EXHIBIT 10.13
AMENDED AND RESTATED
REVOLVING CREDIT
AND
SECURITY AGREEMENT
GMAC COMMERCIAL FINANCE LLC,
(AS AGENT)
AND
CONGRESS FINANCIAL CORPORATION (FLORIDA),
(AS DOCUMENTATION AGENT)
AND
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME
(AS LENDERS),
WITH
PERFUMANIA, INC.,
PERFUMANIA PUERTO RICO, INC.,
MAGNIFIQUE PARFUMES AND COSMETICS, INC.
AND
TEN KESEF II, INC.,
(BORROWERS)
DATED AS OF MAY 12, 2004
TABLE OF CONTENTS
1. DEFINITIONS..............................................................................1
1.1 Accounting Terms................................................................1
1.2 General Terms...................................................................2
1.3 Uniform Commercial Code Terms..................................................18
1.4 Certain Matters of Construction................................................18
2. ADVANCES, PAYMENTS......................................................................18
2.1(a) TOTAL REVOLVING ADVANCES......................................................18
(b) Discretionary Rights..................................................18
(c) Inventory Sublimits...................................................19
2.2 Procedure for Borrowing Revolving Advances.....................................19
2.3 Disbursement of Advance Proceeds...............................................20
2.4 Repayment of Advances..........................................................21
2.5 Repayment of Excess Advances...................................................21
2.6 Statement of Account...........................................................21
2.7 Letters of Credit..............................................................22
2.8 Issuance of Letters of Credit..................................................22
2.9 Requirements For Issuance of Letters of Credit.................................22
2.10 Additional Payments............................................................23
2.11 Manner of Borrowing and Payment................................................23
2.12 Use of Proceeds................................................................25
2.13 Joint and Several Liability....................................................25
2.14 Defaulting Lender..............................................................26
3. INTEREST AND FEES.......................................................................27
3.1 Interest.......................................................................27
3.2 Letter of Credit Fees..........................................................27
3.3 Facility Fee...................................................................28
3.4 Computation of Interest and Fees...............................................28
3.5 Maximum Charges................................................................28
3.6 Increased Costs................................................................28
3.7 Basis For Determining Interest Rate Inadequate or Unfair.......................29
3.8 Capital Adequacy...............................................................30
4. COLLATERAL: GENERAL TERMS...............................................................30
4.1 Security Interest in the Collateral............................................30
4.2 Perfection of Security Interest................................................30
4.3 Disposition of Collateral......................................................34
4.4 Preservation of Collateral.....................................................34
4.5 Ownership of Collateral........................................................34
(i)
4.6 Defense of Agent's and Lender's Interests......................................35
4.7 Books and Records..............................................................35
4.8 Financial Disclosure...........................................................35
4.9 Compliance with Laws...........................................................36
4.10 Inspection of Premises.........................................................36
4.11 Insurance......................................................................36
4.12 Failure to Pay Insurance.......................................................37
4.13 Payment of Taxes...............................................................37
4.14 Payment of Leasehold Obligations...............................................37
4.15 Accounts.......................................................................38
(a) Nature of Accounts....................................................38
(b) Solvency of Customers................................................ 38
(c) Locations of Borrower.................................................38
(d) Collection of Accounts................................................38
(e) Notification of Assignment of Accounts................................38
(f) Power of Agent to Act on Borrowers' Behalf............................38
(g) No Liability..........................................................39
(h) Establishment of a Lockbox Account, Dominion Account..................39
(i) Adjustments...........................................................41
4.16 Inventory......................................................................41
4.17 Maintenance of Equipment.......................................................41
4.18 Exculpation of Liability.......................................................41
4.19 Environmental Matters..........................................................42
4.20 Financing Statements...........................................................44
5. REPRESENTATIONS AND WARRANTIES..........................................................44
5.1 Authority......................................................................44
5.2 Formation and Qualification....................................................44
5.3 Survival of Representations and Warranties.....................................45
5.4 Tax Returns....................................................................45
5.5 Financial Statements...........................................................45
5.6 Corporate Name.................................................................46
5.7 O.S.H.A. and Environmental Compliance..........................................46
5.8 Solvency; No Litigation, Violation, Indebtedness or Default....................46
5.9 Patents, Trademarks, Copyrights and Licenses...................................47
5.10 Licenses and Permits...........................................................48
5.11 Default of Indebtedness........................................................48
5.12 No Default.....................................................................48
5.13 No Burdensome Restrictions.....................................................48
5.14 No Labor Disputes..............................................................48
5.15 Margin Regulations.............................................................48
5.16 Investment Company Act.........................................................49
5.17 Disclosure.....................................................................49
5.18 Subordinated Debt Documentation................................................49
5.19 Swaps..........................................................................49
5.20 Conflicting Agreements.........................................................49
5.21 Application of Certain Laws and Regulations....................................49
5.22 Business and Property of Borrowers.............................................49
5.23 Credit Card Agreements.........................................................49
(ii)
6. AFFIRMATIVE COVENANTS...................................................................50
6.1 Payment of Fees................................................................50
6.2 Conduct of Business and Maintenance of Existence and Assets....................50
6.3 Violations.....................................................................51
6.4 Government Receivables.........................................................51
6.5 Fixed Charge Coverage Ratio....................................................51
6.6 Minimum EBITDA.................................................................51
6.7 Minimum Undrawn Availability...................................................52
6.8 Execution of Supplemental Instruments..........................................52
6.9 Payment of Indebtedness........................................................52
6.10 Standards of Financial Statements..............................................52
6.11 Credit Card Agreements.........................................................52
7. NEGATIVE COVENANTS......................................................................53
7.1 Merger, Consolidation, Acquisition and Sale of Assets..........................53
7.2 Creation of Liens..............................................................53
7.3 Guarantees.....................................................................53
7.4 Investments....................................................................53
7.5 Loans..........................................................................53
7.6 Capital Expenditures...........................................................54
7.7 Dividends......................................................................54
7.8 Indebtedness...................................................................54
7.9 Nature of Business.............................................................54
7.10 Transactions with Affiliates...................................................54
7.11 Leases.........................................................................54
7.12 Subsidiaries...................................................................54
7.13 Fiscal Year and Accounting Changes.............................................55
7.14 Pledge of Credit...............................................................55
7.15 Amendment of Articles of Incorporation, By-Laws................................55
7.16 Compliance with ERISA..........................................................55
7.17 Subordinated Note..............................................................55
7.18 Prepayment of Indebtedness.....................................................55
7.19 Additional Loans and Investments by Original Owner.............................55
8. CONDITIONS PRECEDENT....................................................................56
8.1 Conditions to Initial Advances.................................................56
(a) Filings, Registrations and Recordings.................................56
(b) Corporate Proceedings of Borrowers and Guarantor......................56
(c) Incumbency Certificates of Borrowers and Guarantor....................56
(d) Certificates..........................................................56
(iii)
(e) Good Standing Certificates............................................57
(f) No Litigation.........................................................57
(g) Financial Condition Certificates......................................57
(h) Collateral Examination................................................58
(i) Fees..................................................................58
(j) Pro Forma Financial Statements and Other Financial Information........58
(k) Other Documents.......................................................58
(l) Subordination Agreement...............................................58
(m) Insurance.............................................................58
(n) Payment Instructions..................................................58
(o) Blocked Accounts......................................................58
(p) Consents..............................................................58
(q) Financial Statements..................................................59
(r) No Adverse Material Change............................................59
(s) Leasehold Agreements..................................................59
(t) Subordinated Debt Documentation.......................................59
(u) Guarantees and Other Documents........................................59
(v) Contract Review.......................................................59
(w) Closing Certificate...................................................59
(x) Borrowing Base........................................................59
