EXHIBIT 99.1
Execution Copy
LOAN AND SECURITY AGREEMENT
by and among
TWC ACQUISITION CORP. (THE WALKING COMPANY)
the Borrower,
THE LENDERS THAT ARE SIGNATORIES HERETO,
as the Lenders,
and
WELLS FARGO RETAIL FINANCE II, LLC,
as the Arranger and Administrative Agent
Dated as of March 3, 2004
-50-
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is
entered into as of March 3, 2004, between and among, on the one hand, the
lenders identified on the signature pages hereof (such lenders, together with
their respective successors and assigns, are referred to hereinafter each
individually as a "Lender" and collectively as the "Lenders"), WELLS FARGO
RETAIL FINANCE II, LLC, a Delaware limited liability company, as the arranger
and administrative agent for the Lenders ("Agent"), and, on the other hand, TWC
ACQUISITION CORP., a Delaware corporation ("Borrower") .
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall have the
following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account, chattel paper,
or a General Intangible.
"Account Reserves" means such reserves as Agent determines
from time to time in its Permitted Discretion as being appropriate to reflect
impediments to the Agent's ability to realize upon the Collateral.
Without limiting the generality of the foregoing, Account Reserves may include
(but are not limited to) reserves based upon the following: (a) any Account or
parties thereof is past due, delinquent or otherwise at risk of non-payment, (b)
any Account or portion thereof which is subject to counterclaim, defense, or
dispute, (c) any Account or portion thereof which is subject to setoff or
chargeback, (d) any facts, events or circumstances which impair the validity,
enforceability or collectibility of such Account or reduce the amount payable or
delay payment thereunder, (e) any material adverse change in the financial
condition of the Credit Card Processor or Agent no longer deems the Credit Card
Processor as credit worthy, (f) any event of default under any Credit Card
Agreement which event of default gives the Credit Card Processor the right to
setoff against amounts otherwise payable to a Borrower or the right to establish
reserves or establish or demand collateral.
"Accounts" means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "accounts" (as that term is
defined in the Code), and any and all supporting obligations in respect thereof.
"ACH Transactions" means any cash management or related
services (including the Automated Clearing House processing of electronic funds
transfers through the direct Federal Reserve Fedline system) provided by Wells
Fargo or its Affiliates for the account of Borrower or its Subsidiaries.
"Acquisition Proceeds" means net cash proceeds, in
immediately available funds, of not less than $8.95 million, which shall be
comprised of $1.05 million of the proceeds of Parent Loan I and $1.45 million of
the proceeds of Parent Loan II and the full amount of the Parent Equity
Contribution.
"Acquisition" means any purchase or other acquisition by
Borrower or any Subsidiary of Borrower of the Stock or substantially all of the
assets of any other Person.
"Additional Documents" has the meaning set forth in Section
4.4.
"Advances" means advances made to Borrower, pursuant to the
provisions of Section 2.1.
"Affiliate" means, as applied to any Person, any other Person
who, directly or indirectly,
controls, is controlled by, or is under common control with, such Person. For
purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person,
whether through the ownership of Stock, by contract, or otherwise; provided,
however, that, for purposes of Section 7.14 hereof: (a) any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person, (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person, and (c) each partnership or joint
venture in which a Person is a partner or joint venturer shall be deemed to be
an Affiliate of such Person.
"Agent" means WFRF, solely in its capacity as agent for the
Lenders hereunder, and any successor thereto.
"Agent's Account" means an account at a bank designated by
Agent from time to time as the account into which Borrower shall make all
payments to Agent for the benefit of the Lender Group and into which the Lender
Group shall make all payments to Agent under this Agreement and the other Loan
Documents; unless and until Agent notifies Borrower and the Lender Group to the
contrary, Agent's Account shall be that certain deposit account listed on
Schedule A-1.
"Agent Advances" has the meaning set forth in Section
2.3(e)(i).
"Agent's Liens" means the Liens granted by Borrower to Agent
for the benefit of the Lender Group under this Agreement or the other Loan
Documents.
"Agent-Related Persons" means Agent together with its
Affiliates, officers, directors, employees, and agents.
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Prepayment Premium" means, as of any date of
determination, an amount equal to (a) during the period of time from and after
the date of the execution and delivery of this Agreement up to the date that is
the first anniversary of the Closing Date, 0.50% times the Maximum Revolver
Amount, (b) during the period of time from and including the date that is the
first anniversary of the Closing Date up to the date that is the second
anniversary of the Closing Date, 0.25% times the Maximum Revolver Amount, and
(c) during the period of time from and including the date that is the second
anniversary of the Closing Date up to the Maturity Date, zero (0).
"Assignee" has the meaning set forth in Section 14.1.
"Assignment and Acceptance" means an Assignment and Acceptance
in the form of Exhibit A-1.
"Authorized Person" means any officer or other employee of any
Borrower.
"Availability" means, as of any date of determination, if such
date is a Business Day, and determined at the close of business on the
immediately preceding Business Day, if such date of determination is not a
Business Day, the amount that Borrower is entitled to borrow as Advances under
Section 2.1(a) (after giving effect to all then outstanding Obligations and all
sublimits and reserves applicable hereunder).
"Average Excess Availability" means the average daily Excess
Availability for the monthly period ending the last day of each month.
"Bank Products" means any one or more of the following types
of services or facilities extended to Borrower or its Subsidiaries by Wells
Fargo or any Affiliate of Wells Fargo: (a) credit cards, (ii) debit cards, (iii)
purchase cards, (iv) ACH Transactions, (v) cash management, including controlled
disbursement, accounts or services, and (vi) Hedge Agreements.
"Bank Product Agreements" means those certain cash management
service agreements entered into from time to time by Borrower or its
Subsidiaries in connection with any of the Bank Products.
"Bank Product Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrower or
its Subsidiaries to Wells Fargo or its Affiliates pursuant to or evidenced by
the Bank Product Agreements and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all such amounts that Borrower
is obligated to reimburse to Agent or any member of the Lender Group as a result
of Agent or such member of the Lender Group purchasing participations or
executing indemnities or reimbursement obligations with respect to the Bank
Products provided to Borrower or its Subsidiaries pursuant to the Bank Product
Agreements.
"Bank Product Reserves" means, as of any date of
determination, the amount of reserves that Agent has established (based upon
Wells Fargo's or its Affiliate's reasonable determination of the credit exposure
in respect of then extant Bank Products) for Bank Products then provided or
outstanding.
"Bankruptcy Code" means the United States Bankruptcy Code, as
in effect from time to time.
"Bankruptcy Court" means the United States Bankruptcy Court
for Central District of California (San Fernando Valley) before which the
Proceeding is pending.
"Base Advance Rate" means the following percentages during the
periods of each calendar year during the term of this Agreement indicated in the
chart below:
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Period Base Advance Rate
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December 16 through March 31 62%
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April 1 through June 15 65%
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June 16 through July 31 60%
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August 1 through September 30 65%
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October 1 through December 15 68%
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"Base LIBOR Rate" means the rate per annum, determined by
Agent in accordance with its customary procedures, and utilizing such electronic
or other quotation sources as it considers appropriate (rounded upwards, if
necessary, to the next 1/16%), on the basis of the rates at which Dollar
deposits are offered to major banks in the London interbank market on or about
11:00 a.m. (California time) 2 Business Days prior to the commencement of the
applicable Interest Period, for a term and in amounts comparable to the Interest
Period and amount of the LIBOR Rate Loan requested by the Borrower in accordance
with this Agreement, which determination shall be conclusive in the absence of
manifest error.
"Base Rate" means, the rate of interest announced within Wells
Fargo at its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of Wells Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Wells Fargo may designate.
"Base Rate Margin" as determined pursuant to the applicable
section of the Margin Pricing Grid set forth in Section 2.6(a)(ii) for loans
initiated on or after the date when so set.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA
Affiliate of any Borrower has been an "employer" (as defined in Section 3(5) of
ERISA) within the past six years.
"Big Dog" means Big Dog USA, Inc., a California corporation.
"Big Dog Dividend" means the dividend by Big Dog to Parent in
the amount of $1.05 million.
"Books" means Borrower and its Subsidiaries now owned or
hereafter acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of Borrower or its Subsidiaries' Records relating to its or their business
operations or financial condition, and all of its or their goods or General
Intangibles related to such information).
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower Collateral" means all of Borrower's now owned or
hereafter acquired right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Deposit Accounts,
(d) Equipment,
(e) General Intangibles,
(f) Inventory,
(g) Investment Property,
(h) Negotiable Collateral,
(i) Goods,
(j) money or other assets of each such Borrower that now or hereafter come into
the possession, custody, or control of any member of the Lender Group,
(k) all Commercial Tort Claims,
(l) the proceeds and products, whether tangible or intangible, of any of the
foregoing, including proceeds of insurance covering any or all of the foregoing,
and any and all Accounts, Books, Documents, Equipment, General Intangibles,
Instruments, Inventory, Investment Property, Negotiable Collateral, real
property, fixtures, leases and leasehold interests, money, deposit accounts, or
other tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any portion thereof
or interest therein, and the proceeds thereof, and
(m) liens, guaranties, rights, remedies
and privileges pertaining to any of the foregoing, including the right of
stoppage in transit.
"Borrowing" means a borrowing hereunder consisting of Advances
made on the same day by the Lenders (or Agent on behalf thereof), or by Swing
Lender in the case of a Swing Loan, or by Agent in the case of an Agent Advance,
in each case to the applicable Borrower.
"Borrowing Base", as of any date of determination, shall mean
the result of:
(a) the lesser of:
(i) the Base Advance Rate times the value
(at Cost) of the Eligible Inventory, and
(ii) the Maximum Advance Rate times
Borrower's then extant Net Liquidation Percentage times the value (at Cost) of
Eligible Inventory, plus
(b) 85% of Eligible Credit Card Receivables, up to a maximum
amount of $2,000,000 minus
(c) the sum of (i) the Bank Product Reserve and (ii) the
aggregate amount of reserves, if any, established by Agent under Section
2.1(a)(ii).
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close, except
that, if a determination of a Business Day shall relate to a LIBOR Rate Loan,
the term "Business Day" also shall exclude any day on which banks are closed for
dealings in Dollar deposits in the London interbank market.
"Capital Lease" means a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means any Indebtedness
represented by obligations under a Capital Lease.
"Cash Equivalents" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within 1 year from the date of acquisition thereof,
(b)marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody's,
(c) commercial paper maturing no more than 270 days from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody's, and (d)certificates of deposit or bankers'
acceptances maturing within 1 year from the date of acquisition thereof either
(i)issued by any bank organized under the laws of the United States or any state
thereof which bank has a rating of A or A2, or better, from S&P or Moody's, or
(ii)certificates of deposit less than or equal to $100,000 in the aggregate
issued by any other bank insured by the Federal Deposit Insurance Corporation.
"Cash Management Account" has the meaning set forth in
Section 2.7(a).
"Cash Management Agreements" means those certain cash
management service agreements, in form
and substance satisfactory to Agent, each of which is among the Borrower, Agent,
and one of the Cash Management Banks.
"Cash Management Bank" has the meaning set forth in Section
2.7(a).
"Change of Control" means (a) any Person becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50%, or more, of the Stock of Borrower having the right to vote
for the election of members of the Board of Directors, or (b), Parent ceases to
directly own and control at least 75% of the outstanding capital Stock of
Borrower.
"Closing Date" means the date of the making of the initial
Advance (or other extension of credit) hereunder.
"Closing Date Business Plan" means the set of Projections of
Borrower for the 1 year period following the Closing Date (on a yearly and month
by month basis), in form and substance (including as to scope and underlying
assumptions) satisfactory to Agent.
"Code" means the Massachusetts Uniform Commercial Code, as in
effect from time to time.
"Collateral" means any and all assets and rights and interests
in or to property pledged from time to time as security for the Obligations
pursuant to any pledge or security agreement that constitutes a Loan Document.
"Collateral Access Agreement" means a landlord waiver, bailee
letter, contractor letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee,
contractor, or other Person in possession of, having a Lien upon, or having
rights or interests in the Equipment or Inventory, in each case, in form and
substance satisfactory to Agent.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) of Borrower.
"Commercial Tort Claims" shall have the same definition as in
the Code.
"Commitment" means, with respect to each Lender, its
Commitment and, with respect to all Lenders, their Commitments, in each case as
such Dollar amounts are set forth beside such Lender's name on Schedule C-1 or
on the signature page of the Assignment and Acceptance pursuant to which such
Lender became a Lender hereunder in accordance with the provisions of Section
14.1.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 delivered by the chief financial officer of Borrower to
Agent.
"Control Agreement" means a control agreement, in form and
substance satisfactory to Agent, executed and delivered by the Borrower, Agent,
and the applicable securities intermediary with respect to a Securities Account
or bank with respect to a deposit account.
"Copyright" shall have the meaning ascribed to such term in
the United States Copyright Act of 1976, as amended, and includes unregistered
copyrights.
"Copyright Security Agreement" means a copyright security
agreement executed and delivered by Parent and the Borrower, as applicable, and
Agent, the form and substance of which is satisfactory to Agent.
"Cost" means the lower of
(a) the calculated cost of purchases, based upon the
Borrower's accounting practices, on a first-in, first-out
(FIFO) basis, in accordance with GAAP, which practices are in
effect on the date on which this Agreement was executed as
such calculated cost is determined from invoices received by
the Borrower; such Borrower's purchase journal; or such
Borrower's stock ledger; and
(b) the cost equivalent of the lowest ticketed price at which
the subject Inventory is offered to the public, after all
ticketed mark-downs (whether or not such price is then
reflected on the Borrower's accounting system), determined in
accordance with the cost method of accounting and reflecting
the Borrower's practices in the ordinary course of the
Borrower's business;
provided that "Cost" may include costs of freight from vendors
to the Borrower's warehouse or distribution center and import duty costs but
does not include Inventory capitalization costs or other non-purchase price
charges (such as other freight charges and UNICAP) used in the Borrower's
calculation of cost of goods sold.
"Custom Brokers Agreement" means a tri-party agreement in
form and substance satisfactory to the Agent in its Permitted Discretion among
the Borrower, Agent and customs broker or carrier, in which the customs broker
or carrier acknowledges that it has control over and holds the documents
evidencing ownership of the subject Inventory for the benefit of the Agent and
agrees, upon notice from the Agent, to hold and dispose of the subject Inventory
solely as directed by the Agent.
"Customer Credit Liabilities" means gift certificates,
customer deposits, merchandise credits, layaway obligations, frequent shopper
programs, and similar liabilities of Borrower to its retail customers and
prospective customers.
"Daily Balance" means, with respect to each day during the
term of this Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account
maintained by Borrower.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" means any Lender that fails to make any
Advance (or other extension of credit) that it is required to make hereunder on
the date that it is required to do so hereunder.
"Defaulting Lender Rate" means (a) the Base Rate for the first
3 days from and after the date the relevant payment is due, and (b) thereafter,
at the interest rate then applicable to Advances that are Base Rate Advances.
"Deposit Accounts" shall have the same definition as in the
Code.
"Designated Account" means that certain account designated as
such on Schedule D-1.
"Designated Account Bank" means Wells Fargo Bank, whose office
is located at 1036 Anacapa Street, Santa Barbara, CA 93101, and whose ABA number
is 121-000248.
"Disbursement Letter" means an instructional letter executed
and delivered by the Borrower to Agent regarding the extensions of credit to be
made on the Closing Date, the form and substance of which is satisfactory to
Agent.
"Distribution" means, with respect to any Person, (a) the
declaration or payment of any dividend on or in respect of any shares of any
class of capital Stock of such Person, other than dividends payable solely in
shares of common Stock of such Person, (b) the purchase, redemption, or other
retirement of any shares of any class of capital Stock of such Person, directly
or indirectly, (c) the return of capital by such Person to its shareholders or
other interest holders, or (d) any other distribution on or in respect of any
shares of any class of capital Stock of such Person.
"Dollars" or "$" means United States dollars.
"EBITDA" means, with respect to any fiscal period, Borrower's
and its Subsidiaries consolidated net earnings (or loss), minus extraordinary
gains, plus interest expense, income taxes, and depreciation and amortization
for such period, as determined in accordance with GAAP.
"Eligible Credit Card Receivables" means Accounts due on a
non-recourse basis from major credit card processors, which accounts have been
outstanding for no more than four (4) Business Days. For the purposes of this
provision, major credit card processors shall include, without limitation, Visa,
MasterCard, Discover and American Express.
"Eligible Inventory" means Inventory (including, without
duplication, Eligible Letter of Credit Inventory) in which the Borrower has
good, valid, and marketable title thereto, at such locations, and of such types,
character, quality and quantities, as the Agent in its Permitted Discretion from
time to time determines to be acceptable for inclusion in the calculation of the
Borrowing Base, as to which the Agent has a perfected security interest that is
prior and superior to all claims and all Liens (other than Permitted Liens,
subject to the Agent's rights to establish reserves therefore); provided,
however, that such criteria may be fixed and revised from time to time by Agent
in Agent's Permitted Discretion to address the results of any audit or appraisal
performed by Agent from time to time after the Closing Date. In no event shall
"Eligible Inventory" include: (i) any non-merchandise inventory (such as labels,
bags, and packaging materials); (ii) damaged or defective goods (including
without limitation), return to vendor merchandise, packaways, consigned
inventory, and other similar categories of goods; (iii) any Inventory located in
any store of the Borrower which has been closed for business for more than 20
days in any fiscal quarter; and (iv) any pre-sold Inventory for which a customer
has paid a deposit equal to 100% of the purchase price of such Inventory.
"Eligible Letter of Credit Inventory" means those items of
Inventory (without duplication of other Eligible Inventory) as to which (A)(a)
such Inventory is the subject of a Qualified Import Letter of Credit, (b) such
Inventory currently is in transit (whether by vessel, air, or land) from a
location outside of the continental United States and to be received by the
Borrower within 50 days of the issuance date of the Qualified Import Letter of
Credit at a location set forth on Schedule E-1 that is the subject of a
Collateral Access Agreement, (c) title to such Inventory shall pass to the
Borrower within 50 days of the issuance date of the Qualified Import Letter of
Credit, (d) such Inventory is insured against types of loss, damage, hazards,
and risks, and in amounts, satisfactory to Agent in its Permitted Discretion,
(e) such Inventory either (1) is the subject of a negotiable bill of lading (x)
that is consigned to Agent (either directly or by means of endorsements), (y)
that was issued by the carrier respecting the subject Inventory, and (z) that
either is (I) in the possession of Agent or a customs broker that has executed a
Customs Broker Agreement with Agent, or (II) the subject of a telefacsimile copy
that Agent has received from the Underlying Issuer which issued the Underlying
Letter of Credit and as to which Agent also has received a confirmation from
such Underlying Issuer that such document is in-transit by air-courier to Agent
or a customs broker, or (2) is the subject of a negotiable cargo receipt and is
not the subject of a bill of lading (other than a negotiable bill of lading
consigned to, and in the possession of, a consolidator or Agent, or their
respective agents) and such negotiable cargo receipt is (x) consigned to Agent
(either directly or by means of endorsements), (y) that was issued by a
consolidator respecting the subject Inventory, (z) that either is (I) in the
possession of Agent or a customs broker that has executed a Customs Broker
Agreement with Agent, or (II) the subject of a telefacsimile copy that Agent has
received from the Underlying Issuer which issued the Underlying Letter of Credit
and as to which Agent also has received a confirmation from such Underlying
Issuer that such document is in-transit by air-courier to Agent or a customs
broker that has executed a Customs Broker Agreement with Agent, (f) the Borrower
has provided a certificate to Agent that certifies that, to the best knowledge
of the Borrower, such Inventory meets all of the Borrower's representations and
warranties contained in the Loan Documents concerning Eligible Inventory, that
it knows of no reason why such Inventory would not be accepted by the Borrower
when it is delivered to Borrower, and that the shipment as evidenced by the
documents conforms to the related order documents or (B) (a) meets all of the
foregoing criteria except that the Underlying Letter of Credit has been drawn
upon in full and the Underlying Issuer has honored such drawing and Agent has
honored its obligations to the Underlying Issuer of the Qualified Import Letter
of Credit and (b) title has irrevocably passed to the Borrower. Notwithstanding
anything contained herein to the contrary, Eligible Letter of Credit Inventory
shall not at any time exceed $1,500,000, at Cost.
"Eligible Transferee" means (a)a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $250,000,000, (b)a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country and
which has total assets in excess of $250,000,000, provided that such bank is
acting through a branch or agency located in the United States, (c)a finance
company, insurance company, or other financial institution or fund that is
engaged in making, purchasing, or otherwise investing in commercial loans in the
ordinary course of its business and having (together with its Affiliates)total
assets in excess of $250,000,000, (d)any Affiliate (other than individuals) of a
Lender that was party hereto as of the Closing Date, (e) so long as no Event of
Default has occurred and is continuing, any other Person approved by Agent and
Borrower, and (f)during the continuation of an Event of Default, any other
Person approved by Agent.
"Environmental Actions" means any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation, judicial
or administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials from (a) any assets, properties, or
businesses of Borrower or any predecessor in interest, (b) from adjoining
properties or businesses, or (c) from or onto any facilities which received
Hazardous Materials generated by the Borrower or any predecessor in interest.
"Environmental Law" means any applicable federal, state,
provincial, foreign or local statute, law, rule, regulation, ordinance, code,
binding and enforceable guideline, binding and enforceable written policy, or
rule of common law now or hereafter in effect and in each case as amended, or
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, to the extent binding on
Borrower, relating to the environment, employee health and safety, or Hazardous
Materials, including CERCLA; RCRA; the Federal Water Pollution Control Act, 33
USC SS 1251 et seq; the Toxic Substances Control Act, 15 USC, SS 2601 et seq;
the Clean Air Act, 42 USC SS 7401 et seq.; the Safe Drinking Water Act, 42 USC.
SS 3803 et seq.; the Oil Pollution Act of 1990, 33 USC. SS 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC. SS 11001
et seq.; the Hazardous Material Transportation Act,49 USC SS 1801 et seq.; and
the Occupational Safety and Health Act, 29 USC. SS 651 et seq. (to the extent it
regulates occupational exposure to Hazardous Materials); any state and local or
foreign counterparts or equivalents, in each case as amended from time to time.
"Environmental Liabilities and Costs" means 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, experts, or consultants,
and costs of investigation and feasibility studies), fines, penalties,
sanctions, and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any Environmental
Action.
"Environmental Lien" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"Equipment" includes, without limitation, "equipment" as it is
defined in the Code, and also all of Borrower's now owned or hereafter acquired
right, title, and interest with respect to equipment, machinery, machine tools,
motors, furniture, furnishings, fixtures, vehicles (including motor vehicles),
tools, parts, goods (other than consumer goods, farm products, or Inventory),
wherever located, including all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of the
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
the Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which the Borrower is a member under
IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and
Section 412 of the IRC, any Person subject to ERISA that is a party to an
arrangement with the Borrower and whose employees are aggregated with the
employees of the Borrower under IRC Section 414(o).
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrower aged in excess of 60 days from
the invoice date and all book overdrafts in excess of the Borrower's customary
practices with respect thereto utilized in the ordinary course of the Borrower's
business, as determined by Agent in its Permitted Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as
in effect from time to time.
"Exempt Copyright" means any Obsolete Copyright.
"Existing Lender" means Wells Fargo Retail Finance II, LLC.
"Family Member" means, with respect to any individual, any
other individual having a relationship by blood (to the second degree of
consanguinity), marriage, or adoption to such individual.
"Family Trusts" means, with respect to any individual, trusts
or other estate planning vehicles established for the benefit of Family Members
of such individual and in respect of which such individual serves as trustee or
in a similar capacity.
"FEIN" means Federal Employer Identification Number.
"Final Order" means an order of the Bankruptcy Court entered
in the Proceeding upon the application of the Borrower in form and substance
satisfactory to the Agent in its Permitted Discretion, which order (i) is not
subject to an appeal and (ii) has not been modified, stayed, vacated, or
rescinded or subject to a motion to modify, stay, vacate or rescind.
"First Unsecured Creditors Promissory Note" shall mean that
promissory note issued to the Liquidating Agent for the benefit of the unsecured
creditors of the Walking Company pursuant to the Walking Company Plan of
Reorganization in the original face amount of $700,000.
"First Unsecured Creditors Note Put Right" shall mean the
right of the Liquidating Agent to cause the Borrower to prepay all or such
portion of the then outstanding principal amount of the First Unsecured
Creditors Promissory Note as designated by the Liquidating Agent pursuant to
that certain Note Put Right (First Unsecured Creditors Promissory Note) dated as
of March 3, 2004 by and between the Liquidating Agent and the Borrower.
"Funding Conditions" means that Agent shall have received (a)
duly executed originals of all documents evidencing the Walking Company
Acquisition certified as true, correct, and complete by an appropriate officer
of Borrower, the form and substance of which shall be satisfactory to Agent in
its Permitted Discretion; (b) a certificate by an appropriate officer of the
Borrower that all conditions to the Walking Company Acquisition shall have been
satisfied or the fulfillment of such conditions shall have been duly waived by
the Agent; (c) evidence satisfactory to Agent in its Permitted Discretion that
all documents
evidencing the Walking Company Acquisition have been duly executed and delivered
by each of the parties thereto and, in each case, remain in full force and
effect; (d) evidence satisfactory to Agent in its Permitted Discretion that the
security interests granted in favor of Agent pursuant hereto have been duly
perfected and are senior in priority to all other liens, claims, security
interests, or encumbrances, except for Permitted Liens; (e) evidence
satisfactory to Agent in its Permitted Discretion that Parent has contributed
the Acquisition Proceeds to the Borrower; (f) evidence satisfactory to the Agent
in its Permitted Discretion that all Walking Company Acquisition Orders have
been duly entered by the Bankruptcy Court; (g) evidence satisfactory to the
Agent in its Permitted Discretion that neither the Walking Company Plan of
Reorganization nor any Walking Company Acquisition Order has been amended,
supplemented, restated, or otherwise modified, whether pursuant to Section 1127
of the Bankruptcy Code, court order, or otherwise, without the prior written
consent of Agent; (h) evidence satisfactory to Agent in its Permitted Discretion
that, the Walking Company Acquisition will be consummated substantially in
accordance with the terms and provisions of the (i) documents evidencing the
Walking Company Acquisition, (ii) the Walking Company Plan of Reorganization,
and (iii) the Walking Company Acquisition Orders; (i) evidence satisfactory to
the Agent in its Permitted Discretion that the Effective Date (as defined in the
Walking Company Plan of Reorganization) shall have occurred; (j) evidence
satisfactory to the Agent in its Permitted Discretion that the Walking Company
Plan of Reorganization shall have been substantially consummated in accordance
with the terms of the Walking Company Plan of Reorganization and the terms of
the Walking Company Acquisition Orders; and (k) evidence satisfactory to Agent,
in its Permitted Discretion, that the Designated Account has been established.
