
assignee or prospective participant or assignee an agreement to hold such
information in confidence to the same extent as if it were CIT.
11.16 Waiver of Jury Trial.
BY ITS EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION AGAINST CIT, ANY PARTICIPANT,
ASSIGNEE, INDEMNIFIED PARTY OR LETTER OF CREDIT ISSUER, BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTE OR ANY
OTHER RELATED
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DOCUMENT, ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF CIT OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR CIT TO ENTER INTO THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Agreement as of the date first
above written.
GANDER MOUNTAIN, INC., as debtor and as
debtor-in-possession
By: _________________________
Its:_________________________
Address for Notices:
GANDER MOUNTAIN, INC.
P.O. Box 128
Wilmot, Wisconsin 53192
Telephone: (414) 862-2331
Facsimile: (414) 862-3545
with a copy to:
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LENDER
THE CIT GROUP/BUSINESS CREDIT, INC.
By:__________________________
Its:_________________________
Address for Notices:
The CIT Group/Business Credit, Inc.
10 South LaSalle Street
Chicago, Illinois 60603
Attention: Michael Egan
Telephone: (312) 424-9760
Facsimile: (312) 443-0139
with a copy to:
Goldberg, Kohn, Bell, Black, Rosenbloom &
Moritz, Ltd.
55 East Monroe Street
Suite 3700
Chicago, Illinois 60603
Attention: James B. Rosenbloom
Telephone: (312) 201-4000
Facsimile: (312) 332-2196
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JOINDER
The undersigned, GRS, Inc. and GMO, Inc., hereby confirm that concurrently
herewith each has executed and delivered a guaranty secured, respectively, by
the GRS Collateral and the GMO Collateral, pursuant to which each has
unconditionally guaranteed the prompt and full payment and performance of the
Obligations.
GRS, INC., a Wisconsin corporation
By___________________________________
Its__________________________________
GMO, INC., a Wisconsin corporation
By___________________________________
Its__________________________________
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