(y) Business Plan and Projections.........................................59
(z) Undrawn Availability..................................................60
(aa) Other.................................................................60
8.2 Conditions to Each Advance.....................................................60
(a) Representations and Warranties........................................60
(b) No Default............................................................60
(c) Maximum Advances......................................................60
9. INFORMATION AS TO BORROWERS.............................................................60
9.1 Disclosure of Material Matters.................................................60
9.2 Schedules......................................................................61
9.3 Environmental Reports..........................................................61
9.4 Litigation.....................................................................61
9.5 Material Occurrences...........................................................61
9.6 Government Receivables.........................................................62
9.7 Annual Financial Statements....................................................62
9.8 Monthly Financial Statements...................................................62
9.9 Borrowing Base Certificate.....................................................63
9.10 Other Reports..................................................................63
9.11 Additional Information.........................................................63
9.12 Projected Operating Budget.....................................................63
9.13 Variances From Operating Budget................................................63
9.14 Notice of Suits, Adverse Events................................................63
9.15 ERISA Notices and Requests.....................................................64
9.16 Additional Documents...........................................................64
(iv)
10. EVENTS OF DEFAULT.......................................................................64
11. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..............................................67
11.1 Rights and Remedies............................................................67
11.2 Agent's Discretion.............................................................68
11.3 Setoff.........................................................................68
11.4 Rights and Remedies not Exclusive..............................................68
12. WAIVERS AND JUDICIAL PROCEEDINGS........................................................68
12.1 Waiver of Notice...............................................................68
12.2 Delay..........................................................................69
12.3 JURY TRIAL WAIVER..............................................................69
13. EFFECTIVE DATE AND TERMINATION..........................................................69
13.1 Term...........................................................................69
13.2 Termination....................................................................69
14. REGARDING AGENT.........................................................................70
14.1 Appointment....................................................................70
14.2 Nature of Duties...............................................................70
14.3 Lack of Reliance on Agent and Resignation......................................71
14.4 Certain Rights of Agent........................................................71
14.5 Reliance.......................................................................72
14.6 Notice of Default..............................................................72
14.7 Indemnification................................................................72
14.8 Agent in its Individual Capacity...............................................72
14.9 Delivery of Documents..........................................................72
14.10 Borrowers' Undertaking to Agent................................................72
14.11 Documentation Agent............................................................73
15. INTERRELATED BUSINESSES; BORROWING AGENCY...............................................73
15.1 Interrelated Businesses........................................................73
15.2 Borrowing Agency Provisions....................................................73
15.3 Waiver of Subrogation..........................................................74
16. MISCELLANEOUS...........................................................................74
16.1 Governing Law..................................................................74
16.2 Amended and Restated Agreement; Amendments to Other Documents..................75
16.3 Entire Understanding...........................................................75
16.4 Successors and Assigns; Participations; New Lenders............................76
16.5 Application of Payments........................................................77
16.6 Indemnity......................................................................77
(v)
16.7 Notice.........................................................................78
16.8 Survival.......................................................................79
16.9 Severability...................................................................79
16.10 Expenses.......................................................................79
16.11 Injunctive Relief..............................................................79
16.12 Consequential Damages..........................................................79
16.13 Captions.......................................................................79
16.14 Counterparts; Telecopied Signatures............................................79
16.15 Construction...................................................................80
16.16 Confidentiality................................................................80
(vi)
346115.9
EXHIBITS AND SCHEDULES
Exhibit A Borrowing Base Certificate
Exhibit 5.5(b) Projections
Exhibit 16.4 Commitment Transfer Supplement
Schedule 1.2 Permitted Liens
Schedule 4.2(b) Chattel Paper
Schedule 4.2(d) Deposit Accounts
Schedule 4.2(e) Investment Property
Schedule 4.2(h) Letter of Credit; Bankers Acceptances; or
similar instruments
Schedule 4.2(i) Commercial Tort Claims
Schedule 4.2(j) Collateral in the Custody or Control of Third Parties
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Chief Executive Offices
Schedule 5.2(a) Organizational Information and Qualifications
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Trade Names
Schedule 5.8(b) Pending Litigation
Schedule 5.8(d) Employee Benefit Plans
Schedule 5.9 Intellectual Property
Schedule 5.10 Licenses or Permits
Schedule 5.14 Labor Disputes
Schedule 5.23 Credit Card Agreements
Schedule 7.3 Guarantees
Schedule 7.5 Loans
Schedule 7.8 Permitted Indebtedness
AMENDED AND RESTATED
REVOLVING CREDIT
AND
SECURITY AGREEMENT
Amended and Restated Revolving Credit and Security Agreement dated as of
May __, 2004 (this "Agreement") by and among PERFUMANIA, INC., a corporation
organized under the laws of the State of Florida ("Perfumania"), TEN KESEF II,
INC., a corporation organized under the laws of the State of Florida ("Ten
Kesef"), PERFUMANIA PUERTO RICO, INC., a corporation organized under the laws of
the Commonwealth of Puerto Rico ("Perfumania-Puerto Rico"), and MAGNIFIQUE
PARFUMES AND COSMETICS, INC., a corporation organized under the laws of the
State of Florida ("Magnifique"; and together with Perfumania, Ten Kesef and
Perfumania-Puerto Rico, each individually, a "Borrower" and collectively, the
"Borrowers"), the undersigned financial institutions (collectively, the
"Lenders" and individually a "Lender"), GMAC COMMERCIAL FINANCE LLC, as
successor by merger with GMAC Commercial Credit LLC ("GMAC CF"), a limited
liability company formed under the laws of the State of Delaware, as agent for
Lenders (GMAC CF, in such capacity, the "Agent"), and CONGRESS FINANCIAL
CORPORATION (FLORIDA), a corporation organized under the laws of the State of
Florida, as documentation agent (in such capacity, the "Documentation Agent").
WHEREAS, GMAC CF has previously entered into a Revolving Credit and
Security Agreement dated as of May 12, 2000 with Borrowers (as thereafter
amended, restated, renewed, extended, substituted, supplemented or otherwise
modified, collectively, prior to the date of this Agreement, the "Existing
Agreement"); and
WHEREAS, Borrowers have requested that the Existing Agreement be amended,
and Agent, Documentation Agent and Lenders have agreed to do so, subject to the
terms and conditions set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and undertakings
herein contained, each of the Borrowers, Agent, Documentation Agent and Lenders
hereby agree as follows:
1. DEFINITIONS
1.1 ACCOUNTING TERMS. As used in this Agreement or any certificate, report
or other document made or delivered pursuant to this Agreement, accounting terms
not defined in Section 1.2 or elsewhere in this Agreement and accounting terms
partly defined in Section 1.2 to the extent not defined, shall have the
respective meanings given to them under GAAP, provided, however, whenever such
accounting terms are used for the purposes of determining compliance with
financial covenants in this Agreement, except as limited in these definitions,
such accounting terms shall be defined in accordance with GAAP applied in
preparation of the audited financial statements of Borrowers.
1.2 GENERAL TERMS. For purposes of this Agreement the following terms
shall have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7 hereof.
"Accounts" shall mean all present and future rights of Borrowers to
payment of a monetary obligation, whether or not earned by performance, which is
not evidenced by chattel paper or an instrument, (a) for property that has been
or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for
services rendered or to be rendered, (c) for a secondary obligation incurred or
to be incurred, or (d) arising out of the use of a credit or charge card or
information contained on or for use with the card.
"Advances" shall mean and include the Revolving Advances and Letters of
Credit.
"Affiliate" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or executive officer of such Person, of any Subsidiary of such Person or of any
Person described in CLAUSE (A) above. For purposes of this definition, control
of a Person shall mean the power, direct or indirect, (x) to vote ten percent
(10%) or more of the securities having ordinary voting power for the election of
directors of such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to this Agreement
and shall include its successors and assigns.
"Agent's security interest" or words of similar import shall have the
meaning set forth in Section 4.1 hereof.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
the higher of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Rate in effect on such day plus one half of one percent (1/2 %).
"Applicable Margin for Domestic Rate Loans" for any given month, (a) for
the period commencing on the Closing Date and ending on the last day of the
calendar month during which Agent has received Borrowers' audited financial
statements for fiscal year ending January 31, 2004, the Applicable Margin for
Domestic Rate Loans shall be 0.5%; and (b) for the period commencing on the
first day of the month following Agent's receipt of Borrowers' audited financial
statements for fiscal year ending January 31, 2004 and at all times thereafter
for the balance of the Term, if the Borrowers' Leverage Ratio as at the last day
of Borrowers' immediately preceding fiscal quarter (as determined from the
Borrowers' financial statements most recently delivered in accordance with
Section 9.8 hereof), is (i) greater than or equal to 6.0:1, then the Applicable
Margin for Domestic Rate Loans for such month shall be 1.25%; (ii) greater than
or equal to 5.0:1 but less than 6.0:1, then the Applicable Margin for Domestic
Rate Loans for such month shall be 1.00%; (iii) greater than or equal to 4.0:1
but less than 5.0:1, then the Applicable Margin for Domestic Rate Loans for such
month shall be 0.5%; or (iv) less than 4.0:1, then the Applicable Margin for
Domestic Rate Loans for such month shall be 0.0%.