"Funding Date" means the date on which a Borrowing occurs.
"Funding Losses" has the meaning set forth in Section
2.13(b)(ii).
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" includes, without limitation, "general
intangibles' as defined in the Code; and also means all of Borrower's now owned
or hereafter acquired right, title, and interest with respect to general
intangibles (including, but not limited to, payment intangibles, health care
insurance receivables, contract rights, rights to payment, rights arising under
common law, statutes, or regulations, choses or things in action, judgments,
payments under any settlement or other agreement, rights to performance,
royalties, all means and vehicles of investment or hedging, including without
limitation, options, warrants and future contracts, goodwill, patents, patent
applications, trade names, trademarks, trademark applications, servicemarks,
copyrights, mask work rights and interests and derivative works and interests,
internet addresses and domain names, developmental ideas and concepts,
proprietary processes, blueprints, drawings, designs, diagrams, plans, charts,
purchase orders, customer lists, telephone numbers, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing or franchise agreements, rights to admission, infringement
claims, computer programs, computer software, computer records, information
contained on computer disks or tapes, software, literature, literary rights,
reports, catalogs, manuals, technical data, money, trade secrets rights,
insurance premium rebates, warranties, warranty claims, tax refunds, and tax
refund claims), and any and all supporting obligations in respect thereof, and
any other personal property other than goods, Accounts, Investment Property, and
Negotiable Collateral.
"Goods" shall have the same definition as in the Code.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal, state, local, or
other governmental or administrative body, instrumentality, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
"Guarantor Security Agreement" means that certain Guarantor
Security Agreement executed and delivered by Parent and Agent, the form and
substance of which is satisfactory to Agent.
"Guaranty" means that certain general continuing guaranty
executed and delivered by Parent in favor of Agent, for the benefit of the
Lender Group, in form and substance satisfactory to Agent.
"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Hedge Agreement" means any and all transactions, agreements,
or documents now existing or hereafter entered into between the Borrower or its
Subsidiaries and Wells Fargo or its Affiliates, which provide for an interest
rate, credit, commodity or equity swap, cap, floor, collar, forward foreign
exchange transaction, currency swap, cross currency rate swap, currency option,
or any combination of, or option with respect to, these or similar transactions,
for the purpose of hedging the Borrower's or its Subsidiaries' exposure to
fluctuations in interest or exchange rates, loan, credit exchange, security or
currency valuations or commodity prices.
"IDB" means the Israel Discount Bank.
"IDB Note" means that promissory note in the original face
amount of $3 million executed by Parent in favor of IDB.
"Indebtedness" means (a) all obligations for borrowed money,
(b) all obligations evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations in respect of letters of
credit, bankers acceptances, interest rate swaps, or other financial products,
(c) all obligations under Capital Leases, (d) all obligations or liabilities of
others secured by a Lien on any asset of Borrower or its Subsidiaries,
irrespective of whether such obligation or liability is assumed, (e) all
obligations for the deferred purchase price of assets (other than trade debt
incurred in the ordinary course of business and repayable in accordance with
customary trade practices), and (f) any obligation guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse) any obligation of any other Person.
"Indemnified Liabilities" has the meaning set forth in Section
11.3.
"Indemnified Person" has the meaning set forth in Section
11.3.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
state or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Interest Period" means, with respect to each LIBOR Rate Loan,
a period commencing on the date of the making of such LIBOR Rate Loan and ending
1, 2, or 3 months thereafter; provided, however, that (a) if any Interest Period
would end on a day that is not a Business Day, such Interest Period shall be
extended (subject to clauses (c)-(e) below) to the next succeeding Business Day,
(b) interest shall accrue at the applicable rate based upon the LIBOR Rate from
and including the first day of each Interest Period to, but excluding, the day
on which any Interest Period expires, (c) any Interest Period that would end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day, (d) with
respect to an Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period), the Interest Period shall
end on the last Business Day of the calendar month that is 1, 2, or 3 months
after the date on which the Interest Period began, as applicable, and (e) the
Borrower may not elect an Interest Period which will end after the Maturity
Date.
"Intercompany Advances" means loans or advances (i) from
Borrower to Parent, any Subsidiary or any Affiliate or (ii) from Parent, any
Subsidiary or any Affiliate, to the Borrower or (iii) from Big Dog to Borrower.
"Intercompany Subordination Agreement" means a subordination
agreement, in form and substance satisfactory to Agent in its Permitted
Discretion executed and delivered by Borrower; Parent, Subsidiary or Affiliate,
as applicable; and Agent in which Parent, Subsidiary or Affiliate, as
applicable, subordinate the obligations of the Borrower to Parent, Subsidiary or
Affiliate, as applicable, to the Obligations of the Borrower to Agent and
Lenders hereunder.
"Inventory" includes, without limitation, "inventory" as
defined in the Code and also means all Borrower's now owned or hereafter
acquired right, title, and interest with respect to inventory, including goods
held for sale or lease or to be furnished under a contract of service, goods
that are leased by the Borrower as lessor, goods that are furnished by the
Borrower under a contract of service, and raw materials, work in process, or
materials used or consumed in the Borrower's business.
"Inventory Reserves" means reserves (determined from time to
time by Agent in its Permitted Discretion) for (a) the estimated costs relating
to unpaid freight charges, warehousing or storage charges, taxes, duties, and
other similar unpaid costs associated with the acquisition of Eligible Letter of
Credit Inventory by the Borrower, plus (b) the estimated reclamation claims of
unpaid sellers of Eligible Letter of Credit Inventory, which is not the subject
of a Qualified Import Letter of Credit, sold to the Borrower.
"Investment" means, with respect to any Person, any investment
by such Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practices), purchases or other
acquisitions for consideration of Indebtedness or Stock, and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"Investment Property" means all of Borrower's now owned or
hereafter acquired right, title, and interest with respect to "investment
property" as that term is defined in the Code, and any and all supporting
obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect
from time to time.
"Issuing Lender" means WFRF or any other Lender that, at the
request of the Borrower and with the consent of Agent agrees, in such Lender's
sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or
L/C Undertakings pursuant to Section 2.12.
"Junior Secured Creditors" means Stratford Capital Partners,
L.P., Retail & Restaurant Growth Capital L.P., Provender Opportunities Fund
L.P., Cornerstone Equity Investors IV, L.P., James P. Argyropoulos, Giles
Bateman, Steve Nessim, Trent and Marilyn Merrill Trust, The Perlman Family Trust
dtd 2/27/95, Montesano Family Trust dated March 17, 1998, Candice E. Appleton
Family Trust, Pinney Family 1999 Trust UAD 5/2/99, Robert Taicher, Herbert
Simon, Harry Adler, Greg Milne and Dan Zuckerman.
"Junior Secured Creditors Promissory Note" means those
promissory notes issued by the Borrower to the Junior Secured Creditors in the
aggregate principal amount of $3.279 million pursuant to the Walking Company
Plan of Reorganization.
"Junior Secured Creditors Stock Put Right" means the right of
the Junior Secured Creditors to cause the Borrower to purchase such creditors
stock of the Borrower for cash pursuant to the Junior Secured Creditors Stock
Put Right Agreement.
"Junior Secured Creditors Stock Put Right Agreement" means
that certain Stock Put Right (Junior Secured Creditors Stock) dated as of March
3, 2004 by and between the Borrower and the Junior Secured Creditors.
"Landlord Reserve" means with respect to each leased location
(i) at which the Borrower stores Inventory in a state that has a landlord lien
or similar statute with respect to commercial property, including without
limitation, as of the Closing Date, the states of Alabama, Arizona, Florida,
Georgia, Illinois, Iowa, Kentucky, Louisiana, Maryland, Mississippi, Nevada, New
Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, South Carolina, Texas,
Utah, Virginia, Washington, and West Virginia, and in the District of Columbia,
and (ii) for which either (I) a Collateral Access Agreement has not been
received by Agent, or (II) the underlying lease agreement does not contain a
provision that waives the Lien rights that the landlord may have in and to the
Inventory, including without limitation all rights of levy or distraint for
rent; a reserve in an amount equal to the greater of (a) the number of months
rent for which a landlord will have, under the applicable statutory lien, a Lien
in the assets of the applicable Borrower to secure the payment of rent or other
amounts under a lease, or (b) 2 months rent under the lease.
"L/C" has the meaning set forth in Section 2.12(a).
"L/C Disbursement" means a payment made by the Issuing Lender
pursuant to a Letter of Credit.
"L/C Undertaking" has the meaning set forth in Section
2.12(a).
"Leasehold Threshold" shall mean, as of the date of
determination, a default by Borrower under (a) any lease related to a
distribution center or warehouse, or (b) 3 or more leases related to retail
stores.
"Lender" and "Lenders" have the respective meanings set forth
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement in accordance with the provisions of Section 14.1.
"Lender Group" means, individually and collectively, each of
the Lenders (including the Issuing Lender) and Agent.
"Lender Group Expenses" means all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by the Borrower
under any of the Loan Documents that are paid or incurred by the Lender Group,
(b) fees or charges paid or incurred by Agent in connection with the Lender
Group's transactions with Borrower, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation, and UCC searches and including searches with
the patent and trademark office, the copyright office, or the department of
motor vehicles), filing, recording, publication, appraisal (including periodic
Collateral appraisals or business valuations to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement),
real estate surveys, real estate title policies and endorsements, and
environmental audits, (c) costs and expenses incurred by Agent in the
disbursement of funds to or for the account of Borrower (by wire transfer or
otherwise), (d) charges paid or incurred by Agent resulting from the dishonor of
checks, (e) reasonable costs and expenses paid or incurred by the Lender Group
to correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit fees
and expenses of Agent related to audit examinations of the Books to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this Agreement, (g) reasonable costs and expenses of third party claims or any
other suit paid or incurred by the Lender Group in enforcing or defending the
Loan Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group's relationship with the Borrower or any guarantor
of the Obligations, (h) Agent's and each Lender's reasonable fees and expenses
(including attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents, and (i) Agent's and
each Lender's reasonable fees and expenses (including attorneys fees) incurred
in terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning the Borrower or in exercising rights or remedies under the Loan
Documents), or defending the Loan Documents, irrespective of whether suit is
brought, or in taking any Remedial Action concerning the Collateral.
"Lender-Related Person" means, with respect to any Lender,
such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, and agents of such Lender.
"Letter of Credit" means an L/C or an L/C Undertaking, as the
context requires.
"Letter of Credit Usage" means, as of any date of
determination thereof, the aggregate undrawn amount of all outstanding Letters
of Credit issued for the account of Borrower plus 100% of the amount of
outstanding time drafts accepted by an Underlying Issuer as a result of drawings
under Underlying Letters of Credit issued for the account of Borrower.
"LIBOR Deadline" has the meaning set forth in Section
2.13(b)(i).
"LIBOR Notice" means a written notice in the form of Exhibit
L-1.
"LIBOR Rate" means, for each Interest Period for each LIBOR
Rate Loan, the rate per annum determined by Agent (rounded upwards, if
necessary, to the next 1/16%) by dividing (a) the Base LIBOR Rate for such
Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate shall
be adjusted on and as of the effective day of any change in the Reserve
Percentage.
"LIBOR Rate Loan" means each portion of an Advance that bears
interest at a rate determined by reference to the LIBOR Rate.
"LIBOR Rate Margin" as determined pursuant to the Margin
Pricing Grid set forth in section 2.6(a)(ii) for loans initiated on or after the
date when so set, that is to say LIBOR contracts in effect at the time of
increases/decreases in margin will remain in effect at the margin originally
utilized when the contract was opened. The margin in effect at a given time will
apply to contacts opened at that time, and shall be based upon the Margin
Pricing Grid.
"License" has the meaning set forth in Section 4.1
"Lien" means any interest in an asset securing an obligation
owed to, or a claim by, any Person other than the owner of the asset, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting real property.
"Liquidating Agent" means the Post-Confirmation Committee as
defined in the Walking Company Plan of Reorganization.
"Loan Account" and "Loan Accounts" have the respective
meanings set forth in Section 2.10.
"Loan Account" means the Loan Account respecting the Borrower
maintained on the books of Agent pursuant to Section 2.10.
"Loan Documents" means this Agreement, the Bank Product
Agreements, the Cash Management Agreements, the Control Agreements, the
Copyright Security Agreement, the Disbursement Letter, the Intercompany
Subordination Agreement, the Letters of Credit, the Officers' Certificate, the
Stock Pledge Agreement, the Trademark Security Agreement, any note or notes
executed by the Borrower in connection with this Agreement and payable to a
member of the Lender Group, and any other agreement entered into, now or in the
future, by the Borrower and the Lender Group in connection with this Agreement.
"Margin Adjustment Date" has that meaning set forth in Section
2.6(a)(ii).
"Margin Pricing Grid" means the pricing grid set forth in
Section 2.6(a).
"Material Adverse Change" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, taken as a whole,
(b) a material impairment of the Borrower's ability to perform its respective
obligations under the Loan Documents to which it is a party or of the Lender
Group's ability to enforce the Obligations or realize upon the Collateral, or
(c) a material impairment of the enforceability or priority of the Agent's Liens
with respect to the Collateral as a result of an action or failure to act on the
part of the Borrower.
"Maturity Date" means March 3, 2007.
"Maximum Advance Rate" means 85%, except that (i) during the
months of August and September calendar year 2004, such percentage shall be
increased to 90% provided, that, there does not exist an Event of Default and an
Event of Default would not exist after giving effect to the increased percentage
and (ii) during the months of August and September calendar year 2005, such
percentage shall be increased to 90% provided, that, (x) there does not exist an
Event of Default and an Event of Default would not exist after giving effect to
the increased percentage, (y) the Borrower was in compliance with the EBITDA
Financial Covenant for the period ending December 31, 2004, and (iii) during the
months of August and September calendar year 2006, such percentage shall be
increased to 90% provided, that, (x) there does not exist an Event of Default
and an Event of Default would not exist after giving effect to the increased
percentage, (y) the Borrower was in compliance with the EBITDA Financial
Covenant for the period ending December 31, 2005.
"Maximum Revolver Amount" means $17,500,000, provided,
however, at the Borrower's option, effective upon five (5) Business Days' prior
written notice by Borrower to the Agent, the "Maximum Revolver Amount" may be
increased to $20,000,000 at any time prior to June 30, 2006, provided, that
there does not exist an Event of Default at the time of such exercise and an
Event of Default would not exist after giving effect to such increase.
"Minimum Excess Reserve" means $1,500,000.
"Negotiable Collateral" means all of Borrower's now owned and
hereafter acquired right, title, and interest with respect to letters of credit,
letter of credit rights, instruments, promissory notes, drafts, documents, and
chattel paper (including electronic chattel paper and tangible chattel paper),
and any and all supporting obligations in respect thereof.
"Net Liquidation Percentage" means the net percentage of the
Cost of the Borrower's Inventory that is estimated to be recoverable in an
orderly liquidation of such Inventory, such percentage to be as determined from
time to time by a qualified appraisal company selected by Agent.
"Obligations" means (a) all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations with respect to
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrower's Loan Account pursuant hereto), obligations, fees, charges,
costs, Lender Group Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by Borrower
to the Lender Group pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all interest not paid when due and all Lender Group Expenses that
Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise, and (b) all Bank Product Obligations. Any reference in this Agreement
or in the Loan Documents to the Obligations shall include all amendments,
changes, extensions, modifications, renewals replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding.
"Obsolete Copyright" means any copyright of a Person that, in
such Person's good faith determination (a) is no longer sold or marketed by such
Person, (b) is not generating any material amount of revenues of such Person, or
(c) does not have a material fair market value.
"Officers' Certificate" means the representations and
warranties of officers form submitted by Agent to Borrower, together with
Borrower's completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Agent.
"Originating Lender" has the meaning set forth in Section
14.1(e).
"Overadvance" means the amount, if any, by which (a) the
outstanding principal amount of the Revolver Usage exceeds (b) the lesser of (i)
the Borrowing Base, or (ii) the Maximum Revolver Amount.
"Parent" means Big Dog Holdings, Inc., a Delaware corporation.
"Parent Equity Contribution" means an equity contribution by
Parent to Borrower in an amount of not less than $6.45 million.
"Parent IP License" has the meaning set forth in Section 5.16.
"Parent Loan I" means that unsecured line of credit
established by Parent to Borrower pursuant to the terms of that certain
Subordinated Intercompany Promissory Note dated as of March 3, 2004 in the face
amount of $1.05 million, funded from proceeds of the Big Dog Dividend.
"Parent Loan II" means that unsecured line of credit
established by Parent to Borrower pursuant to the terms of that certain
Subordinated Intercompany Promissory Note dated as of March 3, 2004 in the face
amount of up to $3.0 million, funded from proceeds of the IDB Note.
"Participant" has the meaning set forth in Section 14.1(e).
"Pay-Off Letter" means a letter, in form and substance
satisfactory to Agent, from Existing Lender to Agent respecting the amount
necessary to repay in full all of the obligations of the Walking Company owing
to Existing Lender and obtain a release or assignment of all of the Liens
existing in favor of Existing Lender in and to the assets of the Walking
Company.
"Permitted Acquisitions" means, during the term of this
Agreement, one or more Acquisitions so long as:
(a) no Default or Event of Default shall have occurred and be
continuing or would result from the consummation of such proposed Acquisition,
(b) such Acquisition, if consummated prior to December 31,
2004, is such that the assets being acquired or the Person whose Stock is being
acquired is engaged in the business of selling shoes or accessories or other
merchandise of a brand carried by the Borrower following consummation of the
Walking Company Acquisition, or, such Acquisition, if consummated after December
31, 2004, is such that the assets being acquired or the Person whose Stock is
being acquired is engaged in the business of the Borrower or a business
reasonably related thereto,
(c) the consideration payable in respect of such Acquisition
shall be composed solely of net proceeds from the issuance of common Stock of
Borrower, warrants for common Stock of Parent, preferred Stock of Parent (so
long as such preferred Stock does not require any current cash payment until
after the Obligations have been paid in full and the Commitments terminated
hereunder),
(d) Borrower has provided to Agent written notice thereof not
less than 15 days prior to the anticipated closing date of such subject
Acquisition together with such documentation that Agent may require
demonstrating that after giving effect to such subject Acquisition, Borrower and
its Subsidiaries (taken as a whole) would not suffer a Material Adverse Change
as a result of such proposed Acquisition,
(e) the subject Stock is being acquired in such Acquisition
directly by Borrower, or the subject assets are being acquired in such
Acquisition directly by Borrower or a new Subsidiary formed for the purposes of
such Acquisition,
(f) Borrower shall have caused such acquired Person to execute
and deliver a guaranty of the Obligations hereunder, together with any and all
security agreements, UCC-1 financing statements, fixture filings, and other
documentation reasonably requested by Agent to cause such acquired Person to be
obligated with respect to the Obligations and to include the assets of the
acquired Person within the Collateral, provided, that, such assets shall not be
included in the calculation of the Borrowing Base, except to the extent such
assets are deemed acceptable for borrowing by the Agent, in its sole discretion,
and
(g) Following consummation of such Acquisition, those Persons
comprising senior management of the Person whose assets are being acquired or
the Person whose Stock is being acquired do not perform any of the functions of
senior management of the Borrower unless such Person is acceptable to the Agent,
in its Permitted Discretion .
"Permitted Discretion" means a determination made in good
faith and in the exercise of reasonable (from the perspective of a secured
asset-based lender) business judgment.
"Permitted Dispositions" means (a) sales or other dispositions
by Borrower or its Subsidiaries of Equipment that is substantially worn,
damaged, or obsolete in the ordinary course of the Borrower's business, (b)
sales by Borrower or its Subsidiaries of Inventory to buyers in the ordinary
course of business, (c) the use or transfer of money or Cash Equivalents by
Borrower or its Subsidiaries in a manner that is not prohibited by the terms of
this Agreement or the other Loan Documents, (d) the licensing by Borrower or its
Subsidiaries, on an exclusive or non-exclusive basis, and for fair market value,
of patents, trademarks, copyrights, and other intellectual property rights in
the ordinary course of their business, provided, however, that Borrower or its
Subsidiaries, as applicable, must retain or obtain sufficient rights to use the
subject intellectual property as to enable Borrower or its Subsidiaries, as
applicable, to continue to conduct its business in the ordinary course and such
rights shall be assignable to Agent, for the benefit of the Lender Group, (e)
charitable donations by Borrower of Inventory that is old or obsolete and has a
retail value of not more than $200,000, in the aggregate, during any fiscal
year, and (f) transfer or assignment of Borrower's patents, trademarks,
copyrights, and other intellectual property rights to Parent, provided, however,
that Parent has simultaneously executed and delivered a fully paid,
non-cancelable, worldwide, exclusive license to Borrower enabling Borrower to
use and exploit each of the Parent's trademarks, trade names, copyrights,
patents, patent rights, and licenses used in the Borrower's business.
"Permitted Distributions" means (a) redemptions of Borrower's
outstanding Stock held by the Junior Secured Creditors in accordance with the
terms of the Junior Secured Creditors Stock Put Right Agreement, provided, that,
(i) no Default or Event of Default has occurred and is continuing or would
result therefrom, (ii) at all times tested, Borrower, has maintained Excess
Availability for 30 days prior to date of such cash Distribution and, on a pro
forma basis, will maintain Excess Availability for 60 days after the date of
such cash Distribution of not less than $1,500,000 after giving effect to such
cash Distribution and (iii) and the Borrower is Solvent; and (b) cash
Distributions to Parent after July 31, 2004, provided, that, (i) no Default or
Event of Default has occurred and is continuing or would result therefrom, (ii)
at all times tested, Borrower, has maintained Excess Availability for 60 days
prior to date of such cash Distribution and, on a pro forma basis, will maintain
Excess Availability for 90 days after the date of such cash Distribution of not
less than $4,000,000 after giving effect to such cash Distribution, and (iii)
the Borrower is Solvent.
"Permitted Holder" means Fred Kayne, Andrew Feshbach,
and their Family Members and Family Trusts.
"Permitted Intercompany Advances" means Intercompany Advances
made by (a) Parent to the Borrower pursuant to the Parent Loan I, Parent Loan
II, and Shoes.com Loan (if funded by Parent) and (b) advances made by Big Dog
for actual overhead charges reasonably allocable to the Borrower including, but
not limited to, charges for general corporate shared administrative services and
Borrower's occupancy of a portion of the warehouse or distribution centers
operated by Big Dog in amounts not to exceed caps to be established by Agent, in
its Permitted Discretion, based upon an allocation analysis to be furnished by
Borrower to Agent within 90 days of the Closing Date, provided, that an
Intercompany Subordination Agreement is in full force and effect with respect to
the proposed Intercompany Advance. In the event Borrower fails to provide Agent
with such allocation analysis within 90 days of the Closing Date, Borrower shall
pay Agent an extension fee equal to $10,000 per month (or any portion thereof)
until such analysis is furnished to Agent.
"Permitted Investments" means (a) investments in Cash
Equivalents, (b) investments in negotiable instruments for collection, (c)
advances made in connection with purchases of goods or services in the ordinary
course of business, and (d) investments in connection with Permitted
Acquisitions.
"Permitted Liens" means (a) Liens held by Agent for the
benefit of Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are
not yet delinquent, or (ii) do not constitute an Event of Default hereunder and
are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d)
the interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of Borrower's business and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet delinquent, or (ii) are the subject
of Permitted Protests, (g) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (h) Liens or
deposits to secure performance of bids, tenders, or leases incurred in the
ordinary course of Borrower's business and not in connection with the borrowing
of money, (i) Liens granted as security for surety or appeal bonds in connection
with obtaining such bonds in the ordinary course of Borrower's business, (j)
Liens resulting from any judgment or award that is not an Event of Default
hereunder, (k) with respect to any real property, easements, rights of way, and
zoning restrictions that do not materially interfere with or impair the use or
operation thereof by Borrower and (l) Liens of the Junior Secured Creditors
pursuant to the terms of Junior Secured Creditors Promissory Note, provided,
that the Liens of the Junior Secured Creditors are at all time junior and
subordinate to the Liens of the Agent created hereunder. Notwithstanding
anything contained herein to the contrary, the inclusion of any of the foregoing
as "Permitted Liens" shall not affect their respective relative priorities
vis-a-vis the Liens of the Agent created herein.
"Permitted Protest" means the right of Parent or the Borrower
or its Subsidiaries to protest any Lien (other than any such Lien that secures
the Obligations), taxes (other than payroll taxes or taxes that are the subject
of a United States federal tax lien), or rental payment, provided that (a) a
reserve with respect to such obligation is established on the Books in such
amount as is required under GAAP, (b) any such protest is instituted promptly
and prosecuted diligently by Parent or the Borrower or its Subsidiary, as
applicable, in good faith, and (c) Agent is satisfied that, while any such
protest is pending, there will be no impairment of the enforceability, validity,
or priority of any of the Agent's Liens.
"Permitted Purchase Money Indebtedness" means, as of any date
of determination, Purchase Money Indebtedness incurred after the Closing Date in
an aggregate principal amount outstanding at any one time not in excess of
$1,000,000.
"Person" means natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Proceeding" means the Chapter 11 case of the Walking Company
pending before the Bankruptcy Court as case number SV 03-44040 GM, jointly
administered with Case No. SV 03-15932 GM.
"Projections" means Borrower's forecasted (a) balance sheets,
(b) profit and loss statements, and (c) cash flow statements, all prepared on a
basis consistent with Borrower's historical financial statements (if any),
together with appropriate supporting details and a statement of underlying
assumptions.
"Pro Rata Share" means:
(a) with respect to a Lender's obligation to make
Advances and receive payments of
principal, interest, fees, costs, and expenses with respect thereto, the
percentage obtained by dividing (i) such Lender's Commitment, by (ii) the
aggregate Revolver of all Lenders,
(b) with respect to a Lender's obligation to
participate in Letters of Credit, to
reimburse the Issuing Lender, and to receive payments of fees with respect
thereto, the percentage obtained by dividing (i) such Lender's Commitment, by
(ii) the aggregate Commitments of all Lenders,
(c) with respect to all other matters (including the
indemnification obligations
arising under Section 16.7), the percentage obtained by dividing (i) such
Lender's Commitment, by (ii) the aggregate amount of Commitments of all Lenders;
provided, however, that, in each case, in the event all Commitments have been
terminated, Pro Rata Share shall be determined according to the Commitments in
effect immediately prior to such termination.
"Purchase Money Indebtedness" means Indebtedness (other than
the Obligations, but including Capitalized Lease Obligations), incurred at the
time of, or within 20 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.
"Qualified Cash" means cash of the Walking Company on
deposit in local store level accounts of up to $250,000.
"Qualified Import Letter of Credit" means a Letter of Credit
that (a) is issued to facilitate the purchase by Borrower of Eligible Inventory,
(b) is in form and substance acceptable to Agent, and (c) is issued to support
an Underlying Letter of Credit that only is drawable by the beneficiary thereof
by the presentation of, among other documents, either (i) a negotiable bill of
lading that is consigned to Agent (either directly or by means of endorsements)
and that was issued by the carrier respecting the subject Eligible Inventory, or
(ii) a negotiable cargo receipt that is consigned to Agent (either directly or
by means of endorsements) and that was issued by a consolidator respecting the
subject Eligible Inventory; provided, however, that, in the latter case, no bill
of lading shall have been issued by the carrier (other than a bill of lading
consigned to the consolidator or to Agent).
"Record" means information that is inscribed on a tangible
medium or which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Remedial Action" means all actions taken to (a) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate, or in any way
address Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC ss. 9601.
"Report" has the meaning set forth in Section 16.17.
"Required Availability" means Excess Availability in an amount
of not less than $3,500,000, after giving effect to the first funding hereunder,
all payments required to be made pursuant to the Walking Company Plan of
Reorganization on the effective date of such plan, all post-petition accounts
payable of the Walking Company which are beyond credit terms then accorded the
Walking Company, overdrafts, any charges to the Loan Account made in connection
with the establishment of the credit facility contemplated hereby; any Letters
of Credit requested by the Borrower hereunder to be issued at, or immediately
subsequent to, such establishment; and any Letters of Credit to be assumed by
the Borrower upon consummation of the Walking Company Acquisition; plus
Qualified Cash.
"Required Lenders" means, at any time, (a) Agent, and (b)
Lenders whose Pro Rata Shares aggregate 50.1% of the Commitments, or if the
Commitments have been terminated irrevocably, 50.1% of the Obligations (other
than Bank Product Obligations) then outstanding.
"Reserve Percentage" means, on any day, for any Lender, the
maximum percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"Revolver Usage" means, as of any date of determination, the
sum of (a) the then extant amount of outstanding Advances, plus (b) the then
extant amount of the Letter of Credit Usage.
"Risk Participation Liability" means, as to each Letter of
Credit, all reimbursement obligations of the Borrower to the Issuing Lender with
respect to an L/C Undertaking, consisting of (a) the amount available to be
drawn or which may become available to be drawn, (b) all amounts that have been
paid by the Issuing Lender to the Underlying Issuer to the extent not reimbursed
by the Borrower, whether by the making of an Advance or otherwise, and (c) all
accrued and unpaid interest, fees, and expenses payable with respect thereto.
"SEC" means the United States Securities and Exchange
Commission and any successor thereto.
"Second Unsecured Creditors Promissory Note" means that
promissory note issued by the Borrower to the Liquidating Agent in the original
face amount of $21,000 pursuant to the Walking Company Plan of Reorganization.
"Securities Account" means a "securities account" as that term
is defined in the Code.
"Settlement" has the meaning set forth in Section 2.3(f)(i).
"Settlement Date" has the meaning set forth in Section
2.3(f)(i).
"Shoes.com Administrative Claim" means any claim of Shoes.com,
Inc. allowed by Final Order of the Bankruptcy Court as an administrative claim
against the Borrower pursuant to Section 503 of the Bankruptcy Code in the
Proceeding.
"Shoes.com Loan" means an unsecured loan to be made by either
(i) Parent to Borrower or (ii) by Fred Kayne and/or Andrew Feshbach to Borrower
in an amount sufficient to satisfy the Shoes.com Administrative Claim after
application of then available proceeds of Parent Loan II.
"Solvent" means, with respect to any Person on a particular
date, that such Person is not insolvent (as such term is defined in the Uniform
Fraudulent Transfer Act).
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"Stock Pledge Agreement" means a stock pledge agreement, in
form and substance satisfactory to Agent, executed and delivered by Parent and
Borrower to Agent with respect to the pledge of the Stock owned by Parent and
Borrower.
"Subordinated Indebtedness" means any Indebtedness of Borrower
that contains terms and conditions (including subordination terms) acceptable to
Agent in the exercise of its Permitted Discretion.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock having ordinary voting power to
elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company, or other
entity.
"Swing Lender" means WFRF or any other Lender that, at the
request of a Borrower and with the consent of Agent agrees, in such Lender's
sole discretion, to become the Swing Lender hereunder.
"Swing Loan" has the meaning set forth in Section 2.3(d)(i).
"Taxes" has the meaning set forth in Section 16.11.
"Trademark Security Agreement" means a trademark security
agreement executed and delivered by Parent, the Borrower, and Agent, the form
and substance of which is satisfactory to Agent.
"TWC Acquisition" has the meaning set forth in the preamble to
this Agreement.
"Underlying Issuer" means a third Person which is the
beneficiary of an L/C Undertaking and which has issued a letter of credit at the
request of the Issuing Lender for the benefit of Borrower and, in the case of a
proposed Qualified Import Letter of Credit, has agreed, in writing, to hold
documents of title as agent for Agent.
"Underlying Letter of Credit" means a letter of credit
that has been issued by an Underlying Issuer.
"Voidable Transfer" has the meaning set forth in Section 17.7.
"Walking Company" means The Walking Company, a California
corporation and Alan's Shoes, Inc., an Arizona corporation, both of which are
debtors in possession in the Proceeding.
"Walking Company Acquisition" means the acquisition of the
Walking Company Assets by Borrower pursuant to the Walking Company Plan of
Reorganization.
"Walking Company Acquisition Orders" means, collectively, (a)
a Final Order from the Bankruptcy Court (i) confirming the Walking Company Plan
of Reorganization and the sale of the Walking Company Assets free and clear of
all liens and encumbrances to Borrower pursuant to Section 1129 of the
Bankruptcy Code and (b) such other Final Orders of the Bankruptcy Court required
for the consummation of the Walking Company Acquisition, all of which are
determined by Agent, in its Permitted Discretion, to be in form and substance
acceptable to Agent.
"Walking Company Assets" means all of the property and assets
(tangible and intangible) of the Walking Company that (i) are proposed to be
purchased by Borrower pursuant to the Walking Company Plan of Reorganization, or
(ii) are acceptable to Agent in its Permitted Discretion.
"Walking Company Plan of Reorganization" means the Plan of
Reorganization of the Walking Company dated November 6, 2003, filed by the
Walking Company in the Proceeding, as such plan may be modified, supplemented or
amended from time to time with the prior written consent of Agent.
"Warehouse Sublicense" has the meaning set forth in Section
5.17.
"Wells Fargo" means Wells Fargo Bank, National Association, a
national banking association.
"WFRF" means Wells Fargo Retail Finance II, LLC, a Delaware
limited liability company.
1.2 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. When used herein, the term "financial
statements" shall include the notes and schedules thereto. Whenever the term
"Borrower" is used in respect of a financial covenant or a related definition,
it shall be understood to mean Borrower and its Subsidiaries on a consolidated
basis unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code shall be
construed and defined as set forth in the Code unless otherwise defined herein.
1.4 Construction. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
include such Person's successors and assigns. Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolver Advances.
(a)
(i) Subject to the terms and conditions of this Agreement, and during the
term of this Agreement, each Lender agrees (severally, not jointly or
jointly and severally) to make advances to Borrower in an amount at
any one time outstanding not to exceed such Lender's Pro Rata Share of
an amount equal to the least of (A) the Maximum Revolver Amount less
the then extant Revolver Usage and the aggregate amount of reserves,
if any, established by Agent under Section 2.1(a)(ii), or (B) the
Borrowing Base less the Revolver Usage and the aggregate amount of the
aggregate amount of reserves imposed under Section 2.1(a)(ii)).
(ii) Anything to the contrary in this Section 2.1(a) notwithstanding, Agent
shall have the right to establish Landlord Reserves and such other
reserves in such amounts, and with respect to such matters, as Agent
in its Permitted Discretion shall deem necessary or appropriate,
against the Borrowing Base, including (without duplication) reserves
with respect to (i) sums that Borrower is required to pay (such as
taxes, assessments, insurance premiums, or, in the case of leased
assets, rents or other amounts payable under such leases) and has
failed to pay under any Section of this Agreement or any other Loan
Document, (ii) amounts owing by Borrower to any Person to the extent
secured by a Lien on, or trust over, any of its Collateral (other than
any existing Permitted Lien set forth on Schedule P-1 which is
specifically identified thereon as entitled to have priority over the
Agent's Liens), which Lien or trust, in the Permitted Discretion of
Agent likely would have a priority superior to the Agent's Liens (such
as Liens or trusts in favor of landlords, warehousemen, carriers,
mechanics, materialmen, laborers, or suppliers, or Liens or trusts for
ad valorem, excise, sales, or other taxes where given priority under
applicable law) in and to such item of the Collateral (iii) Customer
Credit Liabilities; (iv) shrinkage, markdowns (to the extent not taken
into account in the calculation of "Cost"), seasonality and other such
categories of reasons which the Agent may establish, in its Permitted
Discretion, which reflect other factors which affect the market value
of Eligible Inventory; (v) Account Reserves; (vi) the Minimum Excess
Reserve. In addition to the foregoing and subject to Section 2.11(c),
Agent shall have the right to have Borrower's Inventory reappraised by
a qualified appraisal company selected by Agent from time to time
after the Closing Date for the purpose of redetermining the Net
Liquidation Percentage of Eligible Inventory portion of its Collateral
and, as a result, redetermining the Borrowing Base.
(b) The Lenders shall have no obligation to make additional Advances
hereunder to the extent such additional Advances would cause the
Revolver Usage to exceed the Maximum Revolver Amount or be in excess
of the formula limitations set forth in Section 2.1(a)(i) and which
are not permitted pursuant to Section 2.3(i).
(c) Amounts borrowed pursuant to this Section may be repaid and, subject
to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 [Intentionally Omitted]
2.3 Borrowing Procedures and Settlements.
(a) Procedure for Borrowing. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered
to Agent (which notice must be received by Agent no later than
10:00 a.m. (California time) on the Business Day prior to the
date that is the requested Funding Date in the case of a
request for an Advance specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be
a Business Day; provided, however, that in the case of a
request for Swing Loan in an amount of $2,000,000, or less,
such notice will be timely received if it is received by Agent
no later than 10:00 a.m. (California time) on the Business Day
that is the requested Funding Date) specifying (i) the amount
of such Borrowing, and (ii) the requested Funding Date, which
shall be a Business Day. At Agent's election, in lieu of
delivering the above-described written request, any Authorized
Person may give Agent telephonic notice of such request by the
required time, with such telephonic notice to be confirmed in
writing within 24 hours of the giving of such notice.
(b) Agent's Election. Promptly after receipt of a request for a
Borrowing pursuant to Section 2.3(a), Agent shall elect, in
its discretion, (i) to have the terms of Section 2.3(c) apply
to such requested Borrowing, or (ii) if the Borrowing is for a
Base Rate Advance, to request Swing Lender to make a Swing
Loan pursuant to the terms of Section 2.3(d) in the amount of
the requested Borrowing; provided, however, that if Swing
Lender declines in its sole discretion to make a Swing Loan
pursuant to Section 2.3(d), Agent shall elect to have the
terms of Section 2.3(c) apply to such requested Borrowing.
(c) Making of Advances.
(i) In the event that Agent shall elect to have the terms of this Section
2.3(c) apply to a requested Borrowing as described in Section 2.3(b),
then promptly after receipt of a request for a Borrowing pursuant to
Section 2.3(a), Agent shall notify the Lenders, not later than 1:00
p.m. (California time) on the Business Day immediately preceding the
Funding Date applicable thereto, by telecopy, telephone, or other
similar form of transmission, of the requested Borrowing. Each Lender
shall make the amount of such Lender's Pro Rata Share of the requested
Borrowing available to Agent in immediately available funds, to
Agent's Account, not later than 10:00 a.m. (California time) on the
Funding Date applicable thereto. After Agent's receipt of the proceeds
of such Advances, upon satisfaction of the applicable conditions
precedent set forth in Section 3 hereof, Agent shall make the proceeds
thereof available to the applicable Borrower on the applicable Funding
Date by transferring immediately available funds equal to such
proceeds received by Agent to Designated Account; provided, however,
that, subject to the provisions of Section 2.3(i), Agent shall not
request any Lender to make, and no Lender shall have the obligation to
make, any Advance if Agent shall have actual knowledge that (1) one or
more of the applicable conditions precedent set forth in Section 3
will not be satisfied on the requested Funding Date for the applicable
Borrowing unless such condition has been waived, or (2) the requested
Borrowing would exceed the Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or prior to the Closing
Date or, with respect to any Borrowing after the Closing Date, at
least 1 Business Day prior to the date of such Borrowing, that such
Lender will not make available as and when required hereunder to Agent
for the account of the applicable Borrower the amount of that Lender's
Pro Rata Share of the Borrowing, Agent may assume that each Lender has
made or will make such amount available to Agent in immediately
available funds on the Funding Date and Agent may (but shall not be so
required), in reliance upon such assumption, make available to such
Borrower on such date a corresponding amount. If and to the extent any
Lender shall not have made its full amount available to Agent in
immediately available funds and Agent in such circumstances has made
available to the applicable Borrower such amount, that Lender shall on
the Business Day following such Funding Date make such amount
available to Agent, together with interest at the Defaulting Lender
Rate for each day during such period. A notice submitted by Agent to
any Lender with respect to amounts owing under this subsection shall
be conclusive, absent manifest error. If such amount is so made
available, such payment to Agent shall constitute such Lender's
Advance on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to Agent on the Business Day
following the Funding Date, Agent will notify the applicable Borrower
of such failure to fund and, upon demand by Agent, such Borrower shall
pay such amount to Agent for Agent's account, together with interest
thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to
the Advances composing such Borrowing. The failure of any Lender to
make any Advance on any Funding Date shall not relieve any other
Lender of any obligation hereunder to make an Advance on such Funding
Date, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on any
Funding Date.
(iii)Agent shall not be obligated to transfer to a Defaulting Lender any
payments made by the Borrower to Agent for the Defaulting Lender's
benefit, and, in the absence of such transfer to the Defaulting
Lender, Agent shall transfer any such payments to each other
non-Defaulting Lender member of the Lender Group ratably in accordance
with their Commitments (but only to the extent that such Defaulting
Lender's Advance was funded by the other members of the Lender Group)
or, if so directed by a Borrower and if no Default or Event of Default
had occurred and is continuing (and to the extent such Defaulting
Lender's Advance was not funded by the Lender Group), retain same to
be re-advanced to such Borrower as if such Defaulting Lender had made
Advances to such Borrower. Subject to the foregoing, Agent may hold
and, in its Permitted Discretion, re-lend to a Borrower for the
account of such Defaulting Lender the amount of all such payments
received and retained by it for the account of such Defaulting Lender.
Solely for the purposes of voting or consenting to matters with
respect to the Loan Documents, such Defaulting Lender shall be deemed
not to be a "Lender" and such Lender's Commitment shall be deemed to
be zero. This Section shall remain effective with respect to such
Lender until (x) the Obligations under this Agreement shall have been
declared or shall have become immediately due and payable, (y) the
non-Defaulting Lenders, Agent, and the Borrower shall have waived such
Defaulting Lender's default in writing, or (z) the Defaulting Lender
makes its Pro Rata Share of the applicable Advance and pays to Agent
all amounts owing by Defaulting Lender in respect thereof. The
operation of this Section shall not be construed to increase or
otherwise affect the Commitment of any Lender, to relieve or excuse
the performance by such Defaulting Lender or any other Lender of its
duties and obligations hereunder, or to relieve or excuse the
performance by Borrower of its duties and obligations hereunder to
Agent or to the Lenders other than such Defaulting Lender. Any such
failure to fund by any Defaulting Lender shall constitute a material
breach by such Defaulting Lender of this Agreement and shall entitle
Borrower at its option, upon written notice to Agent, to arrange for a
substitute Lender to assume the Commitment of such Defaulting Lender,
such substitute Lender to be acceptable to Agent. In connection with
the arrangement of such a substitute Lender, the Defaulting Lender
shall have no right to refuse to be replaced hereunder, and agrees to
execute and deliver a completed form of Assignment and Acceptance
Agreement in favor of the substitute Lender (and agrees that it shall
be deemed to have executed and delivered such document if it fails to
do so) subject only to being repaid its share of the outstanding
Obligations (other than Bank Product Obligations) (including an
assumption of its Pro Rata Share of the Risk Participation Liability)
without any premium or penalty of any kind whatsoever; provided
further, however, that any such assumption of the Commitment of such
Defaulting Lender shall not be deemed to constitute a waiver of any of
the Lender Groups' or Borrower's rights or remedies against any such
Defaulting Lender arising out of or in relation to such failure to
fund.
(d) Making of Swing Loans.
(i) In the event Agent shall elect, with the consent of Swing Lender, as a
Lender, to have the terms of this Section 2.3(d) apply to a requested
Borrowing as described in Section 2.3(b), Swing Lender as a Lender
shall make such Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to this
Section 2.3(d) being referred to as a "Swing Loan" and such Advances
being referred to collectively as "Swing Loans") available to the
applicable Borrower on the Funding Date applicable thereto by
transferring immediately available funds to Borrower's Designated
Account. Each Swing Loan is an Advance hereunder and shall be subject
to all the terms and conditions applicable to other Advances, except
that no such Swing Loan shall be eligible for the LIBOR Option and all
payments on any Swing Loan shall be payable to Swing Lender as a
Lender solely for its own account (and for the account of the holder
of any participation interest with respect to such Swing Loan).
Subject to the provisions of Section 2.3(i), Agent shall not request
Swing Lender as a Lender to make, and Swing Lender as a Lender shall
not make, any Swing Loan if Agent has actual knowledge that (i) one or
more of the applicable conditions precedent set forth in Section 3
will not be satisfied on the requested Funding Date for the applicable
Borrowing unless such condition has been waived, or (ii) the requested
Borrowing would exceed the Availability on such Funding Date. Swing
Lender as a Lender shall not otherwise be required to determine
whether the applicable conditions precedent set forth in Section 3
have been satisfied on the Funding Date applicable thereto prior to
making, in its sole discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the Agent's Liens, shall
constitute Advances and Obligations hereunder, and shall bear
interest at the rate applicable from time to time to Advances
that are Base Rate Seasonal Advances.
(e) Agent Advances.
(i) Agent hereby is authorized by the Borrower and the Lenders, from time
to time in Agent's sole discretion, (1) after the occurrence and
during the continuance of a Default or an Event of Default, or (2) at
any time that any of the other applicable conditions precedent set
forth in Section 3 have not been satisfied, to make Advances to the
Borrower on behalf of the Lenders that Agent, in its Permitted
Discretion deems necessary or desirable (A) to preserve or protect the
Collateral, or any portion thereof, (B) to enhance the likelihood of
repayment of the Obligations (other than the Bank Product
Obligations), or (C) to pay any other amount chargeable to each
Borrower pursuant to the terms of this Agreement, including Lender
Group Expenses and the costs, fees, and expenses described in Section
10 (any of the Advances described in this Section 2.3(e) shall be
referred to as "Agent Advances"). Each Agent Advance is an Advance
hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that no such Agent Advance shall
be eligible for the LIBOR Option and all payments thereon shall be
payable to Agent solely for its own account (and for the account of
the holder of any participation interest with respect to such Agent
Advance).
(ii) The Agent Advances shall be repayable on demand and secured by
the Agent's Liens granted to Agent under the Loan Documents,
shall constitute Advances and Obligations hereunder, and shall
bear interest at the rate applicable from time to time to
Advances that are Base Rate Advances.
(f) Settlement. It is agreed that each Lender's funded portion of
the Advances is intended by the Lenders to equal, at all
times, such Lender's Pro Rata Share of the outstanding
Advances. Such agreement notwithstanding, Agent, Swing Lender,
and the other Lenders agree (which agreement shall not be for
the benefit of or enforceable by any Borrower) that in order
to facilitate the administration of this Agreement and the
other Loan Documents, settlement among them as to the
Advances, the Swing Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following
provisions:
(i) Agent shall request settlement ("Settlement") with the Lenders on a
weekly basis, or on a more frequent basis if so determined by Agent,
(1) on behalf of Swing Lender, with respect to each outstanding Swing
Loan, (2) for itself, with respect to each Agent Advance, and (3) with
respect to Collections received, as to each by notifying the Lenders
by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 2:00 p.m. (California time) on the
Business Day immediately prior to the date of such requested
Settlement (the date of such requested Settlement being the
"Settlement Date"). Such notice of a Settlement Date shall include a
summary statement of the amount of outstanding Advances, Swing Loans,
and Agent Advances for the period since the prior Settlement Date.
Subject to the terms and conditions contained herein (including
Section 2.3(c)(iii)): (y) if a Lender's balance of the Advances, Swing
Loans, and Agent Advances exceeds such Lender's Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a Settlement Date,
then Agent shall, by no later than 12:00 p.m. (California time) on the
Settlement Date, transfer in immediately available funds to the
account of such Lender as such Lender may designate, an amount such
that each such Lender shall, upon receipt of such amount, have as of
the Settlement Date, its Pro Rata Share of the Advances, Swing Loans,
and Agent Advances, and (z) if a Lender's balance of the Advances,
Swing Loans, and Agent Advances is less than such Lender's Pro Rata
Share of the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, such Lender shall no later than 12:00 p.m.
(California time) on the Settlement Date transfer in immediately
available funds to the Agent's Account, an amount such that each such
Lender shall, upon transfer of such amount, have as of the Settlement
Date, its Pro Rata Share of the Advances, Swing Loans, and Agent
Advances. Such amounts made available to Agent under clause (z) of the
immediately preceding sentence shall be applied against the amounts of
the applicable Swing Loan or Agent Advance and, together with the
portion of such Swing Loan or Agent Advance representing Swing
Lender's Pro Rata Share thereof, shall constitute Advances of such
Lenders. If any such amount is not made available to Agent by any
Lender on the Settlement Date applicable thereto to the extent
required by the terms hereof, Agent shall be entitled to recover for
its account such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate.
(ii) In determining whether a Lender's balance of the Advances, Swing
Loans, and Agent Advances is less than, equal to, or greater than such
Lender's Pro Rata Share of the Advances, Swing Loans, and Agent
Advances as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually
received in good funds by Agent with respect to principal, interest,
fees payable by Borrower and allocable to the Lenders hereunder, and
proceeds of Collateral. To the extent that a net amount is owed to any
such Lender after such application, such net amount shall be
distributed by Agent to that Lender as part of such next Settlement.
(iii)Between Settlement Dates, Agent, to the extent no Agent Advances or
Swing Loans are outstanding, may pay over to Swing Lender any payments
received by Agent, that in accordance with the terms of this Agreement
would be applied to the reduction of the Advances, for application to
Swing Lender's Pro Rata Share of the Advances. If, as of any
Settlement Date, Collections received since the then immediately
preceding Settlement Date have been applied to Swing Lender's Pro Rata
Share of the Advances other than to Swing Loans, as provided for in
the previous sentence, Swing Lender shall pay to Agent for the
accounts of the Lenders, and Agent shall pay to the Lenders, to be
applied to the outstanding Advances of such Lenders, an amount such
that each Lender shall, upon receipt of such amount, have, as of such
Settlement Date, its Pro Rata Share of the Advances. During the period
between Settlement Dates, Swing Lender with respect to Swing Loans,
Agent with respect to Agent Advances, and each Lender (subject to the
effect of letter agreements between Agent and individual Lenders) with
respect to the Advances other than Swing Loans and Agent Advances,
shall be entitled to interest at the applicable rate or rates payable
under this Agreement on the daily amount of funds employed by Swing
Lender, Agent, or the Lenders, as applicable.
(g) Notation. Agent shall record on its books the principal amount
of the Advances owing to each Lender, including the Swing
Loans owing to Swing Lender, and Agent Advances owing to
Agent, and the interests therein of each Lender, from time to
time. In addition, each Lender is authorized, at such Lender's
option, to note the date and amount of each payment or
prepayment of principal of such Lender's Advances in its books
and records, including computer records.
(h) Lenders' Failure to Perform. All Advances (other than Swing
Loans and Agent Advances) shall be made by the Lenders
contemporaneously and in accordance with their Pro Rata
Shares. It is understood that (i) no Lender shall be
responsible for any failure by any other Lender to perform its
obligation to make any Advance (or other extension of credit)
hereunder, nor shall any Commitment of any Lender be increased
or decreased as a result of any failure by any other Lender to
perform its obligations hereunder, and (ii) no failure by any
Lender to perform its obligations hereunder shall excuse any
other Lender from its obligations hereunder.
(i) Optional Overadvances. Any contrary provision of this
Agreement notwithstanding, the Lenders hereby authorize Agent
or Swing Lender, as applicable, and Agent or Swing Lender, as
applicable, may, but is not obligated to, knowingly and
intentionally, continue to make Advances (including Swing
Loans) to Borrower notwithstanding that an Overadvance exists
or thereby would be created, so long as (i) after giving
effect to such Advances (including a Swing Loan), the
outstanding Adjusted Revolver Usage does not exceed the
Borrowing Base by more than $1,500,000, (ii) after giving
effect to such Advances (including a Swing Loan), the
outstanding Revolver Usage (except for and excluding amounts
charged to the Loan Accounts for interest, fees, or Lender
Group Expenses) does not exceed the Maximum Revolver Amount,
and (iii) at the time of the making of any such Advance
(including any Swing Loan), Agent does not believe, in good
faith, that the Overadvance created by such Advance will be
outstanding for more than 90 days. The foregoing provisions
are for the exclusive benefit of Agent, Swing Lender, and the
Lenders and are not intended to benefit Borrower in any way.
The Advances and Swing Loans, as applicable, that are made
pursuant to this Section 2.3(i) shall be subject to the same
terms and conditions as any other Advance or Swing Loan, as
applicable, except that they shall not be eligible for the
LIBOR Option and the rate of interest applicable thereto shall
be the rate applicable to Advances that are Base Rate Seasonal
Advances under Section 2.6(c) hereof without regard to the
presence or absence of a Default or Event of Default.
(i) In the event Agent obtains actual knowledge that the Revolver Usage
exceeds the amounts permitted by the preceding paragraph, regardless
of the amount of, or reason for, such excess, Agent shall notify
Lenders as soon as practicable (and prior to making any (or any
additional) intentional Overadvances (except for and excluding amounts
charged to the Loan Accounts for interest, fees, or Lender Group
Expenses) unless Agent determines that prior notice would result in
imminent harm to the Collateral or its value), and the Lenders
thereupon shall, together with Agent, jointly determine the terms of
arrangements that shall be implemented with Borrower intended to
reduce, within a reasonable time, the outstanding principal amount of
the Advances to Borrower to an amount permitted by the preceding
paragraph. In the event Agent or any Lender disagrees over the terms
of reduction or repayment of any Overadvance, the terms of reduction
or repayment thereof shall be implemented according to the
determination of the Required Lenders.
(ii) Each Lender shall be obligated to settle with Agent as
provided in Section 2.3(f) for the amount of such Lender's Pro
Rata Share of any unintentional Overadvances by Agent reported
to such Lender, any intentional Overadvances made as permitted
under this Section 2.3(i), and any Overadvances resulting from
the charging to the Loan Accounts of interest, fees, or Lender
Group Expenses.