2
"Applicable Margin for LIBOR Rate Loans" shall mean, for any given month,
(a) for the period commencing on the Closing Date and ending on the last day of
the calendar month during which Agent has received Borrowers' audited financial
statements for fiscal year ending January 31, 2004, the Applicable Margin for
LIBOR Rate Loans shall be 3.0%; and (b) for the period commencing on the first
day of the month following Agent's receipt of Borrowers' audited financial
statements for fiscal year ending January 31, 2004 and at all times thereafter
for the balance of the Term, if the Borrowers' Leverage Ratio as at the last day
of Borrowers' immediately preceding fiscal quarter (as determined from the
Borrowers' financial statements most recently delivered in accordance with
Section 9.8 hereof), is (i) greater than or equal to 6.0:1, then the Applicable
Margin for LIBOR Rate Loans for such month shall be 3.75%; (ii) greater than or
equal to 5.0:1 but less than 6.0:1, then the Applicable Margin for LIBOR Rate
Loans for such month shall be 3.50%; (iii) greater than or equal to 4.0:1 but
less than 5.0:1, then the Applicable Margin for LIBOR Rate Loans for such month
shall be 3.00%; (iv) greater than or equal to 3.0:1 but less than 4.0:1, then
the Applicable Margin for LIBOR Rate Loans for such month shall be 2.75%; or (v)
less than 3.0:1, then the Applicable Margin for LIBOR Rate Loans for such month
shall be 2.50%. The Applicable Margin for LIBOR Rate Loans shall be determined
based upon the Applicable Margin for LIBOR Rate Loans in effect as of the
commencement of any Interest Period and, notwithstanding anything to the
contrary contained herein, the Applicable Margin for LIBOR Rate Loans in effect
as of the commencement of each Interest Period shall remain the Applicable
Margin for LIBOR Rate Loans for the entire Interest Period.
"Armored Car Companies" shall mean collectively, Safe & Sound Armed
Courier, Inc. and Dunbar Armored, Inc., and their respective successors and
assigns or any other armored car service selected by a Borrower after the date
hereof after prior written notice to Agent and reasonably acceptable to Agent.
"Authority" shall have the meaning set forth in Section 4.19(c).
"Bank" shall mean The Bank of New York, and its successors and assigns.
"Blocked Accounts" shall have the meaning set forth in Section 4.15(h).
"Borrower" or "Borrowers" shall have the meanings set forth in the
preamble to this Agreement and shall extend to all permitted successors and
assigns of such Persons.
"Borrowers on a Consolidated Basis" except to the extent limited in this
definition, shall mean the consolidation in accordance with GAAP of the accounts
or other items of Borrowers. Presentations of financial information for the
Borrowers on a Consolidated Basis shall be consolidated from the applicable
audited or unaudited consolidating financial statements of E Com Ventures, Inc.
Financial information shall not include footnote disclosure required by GAAP
with respect to the Borrowers on a Consolidated Basis, but shall be deemed to
include the footnote disclosure contained in E Com Ventures, Inc.'s related
audited or unaudited financial statements as it relates to such disclosure
related to Borrowers on a Consolidated Basis.
"Borrowing Agent" shall mean Perfumania, Inc. and its permitted successors
and assigns.
3
"Borrowing Base Certificate" shall mean the borrowing base certificate,
substantially in the form of EXHIBIT A hereto, as such form may from time to
time be reasonably modified by Agent.
"Business Day" shall mean with respect to LIBOR Rate Loans, any day on
which commercial banks are open for domestic and international business,
including dealings in Dollar deposits in London, England and New York, New York
and with respect to all other loans, any day other than a day on which
commercial banks in New York are authorized or required by law to close.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.
"Change of Control" shall mean (a) the occurrence of any event (whether in
one or more transactions) which results in a transfer of control of any Borrower
to a Person who is not an Original Owner or (b) any merger or consolidation of
or with any Borrower or sale of all or substantially all of the property or
assets of any Borrower, except that the merger of any Borrower with any other
Borrower or an Original Owner shall not be deemed to be a Change of Control. For
purposes of this definition, "control of Borrower" shall mean the power, direct
or indirect (x) to vote 50% or more of the securities having ordinary voting
power for the election of directors of any Borrower or (y) to direct or cause
the direction of the management and policies of any Borrower by contract or
otherwise; PROVIDED, however, a change of control of the Guarantor shall not be
a Change of Control under this Agreement.
"Change of Ownership" shall mean (a) fifty percent (50%) or more of the
common stock of any Borrower is no longer owned or controlled by (including for
the purposes of the calculation of percentage ownership, any shares of common
stock into which any capital stock of any Borrower held by any of the Original
Owners is convertible or for which any such shares of the capital stock of any
Borrower or of any other Person may be exchanged and any shares of common stock
issuable to such Original Owners upon exercise of any warrants, options or
similar rights which may at the time of calculation be held by such Original
Owners) a Person who is either an Original Owner or an Affiliate of an Original
Owner or (b) any merger, consolidation or sale of substantially all of the
property or assets of any Borrower, except that the merger of any Borrower with
any other Borrower shall not be deemed to be a Change of Ownership.
"Charges" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the PBGC or any environmental agency or
superfund), upon the Collateral, any Borrower or any of its Affiliates or
Subsidiaries.
4
"Closing Date" shall mean the date hereof or such other date as may be
agreed to in writing by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time and the regulations promulgated thereunder.
"Collateral" shall mean and include, with respect to each Borrower:
(a) all Accounts and other Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Subsidiary Stock;
(f) the Leasehold Interests;
(g) all of such Borrower's right, title and interest in and to (i) its
respective goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of such Borrower's rights as a consignor, a consignee,
an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to any Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of such Borrower's contract rights,
rights of payment which have been earned under a contract right, instruments
(including all promissory notes), documents, chattel paper (including all
tangible and electronic chattel paper), warehouse receipts, deposit accounts,
money, securities and investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts), credit balances and other property
of such Borrower now or hereafter held or received by or in transit to Agent or
any Lender or any of Agent or any Lender's Affiliates or at any other depository
or other institution from or for the account of any Borrower whether for
safekeeping, pledge, custody, transmission, collection or otherwise; (vi) if and
when obtained by such Borrower, all real and personal property of third parties
in which such Borrower has been granted a lien or security interest as security
for the payment or enforcement of Receivables and including deposits by and
property of account debtors or other persons securing the obligations of account
debtors; (vii) any other goods, personal property or real property now owned or
hereafter acquired in which such Borrower has expressly granted a security
interest or may in the future grant a security interest to Agent hereunder, or
in any amendment or supplement hereto or thereto, or under any other agreement
between Agent and such Borrower; (viii) all letters of credit, banker's
acceptances and similar instruments and including all letter-of-credit rights;
and (ix) all commercial tort claims, including, without limitation, those
identified on SCHEDULE 4.2(I) hereto;
(h) all Records; and
5
(i) all proceeds and products of (a), (b), (c), (d), (e), (f), (g) or (h)
in whatever form, including, insurance proceeds and all claims against third
parties for loss or damage to or destruction of or other involuntary conversion
of any kind or nature of any or all of the other Collateral.
"Collateral Access Agreement" shall mean an agreement in writing, in form
and substance satisfactory to Agent, from any lessor of premises to a Borrower,
or any other person to whom any Collateral (including Inventory, Equipment,
bills of lading or other documents of title) is consigned or who has custody,
control or possession of any such Collateral or is otherwise the owner or
operator of any premises on which any of such Collateral is located, pursuant to
which such lessor, consignee or other person, inter alia, acknowledges the first
priority security interest of Agent in such Collateral, agrees to waive any and
all claims such lessor, consignee or other person may, at any time, have against
such Collateral, whether for processing, storage or otherwise, and agrees to
permit Agent access to, and the right to remain on, the premises of such lessor,
consignee or other person so as to exercise Agent's rights and remedies and
otherwise deal with such Collateral and, in the case of any consignee or other
person who at any time has custody, control or possession of any Collateral,
acknowledges that it holds and will hold possession of the Collateral for the
benefit of Agent and agrees to follow all instructions of Agent with respect
thereto.
"Collection Period" shall have the meaning set forth in Section 2.4(b)
hereof.
"Commitment Percentage" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 16.4(b) hereof.
"Commitment Transfer Supplement" shall mean a document in the form of
EXHIBIT 16.4 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
"Consents" shall mean, with respect to each Borrower, all filings and all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and other third parties, domestic or foreign,
necessary to carry on any Borrower's business, including, without limitation,
any consents required under all applicable federal, state or other applicable
law.
"Contract Rate" shall mean the Revolving Interest Rate.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.
"Cost" shall mean, as to the Inventory as of any date, the cost of such
Inventory as of such date, determined on a first-in-first-out basis in
accordance with GAAP.
6
"Credit Card Acknowledgments" shall mean, individually and collectively,
the agreements by Credit Card Issuers or Credit Card Processors who are parties
to Credit Card Agreements in favor of Agent acknowledging Agent's first priority
security interest in the monies due and to become due to any Borrower
(including, without limitation, credits and reserves) under the Credit Card
Agreements, and agreeing to transfer all such amounts to the Blocked Accounts,
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
"Credit Card Agreements" shall mean all agreements now or hereafter
entered into by any Borrower with any Credit Card Issuer or any Credit Card
Processor, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, including, but not
limited to, the agreements set forth on SCHEDULE 5.23 hereto.