2.4 Payments.
(a) Payments by Borrower.
(i) Except as otherwise expressly provided herein, all payments by
Borrower shall be made to Agent's Account for the account of
the Lender Group and shall be made in immediately available
funds, no later than 11:00 a.m. (California time) on the date
specified herein. Any payment received by Agent later than
11:00 a.m. (California time) shall be deemed to have been
received on the following Business Day and any applicable
interest or fee shall continue to accrue until such following
Business Day.
(ii) Unless Agent receives notice from the Borrower prior to the date on
which any payment is due to the Lenders that the Borrower will not
make such payment in full as and when required, Agent may assume that
the Borrower has made (or will make) such payment in full to Agent on
such date in immediately available funds and Agent may (but shall not
be so required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due such
Lender. If and to the extent the Borrower does not make such payment
in full to Agent on the date when due, each Lender severally shall
repay to Agent on demand such amount distributed to such Lender,
together with interest thereon at the Defaulting Lender Rate for each
day from the date such amount is distributed to such Lender until the
date repaid.
(b) Apportionment and Application of Payments.
(i) Except as otherwise provided with respect to Defaulting Lenders and
except as otherwise provided in the Loan Documents (including letter
agreements between Agent and individual Lenders), aggregate principal
and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Obligations to which
such payments relate held by each Lender) and payments of fees and
expenses (other than fees or expenses that are for Agent's separate
account, after giving effect to any letter agreements between Agent
and individual Lenders) shall be apportioned ratably among the Lenders
having a Pro Rata Share of the type of Commitment or Obligation to
which a particular fee relates. All payments shall be remitted to
Agent and all such payments (other than payments received while no
Event of Default has occurred and is continuing and which relate to
the payment of principal or interest of specific Obligations or which
relate to the payment of specific fees), and all proceeds of Accounts
or other Collateral received by Agent, shall be applied as follows:
(A) first, to pay any Lender Group Expenses then due to Agent
under the Loan Documents, until paid in full,
(B) second, to pay any Lender Group Expenses then due to the
Lenders under the Loan Documents, on a ratable basis, until
paid in full,
(C) third, to pay any fees then due to Agent (for its separate
accounts, after giving effect to any letter agreements between
Agent and individual Lenders) under the Loan Documents until
paid in full,
(D) fourth, to pay any fees then due to any or all of the Lenders
(after giving effect to any letter agreements between Agent
and individual Lenders) under the Loan Documents, on a ratable
basis, until paid in full,
(E) fifth, to pay interest due in respect of all Agent Advances,
until paid in full,
(F) sixth, ratably to pay interest due in respect of all other
Advances (other than Agent Advances) and the Swing Loans until
paid in full,
(G) seventh, to pay the principal of all Agent Advances until paid
in full,
(H) eighth, to pay the principal of all Swing Loans until paid in
full,
(I) ninth, so long as no Event of Default has occurred and is
continuing, and at Agent's election (which election Agent
agrees will not be made if an Overadvance would be created
thereby), to pay amounts then due and owing by Borrower or its
Subsidiaries in respect of Bank Products, until paid in full,
(J) tenth, so long as no Event of Default has occurred and is
continuing, to pay the principal of all Advances until paid in
full,
(K) eleventh, if an Event of Default has occurred and is
continuing, to Agent, to be held by Agent, for the benefit of
Wells Fargo or its Affiliates, as applicable, as cash
collateral in an amount up to the amount of the Bank Products
Reserve established prior to the occurrence of, and not in
contemplation of, the subject Event of Default until
Borrower's and its Subsidiaries' obligations in respect of the
then extant Bank Products have been paid in full or the cash
collateral amount has been exhausted,
(L) twelfth, if an Event of Default has occurred and is
continuing, to Agent to pay the principal of all Advances
until paid in full,
(M) thirteenth, if an Event of Default has occurred and is
continuing, to Agent, to be held by Agent, for the ratable
benefit of Issuing Lender and the Lenders, as cash collateral
in an amount up to 105% of the then extant Letter of Credit
Usage until paid in full,
(N) fourteenth, to pay any other Obligations (including Bank
Product Obligations) until paid in full, and
(O) fifteenth, to Borrower (to be wired to the Designated Account)
or such other Person entitled thereto under applicable law.
(ii) Agent promptly shall distribute to each Lender, pursuant to
the applicable wire instructions received from each Lender in
writing, such funds as it may be entitled to receive, subject
to a Settlement delay as provided in Section 2.3(h).
(iii) In each instance, so long as no Event of Default has occurred
and is continuing, Section 2.4(b) shall not be deemed to apply
to any payment by Borrower specified by Borrower to be for the
payment of specific Obligations then due and payable (or
prepayable) under any provision of this Agreement.
(iv) For purposes of the foregoing, "paid in full" means payment of
all amounts owing under the Loan Documents according to the
terms thereof, including loan fees, service fees, professional
fees, interest (and specifically including interest accrued
after the commencement of any Insolvency Proceeding), default
interest, interest on interest, and expense reimbursements,
whether or not the same would be or is allowed or disallowed
in whole or in part in any Insolvency Proceeding.
(v) In the event of a direct conflict between the priority
provisions of this Section 2.4 and other provisions contained
in any other Loan Document, it is the intention of the parties
hereto that such priority provisions in such documents shall
be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of
any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section 2.4 shall
control and govern.
2.5 Overadvances. If, at any time or for any reason, (a) the amount of
Obligations (other than Bank Product Obligations) owed by Borrower to the Lender
Group pursuant to Sections 2.1 and 2.12 is greater than either the Dollar or
percentage limitations set forth in Sections 2.1 or 2.12, or (b) the Obligations
(other than Bank Product Obligations) exceed Availability (in each case, an
"Overadvance"), Borrower immediately shall pay to Agent, in cash, the amount of
such excess, which amount shall be used by Agent to reduce the Obligations in
accordance with the priorities set forth in Section 2.4(b). In addition,
Borrower hereby promises to pay the Obligations (including principal, interest,
fees, costs, and expenses) in Dollars in full to Agent, on behalf of the Lender
Group, as and when due and payable under the terms of this Agreement and the
other Loan Documents.
2.Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations.
(a) Interest Rates.
(i) Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit and
except for Bank Product Obligations) that have been
charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance
thereof as follows (i) if the relevant Obligation is
a Advance that is a LIBOR Rate Loan, at a per annum
rate equal to the LIBOR Rate plus the LIBOR Rate
Margin, and (ii) if the relevant Obligation is a
Advance that is a Base Rate Advance, at a per annum
rate equal to the Base Rate plus the Base Rate
Margin.
(ii) The applicable interest rate shall be reset monthly,
on the first day of each month (the "Margin
Adjustment Date"), commencing with the first day
following the last day of the third calendar month
following the Closing Date, based upon the Margin
Pricing Grid set forth below, subject to the
provisions in the definitions of "Base Rate Margin"
and "LIBOR Rate Margin":
Margin Pricing Grid
-------------- ----------------- --------------- -------------- ------------- -------------
Average Excess
Availability Base Rate LIBOR Rate Standby LC's Import LC's
Tier Margin Margin
-------------- ----------------- --------------- -------------- ------------- -------------
-------------- ----------------- --------------- -------------- ------------- -------------
I =$3,000,000 .50% 2.75% 2.75% 2.25%
-------------- ----------------- --------------- -------------- ------------- -------------
-------------- ----------------- --------------- -------------- ------------- -------------
II >$3,000,000 and .25% 2.50% 2.50% 2.00%
=$6,000,000
-------------- ----------------- --------------- -------------- ------------- -------------
-------------- ----------------- --------------- -------------- ------------- -------------
III >$6,000,000 0% 2.25% 2.25% 2.00%
-------------- ----------------- --------------- -------------- ------------- -------------
Average Excess Availability will be determined based
upon a certificate by an Authorized Person delivered
to the Agent no later than the Margin Adjustment Date
certifying Average Excess Availability for the prior
month. In the absence of the Borrower's timely
delivery of such certificate, Agent may determine the
applicable pricing by its calculation of the
Borrower's Average Excess Availability, which
determination shall be conclusive, absent manifest
error.
(iii) Notwithstanding anything contained herein to the
contrary, for the period between the Closing Date and
the first Margin Adjustment Date, the applicable
interest rate shall be that rate associated with Tier
II pricing.
(b) Letter of Credit Fees. Borrower shall pay Agent (for
the ratable benefit of the Lenders, subject to any
letter agreement between Agent and individual
Lenders), (i) a Letter of Credit fee (in addition to
the charges, commissions, fees, and costs set forth
in Section 2.12(e)), which shall accrue at a rate
equal to the applicable percentage set forth in the
Margin Pricing Grid per annum times the Daily Balance
of the undrawn amount of all outstanding Qualified
Import Letters of Credit, and (ii) a Letter of Credit
fee (in addition to the charges, commissions, fees,
and costs set forth in Section 2.12(e)) which shall
accrue at a rate equal to the applicable percentage
set forth in the Margin Pricing Grid per annum times
the Daily Balance of the undrawn amount of all
outstanding Letters of Credit (other than Qualified
Import Letters of Credit).
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default (and at the
election of Agent or the Required Lenders),
(i) all Obligations (except for undrawn Letters of Credit
and except for Bank Product Obligations) that have
been charged to the Loan Accounts pursuant to the
terms hereof shall bear interest on the Daily Balance
thereof at the applicable per annum rate equal to the
pricing set forth in the Margin Pricing Grid plus 2
percentage points, and
(ii) the Letter of Credit fee provided for above shall be
increased to the applicable pricing set forth in the
Margin Pricing Grid plus 2 percentage points.
(d) Payment. Interest, Letter of Credit fees, and all
other fees payable hereunder shall be due and
payable, in arrears, on the first day of each month
at any time that Obligations or Commitments are
outstanding. Borrower hereby authorizes Agent, from
time to time without prior notice to Borrower, to
charge such interest and fees, all Lender Group
Expenses (as and when incurred), the charges,
commissions, fees, and costs provided for in Section
2.12(e) (as and when accrued or incurred), the fees
and costs provided for in Section 2.11 (as and when
accrued or incurred), and all other payments as and
when due and payable under any Loan Document
(including any amounts due and payable to Wells Fargo
or its Affiliates in respect of Bank Products up to
the amount of the then extant Bank Products Reserve)
to the Loan Account, which amounts thereafter shall
constitute Advances hereunder and shall accrue
interest at the rate then applicable to Advances
hereunder. Any interest not paid when due shall be
compounded by being charged to the Loan Account and
shall thereafter constitute Advances hereunder and
shall accrue interest at the rate then applicable to
either Base Rate Advances.
(e) Computation. All interest and fees chargeable under
the Loan Documents shall be computed on the basis of
a 360 day year for the actual number of days elapsed.
In the event the Base Rate is changed from time to
time hereafter, the rates of interest hereunder based
upon the Base Rate automatically and immediately
shall be increased or decreased by an amount equal to
such change in the Base Rate.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under
this Agreement, plus any other amounts paid in
connection herewith, exceed the highest rate
permissible under any law that a court of competent
jurisdiction shall, in a final determination, deem
applicable. Borrower and the Lender Group, in
executing and delivering this Agreement, intend
legally to agree upon the rate or rates of interest
and manner of payment stated within it; provided,
however, that, anything contained herein to the
contrary notwithstanding, if said rate or rates of
interest or manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrower are and shall
be liable only for the payment of such maximum as
allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of
the Obligations to the extent of such excess.
2.7 Cash Management.
(a) Borrower shall (i) establish and maintain cash management services of a type
and on terms satisfactory to Agent at one or more of the banks set forth on
Schedule 2.7(a) (each, a "Cash Management Bank"), and shall request in writing
and otherwise take such reasonable steps to ensure that all of its Account
Debtors forward payment of the amounts owed by them directly to such Cash
Management Bank, and (ii) deposit or cause to be deposited promptly, and in any
event no later than the first Business Day after the date of receipt thereof,
all Collections (including those sent directly by Account Debtors to a Cash
Management Bank) into a bank account in Agent's name (a "Cash Management
Account") at one of the Cash Management Banks.
(b) Each Cash Management Bank shall establish and maintain Cash Management
Agreements with Agent and Borrower, in form and substance acceptable to Agent.
Each such Cash Management Agreement shall provide, among other things, that (i)
all items of payment deposited in such Cash Management Account and proceeds
thereof are held by such Cash Management Bank as agent or bailee-in-possession
for Agent, (ii) the Cash Management Bank has no rights of setoff or recoupment
or any other claim against the applicable Cash Management Account other than for
payment of its service fees and other charges directly related to the
administration of such Cash Management Account and for returned checks or other
items of payment, and (iii) it immediately will forward by daily sweep all
amounts in the applicable Cash Management Account to the Agent's Account.
(c) So long as no Default or Event of Default has occurred and is continuing,
Borrower may amend Schedule 2.7(a) to add or replace a Cash Management Bank or
Cash Management Account; provided, however, that (i) such prospective Cash
Management Bank shall be satisfactory to Agent and Agent shall have consented in
writing in advance to the opening of such Cash Management Account with the
prospective Cash Management Bank, and (ii) prior to the time of the opening of
such Cash Management Account, Borrower and such prospective Cash Management Bank
shall have executed and delivered to Agent a Cash Management Agreement. Borrower
shall close any of their Cash Management Accounts (and establish replacement
cash management accounts in accordance with the foregoing sentence) promptly and
in any event within 30 days of notice from Agent that the creditworthiness of
any Cash Management Bank is no longer acceptable in Agent's reasonable judgment,
or as promptly as practicable and in any event within 60 days of notice from
Agent that the operating performance, funds transfer, or availability procedures
or performance of the Cash Management Bank with respect to Cash Management
Accounts or Agent's liability under any Cash Management Agreement with such Cash
Management Bank is no longer acceptable in Agent's reasonable judgment.
(d) The Cash Management Accounts shall be cash collateral accounts, with all
cash, checks and similar items of payment in such accounts securing payment of
the Obligations, and in which Borrower are hereby deemed to have granted a Lien
to Agent.
(e) At the request of the Agent, the Borrower shall deliver to the Agent
notification, executed by the Borrower, to each depository institution which any
DDA (other than DDA's established for petty cash) is maintained, in form and
substance satisfactory to the Agent in its Permitted Discretion of the Agent's
Lien in such DDA and, instructs the depository institution, upon direction of
the Agent, to remit all amounts deposited from time to time in the DDA to the
Agent's Account or as otherwise directed from time to time by the Agent. The
Borrower shall not establish any DDA hereafter unless, contemporaneous with such
establishment, Borrower notifies Agent and, if requested by Agent, delivers to
such depository institution the notification described herein. The Borrower
shall not change such direction or designation except upon the prior written
consent of the Agent.
(f) The Borrower shall deliver to Agent, as a condition to the effectiveness of
this Agreement, notification, executed by the Borrower, to each of the
Borrower's credit card clearinghouses and processors, a notice (in form and
substances satisfactory to the Agent in its Permitted Discretion), which notice
shall provide that payment of all credit card charges submitted by the Borrower
to that clearinghouse or other processor and any other amount payable to the
Borrower by such clearinghouse or other processor shall be directed to the
Agent's Account or as otherwise directed from time to time by the Agent. The
Borrower shall not change such direction or designation except upon the prior
written consent of the Agent.
2.8 Crediting Payments. The receipt of any payment item by Agent (whether from
transfers to Agent by the Cash Management Banks pursuant to the Cash Management
Agreements or otherwise) shall not be considered a payment on account unless
such payment item is a wire transfer of immediately available federal funds made
to the Agent's Account or unless and until such payment item is honored when
presented for payment. Should any payment item not be honored when presented for
payment, then Borrower shall be deemed not to have made such payment and
interest shall be calculated accordingly. Anything to the contrary contained
herein notwithstanding, any payment item shall be deemed received by Agent only
if it is received into the Agent's Account on a Business Day on or before 11:00
a.m. (California time). If any payment item is received into the Agent's Account
on a non-Business Day or after 11:00 a.m. (California time) on a Business Day,
it shall be deemed to have been received by Agent as of the opening of business
on the immediately following Business Day.
2.9 Designated Account. Agent is authorized to make the Advances, and Issuing
Lender is authorized to issue the Letters of Credit, under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to Section 2.6(d).
Borrower agrees to establish and maintain its Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by the Borrower and made by Agent or the Lenders hereunder.
Unless otherwise agreed by Agent and the Borrower, any Advance, Agent Advance,
or Swing Loan requested by Borrower and made by Agent or the Lenders hereunder
shall be made to the Designated Account.
2.10 Maintenance of Loan Account; Statements of Obligations. Agent shall
maintain an account on its books in the name of the Borrower (each, a "Loan
Account", and collectively, the "Loan Accounts") on which the Borrower will be
charged with all Advances (including Agent Advances and Swing Loans) made by
Agent, Swing Lender, or the Lenders to Borrower or for Borrower's account, the
Letters of Credit issued by Issuing Lender for the Borrower's account, and with
all other payment Obligations of Borrower hereunder or under the other Loan
Documents (except for Bank Product Obligations), including, accrued interest,
fees and expenses, and Lender Group Expenses. In accordance with Section 2.8,
Borrower's Loan Account will be credited with all payments received by Agent
from Borrower or for Borrower's account, including all amounts received in the
Agent's Account from any Cash Management Bank attributable to Borrower. Agent
shall render statements regarding the Loan Account to Borrower, including
principal, interest, fees, and including an itemization of all charges and
expenses constituting Lender Group Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and the Lender Group unless, within 90 days after
receipt thereof by the Borrower, Borrower shall deliver to Agent written
objection thereto describing the error or errors contained in any such
statements.
2.11 Fees. Borrower shall pay to Agent the following fees and charges, which
fees and charges shall be non-refundable when paid (irrespective of whether this
Agreement is terminated thereafter) and shall be apportioned among the Lenders
in accordance with the terms of letter agreements between Agent and individual
Lenders:
(a) Unused Line Fee. On the first day of each month
during the term of this Agreement, an unused line fee
in an amount equal to 0.375% per annum times the
result of (a) the Maximum Revolver Amount, less (b)
the average Daily Balance of the Revolver Usage for
the immediately preceding month,
(b) Other Fees.
(i) Closing Fee: In addition any other fee or expense to
be paid by the Borrower, the Borrower shall pay the
Agent, for the benefit of the Lenders, a "Closing
Fee" of $100,000, which has been fully earned by the
Agent and shall be payable by the Borrower as of the
Closing Date.
(ii) Agent's Fee: In addition to any other fee or expense
to be paid by the Borrower, the Borrower shall pay
the Agent, for the benefit of the Agent, a "Facility
Fee" of $1,500, per month so long as this Agreement
remains in effect. The Facility Fee shall be paid to
the Agent on the Closing Date (pro rated for the
balance of such month) and on the first day of each
month thereafter.
(c) Audit, Appraisal, and Valuation Charges. For the
separate account of Agent, audit, appraisal, and
valuation fees and charges, provided, however, that,
so long as no Event of Default shall have occurred
and be continuing, Borrower shall not be obligated to
pay such fees and expenses in respect of more than
(i) 3 financial audits of Borrower in any calendar
year or (ii) more than 3 appraisals of the Collateral
in any calendar year.
2.12 Letters of Credit
(a) Subject to the terms and conditions of this Agreement, the
Issuing Lender agrees to issue letters of credit for the
account of the Borrower (each, an "L/C") or to purchase
participations or execute indemnities or reimbursement
obligations (each such undertaking, an "L/C Undertaking") with
respect to letters of credit issued by an Underlying Issuer
(as of the Closing Date, the prospective Underlying Issuer is
to be Wells Fargo) for the account of the Borrower. To request
the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C
Undertaking), the Borrower shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for
doing so have been approved by the Issuing Lender) to the
Issuing Lender and Agent (reasonably in advance of the
requested date of issuance, amendment, renewal, or extension)
a notice requesting the issuance of an L/C or L/C Undertaking,
or identifying the L/C or L/C Undertaking to be amended,
renewed, or extended, the date of issuance, amendment,
renewal, or extension, the date on which such L/C or L/C
Undertaking is to expire, the amount of such L/C or L/C
Undertaking, the name and address of the beneficiary thereof
(or the beneficiary of the Underlying Letter of Credit, as
applicable), and such other information as shall be necessary
to prepare, amend, renew, or extend such L/C or L/C
Undertaking. If requested by the Issuing Lender, the Borrower
also shall be an applicant under the application with respect
to any Underlying Letter of Credit that is to be the subject
of an L/C Undertaking. The Issuing Lender shall have no
obligation to issue a Letter of Credit if any of the following
would result after giving effect to the requested Letter of
Credit:
(i) the Letter of Credit Usage would exceed the Borrowing Base
less the amount of outstanding Advances, or
(ii) the Letter of Credit Usage would exceed $3,000,000, or
(iii) the Letter of Credit Usage would exceed the Maximum Revolver
Amount less the amount of outstanding Advances. Borrower and
the Lender Group acknowledge and agree that certain Underlying
Letters of Credit
may be issued to support letters of credit that already are outstanding as of
the Closing Date. Each Letter of Credit (and corresponding Underlying Letter of
Credit) shall be in form and substance acceptable to the Issuing Lender (in the
exercise of its Permitted Discretion), including the requirement that the
amounts payable thereunder must be payable in Dollars. If Issuing Lender is
obligated to advance funds under a Letter of Credit, Borrower immediately shall
reimburse such L/C Disbursement to Issuing Lender by paying to Agent an amount
equal to such L/C Disbursement not later than 11:00 a.m., California time, on
the date that such L/C Disbursement is made, if the Borrower shall have received
written or telephonic notice of such L/C Disbursement prior to 10:00 a.m.,
California time, on such date, or, if such notice has not been received by the
Borrower prior to such time on such date, then not later than 11:00 a.m.,
California time, on the Business Day that the Borrower receives such notice, if
such notice is received prior to 10:00 a.m., California time, on the date of
receipt, and, in the absence of such reimbursement, the L/C Disbursement
immediately and automatically shall be deemed to be an Advance hereunder and,
thereafter, shall bear interest at the rate then applicable to Advances under
Section 2.6. To the extent an L/C Disbursement is deemed to be an Advance
hereunder, Borrower's obligation to reimburse such L/C Disbursement shall be
discharged and replaced by the resulting Advance. Promptly following receipt by
Agent of any payment from the Borrower pursuant to this paragraph, Agent shall
distribute such payment to the Issuing Lender or, to the extent that Lenders
have made payments pursuant to Section 2.12(c) to reimburse the Issuing Lender,
then to such Lenders and the Issuing Lender as their interest may appear.
(b) Promptly following receipt of a notice of L/C Disbursement
pursuant to Section 2.12(a), each Lender agrees to fund its
Pro Rata Share of any Advance deemed made pursuant to the
foregoing subsection on the same terms and conditions as if
the Borrower had requested such Advance and Agent shall
promptly pay to Issuing Lender the amounts so received by it
from the Lenders. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof)
and without any further action on the part of the Issuing
Lender or the Lenders, the Issuing Lender shall be deemed to
have granted to each Lender, and each Lender shall be deemed
to have purchased, a participation in each Letter of Credit,
in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit, and each
such Lender agrees to pay to Agent, for the account of the
Issuing Lender, such Lender's Pro Rata Share of any payments
made by the Issuing Lender under such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to Agent,
for the account of the Issuing Lender, such Lender's Pro Rata
Share of each L/C Disbursement made by the Issuing Lender and
not reimbursed by the Borrower on the date due as provided in
clause (a) of this Section, or of any reimbursement payment
required to be refunded to the Borrower for any reason. Each
Lender acknowledges and agrees that its obligation to deliver
to Agent, for the account of the Issuing Lender, an amount
equal to its respective Pro Rata Share pursuant to this
Section 2.12(b) shall be absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or
continuation of an Event of Default or Default or the failure
to satisfy any condition set forth in Section 3 hereof. If any
such Lender fails to make available to Agent the amount of
such Lender's Pro Rata Share of any payments made by the
Issuing Lender in respect of such Letter of Credit as provided
in this Section, Agent (for the account of the Issuing Lender)
shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the Defaulting Lender
Rate until paid in full.
(c) Borrower hereby agrees to indemnify, save, defend, and hold
the Lender Group harmless from any loss, cost, expense, or
liability, and reasonable attorneys fees incurred by the
Lender Group arising out of or in connection with any Letter
of Credit; provided, however, that Borrower shall not be
obligated hereunder to indemnify for any loss, cost, expense,
or liability that is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the
Lender Group. Borrower agrees to be bound by the Underlying
Issuer's regulations and interpretations of any Underlying
Letter of Credit or by Issuing Lender's interpretations of any
L/C issued by Issuing Lender to or for Borrower's account,
even though this interpretation may be different from
Borrower's own, and Borrower understands and agrees that the
Lender Group shall not be liable for any error, negligence, or
mistake, whether of omission or commission, in following
Borrower's instructions or those contained in the Letter of
Credit or any modifications, amendments, or supplements
thereto. Borrower understands that the L/C Undertakings may
require Issuing Lender to indemnify the Underlying Issuer for
certain costs or liabilities arising out of claims by Borrower
against such Underlying Issuer. Borrower hereby agrees to
indemnify, save, defend, and hold the Lender Group harmless
with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by the Lender Group
under any L/C Undertaking as a result of the Lender Group's
indemnification of any Underlying Issuer; provided, however,
that Borrower shall not be obligated hereunder to indemnify
for any loss, cost, expense, or liability that is caused by
the gross negligence or willful misconduct of the Issuing
Lender or any other member of the Lender Group.
(d) Borrower hereby authorizes and directs any Underlying Issuer
to deliver to the Issuing Lender all instruments, documents,
and other writings and property received by such Underlying
Issuer pursuant to such Underlying Letter of Credit and to
accept and rely upon the Issuing Lender's instructions with
respect to all matters arising in connection with such
Underlying Letter of Credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred by
the Issuing Lender relating to Underlying Letters of Credit
shall be Lender Group Expenses for purposes of this Agreement
and immediately shall be reimbursable by Borrower to Agent for
the account of the Issuing Lender; it being acknowledged and
agreed by each Borrower that, as of the Closing Date, the
issuance charge imposed by the prospective Underlying Issuer
is .825% per annum times the face amount of each Underlying
Letter of Credit, that such issuance charge may be changed
from time to time, and that the Underlying Issuer also imposes
a schedule of charges for amendments, extensions, drawings,
and renewals.
(f) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or
application thereof by any Governmental Authority, or (ii)
compliance by the Underlying Issuer or the Lender Group with
any direction, request, or requirement (irrespective of
whether having the force of law) of any Governmental Authority
or monetary authority including, Regulation D of the Federal
Reserve Board as from time to time in effect (and any
successor thereto):
(i) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letter of Credit issued
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or the Lender
Group any other condition regarding any Underlying Letter of
Credit or any Letter of Credit issued pursuant hereto,
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Borrower and Borrower shall pay on demand such amounts as Agent may
specify to be necessary to compensate the Lender Group for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Advances hereunder. The determination by Agent of any amount due pursuant to
this Section, as set forth in a certificate setting forth the calculation
thereof in reasonable detail, shall, in the absence of manifest or demonstrable
error, be final and conclusive and binding on all of the parties hereto.