"Credit Card Issuer" shall mean any person (other than a Borrower) who
issues or whose members issue credit cards, including, without limitation,
MasterCard or VISA bank credit or debit cards or other bank credit or debit
cards issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa
International and American Express, Discover, Diners Club, Carte Blanche and
other non-bank credit or debit cards, including, without limitation, credit or
debit cards issued by or through American Express Travel Related Services
Company, Inc. and Novus Services, Inc.
"Credit Card Processor" shall mean any servicing or processing agent or
any factor or financial intermediary who facilitates, services, processes or
manages the credit authorization, billing transfer and/or payment procedures
with respect to any of any Borrower's sales transactions involving credit card
or debit card purchases by customers using credit cards or debit cards issued by
any Credit Card Issuer (including, but not limited to Citicorp Credit Services,
Inc.)
"Credit Card Receivables" shall mean collectively, (a) all present and
future rights of each Borrower to payment from any Credit Card Issuer, Credit
Card Processor or other third party arising from sales of goods or rendition of
services to customers who have purchased such goods or services using a credit
or debit card and (b) all present and future rights of each Borrower to payment
from any Credit Card Issuer, Credit Card Processor or other third party in
connection with the sale or transfer of Accounts arising pursuant to the sale of
goods or rendition of services to customers who have purchased such goods or
services using a credit card or a debit card, including, but not limited to, all
amounts at any time due or to become due from any Credit Card Issuer or Credit
Card Processor under the Credit Card Agreements or otherwise.
"Customer" shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.
"Default" shall mean an event which, with the giving of notice or passage
of time or both, would constitute an Event of Default.
"Default Rate" shall mean a rate equal to two percent (2%) per annum in
excess of the Contract Rate or the Overadvance Rate, as the case may be.
7
"Defaulting Lender" shall have the meaning set forth in Section 2.14(a)
hereof.
"Deposit Account Control Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Agent, by and among Agent, each Borrower and
any bank at which any deposit account of such Borrower is at any time maintained
which provides that such bank will comply with instructions originated by Agent
directing disposition of the funds in the deposit account without further
consent by such Borrower and such other terms and conditions as Agent may
require, including as to any such agreement with respect to any Blocked Account,
providing that all items received or deposited in the Blocked Accounts are the
property of Agent, that the bank has no lien upon, or right to setoff (except
with regard to the usual and customary charges of the bank for such Blocked
Account Services) against, the Blocked Accounts, the items received for deposit
therein, or the funds from time to time on deposit therein and that the bank
will wire, or otherwise transfer, in immediately available funds, on a daily
basis to the Payment Account all funds received or deposited into the Blocked
Accounts.
"Documents" shall have the meaning set forth in Section 8.1(b) hereof.
"Dollars" and the sign "$" shall mean lawful money of the United States of
America.
"Domestic Rate Loan" shall mean any Advance that bears interest based upon
the Alternate Base Rate.
"EBITDA" shall mean for any given period for Borrowers on a Consolidated
Basis (a) net income (or loss) determined in accordance with GAAP less all
extraordinary gains plus (b) cash payments of taxes, plus (c) cash payments of
interest expense plus (d) depreciation and amortization and other non-cash
expenses during such period (to the extent deducted in the computation of net
income (or loss) for such period).
"Eligible Inventory" shall mean Inventory located in the United States of
America or the Commonwealth of Puerto Rico consisting of finished goods held for
resale in the ordinary course of the business of Borrowers that are acceptable
to Agent based on the criteria set forth below. In general, Eligible Inventory
shall not include (a) packaging and shipping materials; (b) supplies used or
consumed in Borrowers' business; (c) Inventory at premises other than those
owned, leased and/or controlled by a Borrower, (d) Inventory subject to a
security interest or lien in favor of any person other than Agent except those
permitted in this Agreement including Permitted Encumbrances; (e) bill and hold
goods; (f) unserviceable, obsolete or slow moving Inventory; (g) Inventory which
is not subject to the first priority, valid and perfected security interest of
Agent; (h) damaged and/or defective Inventory (i) returned Inventory that is not
held for resale; (j) Inventory to be returned to vendors; (k) Inventory subject
to deposits made by customers for sales of Inventory that has not been
delivered; (l) Inventory held after the applicable expiration date thereof; (m)
samples; and (n) Inventory purchased or sold on consignment. General criteria
for Eligible Inventory may be established and revised from time to time by Agent
in its sole and absolute discretion.
"Environmental Complaint" shall have the meaning set forth in Section
4.19(c) hereof.
8
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include with respect to each Borrower, all of
such Borrower's now owned and hereafter acquired equipment, wherever located,
including machinery, data processing and computer equipment and computer
hardware and software, whether owned or licensed, and including embedded
software, vehicles, tools, furniture, fixtures, all attachments, accessions and
property now or hereafter affixed thereto or used in connection therewith, and
substitutions and replacements thereof, wherever located.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.
"Event of Default" shall mean the occurrence of any of the events set
forth in Article 10 hereof.
"Existing Agreement" shall have the meaning set forth in the preamble to
this Agreement.
"Federal Funds Rate" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next immediately preceding Business
Day) by the Federal Reserve Bank of New York, or if such rate is not so
published for any day which is a Business Day, the average of quotations for
such day on such transactions received by the Bank from three Federal funds
brokers of recognized standing selected by the Bank.
"Fee Letter" shall mean the fee letter dated as of the date hereof among
Borrowers and Agent.
"Fixed Charge Coverage Ratio" shall mean as at the end of each fiscal
quarter, determined with respect to the Borrowers on a Consolidated Basis, the
ratio for any given computation period of (a) EBITDA minus unfinanced capital
expenditures to (b) the sum of (i) the interest expense (including all imputed
interest on capital lease obligations of Borrowers) plus (ii) the aggregate
amount of all scheduled debt repayments (including all imputed principal
payments on capital lease obligations of Borrowers but excluding all Revolving
Advances) plus (iii) cash taxes paid by the Borrowers, in all cases for such
quarter.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"Funded Debt" shall mean for Borrowers on a Consolidated Basis,
liabilities for borrowed money, including, without limitation, undrawn or
unreimbursed Letters of Credit (to the extent such Letters of Credit are not
specifically secured one hundred percent (100%) by cash or cash equivalents) and
capitalized lease obligations, but excluding all liabilities for borrowed money
subordinated to the Obligations of Borrowers to Agent and Lenders hereunder.
9
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"General Intangibles" shall mean and include as to each Borrower all of
such Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action, corporate
or other business records, patents, patent rights, patent applications,
equipment formulations, manufacturing procedures, quality control procedures,
trademarks, service marks, service mark applications, goodwill (including any
goodwill associated with any trademark or the license of any trademark),
copyrights, works which are the subject matter of copyrights, rights in works of
authorship, copyright registrations, inventions, trade secrets, formulae,
processes, compounds, drawings, designs, blueprints, surveys, reports, manuals
and operating standards, design rights, registrations, licenses, franchises,
customer lists, tax refunds, tax refund claims, computer programs, domaine
names, domaine name registrations, software and contract rights relating to
software, all claims under guaranties, security interests or other security held
by or granted to such Borrower to secure payment of any of the Accounts by a
Customer, all rights of indemnification and all other intangible property of
every kind and nature (other than Receivables).
"GMAC CF" shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Governmental Body" shall mean any nation or government, any state or
other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Guarantor" shall mean E Com Ventures, Inc. and any other Person that at
any time executes a Guaranty.
"Guaranty" shall mean individually and collectively, each guaranty of the
obligations of Borrowers executed by a Guarantor in favor of Agent and Lenders.
"Hazardous Discharge" shall have the meaning set forth in Section 4.19(c)
hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.
10
"Indebtedness" of a Person at a particular date shall mean all obligations
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.
"Interest Period" shall mean the period provided for any LIBOR Rate Loan
pursuant to Section 2.2(c).
"Inventory" shall mean and include, with respect to each Borrower, all of
such Borrower's now owned and hereafter existing or acquired goods, wherever
located, which (a) are leased by such Borrower as lessor; (b) are held by such
Borrower for sale or lease or to be furnished under a contract of service; (c)
are furnished by such Borrower under a contract of service; or (d) consist of
raw materials, work in process, finished goods or materials used or consumed in
its business.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(i) hereof.
"Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, each
Borrower and any securities intermediary, commodity intermediary or other person
who has custody, control or possession of any investment property of such
Borrower acknowledging that such securities intermediary, commodity intermediary
or other person has custody, control or possession of such investment property
on behalf of Agent, that it will comply with entitlement orders originated by
Agent with respect to such investment property, or other instructions of Agent,
or (as the case may be) apply any value distributed on account of any commodity
contract as directed by Agent, in each case, without the further consent of such
Borrower and including such other terms and conditions as Agent may require.
"Leasehold Interests" shall mean all of Borrowers' present and future
right, title and interest in and to any leased premises.
"Lender" and "Lenders" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which is a transferee,
successor or assign of any Lender.
"Letters of Credit" shall have the meaning set forth in Section 2.7.
"Letter of Credit Fees" shall have the meaning set forth in Section 3.2
hereof.
"Leverage Ratio" shall mean as at the end of each fiscal quarter, the
ratio, for any given computation period of (a) Funded Debt to (b) EBITDA.
"LIBOR Rate" shall mean for any LIBOR Rate Loan for the then current
Interest Period relating thereto, the rate per annum quoted by the Bank two (2)
Business Days prior to the first day of such Interest Period for the offering by
the Bank to prime commercial banks in the London interbank Eurodollar market of
Dollar deposits in immediately available funds for a period equal to such
Interest Period and in an amount equal to the amount of such LIBOR Rate Loan.
11
"LIBOR Rate Loan" shall mean an Advance at any time that bears interest
based upon the LIBOR Rate.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charges,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
condition, operations, assets or business prospects of the Borrowers on a
Consolidated Basis, (b) the Borrowers' collective ability to pay the Obligations
in accordance with the terms thereof, (c) the value of the Collateral, the Liens
on the Collateral or the priority of any such Lien or (d) the practical
realization of the benefits of Agent's and Lenders' rights and remedies under
this Agreement and the Other Documents.
"Maximum Loan Amount" shall mean $60,000,000.
"Maximum Revolving Advance Amount" shall mean $60,000,000.
"Monthly Advances" shall have the meaning set forth in Section 3.1 hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Net Orderly Liquidation Value" shall mean the amount equal to the
recovery on the aggregate amount of Inventory at such time on a "store closing
sale" basis or a "going out of business sale" basis as set forth in the most
recent appraisal of Inventory reasonably acceptable to and received by Agent,
net of operating expenses incurred during the period of liquidation, and
liquidation expenses and commissions.
"Obligations" shall mean and include any and all of each Borrower's
Indebtedness and/or liabilities to Agent or Lenders or any Affiliate of Agent or
any Lender of every kind, nature and description, direct or indirect, secured or
unsecured, joint, several, joint and several, absolute or contingent, due or to
become due, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, arising under or in connection with this Agreement,
the Other Documents or any transactions hereunder or thereunder, including, but
not limited to, any and all of any Borrower's Indebtedness and/or liabilities
under this Agreement, the Other Documents or under any other agreement between
Agent or Lenders and any Borrower and all obligations of any Borrower to Agent
or Lenders to perform acts or refrain from taking any action.
12
"Original Owners" shall mean E Com Ventures, Inc., Stephen Nussdorf and
Glenn Nussdorf.
"Other Documents" shall mean the Questionnaire and any and all other
agreements, instruments and documents, including, without limitation, notes,
guaranties, pledges, additional security agreements, powers of attorney,
consents, and all other writings heretofore, now or hereafter executed by any
Borrower and/or delivered by or on behalf of a Borrower to Agent or any Lender
in respect of the transactions contemplated by this Agreement.
"Overadvance" shall have the meaning set forth in Section 3.1 hereof.
"Overadvance Rate" shall mean a per annum rate equal to one percent (1%)
in excess of the applicable Revolving Interest Rate and the Letter of Credit
Fees, as the case may be.
"Parent" of any Person shall mean a corporation or other entity owning,
directly or indirectly, at least fifty percent (50%) of the shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the directors of the Person, or other Persons performing similar functions for
any such Person.
"Payment Account" shall have the meaning set forth in Section 4.15(h)(ii)
hereof.
"Payment Office" shall mean initially 1290 Avenue of the Americas, New
York, New York; thereafter, such other office of Agent, if any, which it may
designate by notice to Borrowing Agent to be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean with respect to each Borrower (a)
Liens in favor of Agent for itself and the ratable benefit of Lenders; (b) Liens
for taxes, assessments or other governmental charges either not delinquent or
being contested in good faith by appropriate proceedings and, in each case, with
respect to which proper reserves have been taken by Borrowers; provided, that,
the Lien shall have no effect on the priority of the Liens in favor of Agent or
the value of the assets in which Agent has such a Lien and a stay of enforcement
of any such Lien shall be in effect; (c) Liens disclosed in the financial
statements referred to in Section 5.5, the existence of which Agent has
consented to in writing; (d) deposits or pledges of cash to secure obligations
under worker's compensation, social security or similar laws, or under
unemployment insurance; (e) deposits or pledges of cash to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of any Borrower's business; (f) judgment Liens
that have been stayed or bonded and mechanics', workers', landlord's
materialmen's or other like Liens arising in the ordinary course of any
Borrower's business with respect to obligations which are not due or which are
being contested in good faith by the applicable Borrower; (g) Liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (i) any such lien shall not encumber any other property
of the Borrowers and (ii) the aggregate amount of Indebtedness secured by such
Liens incurred as a result of such purchases during any fiscal year shall not
exceed the amount provided for in Section 7.6 hereof; (h) Liens or rights of
setoff or credit balances of any Borrower with Credit Card Issuers, but not
Liens on or rights of setoff against any other property or assets of any
Borrower pursuant to the Credit Card Agreements (as in effect on the date
hereof) to secure the obligations of any Borrower to the Credit Card Issuers as
a result of fees and chargebacks; and (i) Liens disclosed on SCHEDULE 1.2
hereto.
13
"Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization association, limited liability company, institution, public benefit
corporation, joint venture, entity or government (whether Federal, state,
county, city, municipal or otherwise, including any instrumentality, division,
agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of Section
3(3) of ERISA, maintained for employees of any Borrower or any member of the
Controlled Group or any such Plan to which any Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"Prepayment Date" shall have the meaning set forth in Section 13.1 hereof.
"Prime Rate" shall mean the prime commercial lending rate of the Bank as
publicly announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by the Bank as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by the Bank to any particular class or category of customers of
the Bank.
"Pro Forma Balance Sheet" shall have the meaning set forth in Section
5.5(a) hereof.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in Section 5.5(b) hereof.
"Purchasing Lender" shall have the meaning set forth in Section 16.4(c)
hereof.
"Questionnaire" shall mean the Documentation Information Questionnaire and
the responses thereto provided by Borrowers and delivered to Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
ss.ss. 6901 et seq., as same may be amended from time to
time.
"Real Property" shall mean, with respect to each Borrower, all of such
Borrower's right, title and interest in and to its owned and leased premises.
"Receivables" shall mean and include, with respect to each Borrower, all
of the following now owned or hereafter arising or acquired property of such
Borrower: (a) all Accounts; (b) all amounts at any time payable to such Borrower
in respect of the sale or other disposition by such Borrower or any Account or
other obligation for the payment of money; (c) all interest, fees, late charges,
penalties, collection fees and other amounts due or to become due or otherwise
payable in connection with any Account; (d) all Credit Card Receivables, and (e)
all payment intangibles of such Borrower and other contract rights, chattel
paper, instruments, notes, and other forms of obligations owing to such
Borrower, whether from the sale and lease of goods or other property, licensing
of any property (including Intellectual Property or other general intangibles),
rendition of services or from loans or advances by such Borrower or to or for
the benefit of any third person (including loans or advances to any Affiliates
or Subsidiaries of such Borrower) or otherwise associated with any Accounts,
Inventory or General Intangibles of such Borrower (including, without
limitation, choses in action, causes of action, tax refunds, tax refund claims,
any funds which may become payable to such Borrower in connection with the
termination of any Plan or other employee benefit plan and any other amounts
payable to such Borrower from any Plan or other employee benefit plan, rights
and claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the lives
of employees on which Borrower is beneficiary).
14
"Records" shall mean, with respect to each Borrower, all of such
Borrower's present and future books of account of every kind or nature, purchase
and sale agreements, invoices, ledger cards, bills of lading and other shipping
evidence, statements, correspondence, memoranda, credit files and other data
relating to the Collateral or any account debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of such Borrower with respect to the foregoing maintained with or by any
other person).
"Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.
"Rent Reserve" shall mean (a) prior to the occurrence of a Default,
$350,000, and (b)after the occurrence of a Default and during its continuance,
$350,000 plus all past due rental payments, services charges and other amounts
due to the owners and lessors of any real property leased by Borrowers.
"Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least sixty-six and
two-thirds percent (66 2/3%) of the Advances, EXCEPT, THAT, at any time the
number of Lenders signatory to this Agreement is equal to two (2) or less,
"Required Lenders" shall mean all Lenders.
"Reserves" shall mean all Obligations then chargeable to any account of
Borrowers, as well as Obligations which may, in Agent's sole discretion, be
chargeable to Borrowers' account thereafter, in each case, without duplication,
by reason of or in connection with any of the following: steamship guarantees;
airway releases; to adjust for audit/examination of Borrowers' accounts(s) or
for any documentation correction; and such additional reserves as Agent in its
sole discretion, exercised in good faith, deems appropriate. In addition to and
not in limitation of the foregoing, Reserves shall include, in Agent's sole
discretion, with respect to Borrowers (a) to reflect events, conditions or
contingencies that, as determined by Agent in it sole discretion, adversely
affect or would adversely affect the security interests and other rights of
Agent in the Collateral (including the enforceability, perfection and priority
thereof), or (b) to reflect Agent's good faith belief that any collateral report
or financial information furnished by or on behalf of Borrowers to Agent is or
may have been incomplete, inaccurate or misleading in any material respect, or
(c) in respect of any state of facts which Agent determines in good faith
constitutes an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default, or (d) to reflect inventory shrinkage, or (e) to
reflect amounts due or to become due in respect of sales, use and/or withholding
taxes, provided, that, a Reserve pursuant to this CLAUSE (E) will only be
established if (i) Undrawn Availability (after giving effect to any reserve for
such amounts) shall be less than $500,000 or (ii) Default or an Event of Default
shall exist or have occurred and be continuing, or (f) the Rent Reserve or (g)
to reflect amounts owing by Borrowers to Credit Card Issuers or Credit Card
Processors in connection with the Credit Card Agreements.
15
"Retail Inventory" shall mean all finished goods Inventory to be sold by
Borrowers at a retail store location owned or leased by Borrowers.
"Revolving Advances" shall mean Advances made other than Letters of
Credit.
"Revolving Interest Rate" shall mean a per annum interest rate on all
Revolving Advances equal to as applicable: (a) with respect to Domestic Rate
Loans, the sum of the Alternate Base Rate plus the Applicable Margin for
Domestic Rate Loans, or (b) with respect to LIBOR Rate Loans, the sum of the
LIBOR Rate plus the Applicable Margin for LIBOR Rate Loans.
"Settlement Date" shall mean the Closing Date and thereafter Friday of
each week (unless such day is not a Business Day in which case it shall be the
next succeeding Business Day) or such other date as Agent may elect.
"Subordinated Debt Payments" shall mean and include all cash actually
expended to make payments of principal and interest on the Subordinated
Indebtedness.
"Subordinated Debt Documentation" shall mean collectively, the Security
Agreement dated as of March 9, 2004 by and among Perfumania and Subordinated
Lender, the Subordinated Note, and all agreements, documents, notes and
instruments at any time executed and/or delivered by any Borrower or any other
person to, with or in favor of Subordinated Lender in connection therewith or
related thereto, as all of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
"Subordinated Indebtedness" shall mean all Indebtedness now or hereafter
due and owing Subordinated Lender by any Borrowers under the Subordinated Debt
Documentation or otherwise.
"Subordinated Lender" shall mean, collectively, Stephen Nussdorf and Glenn
Nussdorf.
"Subordinated Note" shall mean that certain Subordinated Secured Demand
Note, dated March 9, 2004 by Perfumania in favor of Subordinated Lender in the
original principal amount of $5,000,000, as in effect on the date hereof.
"Subordination Agreement" shall mean the Subordination Agreement dated as
of the date hereof among Agent, Lenders, Borrowers and Subordinated Lender.
16
"Subsidiary" shall mean a corporation or other entity of whose shares of
stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean all of the issued and outstanding shares of
stock owned by Perfumania of (a) Ten Kesef, a Florida corporation, (b)
Perfumania-Puerto Rico, a Puerto Rico corporation, and (c) Magnifique, a Florida
corporation.
"Term" shall mean the Closing Date through May __, 2007.
"Termination Event" shall mean with respect to each Borrower (a) a
Reportable Event with respect to any Plan or Multiemployer Plan; (b) the
withdrawal of any Borrower or any member of the Controlled Group from a Plan or
Multiemployer Plan during a plan year in which such entity was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA; (c) the providing of notice
of intent to terminate a Plan in a distress termination described in Section
4041(c) of ERISA; (d) the institution by the PBGC of proceedings to terminate a
Plan or Multiemployer Plan; (e) any event or condition (i) which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan or Multiemployer Plan, or (ii)
that may result in termination of a Multiemployer Plan pursuant to Section 4041A
of ERISA; or (f) the partial or complete withdrawal within the meaning of
Sections 4203 and 4205 of ERISA, of any Borrower or any member of the Controlled
Group from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the Real
Property or the Leasehold Interests which has been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. ss.ss. 2601 et seq., applicable state
law, or any other applicable Federal or state laws now in force or hereafter
enacted relating to toxic substances. "Toxic Substance" includes but is not
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
"Transactions" shall have the meaning set forth in Section 5.5(a) hereof.
"Transferee" shall have the meaning set forth in Section 16.4(b) hereof.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
New York, and any successor statute, as in effect from time to time (except that
terms used herein which are defined in the Uniform Commercial Code as in effect
in the State of New York on the date hereof shall continue to have the same
meaning notwithstanding any replacement or amendment of such statute except as
Agent may otherwise determine).
"Undrawn Availability" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Loan Amount, minus
(b) the outstanding amount of Advances.
"Value" shall mean, as determined by Agent, with respect to Inventory, the
lower of (a) Cost or (b) market value.
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"Week" shall mean the time period commencing with a Wednesday and ending
on the following Tuesday.
"Wholesale Inventory" shall mean all finished goods Inventory of
Borrowers, other than Retail Inventory.
"Working Capital" at a particular date, shall mean the excess, if any,
with respect to the Borrowers on a Consolidated Basis, of Current Assets over
Current Liabilities at such date.
1.3 UNIFORM COMMERCIAL CODE TERMS. All terms used herein and defined in
the UCC shall have the meaning given therein unless otherwise defined herein.
1.4 CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any
instruments or agreements, including, without limitation, references to any of
the Other Documents shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof.
2. ADVANCES, PAYMENTS.
2.1 (A) TOTAL REVOLVING ADVANCES. Subject to the terms and conditions set
forth in this Agreement, including, without limitation, Section 2.1(b), each
Lender, severally and not jointly, will make Revolving Advances to Borrowers in
aggregate amounts outstanding at any time not greater than such Lender's
Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount
less the aggregate undrawn amount of outstanding Letters of Credit or (y) an
amount equal to the sum of:
(i) up to the lesser of (A) 65%, subject to the provisions of
Section 2.1(b), of Eligible Inventory at such time, or (B) 90%, subject to the
provisions of Section 2.1(b), of the Net Orderly Liquidation Value of such
Eligible Inventory at such time (CLAUSES (A) AND (B) collectively, the
"Inventory Advance Rate"), minus
(ii) such Reserves as Agent may reasonably deem proper and necessary
from time to time.
The amount derived from (x) Section 2.1(a)(i) minus (y) Section 2.1(a)(ii) at
any time and from time to time shall be referred to as the "Formula Amount".
(b) DISCRETIONARY RIGHTS. The Inventory Advance Rate may be increased or
decreased by Agent at any time and from time to time in the exercise of its
reasonable discretion. Each Borrower consents to any such increases or decreases
and acknowledges that decreasing the Inventory Advance Rate or increasing the
reserves may limit or restrict Advances requested by a Borrower.
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(c) INVENTORY SUBLIMITS. Notwithstanding anything to the contrary set
forth herein, Borrowers hereby acknowledge, confirm and agree that the maximum
amount of Wholesale Inventory which may be considered Eligible Inventory for
advance purposes hereunder shall not exceed, at any given time, the aggregate
amount of $11,000,000.
2.2 PROCEDURE FOR BORROWING REVOLVING ADVANCES.
(a) Borrowing Agent, on behalf of Borrowers, may notify Agent prior
to 11:00 a.m. on a Business Day of Borrowers' request to incur, on that day, a
Revolving Advance hereunder. Such request shall indicate the amount of the
requested Revolving Advance. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Agent or any Lender, or with respect to any other Obligation,
become due, same shall to the extent not otherwise paid be deemed a request for
a Revolving Advance bearing interest at the rate applicable to Domestic Rate
Loans as of the date such payment is due, in the amount required to pay in full
such interest, fee, charge or Obligation under this Agreement or any other
agreement with Agent or any Lender, and such request shall be irrevocable.