(g) Borrower acknowledges and agrees that certain of the Qualified Import
Letters of Credit may provide for the presentation of time drafts to the
Underlying Issuer. If an Underlying Issuer accepts such a time draft that is
presented under an Underlying Letter of Credit, it is acknowledged and agreed
that (i) the Letter of Credit will require the Issuing Lender to reimburse the
Underlying Issuer for amounts paid on account of such time draft on or after the
maturity date thereof, (ii) the pricing provisions hereof (including Sections
2.6(b) and 2.12(e)) shall continue to apply, until payment of such time draft on
or after the maturity date thereof, as if the Underlying Letter of Credit were
still outstanding, and (iii) on the date on which Issuing Lender makes payment
to the Underlying Issuer of the amounts paid on account of such time draft,
Borrower immediately shall reimburse such amount to Issuing Lender and such
amount shall constitute an L/C Disbursement hereunder.
(h) Letters of Credit issued on account of the
Walking Company set forth in
Schedule 2.12(h) hereof shall be deemed to have been issued hereunder and
shall be treated as Obligations hereunder.
2.13 LIBOR Option.
(a) Interest and Interest Payment Dates. In lieu of having
interest charged at the rate based upon the Base Rate,
Borrower shall have the option (the "LIBOR Option") to have
interest on all or a portion of the Advances be charged at a
rate of interest based upon the LIBOR Rate. Interest on LIBOR
Rate Loans shall be payable on the earliest of (i) the last
day of the Interest Period applicable thereto, (ii) the
occurrence of an Event of Default in consequence of which the
Required Lenders or Agent on behalf thereof elect to
accelerate the maturity of the all or any portion of the
Obligations, or (iii) termination of this Agreement pursuant
to the terms hereof. On the last day of each applicable
Interest Period, unless Borrower properly has exercised the
LIBOR Option with respect thereto, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert
to the rate of interest then applicable to Base Rate Advances
hereunder. At any time that an Event of Default has occurred
and is continuing with respect to Borrower, such Borrower no
longer shall have the option to request that Advances bear
interest at the LIBOR Rate and Agent shall have the right to
convert the interest rate on all outstanding LIBOR Rate Loans
to the rate then applicable to Base Rate Advances hereunder.
(b) LIBOR Election.
(i) Borrower may, at any time and from time to time, so long as no Event
of Default has occurred and is continuing, elect to exercise the LIBOR
Option by notifying Agent prior to 11:00 a.m. (California time) at
least 3 Business Days prior to the commencement of the proposed
Interest Period (the "LIBOR Deadline"). Notice of Borrower's election
of the LIBOR Option for a permitted portion of the Advances and an
Interest Period pursuant to this Section shall be made by delivery to
Agent of a LIBOR Notice received by Agent before the LIBOR Deadline,
or by telephonic notice received by Agent before the LIBOR Deadline
(to be confirmed by delivery to Agent of a LIBOR Notice received by
Agent prior to 5:00 p.m. (California time) on the same day. Promptly
upon its receipt of each such LIBOR Notice, Agent shall provide a copy
thereof to each of the Lenders.
(ii) Each LIBOR Notice shall be irrevocable and binding on Borrower. In
connection with each LIBOR Rate Loan, Borrower shall indemnify,
defend, and hold Agent and the Lenders harmless against any loss,
cost, or expense incurred by Agent or any Lender as a result of (a)
the payment of any principal of any LIBOR Rate Loan other than on the
last day of an Interest Period applicable thereto (including as a
result of an Event of Default), (b) the conversion of any LIBOR Rate
Loan other than on the last day of the Interest Period applicable
thereto, or (c) the failure to borrow, convert, continue or prepay any
LIBOR Rate Loan on the date specified in any LIBOR Notice delivered
pursuant hereto (such losses, costs, and expenses, collectively,
"Funding Losses"). Funding Losses shall, with respect to Agent or any
Lender, be deemed to equal the amount determined by Agent or such
Lender to be the excess, if any, of (i) the amount of interest that
would have accrued on the principal amount of such LIBOR Rate Loan had
such event not occurred, at the LIBOR Rate that would have been
applicable thereto, for the period from the date of such event to the
last day of the then current Interest Period therefor (or, in the case
of a failure to borrow, convert, or continue, for the period that
would have been the Interest Period therefor), minus (ii) the amount
of interest that would accrue on such principal amount for such period
at the interest rate which Agent or such Lender would be offered were
it to be offered, at the commencement of such period, Dollar deposits
of a comparable amount and period in the London interbank market. A
certificate of Agent or a Lender delivered to Borrower setting forth
any amount or amounts that Agent or such Lender is entitled to receive
pursuant to this Section shall be conclusive absent manifest error.
(iii) Borrower shall have not more than 5 LIBOR Rate Loans in effect
at any given time. Borrower only may exercise the LIBOR Option
for LIBOR Rate Loans of at least $1,000,000 and integral
multiples of $500,000 in excess thereof.
(c) Prepayments. Borrower may prepay LIBOR Rate Loans at any time;
provided, however, that in the event that LIBOR Rate Loans are
prepaid on any date that is not the last day of the Interest
Period applicable thereto, including as a result of any
automatic prepayment through the required application by Agent
of proceeds of Collections in accordance with Section 2.4(b)
or for any other reason, including early termination of the
term of this Agreement or acceleration of all or any portion
of the Obligations pursuant to the terms hereof, Borrower
shall indemnify, defend, and hold Agent and the Lenders and
their Participants harmless against any and all Funding Losses
in accordance with clause (b)(ii) above.
(d) Special Provisions Applicable to LIBOR Rate.
(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on
a prospective basis to take into account any additional or increased
costs to such Lender of maintaining or obtaining any eurodollar
deposits or increased costs due to changes in applicable law occurring
subsequent to the commencement of the then applicable Interest Period,
including changes in tax laws (except changes of general applicability
in corporate income tax laws) and changes in the reserve requirements
imposed by the Board of Governors of the Federal Reserve System (or
any successor), excluding the Reserve Percentage, which additional or
increased costs would increase the cost of funding loans bearing
interest at the LIBOR Rate. In any such event, the affected Lender
shall give Borrower and Agent notice of such a determination and
adjustment and Agent promptly shall transmit the notice to each other
Lender and, upon its receipt of the notice from the affected Lender,
Borrower may, by notice to such affected Lender (y) require such
Lender to furnish to Borrower a statement setting forth the basis for
adjusting such LIBOR Rate and the method for determining the amount of
such adjustment, or (z) repay the LIBOR Rate Loans with respect to
which such adjustment is made (together with any amounts due under
clause (b)(ii) above).
(ii) In the event that any change in market conditions or any law,
regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the
date hereof, in the reasonable opinion of any Lender, make it unlawful
or impractical for such Lender to fund or maintain LIBOR Advances or
to continue such funding or maintaining, or to determine or charge
interest rates at the LIBOR Rate, such Lender shall give notice of
such changed circumstances to Agent and the Borrower and Agent
promptly shall transmit the notice to each other Lender and (y) in the
case of any LIBOR Rate Loans of such Lender that are outstanding, the
date specified in such Lender's notice shall be deemed to be the last
day of the Interest Period of such LIBOR Rate Loans, and interest upon
the LIBOR Rate Loans of such Lender thereafter shall accrue interest
at the rate then applicable to Base Rate Advances, and (z) the
Borrower shall not be entitled to elect the LIBOR Option until such
Lender determines that it would no longer be unlawful or impractical
to do so. (e) No Requirement of Matched Funding. Anything to the
contrary contained herein notwithstanding, neither Agent, nor any
Lender, nor any of their Participants, is required actually to acquire
eurodollar deposits to fund or otherwise match fund any Obligation as
to which interest accrues at the LIBOR Rate. The provisions of this
Section shall apply as if each Lender or its Participants had match
funded any Obligation as to which interest is accruing at the LIBOR
Rate by acquiring eurodollar deposits for each Interest Period in the
amount of the LIBOR Rate Loans.
2.14 Capital Requirements. If, after the date hereof, any Lender determines that
(i) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies, or any
change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request, or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), the effect of reducing the return on such Lender's or such
holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify Borrower and Agent thereof. Following receipt of such notice,
Borrower agrees to pay such Lender on demand the amount of such reduction of
return of capital as and when such reduction is determined, payable within 90
days after presentation by such Lender of a statement in the amount and setting
forth in reasonable detail such Lender's calculation thereof and the assumptions
upon which such calculation was based (which statement shall be deemed true and
correct absent manifest error). In determining such amount, such Lender may use
any reasonable averaging and attribution methods.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit. The obligation of
the Lender Group (or any member thereof) to make the initial Advance (or
otherwise to extend any credit provided for hereunder), is subject to the
fulfillment, to the satisfaction of Agent, of each of the conditions precedent
set forth below:
(a) the Closing Date shall occur on or before March 31, 2004;
(b) Agent shall have received all financing statements required by
Agent and Borrower shall have duly authorized Agent to record
such financing statements. Agent shall have received searches
reflecting the filing of all such financing statements;
(c) Agent shall have received each of the following documents, in
form and substance satisfactory to Agent, duly executed, and
each such document shall be in full force and effect:
(i) a certified copy of all Walking Company Acquisition Orders,
(ii) a certified copy of the docket of the Bankruptcy Court showing
no appeals of any Walking Company Acquisition Orders,
(iii) a certificate of an officer of the Borrower that (i) all
Funding Conditions have been satisfied by the Borrower or
waived by the Agent and (ii) that all representation and
warranties made by the Borrower to the Agent in the Loan
Documents are true and complete as of the date of such
certificate, and that no event has occurred which is or which,
solely with the giving of notice or passage of time (or both),
would be an Event of Default;
(iv) the Copyright Security Agreement,
(v) the Disbursement Letter,
(vi) the Guarantor Security Agreement,
(vii) the Guaranty,
(viii) the Intercompany Subordination Agreement,
(ix) the Officers' Certificate,
(x) the Pay-Off Letter, together with UCC termination statements
and other documentation evidencing the termination by Existing
Lender of its Liens in and to the properties and assets of the
Walking Company, and
(xi) the Stock Pledge Agreement, together with all certificates
representing the shares of Stock pledged thereunder, as well
as Stock powers with respect thereto endorsed in blank,
(xii) the Trademark Security Agreement,
(xiii) all Cash Management Agreements and related notifications; and
(d) Each of the representations made by or on behalf of the
Borrower in this Agreement or any other Loan Document or in
any report, statement, document, or paper provided by or on
behalf of the Borrower shall be true and complete as of the
date as of which such representation or warranty was made and
the date hereof.
(e) All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Agent to
protect and preserve its Liens shall have been duly effected.
The Agent shall have received evidence thereof in form and
substance satisfactory to Agent in its Permitted Discretion.
(f) Agent shall have received a certificate from the Secretary of
Borrower attesting to the resolutions of such Borrower's Board
of Directors authorizing its execution, delivery, and
performance of this Agreement and the other Loan Documents to
which Borrower is a party and authorizing specific officers of
Borrower to execute the same;
(g) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of Borrower;
(h) Agent shall have received a certificate of status with respect
to Borrower, dated within 30 days of the Closing Date, such
certificate to be issued by the appropriate officer of the
jurisdiction of organization of Borrower, which certificate
shall indicate that Borrower is in good standing in such
jurisdiction;
(i) Agent shall have received certificates of status with respect
to Borrower, each dated within 30 days of the Closing Date,
such certificates to be issued by the appropriate officer of
the jurisdictions (other than the jurisdiction of organization
of such Borrower) in which its failure to be duly qualified or
licensed would constitute a Material Adverse Change, which
certificates shall indicate that Borrower is in good standing
in such jurisdictions;
(j) Agent shall have received a certificate of insurance, together
with the endorsements thereto, as are required by Section 6.8,
the form and substance of which shall be satisfactory to
Agent;
(k) Agent shall have received an opinion of Borrower's outside
counsel in form and substance satisfactory to Agent;
(l) Agent shall have received satisfactory evidence (including a
certificate of the chief financial officer of Borrower) that
all tax returns required to be filed by Borrower have been
timely filed and all taxes upon Borrower or its properties,
assets, income, and franchises (including real property taxes
and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
(m) Borrower shall have the Required Availability after giving
effect to the initial extensions of credit hereunder;
(n) Agent shall have received Borrower's Closing Date Business
Plan;
(o) Borrower shall pay all Lender Group Expenses incurred in
connection with the transactions evidenced by this Agreement;
(p) Borrower shall have received all licenses, approvals or
evidence of other actions required by any Governmental
Authority in connection with the execution and delivery by
Borrower of this Agreement or any other Loan Document or with
the consummation of the transactions contemplated hereby and
thereby;
(q) Borrower shall have designated a deposit account of Borrower
(located within the United States) as the Borrower's
concentration account, such designation to be in writing by
Borrower to Agent; such deposit account to be subject to a
Cash Management Agreement and otherwise shall be satisfactory
to Agent in its sole discretion;
(r) All Funding Conditions have been satisfied by the Borrower or
waived by the Agent; and
(s) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been
delivered, executed, or recorded and shall be in form and
substance satisfactory to Agent.
(t) Big Dog shall have made the Big Dog Dividend.
3.2 Conditions Subsequent to the Initial Extension of Credit. The obligation of
the Lender Group (or any member thereof) to continue to make Advances (or
otherwise extend credit hereunder) is subject to the fulfillment, on or before
the date applicable thereto, of each of the conditions subsequent set forth
below (the failure by Borrower to so perform or cause to be performed
constituting an Event of Default):
(a) within 90 days of the Closing Date, deliver to the Agent a Collateral Access
Agreement for the Big Dog warehouses;
(b) within 10 days of the Closing Date, have vacated its warehouse located at
9453 Owensmouth Avenue, Chatsworth, California 91311 and relocated its warehouse
operations to the Big Dog warehouse located at 15614 Shoemaker Avenue, Santa Fe
Springs, California 90670;
(c) within 30 days of the Closing Date, have vacated its warehouse located at
103 South Acres, Sikeston, Missouri 63801, and relocated its warehouse
operations to the Big Dog warehouse located at 15614 Shoemaker Avenue, Santa Fe
Springs, California 90670
(d) within 30 days of the Closing Date, deliver to Agent certified copies of the
policies of insurance, together with the endorsements thereto, as are required
by Section 6.8, the form and substance of which shall be satisfactory to Agent
and its counsel;
(e) within 30 days of the Closing Date, deliver to
Agent executed copies of the Credit
Card Notifications as set forth in Section 5.23 of the Loan Agreement in form
and substance of which shall be satisfactory to Agent and its counsel;
(f) within 15 days of the Closing Date, deliver to
Agent executed copies of the DDA
Notifications as set forth in Section 5.18 of the Loan Agreement in form and
substance of which shall be satisfactory to Agent and its counsel;
(g) within 15 days of the Closing Date, deliver to
Agent a certified copy of the
Borrower's name change with the Delaware Secretary of State's office and all
accompanying documents related thereto; and
(h) within 90 days of the Closing Date, deliver to
Agent the Allocation Agreement, in
form and substance satisfactory to Agent and its counsel, executed by Big Dog
and the Borrower for the Borrower's use of Big Dog's warehouse located at 15614
Shoemaker Avenue, Santa Fe Springs, California 90670.
3.3 Conditions Precedent to all Extensions of Credit. The obligation of the
Lender Group (or any member thereof) to make all Advances (or to extend any
other credit hereunder) shall be subject to the following conditions precedent:
(a) the representations and warranties contained in this Agreement and the other
Loan Documents shall be true and correct in all material respects on and as of
the date of such extension of credit, as though made on and as of such date
(except to the extent that such representations and warranties relate solely to
an earlier date),
(b) no Default or Event of Default shall have occurred and be continuing on the
date of such extension of credit, nor shall either result from the making
thereof,
(c) no injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the extending of such credit shall have
been issued and remain in force by any Governmental Authority against any
Borrower, Agent, any Lender, or any of their Affiliates.
(d) no Material Adverse Change shall have occurred.
3.4 Term. This Agreement shall become effective upon the execution and delivery
hereof by Borrower, Agent, and the Lenders and shall continue in full force and
effect for a term ending the Maturity Date. The foregoing notwithstanding, the
Lender Group, upon the election of the Required Lenders, shall have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this Agreement, all
Obligations (including contingent reimbursement obligations of Borrower with
respect to outstanding Letters of Credit and including all Bank Products
Obligations) immediately shall become due and payable without notice or demand
(including (a) either (i) providing cash collateral to be held by Agent for the
benefit of the Lenders in an amount equal to 105% of the then extant Letter of
Credit Usage, or (ii) causing the original Letters of Credit to be returned to
the Issuing Lender, and (b) providing cash collateral to be held by Agent for
the benefit of Wells Fargo or its Affiliates with respect to the then extant
Bank Products Obligations). No termination of this Agreement, however, shall
relieve or discharge Borrower of its duties, Obligations, or covenants hereunder
and the Agent's Liens in the Collateral shall remain in effect until all
Obligations have been fully and finally discharged and the Lender Group's
obligations to provide additional credit hereunder have been terminated. When
this Agreement has been terminated and all of the Obligations have been fully
and finally discharged and the Lender Group's obligations to provide additional
credit under the Loan Documents have been terminated irrevocably, Agent will, at
Borrower's sole expense, execute and deliver any UCC termination statements,
lien releases, mortgage releases, re-assignments of trademarks, discharges of
security interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, the Agent's Liens and all notices of security interests and liens
previously filed by Agent with respect to the Obligations.
3.6 Early Termination by Borrower. Borrower has the option, at any time upon 30
days prior written notice by Borrower to Agent, to terminate this Agreement by
paying to Agent, for the benefit of the Lender Group, in cash, the Obligations
(including (a) either (i) providing cash collateral to be held by Agent for the
benefit of the Lenders in an amount equal to 105% of the then extant Letter of
Credit Usage, or (ii) causing the original Letters of Credit to be returned to
the Issuing Lender, and (b) providing cash collateral to be held by Agent for
the benefit of Wells Fargo or its Affiliates with respect to the then extant
Bank Products Obligations), in full, together with the Applicable Prepayment
Premium (to be allocated based upon letter agreements between Agent and
individual Lenders). If Borrower have sent a notice of termination pursuant to
the provisions of this Section, then the Commitments shall terminate and
Borrower shall be obligated to repay the Obligations (including (a) either (i)
providing cash collateral to be held by Agent for the benefit of the Lenders in
an amount equal to 105% of the then extant Letter of Credit Usage, or (ii)
causing the original Letters of Credit to be returned to the Issuing Lender, and
(b) providing cash collateral to be held by Agent for the benefit of Wells Fargo
or its Affiliates with respect to the then extant Bank Products Obligations), in
full, together with the Applicable Prepayment Premium, on the date set forth as
the date of termination of this Agreement in such notice. In the event of the
termination of this Agreement and repayment of the Obligations at any time prior
to the Maturity Date, for any other reason, including (a) termination upon the
election of the Required Lenders to terminate after the occurrence of an Event
of Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral
in any Insolvency Proceeding, or (iv) restructure, reorganization, or compromise
of the Obligations by the confirmation of a plan of reorganization or any other
plan of compromise, restructure, or arrangement in any Insolvency Proceeding,
then, in view of the impracticability and extreme difficulty of ascertaining the
actual amount of damages to the Lender Group or profits lost by the Lender Group
as a result of such early termination, and by mutual agreement of the parties as
to a reasonable estimation and calculation of the lost profits or damages of the
Lender Group, Borrower shall pay the Applicable Prepayment Premium to Agent (to
be allocated based upon letter agreements between Agent and individual Lenders),
measured as of the date of such termination.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to Agent, for the benefit
of the Lender Group, a continuing security interest in all of its right, title,
and interest in all currently existing and hereafter acquired or arising
Borrower Collateral in order to secure prompt repayment of any and all of the
Obligations in accordance with the terms and conditions of the Loan Documents
and in order to secure prompt performance by Borrower of each of their covenants
and duties under the Loan Documents. The Agent's Liens in and to the Borrower
Collateral shall attach to all Borrower Collateral without further act on the
part of Agent or Borrower. Anything contained in this Agreement or any other
Loan Document to the contrary notwithstanding, except for Permitted
Dispositions, Borrower has no authority, express or implied, to dispose of any
item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral, including proceeds,
is evidenced by or consists of Negotiable Collateral, and if and to the extent
that perfection or priority of Agent's security interest is dependent on or
enhanced by possession, the Borrower, immediately upon the request of Agent,
shall endorse and deliver physical possession of such Negotiable Collateral to
Agent.
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral. At
any time after the occurrence and during the continuation of an Event of
Default, Agent or Agent's designee may (a) notify Account Debtors of Borrower
that the Accounts, chattel paper, or General Intangibles have been assigned to
Agent or that Agent has a security interest therein, or (b) collect the
Accounts, chattel paper, or General Intangibles directly and charge the
collection costs and expenses to the Loan Account. Borrower agrees that it will
hold in trust for the Lender Group, as the Lender Group's trustee, any
Collections that they receive and immediately will deliver said Collections to
Agent or a Cash Management Bank in their original form as received by them.
4.4 Delivery of Additional Documentation Required. At any time upon the request
of Agent, Borrower shall execute and deliver to Agent, any and all financing
statements, original financing statements in lieu of continuation statements,
fixture filings, security agreements, pledges, assignments, endorsements of
certificates of title, and all other documents (the "Additional Documents") that
Agent may request in its Permitted Discretion, in form and substance
satisfactory to Agent, to perfect and continue perfected or better perfect the
Agent's Liens in the Collateral (whether now owned or hereafter arising or
acquired), to create and perfect Liens in favor of Agent in any real property
acquired after the Closing Date, and in order to fully consummate all of the
transactions contemplated hereby and under the other Loan Documents. To the
maximum extent permitted by applicable law, Borrower authorizes Agent to execute
any such Additional Documents in the Borrower's name and authorize Agent to file
such executed Additional Documents in any appropriate filing office. In
addition, on such periodic basis as Agent shall require, Borrower shall (a)
provide Agent with a report of all new patentable materials and trademarkable
materials acquired or generated by Borrower during the prior period, (b) cause
all patents and trademarks acquired or generated by Borrower that are not
already the subject of a registration with the appropriate filing office (or an
application therefor diligently prosecuted) to be registered with such
appropriate filing office in a manner sufficient to impart constructive notice
of Borrower's ownership thereof, (c) cause to be prepared, executed, and
delivered to Agent supplemental schedules to the applicable Loan Documents to
identify such patents and trademarks as being subject to the security interests
created thereunder, (d) provide Agent with the information required under
Section 6.16 in respect of copyrights and copyrightable materials.
4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and
appoints Agent (and any of Agent's officers, employees, or agents designated by
Agent) as Borrower's true and lawful attorney, with power to (a) if Borrower
refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of Borrower on any of the documents
described in Section 4.4, (b) at any time that an Event of Default has occurred
and is continuing, sign such Borrower's name on any invoice or bill of lading
relating to the Collateral, drafts against Account Debtors, or notices to
Account Debtors, (c) send requests for verification of Accounts, (d) endorse
Borrower's name on any Collection item that may come into the Lender Group's
possession, (e) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under such Borrower's policies
of insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the
Accounts, chattel paper, or General Intangibles directly with Account Debtors,
for amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be executed and delivered any documents and releases that Agent
determines to be necessary. The appointment of Agent as each Borrower's
attorney, and each and every one of its rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and the Lender Group's obligations to extend credit
hereunder are terminated.
4.6 Right to Inspect. Agent and each Lender (through any of their respective
officers, employees, or agents) shall have the right, from time to time
hereafter to inspect the Books and to check, test, and appraise the Collateral
in order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
4.7 Control Agreements. Borrower agrees that it will not transfer assets out of
any Securities Accounts other than as permitted under Section 7.19 and, if to
another securities intermediary, unless each of the applicable Borrower, Agent,
and the substitute securities intermediary have entered into a Control
Agreement. No arrangement contemplated hereby or by any Control Agreement in
respect of any Securities Accounts or other Investment Property shall be
modified by Borrower without the prior written consent of Agent. Upon the
occurrence and during the continuance of a Default or Event of Default, Agent
may notify any securities intermediary to liquidate the applicable Securities
Account or any related Investment Property maintained or held thereby and remit
the proceeds thereof to the Agent's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this
Agreement, Borrower make the following representations and warranties to the
Lender Group which shall be true, correct, and complete, in all material
respects, as of the date hereof, and shall be true, correct, and complete, in
all material respects, as of the Closing Date, and at and as of the date of the
making of each Advance (or other extension of credit) made thereafter, as though
made on and as of the date of such Advance (or other extension of credit)
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1 No Encumbrances. Borrower has good and indefeasible title to the
Collateral free and clear of Liens except for Permitted Liens.
5.2 Eligible Credit Card Accounts. The Eligible Credit Card Accounts are bona
fide existing payment obligations of Account Debtors created by the sale and
delivery of Inventory or the rendition of services to such Account Debtors in
the ordinary course of the Borrower's business, owed to Borrower without
defenses, disputes, offsets, counterclaims, or rights of return or cancellation,
other than rights of return of retail customers of the Borrower's in the
ordinary course of Borrower's business.
5.3 Eligible Inventory. All Eligible Inventory is of good and merchantable
quality, free from defects. As to each item of Inventory that is identified by
Borrower as Eligible Inventory in a borrowing base report submitted to Agent,
such Inventory is not excluded as ineligible by virtue of one or more of the
excluding criteria set forth in the definition of Eligible Inventory.
5.4 Equipment. All of the Equipment is used or held for use in Borrower's
business and is fit for such purposes.
5.5 [Intentionally Omitted].
5.6 Inventory Records. Borrower keeps correct and accurate records itemizing and
describing the type, quality, and quantity of its Inventory and the book value
thereof.
5.7 Location of Chief Executive Office; FEIN. The chief executive office of
Borrower is located at the address indicated in Schedule 5.7 and Borrower's FEIN
is identified in Schedule 5.7.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good standing under the laws
of the jurisdiction of its organization and qualified to do business in any
state where the failure to be so qualified reasonably could be expected to have
a Material Adverse Change.
(b) Set forth on Schedule 5.8(b), is a complete and accurate description of the
authorized capital Stock of Borrower, by class, and, as of the Closing Date, a
description of the number of shares of each such class that are issued and
outstanding. Other than as described on Schedule 5.8(b), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower's
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. Borrower is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock, other than the capital Stock held by
the Junior Secured Creditors pursuant to the terms of the Junior Secured
Creditors Put Right Agreement.