(b) In the event that Borrowing Agent, on behalf of Borrowers
desires to obtain a LIBOR Rate Loan, Borrowing Agent shall give Agent at least
three (3) Business Days' prior written notice, specifying (i) the date of the
proposed borrowing (which shall be a Business Day), (ii) the amount on the date
of such LIBOR Rate Loan to be borrowed, which amount shall be in a minimum
amount of $100,000 and in integral multiples of $100,000 in excess thereof, and
(iii) the duration of the first Interest Period therefor. Interest Periods for
LIBOR Rate Loans shall be for one, two, three or six months. The aggregate
amount of LIBOR Rate Loans shall not exceed eighty percent (80%) of the
aggregate amount of outstanding Advances at any time, and there shall not be at
any time outstanding, more than six (6) LIBOR Rate Loans, in the aggregate. No
LIBOR Rate Loan shall be made available to any Borrower during the continuance
of a Default or an Event of Default.
(c) Each Interest Period of a LIBOR Rate Loan shall commence on the
date such LIBOR Rate Loan is made and shall end on such date as Borrowing Agent
may elect as set forth in (b)(iii) above provided that the exact length of each
Interest Period shall be determined in accordance with the practice of the
interbank market for offshore Dollar deposits and no Interest Period shall end
after the last day of the Term hereof.
(d) Borrowing Agent shall elect the initial Interest Period
applicable to a LIBOR Rate Loan by its notice of borrowing given to Agent
pursuant to Section 2.2(b) or by its notice of conversion given to Agent
pursuant to Section 2.2(e), as the case may be. Borrowing Agent shall elect the
duration of each succeeding Interest Period by giving irrevocable written notice
to Agent of such duration not less than three (3) Business Days prior to the
last day of the then current Interest Period applicable to such LIBOR Rate Loan.
If Agent does not receive timely notice of the Interest Period elected by
Borrowing Agent, any Borrower shall be deemed to have elected to convert to a
Domestic Rate Loan subject to Section 2.2(f) herein below.
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(e) Provided that no Event of Default shall have occurred and be
continuing, any Borrower may, on the last Business Day of the then current
Interest Period applicable to any outstanding LIBOR Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a LIBOR Rate Loan shall be made only on the last Business Day of
the then current Interest Period applicable to such LIBOR Rate Loan. If any
Borrower desires to convert a loan, Borrowing Agent shall give Agent not less
than three (3) Business Days' prior written notice to convert from a Domestic
Rate Loan to a LIBOR Rate Loan or one (1) Business Day's prior written notice to
convert from a LIBOR Rate Loan to a Domestic Rate Loan, specifying the date of
such conversion, the loans to be converted and if the conversion is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor. After giving effect to each such conversion, there shall not be
outstanding more than six (6) LIBOR Rate Loans, in the aggregate.
(f) Each Borrower and Guarantor shall indemnify Agent and Lenders
and hold Agent and Lenders harmless from and against any and all losses or
expenses that Agent and Lenders may sustain or incur as a consequence of any
prepayment, conversion of or any default by any Borrower in the payment of the
principal of or interest on any LIBOR Rate Loan or failure by any Borrower to
complete a borrowing of, a prepayment of or conversion of or to a LIBOR Rate
Loan after notice thereof has been given, including, but not limited to, any
interest payable by Agent or Lenders to lenders of funds obtained by it in order
to make or maintain its LIBOR Rate Loans hereunder. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by Agent
or any Lender to Borrowing Agent shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof, if any applicable
law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any LIBOR Rate Loans) to make or maintain its
LIBOR Rate Loans, the obligation of Lenders to make LIBOR Rate Loans hereunder,
as the case may be, shall forthwith be cancelled and Borrowing Agent, on behalf
of Borrowers, shall, if any affected LIBOR Rate Loans are then outstanding,
promptly upon request from Agent, either pay all such affected LIBOR Rate Loans
or convert such affected LIBOR Rate Loans into loans of another type. If any
such payment or conversion of any LIBOR Rate Loan is made on a day that is not
the last day of the Interest Period applicable to such LIBOR Rate Loan,
Borrowers shall pay Agent, upon Agent's request, such amount or amounts as may
be necessary to compensate Lenders for any loss or expense sustained or incurred
by Lenders in respect of such LIBOR Rate Loan as a result of such payment or
conversion, including (but not limited to) any interest or other amounts payable
by Lenders to lenders of funds obtained by Lenders in order to make or maintain
such LIBOR Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent shall
be conclusive absent manifest error.
2.3 DISBURSEMENT OF ADVANCE PROCEEDS. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers' account on Agent's books. During the Term,
Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions of this Agreement.
The proceeds of each Revolving Advance requested by Borrowers or deemed to have
been requested by Borrowers under Section 2.2(a) hereof shall, with respect to
requested Revolving Advances to the extent Lenders make such Revolving Advances,
be made available to the applicable Borrower on the day so requested by way of
credit to such Borrower's operating account at The Bank of New York, or such
other bank as Borrowing Agent may designate following notification to Agent, in
federal funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested by any Borrower, be disbursed to Agent to
be applied to the outstanding Obligations giving rise to such deemed request.
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2.4 REPAYMENT OF ADVANCES.
(a) The Advances shall be due and payable in full on the last day of
the Term subject to earlier prepayment as herein provided.
(b) Each Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrowers' account as
of the Business Day on which Agent receives those items of payment, each
Borrower agrees that, in computing the charges under this Agreement, all items
of payment shall be deemed applied by Agent on account of the Obligations one
(1) Business Day after confirmation to Agent by the Blocked Account bank, as
provided for in Section 4.15(h) hereof (the "Collection Period"), that such
items of payment have been collected in good funds and finally credited to
Agent's account. Agent is not, however, required to credit Borrowers' account
for the amount of any item of payment which is unsatisfactory to Agent and Agent
may charge Borrowers' account for the amount of any item of payment which is
returned to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the related agreements shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New York Time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrowers'
account or by making Advances as provided in Section 2.2 hereof.
(d) Borrowers shall pay principal, interest, and all other amounts
payable hereunder, or under any Other Documents, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.5 REPAYMENT OF EXCESS ADVANCES. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.6 STATEMENT OF ACCOUNT. Agent shall maintain, in accordance with its
customary procedures, a loan account in the name of Borrowers in which shall be
recorded the date and amount of each Advance made by Lenders and the date and
amount of each payment in respect thereof; provided, however, the failure by
Agent to record the date and amount of any Advance shall not adversely affect
Agent or any Lender. Each month, Agent shall send to Borrowing Agent a statement
showing the accounting for the Advances made, payments made or credited in
respect thereof, and other transactions between Lenders and Borrowers, during
such month. The monthly statements shall be deemed correct and binding upon
Borrowers in the absence of manifest error and shall constitute an account
stated among Lenders and Borrowers unless Agent receives a written statement of
Borrowers' specific exceptions thereto within forty-five (45) days after such
statement is received by Borrowing Agent. The records of Agent with respect to
the loan account shall be prima facie evidence of the amounts of Advances and
other charges thereto and of payments applicable thereto.
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2.7 LETTERS OF CREDIT. Subject to the terms and conditions hereof, Agent
shall issue, or cause Bank to issue, Letters of Credit ("Letters of Credit") on
behalf of any Borrower; provided, however, that Agent will not be required to
issue any Letters of Credit to the extent that the face amount of such Letters
of Credit would then cause the sum of (a) the outstanding Revolving Advances
plus (b) the outstanding Letters of Credit (with the requested Letter of Credit
being deemed to be outstanding for purposes of this calculation) to exceed the
lesser of (i) the Maximum Revolving Advance Amount or (ii) the Formula Amount.
Each Letter of Credit shall be issued for the ratable risk of each Lender
according to its pro rata share of the Advances. Notwithstanding anything to the
contrary contained herein, the maximum amount of outstanding Letters of Credit
shall not exceed $1,000,000 in the aggregate at any time. All disbursements or
payments related to Letters of Credit shall be deemed to be Revolving Advances
and shall bear interest at the Revolving Interest Rate with respect to Domestic
Rate Loans; and Letters of Credit that have not been drawn upon shall not bear
interest.
2.8 ISSUANCE OF LETTERS OF CREDIT.
(a) Borrowing Agent on behalf of Borrowers may request Agent to
issue, or cause Bank to issue, a Letter of Credit by delivering to Agent at the
Payment Office, Agent's standard form of Letter of Credit and Security Agreement
together with Bank's standard form of Letter of Credit Application
(collectively, the "Letter of Credit Application") completed to the satisfaction
of Agent and Bank; and, such other certificates, documents and other papers and
information as Agent and Bank may reasonably request.