(c) Set forth on Schedule 5.8(c), is a complete and accurate list of Borrower's
direct and indirect Subsidiaries, showing: (i) the jurisdiction of their
organization, (ii) the number of shares of each class of common and preferred
Stock authorized for each of such Subsidiaries, and (iii) the number and the
percentage of the outstanding shares of each such class owned directly or
indirectly by Borrower. All of the outstanding capital Stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
(d) Except as set forth on Schedule 5.8(c), there are no subscriptions, options,
warrants, or calls relating to any shares of Borrower's Subsidiaries' capital
Stock, including any right of conversion or exchange under any outstanding
security or other instrument. Neither Borrower nor any of its Subsidiaries is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of capital Stock of any Subsidiaries of Borrower or
any security convertible into or exchangeable for any such capital Stock.
5.9 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower of this Agreement and
the Loan Documents to which it is a party have been duly authorized by all
necessary action on the part of such Borrower.
(b) The execution, delivery, and performance by Borrower of this Agreement and
the Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to Borrower,
the Governing Documents of Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on Borrower, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any material contractual obligation of any Borrower, (iii)
result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets of Borrower, other than Permitted
Liens, or (iv) require any approval of Borrower's interest holders or any
approval or consent of any Person under any material contractual obligation of
any Borrower.
(c) Other than the filing of financing statements, the execution, delivery, and
performance by Borrower of this Agreement and the Loan Documents to which
Borrower is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any Governmental
Authority or other Person.
(d) This Agreement and the other Loan Documents to which each Borrower is a
party, and all other documents contemplated hereby and thereby, when executed
and delivered by Borrower will be the legally valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforcement may be limited by equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or limiting creditors' rights generally.
(e) The Agent's Liens are validly created, perfected, and first priority Liens,
subject only to Permitted Liens which are identified by Borrower potentially
senior to Agent's Liens in Schedule P-1.
5.10 Litigation. Other than those matters disclosed on Schedule 5.10, there are
no actions, suits, or proceedings pending or, to the best knowledge of Borrower,
threatened against Borrower, or any of their Subsidiaries, as applicable, except
for (a) matters that are fully covered by insurance (subject to customary
deductibles), and (b) matters arising after the Closing Date that, if decided
adversely to Borrower, or any of their Subsidiaries, as applicable, reasonably
could not be expected to result in a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to Borrower
that have been delivered by Borrower to the Lender Group have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit adjustments) and
present fairly in all material respects, Borrower's financial condition as of
the date thereof and results of operations for the period then ended. There has
not been a Material Adverse Change with respect to Borrower since the date of
the latest financial statements submitted to the Lender Group on or before the
Closing Date.
5.12 Fraudulent Transfer.
(a) Borrower is Solvent.
(b) No transfer of property is being made by Borrower and no obligation is being
incurred by Borrower in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of Borrower.
5.13 Employee Benefits. Neither the Borrower nor any of its Subsidiaries, or any
of their ERISA Affiliates maintain or contribute to any Benefit Plan.
5.14 Environmental Condition. Except as set forth on Schedule 5.14, (a) to
Borrower's knowledge, none of Borrower's assets has ever been used by Borrower
or by previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous Materials, where such
production, storage, handling, treatment, release or transport was in violation,
in any material respect, of applicable Environmental Law, (b) to Borrower's
knowledge, none of Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, (c) Borrower has not received notice that a
Lien arising under any Environmental Law has attached to any revenues or to any
real property owned or operated by Borrower, and (d) Borrower has not received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
5.15 Brokerage Fees. Borrower has not utilized the services of any broker or
finder in connection with Borrower's obtaining financing from the Lender Group
under this Agreement and no brokerage commission or finders fee is payable by
Borrower in connection herewith.
5.16 Intellectual Property. Borrower owns, or holds licenses in, all trademarks,
trade names, copyrights, patents, patent rights, and licenses that are necessary
to the conduct of Borrower's business as currently conducted. Attached hereto as
Schedule 5.16 is a true, correct, and complete listing as of the Closing Date of
all material patents, patent applications, trademarks, trademark applications,
copyrights, and copyright registrations as to which Borrower is the owner or a
licensee. From and after the consummation of a Permitted Disposition of such
intellectual property to Parent, Parent has executed and delivered a fully paid,
non-cancelable, worldwide, exclusive license to Borrower enabling Borrower to
use and exploit each of the Parent's trademarks, trade names, copyrights,
patents, patent rights, and licenses used in the Borrower's business (the
"Parent IP License").
5.17 Leases/Warehouse. Borrower enjoys peaceful and undisturbed possession under
all leases material to the business of Borrower and to which it is a party or
under which it is operating. All of such leases are valid and subsisting and no
material default by Borrower exists under any of them. From and after the date
Borrower moves its warehouse operations to the Big Dog warehouse located at
15614 Shoemaker Avenue, Santa Fe Springs, California 90670, Borrower shall enjoy
peaceful and undisturbed possession of such warehouse pursuant to that certain
written sublicense agreement between Big Dog and Borrower (the "Warehouse
Sublicense") and such Warehouse Sublicense is valid and subsisting and no
material default by Borrower exists under such license. Borrower has and shall
continue to ensure that Inventory of the Borrower is separate, segregated and
readily identifiable from other inventory or items stored at such warehouse
location.
5.18 DDAs. Set forth on Schedule 5.18 are all of Borrowers' DDAs, including,
with respect to each depository (i) the name and address of such depository, and
(ii) the account numbers of the accounts maintained with such depository.
5.19 Complete Disclosure. All factual information (taken as a whole) furnished
by or on behalf of Borrower in writing to Agent or any Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents,
or any transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of Borrower
in writing to Agent or any Lender will be, true and accurate, in all material
respects, on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in light
of the circumstances under which such information was provided. On the Closing
Date, the Closing Date Projections represent, and as of the date on which any
other Projections are delivered to Agent, such additional Projections represent
Borrower's good faith best estimate of its future performance for the periods
covered thereby.
5.20 Indebtedness. Set forth on Schedule 5.20 is a true and complete list of all
Indebtedness of Borrower and its Subsidiaries outstanding immediately prior to
the Closing Date that is to remain outstanding after the Closing Date and a true
and complete list of all Indebtedness of Borrower and its Subsidiaries which
shall exist immediately following the consummation of the Walking Company
Acquisition, and such Schedule accurately reflects the aggregate principal
amount of such Indebtedness and the principal terms thereof.
5.21 Reserved.
5.22 Material Agreements. Neither the consummation of the Walking Company
Acquisition pursuant to any documents evidencing the Walking Company Acquisition
nor the grant by Borrower or its Subsidiaries of security interests in the
Collateral as contemplated hereunder and under the other Loan Documents will
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any material contractual obligation or material
lease of Borrower or any of its Subsidiaries.
5.23 Credit Card Processors.. Set forth on Schedule 5.22 are all of Borrower's
credit card clearinghouses or other processors, including, with respect to each
clearinghouse or processor (i) the name and address of such clearinghouse or
processor, and (ii) the account numbers of the accounts maintained with such
clearinghouse or processor.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower shall and shall cause of its Subsidiaries to do all of the
following:
6.1 Accounting System. Maintain a system of accounting that enables Parent and
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Agent. Borrower also shall keep an inventory
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Agent (and if so requested by Agent, with
copies for each Lender) with the following documents at the following times in
form satisfactory to Agent:
========================== =====================================================
Weekly (not later than (a) a borrowing base certificate with summary
Tuesday of the following backup information.
week)
- -------------------------- ----------------------------------------------------
- -------------------------- ----------------------------------------------------
- -------------------------- ----------------------------------------------------
- -------------------------- ----------------------------------------------------
Monthly (not later than (b) a monthly sales report,
the 20th day of each
month) (c) a monthly comparable sales report,
(d) a Statement of Store Activity (on Agent's form),
(e) a report of Inventory by location,
(f) an open-to buy-report,
(g) Stock Ledger by Department,
(h) an open payables report (an accounts payable
report by due date),
(i) an Inventory certificate (on Agent's form)
inclusive of sales to stock percentages, and
(j) a purchases and accounts payable aging analysis
form with account payable aging (on Agent's form).
- -------------------------- -----------------------------------------------------
Monthly (not later than (k) a reconciliation of the stock ledger to Borrower's
availability and to the general the last day of each ledger, and month for the
immediately preceding (l) an officer's compliance certificate consistent with
Section 6.3(a)(ii) and (iii) month) hereof and in respect of rent, tax and
insurance compliance (on Agent's form),
- -------------------------- ----------------------------------------------------
- -------------------------- -----------------------------------------------------
Upon request by Agent (m) such other reports as to the
Collateral, or the financial condition of Borrower,
as Agent may request.
========================== =====================================================
In addition, Borrower agrees to cooperate fully with Agent to
facilitate and implement a system of electronic collateral reporting in order to
provide electronic reporting of each of the items set forth above.
6.3 Financial Statements, Reports, Certificates. Deliver to Agent, with
copies to each Lender:
(a) as soon as available, but in any event within 30 days (45 days
in the case of a month that is the end of one of the first 3
fiscal quarters in a fiscal year) after the end of each month
during each of Borrower's fiscal years,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering Borrower's and
its Subsidiaries' operations during such period,
(ii) a certificate signed by the chief financial officer of
Borrower to the effect that:
(A) the financial statements delivered hereunder have been
prepared in accordance with GAAP (except for the lack of
footnotes and being subject to year-end audit adjustments) and
fairly present in all material respects the financial
condition of Borrower and its Subsidiaries,
(B) the representations and warranties of Borrower contained in
this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such
certificate, as though made on and as of such date (except to
the extent that such representations and warranties relate
solely to an earlier date), and
(C) there does not exist any condition or event that constitutes a
Default or Event of Default (or, to the extent of any
non-compliance, describing such non-compliance as to which he
or she may have knowledge and what action Borrower has taken,
are taking, or propose to take with respect thereto), and
(iii) for each month that is the date on which a financial covenant
in Section 7.21 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of
such period with the applicable financial covenants contained
in Section 7.21, and
(b) as soon as available, but in any event within 90 days after the end of
each of Borrower's fiscal years,
(i) financial statements of Borrower and its Subsidiaries for each
such fiscal year, audited by independent certified public
accountants reasonably acceptable to Agent and certified,
without any qualifications, by such accountants to have been
prepared in accordance with GAAP (such audited financial
statements to include a balance sheet, income statement, and
statement of cash flow and, if prepared, such accountants'
letter to management),
(ii) a certificate of such accountants addressed to Agent and the
Lenders stating that such accountants do not have knowledge of
the existence of any Default or Event of Default under Section
7.21,
(c) as soon as available, but in any event within 30 days prior to the
start of each of Borrower's fiscal years,
(i) copies of Borrower's Projections, in form and substance
(including as to scope and underlying assumptions)
satisfactory to Agent, in its sole discretion, for the
forthcoming fiscal year, on a yearly and month by month basis,
certified by the chief financial officer of Borrower as being
such officer's good faith best estimate of the financial
performance of Borrower during the period covered thereby,
(d) if and when filed by Parent,
(i) Form 10-Q quarterly reports, Form 10-K annual reports, and
Form 8-K current reports,
(ii) any other filings made by Parent with the SEC,
(iii) copies of Parent's federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service,
and
(iv) any other information that is provided by Parent and Borrower
to their respective shareholders generally,
(e) if and when filed by Borrower and as requested by Agent,
satisfactory evidence of payment of applicable excise taxes in
each jurisdictions in which (i) Borrower conducts business or
is required to pay any such excise tax, (ii) where the failure
to pay any such applicable excise tax would result in a Lien
on the properties or assets of Borrower, or (iii) where
Borrower's failure to pay any such applicable excise tax
reasonably could be expected to result in a Material Adverse
Change,
(f) as soon as Borrower has knowledge of any event or condition
that constitutes a Default or an Event of Default, notice
thereof and a statement of the curative action that Borrower
proposes to take with respect thereto, and
(g) upon the request of Agent, any other report reasonably
requested relating to the financial condition of Borrower.
In addition to the financial statements referred to above,
Borrower agrees to deliver financial statements prepared on both a consolidated
and consolidating basis and agrees that no Subsidiary of Borrower will have a
fiscal year different from that of Parent. Borrower agrees that its independent
certified public accountants are authorized (and Borrower shall so instruct its
independent certified public accountant) to communicate with Agent and to
release to Agent whatever financial information concerning Borrower Agent
reasonably may request. Borrower waives the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in
connection with any information requested by Agent pursuant to or in accordance
with this Agreement, and agrees that Agent may contact directly any such
accounting firm or service bureau in order to obtain such information, provided,
that, Agent agrees that no Event of Default shall be deemed to have occurred
under this Agreement if any such accounting firm or service bureau refuses to
provide any such financial information, it being understood that Borrower shall
not thereby be relieved of its obligation to provide such financial information.
6.4 [Intentionally Omitted].
6.5 Return. Cause returns and allowances, as between Borrower and its Account
Debtors, to be on the same basis and in accordance with the usual customary
practices of the Borrower, as they exist at the time of the execution and
delivery of this Agreement. If any Account Debtor returns any Inventory to
Borrower, Borrower promptly shall determine the reason for such return and, if
the Borrower accepts such return, issue a credit memorandum in the appropriate
amount to such Account Debtor.
6.6 Maintenance of Properties. Maintain and preserve all of its properties which
are necessary or useful in the proper conduct to its business in good working
order and condition, ordinary wear and tear excepted, and comply at all times
with the provisions of all leases to which it is a party as lessee so as to
prevent any loss or forfeiture thereof or thereunder. Borrower shall segregate
Borrower's Inventory from inventory of Parent or any Affiliate maintained at
15614 Shoemaker Ave., Santa Fe Springs, California.
6.7 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrower
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Agent with proof satisfactory to Agent indicating
that Borrower has made such payments or deposits. Borrower shall deliver
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which any Borrower is required to pay any such excise tax.
6.8 Insurance.
(a) At Borrowers' expense, maintain insurance respecting their assets wherever
located, covering loss or damage by fire, theft, explosion, and all other
hazards and risks as ordinarily are insured against by other Persons engaged in
the same or similar businesses. Borrower also shall maintain business
interruption, public liability, and product liability insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation. All such
policies of insurance shall be in such amounts and with such insurance companies
as are reasonably satisfactory to Agent. Borrower shall deliver copies of all
such policies to Agent with a satisfactory lender's loss payable endorsement
naming Agent as sole loss payee or additional insured, as appropriate. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than 30 days prior written notice to Agent in the event of
cancellation of the policy for any reason whatsoever.
(b) Borrower shall give Agent prompt notice of any loss in excess of $250,000
covered by such insurance. Agent shall have the exclusive right to adjust, in
its reasonable discretion, any losses payable under any such insurance policies
in excess of $250,000, without any liability to Borrower whatsoever in respect
of such adjustments. Any monies received as payment for any loss under any
insurance policy mentioned above (other than liability insurance policies) or as
payment of any award or compensation for condemnation or taking by eminent
domain, shall be paid over to Agent to be applied at the option of the Required
Lenders either to the prepayment of the Obligations or shall be disbursed to the
Borrower under staged payment terms reasonably satisfactory to the Required
Lenders for application to the cost of repairs, replacements, or restorations.
Any such repairs, replacements, or restorations shall be effected with
reasonable promptness and shall be of a value at least equal to the value of the
items of property destroyed prior to such damage or destruction.
6.9 [Intentionally Omitted].
6.10 Compliance with Laws. Comply with the requirements of all applicable laws,
rules, regulations, and orders of any Governmental Authority, including the Fair
Labor Standards Act and the Americans With Disabilities Act, other than laws,
rules, regulations, and orders the non-compliance with which, individually or in
the aggregate, would not result in and reasonably could not be expected to
result in a Material Adverse Change.
6.11 Leases. Pay when due all rents and other amounts payable under any leases
to which Borrower is a party or by which Borrower's properties and assets are
bound, unless such payments are the subject of a Permitted Protest.
Notwithstanding the foregoing, Borrower shall not be deemed to have violated
this Section unless Borrower, has leases that are not in compliance with the
foregoing and such leases have reached the Leasehold Threshold.
6.12 Brokerage Commissions. Pay any and all brokerage commission or finders fees
contracted for by Borrower and incurred in connection with or as a result of
Borrower's obtaining financing from the Lender Group under this Agreement.
Borrower agrees and acknowledges that payment of all such brokerage commissions
or finders fees shall be the sole responsibility of Borrower, and Borrower,
agrees to indemnify, defend, and hold Agent and the Lender Group harmless from
and against any claim of any broker or finder contracted for by Borrower arising
out of Borrower's obtaining financing from the Lender Group under this
Agreement.
6.13 Existence. At all times preserve and keep in full force and effect
Borrower's valid existence and good standing and any rights and franchises
material to Borrower's business.
6.14 Environmental.
(a) Keep any property either owned or operated by Borrower free of any
Environmental Liens or post bonds or other financial assurances sufficient to
satisfy the obligations or liability evidenced by such Environmental Liens, (b)
comply, in all material respects, with Environmental Laws and provide to Agent
documentation of such compliance which Agent reasonably requests, (c) promptly
notify Agent of any release of a Hazardous Material in any reportable quantity
from or onto property owned or operated by Borrower and take any Remedial
Actions required to abate said release or otherwise to come into compliance with
applicable Environmental Law, and (d) promptly provide Agent with written notice
within 10 days of the receipt of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of Borrower, (ii) commencement of any Environmental Action or notice that an
Environmental Action will be filed against Borrower, and (iii) notice of a
violation, citation, or other administrative order which reasonably could be
expected to result in a Material Adverse Change.
6.15 Disclosure Updates. Promptly and in no event later than 5 Business Days
after obtaining knowledge thereof, (a) notify Agent if any written information,
exhibit, or report furnished to the Lender Group contained any untrue statement
of a material fact or omitted to state any material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which made, and (b) correct any defect or error that may be discovered therein
or in any Loan Document or in the execution, acknowledgement, filing, or
recordation thereof.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower will not and will not permit any of its respective
Subsidiaries extant as of the Closing Date to do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become
or remain, directly or indirectly, liable with respect to any Indebtedness,
except:
(a) Indebtedness evidenced by this Agreement and the other Loan Documents,
together with Indebtedness owed to Underlying Issuers with respect to Underlying
Letters of Credit,
(b) Indebtedness set forth on Schedule 5.20,
(c) Permitted Purchase Money Indebtedness, and
(d) refinancings, renewals, or extensions of Indebtedness permitted under
clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not, in Agent's judgment,
materially impair the prospects of repayment of the Obligations by Borrower or
materially impair Borrower's creditworthiness, (ii) such refinancings, renewals,
or extensions do not result in an increase in the principal amount of, or
interest rate with respect to, the Indebtedness so refinanced, renewed, or
extended, (iii) such refinancings, renewals, or extensions do not result in a
shortening of the average weighted maturity of the Indebtedness so refinanced,
renewed, or extended, nor are they on terms or conditions that, taken as a
whole, are materially more burdensome or restrictive to Borrower's, and (iv) if
the Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension Indebtedness must include subordination terms
and conditions that are at least as favorable to the Lender Group as those that
were applicable to the refinanced, renewed, or extended Indebtedness;
(e) Indebtedness composing Permitted Investments;
(f) Indebtedness of Borrower in respect of Permitted Intercompany Advances from
Big Dog;
(g) Indebtedness of Parent Loan I and Parent Loan II.
(h) Indebtedness of Borrower to Junior Secured Creditor in respect of the Junior
Secured Creditors Stock Put Right.
(i) Indebtedness of Borrower to the Junior Secured Creditors in respect of any
Junior Secured Creditors Promissory Note;
(j) Indebtedness of the Borrower to the Liquidating Agent in respect of the
First Unsecured Creditors Promissory Note and First Unsecured Creditors Note Put
Right;
(k) Indebtedness of the Borrower to the Liquidating Agent in respect of the
Second Unsecured Creditors Promissory Note;
(l) Indebtedness of the Borrower in respect of the Shoes.com Administrative
Claim in an amount not to exceed $2.9 million.
(m) Indebtedness of the Borrower in respect of the Shoes.com Loan.
7.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly,
any Lien on or with respect to any of its assets, of any kind, whether now owned
or hereafter acquired, or any income or profits therefrom, except for Permitted
Liens (including Liens that are replacements of Permitted Liens to the extent
that the original Indebtedness is refinanced, renewed, or extended under Section
7.1(d) and so long as the replacement Liens only encumber those assets that
secured the refinanced, renewed, or extended Indebtedness), and Liens of the
Junior Secured Creditors to secure the Indebtedness of Borrower in respect of
the Junior Secured Creditors Promissory Notes, provided, that such Liens are at
all times junior and subordinate to the Liens of Agent on terms and conditions
acceptable to Agent in its Permitted Discretion.
7.3 Restrictions on Fundamental Changes.
(a) Except for the consummation of any Permitted Acquisitions, enter into any
merger, consolidation, reorganization, or recapitalization, or reclassify its
Stock, provided, that the Borrower shall be permitted to merge with and into a
wholly-owned Subsidiary of Parent, with such Subsidiary being the surviving
corporation.
(b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution).
(c) Convey, sell, lease, license, assign, transfer, or otherwise dispose of, in
one transaction or a series of transactions, all or any substantial part of its
assets.
7.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell, lease,
license, assign, transfer, or otherwise dispose of the assets of Borrower.
7.5 Change Name. Change Borrower's name, FEIN, corporate structure, or identity,
or add any new fictitious name; provided, however, that (i) a Borrower may
change its name upon at least 30 days prior written notice to Agent of such
change and so long as, at the time of such written notification, Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens.
7.6 Guarantee. Guarantee or otherwise become in any way liable with respect to
the obligations of any third Person except by endorsement of instruments or
items of payment for deposit to the account of Borrowers or which are
transmitted or turned over to Agent.
7.7 Nature of Business. Make any change in the principal nature of
Borrower's business.
7.8 Payments, Prepayments and Amendments.
(a) Make any payment on account of the Junior Secured Notes, the First Unsecured
Creditors Promissory Note or the Second Unsecured Creditors Promissory Note,
except (x) Borrower may make regularly scheduled payments of interest and
principal pursuant to the terms of Junior Secured Notes, the First Unsecured
Creditors Promissory Note and the Second Unsecured Creditors Promissory Note in
effect as of the date hereof, provided, that (i) there does not exist an Event
of Default and there would not exist an Event of Default after giving effect to
any such payment and (ii) the Borrower has certified to Agent that it, at all
times tested, maintained Excess Availability for the 30 days prior to the date
of such payment and, on a pro forma basis, will maintain Excess Availability for
the 60 days after the date of such payment of at least $1,500,000, after giving
effect to such payment, and (ii) Borrower is Solvent, and (y) Borrower may make
prepayments on such Indebtedness as permitted by Section 7.8(c), provided, that
(i) Borrower shall not make any prepayments on such Indebtedness other than
Indebtedness in respect of the First Unsecured Creditors Note Put Right prior to
July 31, 2004.
(b) Make any payment on account of the Parent Loan I, Parent Loan II and the
Shoes.com Loan, except (x) Borrower may make regularly scheduled payments of
interest and principal pursuant to the terms of Parent Loan I, Parent Loan II,
and the Shoes.com Loan in effect as of the date hereof, provided, that (i) there
does not exist an Event of Default and there would not exist an Event of Default
after giving effect to any such payment and (ii) the Borrower has certified to
Agent that it, at all times tested, maintained Excess Availability for the 30
days prior to the date of such payment and, on a pro forma basis, will maintain
Excess Availability for the 60 days after the date of such payment of at least
$1,500,000, after giving effect to such payment and (y) Borrower may make
prepayments on such Indebtedness as permitted by Section 7.8(c), and (z)
Borrower is Solvent.
(c) Prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of
Borrower, other than the Obligations in accordance with this Agreement except
Borrower may (A) prepay any Junior Secured Creditors Promissory Note, the First
Unsecured Creditors Promissory Note pursuant to the terms of the First Unsecured
Creditors Note Put Right or otherwise or the Second Unsecured Creditors
Promissory Note provided, that (i) there does not exist an Event of Default and
there would not exist an Event of Default after giving effect to such payment,
(ii) the Borrower has certified to Agent that it, at all times tested,
maintained Excess Availability for the 30 days prior to the date of such payment
and, on a pro forma basis, will maintain Excess Availability for the 60 days
after the date of such payment of at least $1,500,000, after giving effect to
such payment, and (iii) the Borrower is Solvent; (B) prepay the Parent Loan I,
Parent Loan II and/or Shoes.com Loan provided, that (i) such payment does not
occur within six months of the Closing Date; (ii) such payment does not exceed
$500,000 in any calendar month; (iii) there does not exist an Event of Default
and there would not exist an Event of Default after giving effect to such
payment, (iv) the Borrower has certified to Agent that it, at all times tested,
maintained Excess Availability for the 30 days prior to the date of such payment
and, on a pro forma basis, will maintain Excess Availability for the 90 days
after the date of such payment of at least $2,750,000, after giving effect to
such payment, and (v) the Borrower is Solvent.
(d) Make any payment on account of the Shoes.com Administrative Claim, except
Borrower may pay such claim, provided, that (i) there does not exist an Event of
Default and there would not exist an Event of Default after giving effect to any
such payment; and (ii) the Borrower has certified to Agent that it, at all times
tested, maintained Excess Availability for the 30 days prior to the date of such
payment and, on a pro forma basis, will maintain Excess Availability for the 60
days after the date of such payment of at least $1,500,000, after giving effect
to such payment.
(e) Directly or indirectly, amend, modify, alter, increase, or change any of the
terms or conditions of any agreement, instrument, document, indenture, or other
writing evidencing or concerning Indebtedness permitted under Sections 7.1(b),
(c), (e), (f), (g), (h), (i), (j), (k), (l), or (m).
(f) Any certifications of Excess Availability to be furnished by Borrower to
lender in connection with payments to be made in accordance with Section 7.8 or
Permitted Distributions shall be delivered no sooner than ten (10) days and no
later than five (5) days prior to the date of the payment or Permitted
Distribution.
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
7.10 Consignments. Consign any Inventory or sell any Inventory on bill
and hold, sale or return, sale on approval, or other conditional
terms of sale.
7.11 Distributions. Other than Permitted Distributions, make any
Distribution (in cash or other property).
7.12 Accounting Methods. Modify or change its method of accounting (other than
as may be required to conform to GAAP) or enter into, modify, or terminate any
agreement currently existing, or at any time hereafter entered into with any
third party accounting firm or service bureau for the preparation or storage of
Borrower's accounting records without said accounting firm or service bureau
agreeing to provide Agent information regarding the Collateral or Borrower's
financial condition.
7.13 Investments. Except for Permitted Investments, directly or indirectly, make
or acquire any Investment or incur any liabilities (including contingent
obligations) for or in connection with any Investment; provided, however, that
Borrower and its Subsidiaries shall not have Permitted Investments (other than
in the Cash Management Accounts, and other than temporary (i.e., held for less
than 2 Business Days) deposits of retail store receipts or petty cash accounts
made by Borrower in deposit accounts maintained at banks that are physically
proximate to the stores that generated such receipts) in deposit accounts or
Securities Accounts unless the Borrower or its Subsidiary, as applicable, and
the applicable securities intermediary or bank have entered into Control
Agreements governing such Permitted Investments, as Agent shall determine in its
Permitted Discretion, to perfect (and further establish) the Agent's Liens in
such Permitted Investments.
7.14 Transactions with Affiliates. Directly or indirectly enter into or permit
to exist any transaction with any Affiliate of Borrower except for (i)
transactions that are in the ordinary course of the Borrower's business, upon
fair and reasonable terms, that are no less favorable to the Borrower than would
be obtained in an arm's length transaction with a non-Affiliate, and for any
transaction the book value of which is $50,000 or greater, that are fully
disclosed to Agent; (ii) the Parent IP License; (iii) Warehouse Sublicense; (iv)
Permitted Intercompany Advances; (v)transfer of the Borrower's intellectual
property to Parent in accordance with Section 5.16 hereof and (vi) the Shoes.com
Loan.
7.15 Suspension. Suspend or go out of a substantial portion of its business.
7.17 Use of Proceeds: Parent Loans and Shoes.com Loan. Use any of the
proceeds of Parent Loan I provided that, Borrower may use proceeds of Parent
Loan I to fund the Acquisition Proceeds. Use any of the proceeds of Parent Loan
II provided that, Borrower may use proceeds of Parent Loan II to (i) fund up to
$1.45 million part of the Acquisition Proceeds, (ii) fund the payment of any
portion of the Shoes.com Administrative Claim, and (iii) after satisfaction of
the obligations pursuant to Section 7.17(i) and (ii), above, for general
corporate purposes. Use any of the proceeds of Shoes.com Loan provided that,
Borrower may use proceeds of Shoes.com Loan solely for the purpose to fund the
payment of any portion of the Shoes.com Administrative Claim.
7.18 Use of Proceeds: Advances. Use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, (i) to repay, in full, the outstanding
principal, accrued interest, and accrued fees and expenses owing to Existing
Lender, (ii) to pay transactional fees, costs, and expenses incurred in
connection with this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby, and (iii) upon satisfaction of the Funding
Conditions and after use of the proceeds of the Parent Loan I, proceeds of $1.45
million of Parent Loan II and all of the proceeds of the Parent Equity
Contribution, to pay the balance of the cash purchase consideration payable by
it for the Walking Company Acquisition provided such amounts do not exceed those
amount set forth in the Walking Company Plan of Reorganization, (b) thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
purposes and (c) to pay the Shoes.com Administrative Expense Claim to the extent
permitted pursuant to Section 7.8(d) hereof.
7.19 Change in Location of Chief Executive Office. Relocate its chief executive
office to a new location without providing 30 days prior written notification
thereof to Agent and so long as, at the time of such written notification, the
Borrower provides any financing statements or fixture filings necessary to
perfect and continue perfected the Agent's Liens and also provides to Agent a
Collateral Access Agreement with respect to such new location.
7.20 Securities Accounts. Establish or maintain any Securities Account unless
Agent shall have received a Control Agreement in respect of such Securities
Account. Borrower shall not transfer assets out of any Securities Account;
provided, however, that, so long as no Event of Default has occurred and is
continuing or would result therefrom, Borrower may use such assets (and the
proceeds thereof) to the extent not prohibited by this Agreement.
7.21 Inactive Subsidiary. Permit the Inactive Subsidiaries to (a) own
any material assets, or (b) engage in any business activity.
7.22 Financial Covenants.
(a) Fail to maintain:
(i) Minimum EBITDA. EBITDA of not less than the required amount
set forth in the following table for the applicable period set
forth opposite thereto:
------------------------------ -------------------------------------------------------
Applicable Amount Applicable Period
------------------------------ -------------------------------------------------------
------------------------------ -------------------------------------------------------
$569,500 For the 3 month period
ending June 30, 2004
------------------------------ -------------------------------------------------------
------------------------------ -------------------------------------------------------
$491,300 For the 6 month period
ending September 30, 2004
------------------------------ -------------------------------------------------------
------------------------------ -------------------------------------------------------
$1,959,250 For the 9 month period
ending December 31, 2004
------------------------------ -------------------------------------------------------
------------------------------ -------------------------------------------------------
As provided below Thereafter
------------------------------ -------------------------------------------------------
Agent, in its Permitted Discretion, shall establish EBITDA
covenants on a month-end or quarterly basis for the trailing twelve month
periods thereafter, which covenants shall be based upon Projections delivered to
Agent pursuant to Section 6.3(c)(i) and utilizing criteria similar to the
criteria that Agent used to establish the EBITDA covenants in the above table.
If Borrower fails to timely deliver Projections pursuant to Section 6.3(c)(i),
then the Minimum Excess Reserve shall on January 1st, be automatically increased
to $3,000,000 until the Projections are delivered to the Agent.
(b) Maintain:
(i) Minimum Accounts Payable to Inventory. The ratio
of Borrower's accounts
payable to Inventory (valued at Cost) to actual EOM (End of Month) cost
inventory, determined monthly (commencing with March 2004, shall not be less
than the ratio set forth in the chart below for the corresponding periods:
--------------------------------- ------------------------------
Month Ratio
--------------------------------- ------------------------------
--------------------------------- ------------------------------
March 31, 2004 0.12
--------------------------------- ------------------------------
--------------------------------- ------------------------------
April 30, 2004 0.12
--------------------------------- ------------------------------
--------------------------------- ------------------------------
May 31, 2004 0.12
--------------------------------- ------------------------------
--------------------------------- ------------------------------
June 30, 2004 0.10
--------------------------------- ------------------------------
--------------------------------- ------------------------------
July 31, 2004 0.10
--------------------------------- ------------------------------
--------------------------------- ------------------------------
August 31, 2004 0.09
--------------------------------- ------------------------------
(c) Make:
(i) Capital Expenditures. Capital expenditures of
more than $700,000 during
fiscal year 2004.
Thereafter, Agent, in its Permitted Discretion, shall
establish Capital Expenditures covenants on a quarterly and annual basis for
each successive fiscal year, which covenants shall be based upon Projections
delivered to Agent pursuant to Section 6.3(c)(i) and utilizing criteria similar
to the criteria that Agent used to establish the Capital Expenditures covenants
above. If Borrower fails to timely deliver Projections pursuant to Section
6.3(c)(i), then the Minimum Excess Reserve shall, on January 1st, be
automatically increased to $3,000,000 until the Projections are delivered to the
Agent.
7.23 Material Agreements. Directly or indirectly amend, modify, cancel or
terminate, or permit the amendment, modification, cancellation or termination of
the Walking Company Plan of Reorganization or any documents issued or order
entered (including the confirmation order) without limitation, in connection
therewith.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable, or when declared due and
payable, all or any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts constituting
Obligations), provided, however, that in the case of Overadvances that are
caused by the charging of interest, fees, or Lender Expenses to the Loan
Account, such event shall not constitute an Event of Default if, within 5
Business Days of Borrower's receipt of telephonic or other notice of such
Overadvance, the Borrower eliminates such Overadvance;
8.2 If Borrower fails to (a) perform, keep, or observe any covenant or other
provision contained in Sections 6.1, 6.3, 6.5, 6.6, 6.7, 6.10, 6.11, 6.13, 6.15,
and 6.16 of this Agreement and such failure or neglect continues for a period of
15 days after the date on which such failure or neglect first occurs, or (b)
perform, keep, or observe any covenant or other provision contained in any
Section of this Agreement (other than a Section that is expressly dealt with
elsewhere in Section 8 of this Agreement) or the other Loan Documents (other
than a Section of such other Loan Documents dealt with elsewhere in Section 8 of
this Agreement) and such failure or neglect is not cured within 15 days after
the date on which such failure or neglect first occurs, or (c) perform, keep, or
observe any covenant or other provision contained in Section 6.8 of this
Agreement, or Section 7 of this Agreement or any comparable provision contained
in any of the other Loan Documents, or (d) fails to perform, keep, or observe
any covenant or other provision contained in Section 6.2 of this Agreement and
such failure or neglect continues for a period of 1 day after the date on which
Agent provides Borrower telephonic or written notice of such failure or
neglect..
8.3 If any material portion of Borrower's assets is attached, seized, subjected
to a writ or distress warrant, levied upon, or comes into the possession of any
third Person;
8.4 If an Insolvency Proceeding is commenced by Borrower and/or the imitation by
or on behalf of the Borrower of the liquidation or winding up of all or any part
of the Borrower's business or operations;
8.5 If an Insolvency Proceeding is commenced against Borrowers, and any of the
following events occur: (a) Borrower consents to the institution of such
Insolvency Proceeding against it, (b) the petition commencing the Insolvency
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed within 60 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Agent (including any successor agent) and each other member of the Lender Group
shall be relieved of their obligations to extend credit hereunder, (d) an
interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Borrower, or (e) an order for relief shall have been
entered therein;
8.6 If Borrower or any of its Subsidiaries is enjoined, restrained, or in any
way prevented by court order from continuing to conduct all or any material part
of its business affairs;
8.7 If (a) a notice of Lien is filed of record with respect to Borrower's or any
of its Subsidiaries' assets by the United States or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency and such state, county, municipal, or governmental agency Lien has
priority over the Liens of Agent in and to the Collateral or any portion thereof
(a "Non-Federal Priority Lien"); or (b) a notice of Lien is filed of record with
respect to Borrower's or any of its Subsidiaries' assets by any state, county,
municipal, or governmental agency that is not a Non-Federal Priority Lien (a
"Non-Federal Non-Priority Lien"); provided, however, that, if the aggregate
amount claimed with respect to any such Non-Federal Non-Priority Liens, or the
combination thereof, is less than $250,000, an Event of Default shall not occur
under this section if the claims that are the subject of such Liens are the
subject of Permitted Protests and if the Liens are released, discharged, or
bonded against within 30 days of each such Lien first being filed of record or,
if earlier, at least 5 days prior to the date on which assets that are subject
to such Liens are subject to being sold or forfeited and, in any such case,
Agent shall have the absolute right to establish and maintain a reserve against
the Borrowing Base and the Maximum Revolver Amount in an amount equal to the
aggregate amount of the underlying claims (determined by Agent, in its Permitted
Discretion, and irrespective of any Permitted Protests with respect thereto and
including any penalties or interest that are estimated by Agent, in its
Permitted Discretion, to arise in connection therewith).;
8.8 If one or more judgments or other claims involving an aggregate amount of
$250,000 or more becomes a Lien or encumbrance upon any material portion of
Borrower's or any of its Subsidiaries' assets and the same is not discharged
before the earlier of 30 days after the date it first arises or 5 days prior to
the date on which such property or asset is subject to forfeiture, provided,
however, that an Event of Default shall not occur if (a) such judgment is fully
insured (without a reservation of rights), or (b) prior to the expiration of the
30-day period or 5-day period, as applicable, such judgment or claim is appealed
and the applicable judgment debtor secured a bond covering the full amount of
such judgment;
8.9 If there is a default in any agreement involving an aggregate amount of
$250,000 to which Borrower or any of its Subsidiaries is a party and such
default (a) occurs at the final maturity of the obligations thereunder, or (b)
results in a right by the other party thereto, irrespective of whether
exercised, to accelerate the maturity of Borrower's or its Subsidiaries'
obligations thereunder, to terminate such agreement, or to refuse to renew such
agreement pursuant to an automatic renewal right therein;
8.10 If Borrower or any of its Subsidiaries makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to the
payment of the Obligations, except to the extent such payment is permitted by
the terms of this Agreement or the subordination provisions applicable to such
Indebtedness;
8.11 If any material misstatement or misrepresentation exists now or hereafter
in any warranty, representation, statement, or Record made to the Lender Group
by Borrower any of its Subsidiaries, or any officer, employee, agent, or
director of Borrower or any of its Subsidiaries;
8.12 If the obligation of Parent under the Guaranty is limited or
terminated by operation of law or by Parent thereunder; or
8.13 If this Agreement or any other Loan Document that purports to create a
Lien, shall, for any reason, fail or cease to create a valid and perfected and,
except to the extent permitted by the terms hereof or thereof, first priority
Lien on or security interest in the Collateral covered hereby or thereby, unless
such failure is caused by Agent or the Lender Group; or
8.14 Any provision of any Loan Document shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by Borrower, or a proceeding shall be commenced by Borrower, or by any
Governmental Authority having jurisdiction over Borrower, seeking to establish
the invalidity or unenforceability thereof, or Borrower shall deny that Borrower
has any liability or obligation purported to be created under any Loan Document.
8.15 Any default by Borrower on its obligations in respect of (i) Parent Loan I;
(ii) Parent Loan II (iii) any Junior Secured Creditors Promissory Note; (iv) any
first Unsecured Creditors Promissory Note; (v) any Second Unsecured Creditors
Promissory Note; or (vi) any documents executed and/or delivered by the Borrower
in connection with any of the foregoing.
8.16 Any Walking Company Acquisition Order (A) shall be supplemented, modified
or amended in such a way that would constitute a Material Adverse Change, or (B)
shall be revoked, remanded, vacated, reversed, stayed or rescinded in any way,
or Borrower shall apply to the Bankruptcy Court for the authority to do so.
8.17 Any default by Borrower in respect of its obligations under the Walking
Company Plan of Reorganization.
8.18 Any default by Fred Kayne or Andrew Feshbach in respect of their personal
guaranty of the Shoes.com Administrative Claim.
8.19 Entry of an order by the Bankruptcy Court in the Proceeding allowing the
Shoes.com Administrative Claim in an amount in excess of $2.9 million and
Borrower has not made provisions (satisfactory to the Agent in its Permitted
Discretion) for the payment of any amount in excess of $2.9 million.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the continuation, of an
Event of Default, the Required Lenders (at their election but without notice of
their election and without demand) may authorize and instruct Agent to do any
one or more of the following on behalf of the Lender Group (and Agent, acting
upon the instructions of the Required Lenders, shall do the same on behalf of
the Lender Group), all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately
due and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the
Loan Documents, or under any other agreement between Borrower
and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of the Lender Group,
but without affecting any of the Agent's Liens in the
Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Agent considers
advisable, and in such cases, Agent will credit the Loan
Accounts with only the net amounts received by Agent in
payment of such disputed Accounts after deducting all Lender
Group Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for the
Lender Group, segregate all returned Inventory from all other
assets of Borrower or in Borrower's possession and
conspicuously label said returned Inventory as the property of
the Lender Group;
(f) Without notice to or demand upon Borrower, make such payments
and do such acts as Agent considers necessary or reasonable to
protect its security interests in the Collateral. Borrower
agrees to assemble the Borrower Collateral if Agent so
requires, and to make the Borrower Collateral available to
Agent at a place that Agent may designate which is reasonably
convenient to both parties. Borrower authorizes Agent to enter
the premises where the Borrower Collateral is located, to take
and maintain possession of the Borrower Collateral, or any
part of it, and to pay, purchase, contest, or compromise any
Lien that in Agent's determination appears to conflict with
the Agent's Liens and to pay all expenses incurred in
connection therewith and to charge Loan Account therefor. With
respect to any of Borrower's owned or leased premises,
Borrower hereby grants Agent a license to enter into
possession of such premises and to occupy the same, without
charge, in order to exercise any of the Lender Group's rights
or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any
collateral in satisfaction of an obligation (within the
meaning of the Code), set off and apply to the Obligations any
and all (i) balances and deposits of Borrower held by the
Lender Group (including any amounts received in the Cash
Management Accounts), or (ii) Indebtedness at any time owing
to or for the credit or the account of Borrower held by the
Lender Group;
(h) Hold, as cash collateral, any and all balances and deposits of
Borrower held by the Lender Group, and any amounts received in
the Cash Management Accounts, to secure the full and final
repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Borrower Collateral. Borrower hereby
grants to Agent a license or other right to use, without
charge, Borrower's labels, patents, copyrights, trade secrets,
trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to
the Borrower Collateral, in completing production of,
advertising for sale, and selling Borrower Collateral and such
Borrower's rights under all licenses and all franchise
agreements shall inure to the Lender Group's benefit;
(j) Sell the Borrower Collateral at either a public or private
sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as Agent determines is
commercially reasonable. It is not necessary that the Borrower
Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the Borrower
Collateral as follows:
(i) Agent shall give Borrower (for the benefit of the Borrower) a
notice in writing of the time and place of public sale, or, if
the sale is a private sale or some other disposition other
than a public sale is to be made of the Borrower Collateral,
the time on or after which the private sale or other
disposition is to be made; and
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower as provided in Section 12, at least 10
days before the earliest time of disposition set forth in the
notice; no notice needs to be given prior to the disposition
of any portion of the Borrower Collateral that is perishable
or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market;
(l) Agent, on behalf of the Lender Group may credit bid and
purchase at any public sale;
(m) Agent may seek the appointment of a receiver or keeper to take
possession of all or any portion of the Collateral or to
operate same and, to the maximum extent permitted by law, may
seek the appointment of such a receiver without the
requirement of prior notice or a hearing;
(n) The Lender Group shall have all other rights and remedies
available to it at law or in equity pursuant to any other Loan
Documents; and
(o) Any deficiency that exists after disposition of the Borrower
Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and
subject to the rights of third Persons, by Agent to Borrower
(for the benefit of the Borrower).
9.2 Remedies Cumulative. The rights and remedies of the Lender Group under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion
and without prior notice to Borrower, may do any or all of the following: (a)
make payment of the same or any part thereof, (b) set up such reserves in Loan
Account as Agent deems necessary to protect the Lender Group from the exposure
created by such failure, or (c) in the case of the failure to comply with
Section 6.8 hereof, obtain and maintain insurance policies of the type described
in Section 6.8 and take any action with respect to such policies as Agent deems
prudent. Any such amounts paid by Agent shall constitute Lender Group Expenses
and any such payments shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any Event
of Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of documents,
instruments, chattel paper, and guarantees at any time held by the Lender Group
on which each such Borrower may in any way be liable.
11.2 The Lender Group's Liability for Collateral. Borrower hereby agrees that:
(a) so long as the Lender Group complies with its obligations, if any, under the
Code, Agent shall not in any way or manner be liable or responsible for: (i) the
safekeeping of the Collateral, (ii) any loss or damage thereto occurring or
arising in any manner or fashion from any cause, (iii) any diminution in the
value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons with respect to each Lender,
each Participant, and each of their respective officers, directors, employees,
agents, and attorneys-in-fact (each, an "Indemnified Person") harmless (to the
fullest extent permitted by law) from and against any and all claims, demands,
suits, actions, investigations, proceedings, and damages, and all reasonable
attorneys fees and disbursements and other costs and expenses actually incurred
in connection therewith (as and when they are incurred and irrespective of
whether suit is brought), at any time asserted against, imposed upon, or
incurred by any of them (a) in connection with or as a result of or related to
the execution, delivery, enforcement, performance, or administration of this
Agreement, any of the other Loan Documents, or the transactions contemplated
hereby or thereby, and (b) with respect to any investigation, litigation, or
proceeding related to this Agreement, any other Loan Document, or the use of the
proceeds of the credit provided hereunder (irrespective of whether any
Indemnified Person is a party thereto), or any act, omission, event, or
circumstance in any manner related thereto (all the foregoing, collectively, the
"Indemnified Liabilities"). The foregoing to the contrary notwithstanding,
Borrower shall have no obligation to any Indemnified Person under this Section
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrower was required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrower
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by Borrower, on the one hand, or Agent, on the other hand, to the other
relating to this Agreement or any other Loan Document shall be in writing and
(except for financial statements and other informational documents which may be
sent by first-class mail, postage prepaid) shall be personally delivered or sent
by registered or certified mail (postage prepaid, return receipt requested),
overnight courier, electronic mail (at such email addresses as the Borrower or
Agent, as applicable, may designate to each other in accordance herewith), or
telefacsimile to Borrower or Agent, as the case may be, at its address set forth
below:
If to
Borrower: TWC ACQUISITION CORP
121 Gray Avenue
Santa Barbara, California
Attn: Andrew Feshbach
Anthony Wall, Esq.
Fax No. (805) 962-9460
Tel. No. (805) 963-8727 x1363
with copies to: BUCHALTER, NEMER, FIELDS & YOUNGER
601 South Figueroa Street, 24th Floor
Los Angeles, CA 90017
Attn: William Schoenholz, Esq.
Fax No. (213) 896-0400
Tel. No. (213) 891-5004
If to Agent:
WELLS FARGO RETAIL FINANCE II, LLC 1 Boston Place Boston, Massachusetts 02108
Attn: Account Executive, The Walking Company Fax No. (617) 523-4032 Tel. No.
(617) 854-7233
with copies to: BROWN RUDNICK BERLACK ISRAELS LLP
One Financial Center
Boston, MA 02111
Attn: Peter J. Antoszyk, Esquire
Fax No. 617-856-8201
Tel. No. 617-856-8513
Agent, and Borrower may change the address at which they are
to receive notices hereunder, by notice in writing in the foregoing manner given
to the other party. All notices or demands sent in accordance with this Section
12, other than notices by Agent in connection with enforcement rights against
the Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Borrower acknowledges and agrees that notices sent by the
Lender Group in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN
THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF SUFFOLK, COMMONWEALTH OF
MASSACHUSETTS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH BORROWER AND THE LENDER GROUP
WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).
(c) BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH BORROWER AND THE LENDER GROUP REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 Assignments and Participations.
(a) Any Lender may, with the written consent of Agent (provided that no written
consent of Agent shall be required in connection with any assignment and
delegation by a Lender to an Eligible Transferee), assign and delegate to one or
more assignees (each an "Assignee") all, or any ratable part of all, of the
Obligations, the Commitments and the other rights and obligations of such Lender
hereunder and under the other Loan Documents, in a minimum amount of $5,000,000;
provided, however, that Borrower and Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
have been given to Borrower and Agent by such Lender and the Assignee, (ii) such
Lender and its Assignee have delivered to Borrower and Agent an Assignment and
Acceptance in form and substance satisfactory to Agent, and (iii) the assignor
Lender or Assignee has paid to Agent for Agent's separate account a processing
fee in the amount of $5,000. Anything contained herein to the contrary
notwithstanding, the consent of Agent shall not be required (and payment of any
fees shall not be required) if such assignment is in connection with any merger,
consolidation, sale, transfer, or other disposition of all or any substantial
portion of the business or loan portfolio of such Lender.
(b) From and after the date that Agent notifies the assignor Lender (with a copy
to Borrower) that it has received an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of a Lender under the Loan Documents, and (ii) the
assignor Lender shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (except with respect to Section
11.3 hereof) and be released from its obligations under this Agreement (and in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement and the
other Loan Documents, such Lender shall cease to be a party hereto and thereto),
and such assignment shall affect a novation between Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (1) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(2) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower or the
performance or observance by Borrower of any of their obligations under this
Agreement or any other Loan Document furnished pursuant hereto, (3) such
Assignee confirms that it has received a copy of this Agreement, together with
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance,
(4) such Assignee will, independently and without reliance upon Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement, (5) such
Assignee appoints and authorizes Agent to take such actions and to exercise such
powers under this Agreement as are delegated to Agent, by the terms hereof,
together with such powers as are reasonably incidental thereto, and (6) such
Assignee agrees that it will perform all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing fee payment under the
Assignment and Acceptance and receipt and acknowledgment by Agent of such fully
executed Assignment and Acceptance, this Agreement shall be deemed to be amended
to the extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of Agent, sell to one
or more commercial banks, financial institutions, or other Persons not
Affiliates of such Lender (a "Participant") participating interests in its
Obligations, the Commitment, and the other rights and interests of that Lender
(the "Originating Lender") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); provided, however, that (i) the Originating Lender shall remain a
"Lender" for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a "Lender" hereunder or under the other Loan
Documents and the Originating Lender's obligations under this Agreement shall
remain unchanged, (ii) the Originating Lender shall remain solely responsible
for the performance of such obligations, (iii) Borrower, Agent, and the Lenders
shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender's rights and obligations under this
Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant
any participating interest under which the Participant has the right to approve
any amendment to, or any consent or waiver with respect to, this Agreement or
any other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating, (C) release
all or a material portion of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant through such Lender, or (E) change the amount or due dates of
scheduled principal repayments or prepayments or premiums; and (v) all amounts
payable by Borrower hereunder shall be determined as if such Lender had not sold
such participation; except that, if amounts outstanding under this Agreement are
due and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement. The rights of any Participant only shall be derivative through the
Originating Lender with whom such Participant participates and no Participant
shall have any rights under this Agreement or the other Loan Documents or any
direct rights as to the other Lenders, Agent, Borrower, the Collections, the
Collateral, or otherwise in respect of the Obligations. No Participant shall
have the right to participate directly in the making of decisions by the Lenders
among themselves.
(f) In connection with any such assignment or participation or proposed
assignment or participation, a Lender may disclose all documents and information
which it now or hereafter may have relating to Borrower or Borrower's business.
Prior to making any such disclosure of any such documents or information, the
Lender shall cause such prospective assignee or participant to enter into a
confidentiality agreement containing confidentiality provision substantially
similar to those contained in Section 16.17(d).
(g) Any other provision in this Agreement notwithstanding, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
14.2 Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrower may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void ab initio. No consent to assignment by the Lenders shall
release Borrower from its Obligations. A Lender may assign this Agreement and
the other Loan Documents and its rights and duties hereunder and thereunder
pursuant to Section 14.1 hereof and, except as expressly required pursuant to
Section 14.1 hereof, no consent or approval by Borrower is required in
connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and Borrower and then any such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such waiver, amendment, or consent
shall, unless in writing and signed by all of the Lenders affected thereby and
Borrower and acknowledged by Agent, do any of the following:
(a) increase or extend any Commitment of any Lender,
(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees, or other amounts due
hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of interest on, any loan or other
extension of credit hereunder, or reduce any fees or other amounts payable
hereunder or under any other Loan Document,
(d) change the percentage of the Commitments that is required to take any action
hereunder,
(e) amend this Section or any provision of the Agreement providing for consent
or other action by all Lenders,
(f) release Collateral other than as permitted by Section 16.12,
(g) change the definition of "Required Lenders",
(h) contractually subordinate any of the Agent's Liens,
(i) release Borrower from any obligation for the payment of money, or
(j) change the definitions of Borrowing Base, Eligible Credit Card Receivables,
Eligible Inventory, Eligible Letter of Credit Inventory, Maximum Revolver
Amount, Net Liquidation Percentage, , or change Section 2.1(b); or
(k) amend any of the provisions of Section 16.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, affect
the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable,
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent, termination, or release of, or
with respect to, any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrower, shall not require consent
by or the agreement of Borrower.
15.2 Replacement of Holdout Lender If any action to be taken by the Lender Group
or Agent hereunder requires the unanimous consent, authorization, or agreement
of all Lenders, and a Lender ("Holdout Lender") fails to give its consent,
authorization, or agreement, then Agent, upon at least 5 Business Days prior
irrevocable notice to the Holdout Lender, may permanently replace the Holdout
Lender with one or more substitute Lenders (each, a "Replacement Lender"), and
the Holdout Lender shall have not right to refuse to be replaced hereunder. Such
notice to replace the Holdout Lender shall specify an effective date for such
replacement, which date shall not be later than 15 Business Days after the date
such notice is given.
Prior to the effective date of such replacement, the Holdout
Lender and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata Share of
the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. The replacement of any Holdout Lender
shall be made in accordance with the terms of Section 14.1. Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender
hereunder and under the other Loan Documents, the Holdout Lender shall remain
obligated to make the Holdout Lender's Pro Rata Share of Advances and to
purchase a participation in each Letter of Credit, in an amount equal to its Pro
Rata Share of the Risk Participation Liability of such Letter of Credit.
15.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement or, any other Loan
Document, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof. No waiver by Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent's and each
Lender's rights thereafter to require strict performance by Borrower of any
provision of this Agreement. Agent's and each Lender's rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 Appointment and Authorization of Agent. Each Lender hereby designates and
appoints Agent as its representative under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such on the express conditions contained in this Section 16. The
provisions of this Section 16 are solely for the benefit of Agent, and the
Lenders, and Borrower shall have no rights as a third party beneficiary of any
of the provisions contained herein. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only, that Agent is
merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Obligations, the Collateral,
the Collections, and related matters, (b) execute or file any and all financing
or similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of Lenders as
provided in the Loan Documents, (d) exclusively receive, apply, and distribute
the Collections as provided in the Loan Documents, (e) open and maintain such
bank accounts and cash management accounts as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections, (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower, the Obligations, the Collateral, the Collections, or otherwise
related to any of same as provided in the Loan Documents, and (g) incur and pay
such Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents.
16.2 Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
16.3 Liability of Agent. None of the Agent-Related Persons shall (i) be liable
for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by Borrower or any Subsidiary or
Affiliate of Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the Books or properties of Borrower or the books or
records or properties of any of Borrower's Subsidiaries or Affiliates.
16.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
16.5 Notice of Default or Event of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders, except
with respect to Events of Default of which Agent has actual knowledge, unless
Agent shall have received written notice from a Lender or Borrower referring to
this Agreement, describing such Default or Event of Default, and stating that
such notice is a "notice of default." Agent promptly will notify the Lenders of
its receipt of any such notice or of any Event of Default of which Agent has
actual knowledge. If any Lender obtains actual knowledge of any Event of
Default, such Lender promptly shall notify the other Lenders and Agent of such
Event of Default. Each Lender shall be solely responsible for giving any notices
to its Participants, if any. Subject to Section 16.4, Agent shall take such
action with respect to such Default or Event of Default as may be requested by
the Required Lenders in accordance with Section 9; provided, however, that
unless and until Agent has received any such request, Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable.
16.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by Agent
hereinafter taken, including any review of the affairs of Borrower and its
Subsidiaries or Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of
Borrower and any other Person (other than the Lender Group) party to a Loan
Document, and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to Borrower. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrower and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
16.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender Group
Expenses to the extent Agent reasonably deems necessary or appropriate for the
performance and fulfillment of its functions, powers, and obligations pursuant
to the Loan Documents, including court costs, reasonable attorneys fees and
expenses, costs of collection by outside collection agencies and auctioneer fees
and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrower is obligated to reimburse Agent or Lenders
for such expenses pursuant to the Loan Agreement or otherwise. Agent is
authorized and directed to deduct and retain sufficient amounts from Collections
received by Agent to reimburse Agent for such out-of-pocket costs and expenses
prior to the distribution of any amounts to Lenders. In the event Agent is not
reimbursed for such costs and expenses from Collections received by Agent, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
Agent for the amount of such Lender's Pro Rata Share thereof. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of Borrower and without limiting the obligation of Borrower to do so),
according to their Pro Rata Shares, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the payment
to any Agent-Related Person of any portion of such Indemnified Liabilities
resulting solely from such Person's gross negligence or willful misconduct nor
shall any Lender be liable for the obligations of any Defaulting Lender in
failing to make an Advance or other extension of credit hereunder. Without
limitation of the foregoing, each Lender shall reimburse Agent upon demand for
such Lender's ratable share of any costs or out-of-pocket expenses (including
attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrower. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
16.8 Agent in Individual Capacity. Agent and its Affiliates may make loans to,
issue letters of credit for the account of, accept deposits from, acquire equity
interests in, and generally engage in any kind of banking, trust, financial
advisory, underwriting, or other business with Borrower and their Subsidiaries
and Affiliates and any other Person (other than the Lender Group) party to any
Loan Documents as though Agent were not Agent hereunder, and, in each case,
without notice to or consent of the other members of the Lender Group. The other
members of the Lender Group acknowledge that, pursuant to such activities, Agent
or its Affiliates may receive information regarding Borrower or their Affiliates
and any other Person (other than the Lender Group) party to any Loan Documents
that is subject to confidentiality obligations in favor of Borrower or such
other Person and that prohibit the disclosure of such information to the
Lenders, and the Lenders acknowledge that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver Agent will
use its reasonable best efforts to obtain), Agent shall not be under any
obligation to provide such information to them. The terms "Lender" and "Lenders"
include Agent in its individual capacity.
16.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the
Lenders. If Agent resigns under this Agreement, the Required Lenders shall
appoint a successor Agent for the Lenders. If no successor Agent is appointed
prior to the effective date of the resignation of Agent, Agent may appoint,
after consulting with the Lenders, a successor Agent. If Agent has materially
breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers, and duties of the retiring Agent and
the term "Agent" shall mean such successor Agent and the retiring Agent's
appointment, powers, and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section 16 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 45 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor
Agent as provided for above.
16.10 Lender in Individual Capacity. Any Lender and its respective Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with Borrower and
their Subsidiaries and Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents as though such Lender were not a Lender
hereunder without notice to or consent of the other members of the Lender Group.
The other members of the Lender Group acknowledge that, pursuant to such
activities, such Lender and its respective Affiliates may receive information
regarding Borrower or their Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of the
Agent.
16.11 Withholding Taxes.
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the IRC and such Lender claims exemption
from, or a reduction of, U.S. withholding tax under Sections
1441 or 1442 of the IRC, such Lender agrees with and in favor
of Agent and Borrower, to deliver to Agent and Borrower:
(i) if such Lender claims an exemption from withholding tax
pursuant to its portfolio interest exception, (a) a statement
of the Lender, signed under penalty of perjury, that it is not
a (I) a "bank" as described in Section 881(c)(3)(A) of the
IRC, (II) a 10% shareholder (within the meaning of Section
881(c)(3)(B) of the IRC), or (III) a controlled foreign
corporation described in Section 881(c)(3)(C) of the IRC, and
(B) a properly completed IRS Form W-8BEN, before the first
payment of any interest under this Agreement and at any other
time reasonably requested by Agent or Borrower;
(ii) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly
completed IRS Form W-8BEN before the first payment of any
interest under this Agreement and at any other time reasonably
requested by Agent or Borrower;
(iii) if such Lender claims that interest paid under this Agreement
is exempt from United States withholding tax because it is
effectively connected with a United States trade or business
of such Lender, two properly completed and executed copies of
IRS Form W-8ECI before the first payment of any interest is
due under this Agreement and at any other time reasonably
requested by Agent or Borrower;
(iv) such other form or forms as may be required under the IRC or
other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding tax under
a United States tax treaty by providing IRS Form W-8BEN and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of Borrower to such Lender, such Lender agrees to notify Agent of
the percentage amount in which it is no longer the beneficial owner of
Obligations of Borrower to such Lender. To the extent of such percentage amount,
Agent will treat such Lender's IRS Form W-8BEN as no longer valid.
(c) If any Lender is entitled to a reduction in the applicable withholding tax,
Agent may withhold from any interest payment to such Lender an amount equivalent
to the applicable withholding tax after taking into account such reduction. If
the forms or other documentation required by subsection (a) of this Section are
not delivered to Agent, then Agent may withhold from any interest payment to
such Lender not providing such forms or other documentation an amount equivalent
to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent did not properly withhold tax from
amounts paid to or for the account of any Lender (because the appropriate form
was not delivered, was not properly executed, or because such Lender failed to
notify Agent of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such Lender
shall indemnify and hold Agent harmless for all amounts paid, directly or
indirectly, by Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to Agent
under this Section, together with all costs and expenses (including attorneys
fees and expenses). The obligation of the Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement of
Agent.
(e) All payments made by Borrower hereunder or under any note or other Loan
Document will be made without setoff, counterclaim, or other defense, except as
required by applicable law other than for Taxes (as defined below). All such
payments will be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
(other than the United States) or by any political subdivision or taxing
authority thereof or therein (other than of the United States) with respect to
such payments (but excluding, any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein (i) measured by or
based on the net income or net profits of a Lender, or (ii) to the extent that
such tax results from a change in the circumstances of the Lender, including a
change in the residence, place of organization, or principal place of business
of the Lender, or a change in the branch or lending office of the Lender
participating in the transactions set forth herein) and all interest, penalties
or similar liabilities with respect thereto (all such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, Borrower agrees
to pay the full amount of such Taxes, and such additional amounts as may be
necessary so that every payment of all amounts due under this Agreement or under
any note, including any amount paid pursuant to this Section 16.11(e) after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein; provided, however, that Borrower shall not be
required to increase any such amounts payable to Agent or any Lender (i) that is
not organized under the laws of the United States, if such Person fails to
comply with the other requirements of this Section 16.11, or (ii) if the
increase in such amount payable results from Agent's or such Lender's own
willful misconduct or gross negligence. Borrower will furnish to Agent as
promptly as possible after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by
Borrower.
16.12 Collateral Matters.
(a) The Lenders hereby irrevocably authorize Agent, at its option and in its
sole discretion, to release any Lien on any Collateral (i) upon the termination
of the Commitments and payment and satisfaction in full by Borrower of all
Obligations, (ii) constituting property being sold or disposed of if a release
is required or desirable in connection therewith and if Borrower certifies to
Agent that the sale or disposition is permitted under Section 7.4 of this
Agreement or the other Loan Documents (and Agent may rely conclusively on any
such certificate, without further inquiry), (iii) constituting property in which
Borrower has not owned any interest at the time the security interest was
granted or at any time thereafter, or (iv) constituting property leased to
Borrower under a lease that has expired or is terminated in a transaction
permitted under this Agreement. Except as provided above, Agent will not execute
and deliver a release of any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or substantially all of the
Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon
request by Agent or Borrower at any time, the Lenders will confirm in writing
Agent's authority to release any such Liens on particular types or items of
Collateral pursuant to this Section 16.12; provided, however, that (1) Agent
shall not be required to execute any document necessary to evidence such release
on terms that, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien without
recourse, representation, or warranty, and (2) such release shall not in any
manner discharge, affect, or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of Borrower in respect of)
all interests retained by Borrower, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the Lenders to assure
that the Collateral exists or is owned by Borrower or is cared for, protected,
or insured or has been encumbered, or that the Agent's Liens have been properly
or sufficiently or lawfully created, perfected, protected, or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Agent pursuant to any of the Loan Documents, it being understood and agreed that
in respect of the Collateral, or any act, omission, or event related thereto,
subject to the terms and conditions contained herein, Agent may act in any
manner it may deem appropriate, in its sole discretion given Agent's own
interest in the Collateral in its capacity as one of the Lenders and that Agent
shall have no other duty or liability whatsoever to any Lender as to any of the
foregoing, except as otherwise provided herein.
16.13 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of Agent, set off against the Obligations, any amounts owing by such
Lender to Borrower or any deposit accounts of Borrower now or hereafter
maintained with such Lender. Each of the Lenders further agrees that it shall
not, unless specifically requested to do so by Agent, take or cause to be taken
any action, including, the commencement of any legal or equitable proceedings,
to foreclose any Lien on, or otherwise enforce any security interest in, any of
the Collateral the purpose of which is, or could be, to give such Lender any
preference or priority against the other Lenders with respect to the Collateral.
(b) If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations arising under, or relating to, this Agreement or
the other Loan Documents, except for any such proceeds or payments received by
such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments
from Agent in excess of such Lender's ratable portion of all such distributions
by Agent, such Lender promptly shall (1) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate the same to Agent, or
in immediately available funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the applicable
provisions of this Agreement, or (2) purchase, without recourse or warranty, an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as among
the Lenders in accordance with their Pro Rata Shares; provided, however, that if
all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.
16.14 Agency for Perfection. Agent hereby appoints each other Lender as its
agent (and each Lender hereby accepts such appointment) for the purpose of
perfecting the Agent's Liens in assets which, in accordance with Article 9 of
the Code can be perfected only by possession. Should any Lender obtain
possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent's request therefor shall deliver such Collateral to Agent or
in accordance with Agent's instructions.
16.15 Payments by Agent to the Lenders. All payments to be made by Agent to the
Lenders shall be made by bank wire transfer or internal transfer of immediately
available funds pursuant to such wire transfer instructions as each party may
designate for itself by written notice to Agent. Concurrently with each such
payment, Agent shall identify whether such payment (or any portion thereof)
represents principal, premium, or interest of the Obligations.
16.16 Concerning the Collateral and Related Loan Documents. Each member of the
Lender Group authorizes and directs Agent to enter into this Agreement and the
other Loan Documents relating to the Collateral, for the benefit of the Lender
Group. Each member of the Lender Group agrees that any action taken by Agent in
accordance with the terms of this Agreement or the other Loan Documents relating
to the Collateral and the exercise by Agent of its powers set forth therein or
herein, together with such other powers that are reasonably incidental thereto,
shall be binding upon all of the Lenders.
16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by
Lenders; Other Reports and Information. By becoming a party to this Agreement,
each Lender:
(a) is deemed to have requested that Agent furnish such Lender, promptly after
it becomes available, a copy of each field audit or examination report (each a
"Report" and collectively, "Reports") prepared by Agent, and Agent shall so
furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does not (i) make any
representation or warranty as to the accuracy of any Report, and (ii) shall not
be liable for any information contained in any Report,
(c) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that Agent or other party performing any audit or
examination will inspect only specific information regarding Borrower and will
rely significantly upon the Books, as well as on representations of Borrower's
personnel,
(d) agrees to keep all Reports and other material, non-public information
regarding Borrower and its Subsidiaries and their operations, assets, and
existing and contemplated business plans in a confidential manner; it being
understood and agreed by Borrower that in any event such Lender may make
disclosures (a) to counsel for and other advisors, accountants, and auditors to
such Lender, (b) reasonably required by any bona fide potential or actual
Assignee or Participant in connection with any contemplated or actual assignment
or transfer by such Lender of an interest herein or any participation interest
in such Lender's rights hereunder, (c) of information that has become public by
disclosures made by Persons other than such Lender, its Affiliates, assignees,
transferees, or Participants, or (d) as required or requested by any court,
governmental or administrative agency, pursuant to any subpoena or other legal
process, or by any law, statute, regulation, or court order; provided, however,
that, unless prohibited by applicable law, statute, regulation, or court order,
such Lender shall notify Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or where
practicable, prior to the disclosure thereof, and
(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold Agent and any such other Lender
preparing a Report harmless from any action the indemnifying Lender may take or
conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to Borrower, or the indemnifying Lender's
participation in, or the indemnifying Lender's purchase of, a loan or loans of
Borrower; and (ii) to pay and protect, and indemnify, defend and hold Agent, and
any such other Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses, and other amounts (including,
attorneys fees and costs) incurred by Agent and any such other Lender preparing
a Report as the direct or indirect result of any third parties who might obtain
all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent that has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender, (y) to the extent that Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from Borrower, any Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Lender's
notice to Agent, whereupon Agent promptly shall request of Borrower the
additional reports or information reasonably specified by such Lender, and, upon
receipt thereof from Borrower, Agent promptly shall provide a copy of same to
such Lender, and (z) any time that Agent renders to Borrower a statement
regarding the Loan Account, Agent shall send a copy of such statement to each
Lender.
16.18 Several Obligations; No Liability. Notwithstanding that certain of the
Loan Documents now or hereafter may have been or will be executed only by or in
favor of Agent in its capacity as such, and not by or in favor of the Lenders,
any and all obligations on the part of Agent (if any) to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in Section 16.7, no member of the Lender Group shall have any
liability for the acts or any other member of the Lender Group. No Lender shall
be responsible to any Borrower or any other Person for any failure by any other
Lender to fulfill its obligations to make credit available hereunder, nor to
advance for it or on its behalf in connection with its Commitment, nor to take
any other action on its behalf hereunder or in connection with the financing
contemplated herein.
16.19 Legal Representation of Agent. In connection with the negotiation,
drafting, and execution of this Agreement and the other Loan Documents, or in
connection with future legal representation relating to loan administration,
amendments, modifications, waivers, or enforcement of remedies, Brown Rudnick
Berlack Israels LLP ("BRBI") only has represented and only shall represent Agent
in its capacity as Agent and as a Lender. Each other Lender hereby acknowledges
that BRBI does not represent it in connection with any such matters.
17. GENERAL PROVISIONS.
17.1 Effectiveness. This Agreement shall be binding and deemed effective when
executed by Borrower, Agent, and each Lender whose signature is provided for on
the signature pages hereof.
17.2 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.
17.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against the Lender Group or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
17.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
17.5 Amendments in Writing. This Agreement only can be amended by a
writing in accordance with Section 15.1.
17.6 Counterparts; Telefacsimile Execution. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
17.7 Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by Borrower or the transfer to the Lender Group of any property
should for any reason subsequently be declared to be void or voidable under any
state or federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, or other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if the Lender Group is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender Group is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees
of the Lender Group related thereto, the liability of Borrower automatically
shall be revived, reinstated, and restored and shall exist as though such
Voidable Transfer had never been made.
17.8 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
[Signature page to follow.]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.
TWC ACQUISITION CORP.,
a Delaware corporation
By:
Title:
WELLS FARGO RETAIL FINANCE II, LLC,
a Delaware limited liability company, as Agent and as a Lender
By:
Title:
-8-
#1257365 v14 - wells/walking company/loan agreement
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION.............................................................................1
1.1 Definitions.....................................................................................1
1.2 Accounting Terms...............................................................................31
1.3 Code...........................................................................................31
1.4 Construction...................................................................................31
1.5 Schedules and Exhibits.........................................................................31
2. LOAN AND TERMS OF PAYMENT...............................................................................31
2.1 Revolver Advances..............................................................................31
2.2 [Intentionally Omitted]........................................................................32
2.3 Borrowing Procedures and Settlements...........................................................32
2.4 Payments.......................................................................................39
2.5 Overadvances...................................................................................42
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations....................43
2.7 Cash Management................................................................................45
2.8 Crediting Payments.............................................................................47
2.9 Designated Account.............................................................................47
2.10 Maintenance of Loan Account; Statements of Obligations.........................................47
2.11 Fees...........................................................................................47
2.12 Letters of Credit..............................................................................48
2.13 LIBOR Option...................................................................................52
2.14 Capital Requirements...........................................................................54
3. CONDITIONS; TERM OF AGREEMENT...........................................................................55
3.1 Conditions Precedent to the Initial Extension of Credit........................................55
3.2 Conditions Subsequent to the Initial Extension of Credit.......................................58
3.3 Conditions Precedent to all Extensions of Credit...............................................58
3.4 Term...........................................................................................59
3.5 Effect of Termination..........................................................................59
3.6 Early Termination by Borrower..................................................................59
4. CREATION OF SECURITY INTEREST...........................................................................60
4.1 Grant of Security Interest.....................................................................60
4.2 Negotiable Collateral..........................................................................60
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.........................61
4.4 Delivery of Additional Documentation Required..................................................61
4.5 Power of Attorney..............................................................................61
4.6 Right to Inspect...............................................................................62
4.7 Control Agreements.............................................................................62
5. REPRESENTATIONS AND WARRANTIES..........................................................................62
5.1 No Encumbrances................................................................................62
5.2 Eligible Credit Card Accounts..................................................................62
5.3 Eligible Inventory.............................................................................63
5.4 Equipment......................................................................................63
5.5 [Intentionally Omitted]........................................................................63
5.6 Inventory Records..............................................................................63
5.7 Location of Chief Executive Office; FEIN.......................................................63
5.8 Due Organization and Qualification; Subsidiaries...............................................63
5.9 Due Authorization; No Conflict.................................................................64
5.10 Litigation.....................................................................................64
5.11 No Material Adverse Change.....................................................................65
5.12 Fraudulent Transfer............................................................................65
5.13 Employee Benefits..............................................................................65
5.14 Environmental Condition........................................................................65
5.15 Brokerage Fees.................................................................................65
5.16 Intellectual Property..........................................................................65
5.17 Leases/Warehouse...............................................................................66
5.18 DDAs...........................................................................................66
5.19 Complete Disclosure............................................................................66
5.20 Indebtedness...................................................................................66
5.21 Reserved.......................................................................................67
5.22 Material Agreements............................................................................67
5.23 Credit Card Processors.........................................................................67
6. AFFIRMATIVE COVENANTS...................................................................................67
6.1 Accounting System..............................................................................67
6.2 Collateral Reporting...........................................................................67
6.3 Financial Statements, Reports, Certificates....................................................68
6.4 [Intentionally Omitted]........................................................................70
6.5 Return.........................................................................................70
6.6 Maintenance of Properties......................................................................71
6.7 Taxes..........................................................................................71
6.8 Insurance......................................................................................71
6.9 [Intentionally Omitted]........................................................................72
6.10 Compliance with Laws...........................................................................72
6.11 Leases.........................................................................................72
6.12 Brokerage Commissions..........................................................................72
6.13 Existence......................................................................................72
6.14 Environmental..................................................................................72
6.15 Disclosure Updates.............................................................................73
7. NEGATIVE COVENANTS......................................................................................73
7.1 Indebtedness...................................................................................73
7.2 Liens..........................................................................................74
7.3 Restrictions on Fundamental Changes............................................................74
7.4 Disposal of Assets.............................................................................75
7.5 Change Name....................................................................................75
7.6 Guarantee......................................................................................75
7.7 Nature of Business.............................................................................75
7.8 Payments, Prepayments and Amendments...........................................................75
7.9 Change of Control..............................................................................76
7.10 Consignments...................................................................................76
7.11 Distributions..................................................................................76
7.12 Accounting Methods.............................................................................77
7.13 Investments....................................................................................77
7.14 Transactions with Affiliates...................................................................77
7.15 Suspension.....................................................................................77
7.17 Use of Proceeds: Parent Loans and Shoes.com Loan...............................................77
7.18 Use of Proceeds: Advances......................................................................77
7.19 Change in Location of Chief Executive Office...................................................78
7.20 Securities Accounts............................................................................78
7.21 Inactive Subsidiary............................................................................78
7.22 Financial Covenants............................................................................78
7.23 Material Agreements............................................................................80
8. EVENTS OF DEFAULT.......................................................................................80
9. THE LENDER GROUP'S RIGHTS AND REMEDIES..................................................................83
9.1 Rights and Remedies............................................................................83
9.2 Remedies Cumulative............................................................................84
10. TAXES AND EXPENSES......................................................................................84
11. WAIVERS; INDEMNIFICATION................................................................................84
11.1 Demand; Protest; etc...........................................................................84
11.2 The Lender Group's Liability for Collateral....................................................84
11.3 Indemnification................................................................................84
12. NOTICES. 84
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..............................................................84
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..............................................................84
14.1 Assignments and Participations.................................................................84
14.2 Successors.....................................................................................84
15. AMENDMENTS; WAIVERS.....................................................................................84
15.1 Amendments and Waivers.........................................................................84
15.2 Replacement of Holdout Lender..................................................................84
15.3 No Waivers; Cumulative Remedies................................................................84
16. AGENT; THE LENDER GROUP.................................................................................84
16.1 Appointment and Authorization of Agent.........................................................84
16.2 Delegation of Duties...........................................................................84
16.3 Liability of Agent.............................................................................84
16.4 Reliance by Agent..............................................................................84
16.5 Notice of Default or Event of Default..........................................................84
16.6 Credit Decision................................................................................84
16.7 Costs and Expenses; Indemnification............................................................84
16.8 Agent in Individual Capacity...................................................................84
16.9 Successor Agent................................................................................84
16.10 Lender in Individual Capacity..................................................................84
16.11 Withholding Taxes..............................................................................84
16.12 Collateral Matters.............................................................................84
16.13 Restrictions on Actions by Lenders; Sharing of Payments........................................84
16.14 Agency for Perfection..........................................................................84
16.15 Payments by Agent to the Lenders...............................................................84
16.16 Concerning the Collateral and Related Loan Documents...........................................84
16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information........................................................................84
16.18 Several Obligations; No Liability..............................................................84
16.19 Legal Representation of Agent..................................................................84
17. GENERAL PROVISIONS......................................................................................84
17.1 Effectiveness..................................................................................84
17.2 Section Headings...............................................................................84
17.3 Interpretation.................................................................................84
17.4 Severability of Provisions.....................................................................84
17.5 Amendments in Writing..........................................................................84
17.6 Counterparts; Telefacsimile Execution..........................................................84
17.7 Revival and Reinstatement of Obligations.......................................................84
17.8 Integration....................................................................................84
EXHIBITS AND SCHEDULES
Exhibit A-1 ......... Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule A-1 Agent's Account
Schedule B-1 Designated Account
Schedule C-1 Commitments
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule 2.8(a) Cash Management Banks
Schedule 5.7 Chief Executive Office; FEIN
Schedule 5.8(b) Capitalization of Borrower
Schedule 5.8(c) Capitalization of Borrower's
Subsidiaries
Schedule 5.10 Litigation
Schedule 5.14 Environmental Matters
Schedule 5.16 Intellectual Property
Schedule 5.18 Demand Deposit Accounts
Schedule 5.20 Permitted Indebtedness
Schedule 5.23 Credit Card Processors
Schedule A-1
Agent's Account
Account number 323-266193 maintained by Agent with JPMorgan Chas Bank, Funds
Transfer Services, 4 New York Plaza, 15th Floor, New York, New York 10004, ABA #
021000021, Credit to Wells Fargo Retail Finance II, LLC.
Schedule B-1
Designated Account
Account number 4100-168079 of Borrower maintained with the Designated Account
Bank, or such other deposit account of Borrower (located within the United
States) that has been designated as such, in writing, by Borrower to Agent.
Schedule C-1
Commitments
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Lender Commitment
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Wells Fargo Retail Finance II, LLC Initially $17,500,000 and
$20,000,000 if Maximum Revolver
Amount is increased by Borrower in
accordance with the terms of the
Loan Agreement
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All Lenders Initially $17,500,000 and
$20,000,000 if Maximum Revolver
Amount is increased by Borrower in
accordance with the terms of the
Loan Agreement
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