(b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts when presented for honor thereunder in accordance
with the terms thereof and when accompanied by the documents described therein
and (ii) have an expiry date not later than twelve (12) months after such Letter
of Credit's date of issuance and in no event later than the last day of the
Term. Each Letter of Credit Application and each Letter of Credit shall be
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, and any
amendments or revision thereof and, to the extent not inconsistent therewith,
the laws of the State of New York.
2.9 REQUIREMENTS FOR ISSUANCE OF LETTERS OF CREDIT.
(a) In connection with the issuance of any Letter of Credit,
Borrowers shall indemnify, save and hold Agent and Lenders harmless from any
loss, cost, expense or liability, including, without limitation, payments made
by Agent or Lenders, and expenses and reasonable attorneys' fees incurred by
Agent and Lenders arising out of, or in connection with, any Letter of Credit to
be issued or created for any Borrower. Borrowers shall be bound by Agent's and
each Lender's regulations and good faith interpretations of any Letter of Credit
issued or created for its account, although this interpretation may be different
from its own, and, neither Agent, Lenders, nor any of their correspondents shall
be liable for any error, negligence, or mistakes, whether of omission or
commission, in following Borrowing Agent's or any Borrower's instructions or
those contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for
Agent's, any Lender's or such correspondents' own willful misconduct.
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(b) In connection with all Letters of Credit issued by Agent under
this Agreement, each Borrower hereby appoints Agent, or its designee, as its
attorney, with full power and authority (i) to sign and/or endorse such
Borrower's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign such Borrower's name on bills of
lading; (iii) to clear Inventory through the United States of America Customs
Department ("Customs") in the name of such Borrower or Agent or Agent's
designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose; and (iv) to complete in such Borrower's
name or Agent's name, or in the name of Agent's designee, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof. Neither Agent nor its attorneys will be liable for any
acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Agent's or its attorney's own willful misconduct. This power, being
coupled with an interest, is irrevocable during the Term and as long thereafter
as any Letters of Credit remain outstanding.
2.10 ADDITIONAL PAYMENTS. Any sums expended by Agent or any Lender due to
any Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, any Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrowers' account as a Revolving Advance, shall bear interest at the
Default Rate applicable to Domestic Rate Loans and shall be added to the
Obligations.
2.11 MANNER OF BORROWING AND PAYMENT.
(a) Each borrowing of Revolving Advances shall be advanced according
to the applicable Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrowers on account
of the principal of and interest on the Revolving Advances, shall be applied to
the Revolving Advances pro rata according to the applicable Commitment
Percentages of Lenders. Except as expressly provided herein, all payments
(including prepayments) to be made by any Borrower on account of principal,
interest and fees shall be made without set off or counterclaim and shall be
made to Agent on behalf of the Lenders to the Payment Office, in each case on or
prior to 1:00 P.M., New York time, in Dollars and in immediately available
funds.
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(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.11(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment any Borrower on account of Revolving Advances
shall be applied first to those Revolving Advances made by Agent. On or before
1:00 P.M., New York time, on each Settlement Date commencing with the first
Settlement Date following the Closing Date, Agent and Lenders shall make certain
payments as follows: (A) if the aggregate amount of new Revolving Advances made
by Agent during the preceding Week (if any) exceeds the aggregate amount of
repayments applied to outstanding Revolving Advances during such preceding Week,
then each Lender shall provide Agent with funds in an amount equal to its
applicable Commitment Percentage of the difference between (1) such Revolving
Advances and (2) such repayments and (B) if the aggregate amount of repayments
applied to outstanding Revolving Advances during such Week exceeds the aggregate
amount of new Revolving Advances made during such Week, then Agent shall provide
each Lender with funds in an amount equal to its applicable Commitment
Percentage of the difference between (1) such repayments and (2) such Revolving
Advances.
(ii) Each Lender shall be entitled to earn interest at the
applicable Contract Rate on outstanding Advances which it has funded. Because
the Agent on behalf of Lenders may be advancing and/or may be repaid Advances
prior to the time when Lenders will actually advance and/or be repaid such
Advances, interest with respect to Advances shall be allocated by Agent in
accordance with the amount of Advances actually advanced by and repaid to each
Lender and the Agent and shall accrue from and including the date such Advances
are so advanced to but excluding the date such Advances are either repaid by
Borrowers or actually settled with the applicable Lender as described in this
Section. To the extent that Agent has made any such amounts available and the
settlement described above shall not yet have occurred, upon repayment of any
Advances by Borrowers, Agent may apply such amounts repaid directly to any
amounts made available by Agent pursuant to this Section.
(iii) Promptly following each Settlement Date, Agent shall
submit to each Lender a settlement statement for the Week immediately preceding
such Settlement Date. Such certificate of Agent shall be conclusive in the
absence of manifest error.
(d) If any Lender or any Transferee (a "benefited Lender") shall at
any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefited
Lender shall purchase for cash from the other Lenders such portion of each such
other Lender's Advances, or shall provide such other Lender with the benefits of
any such Collateral, or the proceeds thereof, as shall be necessary to cause
such benefited Lender to share the excess payment or benefits of such Collateral
or proceeds ratably with each of Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. Each
Lender so purchasing a portion of another Lender's Advances may exercise all
rights of payment (including, without limitation, rights of set off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
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(e) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption, make
available to Borrowers a corresponding amount. Agent will promptly notify
Borrowers of its receipt of any such notice from a Lender. If such amount is
made available to Agent on a date after a Settlement Date, such Lender shall pay
to Agent on demand an amount equal to the product of (i) the daily average
Federal Funds Rate (computed on the basis of a year of 360 days) during such
period as quoted by Agent, times (ii) such amount, times (iii) the number of
days from and including such Settlement Date to the date on which such amount
becomes immediately available to Agent. A certificate of Agent submitted to any
Lender with respect to any amounts owing under this paragraph (e) shall be
conclusive, in the absence of manifest error. If such amount is not in fact made
available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the rate per annum then applicable to such Revolving
Advances hereunder, on demand from Borrowers; provided, however, that Agent's
right to such recovery shall not prejudice or otherwise adversely affect
Borrowers' rights (if any) against such Lender.
2.12 USE OF PROCEEDS. Borrowers shall apply the proceeds of Advances to
pay fees and expenses relating to this transaction, and to provide for its
working capital needs.
2.13 JOINT AND SEVERAL LIABILITY. All Borrowers shall be liable for all
amounts due to Agent and Lenders under this Agreement, regardless of which
Borrower actually receives the Advances or Letters of Credit hereunder or the
amount of such Advances received or the manner in which Agent and Lenders
account for such Advances, Letters of Credit or other extensions of credit on
its books and records. The Obligations with respect to Advances made to a
Borrower, and the Obligations arising as a result of the joint and several
liability of a Borrower hereunder, with respect to Advances made to the other
Borrowers hereunder, shall be separate and distinct obligations, but all such
Obligations shall be primary obligations of all Borrowers. The Obligations
arising as a result of the joint and several liability of a Borrower hereunder
with respect to Advances, Letters of Credit or other extensions of credit made
to the other Borrowers hereunder shall, to the fullest extent permitted by law,
be unconditional irrespective of (a) the validity or enforceability, avoidance
or subordination of the Obligations of the other Borrowers or of any promissory
note or other document evidencing all or any part of the Obligations of the
other Borrowers, (b) the absence of any attempt to collect the Obligations from
the other Borrowers or any other security therefor, or the absence of any other
action to enforce the same, (c) the waiver, consent, extension, forbearance or
granting of any indulgence by Agent or Lenders with respect to any provisions of
any instrument evidencing the Obligations of the other Borrowers, or any part
thereof, or any other agreement now or hereafter executed by the other Borrowers
and delivered to Agent or Lenders, (d) the failure by Agent or Lenders to take
any steps to perfect and maintain its security interest in, or to preserve its
rights and maintain its security or collateral for the Obligations of the other
Borrowers, (e) the election of Agent or Lenders in any proceeding instituted
under Title 11 of the United States Code, as amended ("Bankruptcy Code"), of the
application of Section 1111(b)(2) of the Bankruptcy Code, (f) the disallowance
of all or any portion of the claim(s) of Agent or Lenders for the repayment of
the Obligations of the other Borrowers under Section 502 of the Bankruptcy Code,
or (g) any other circumstances which might constitute a legal or equitable
discharge or defense of the other Borrowers. With respect to the Obligations
arising as a result of the joint and several liability of a Borrower hereunder
with respect to Advances, Letters of Credit or other extensions of credit made
to the other Borrowers hereunder, each Borrower waives, until the Obligations
shall have been paid in full and this Agreement shall have been terminated, any
right to enforce any right of subrogation or any remedy which Agent or Lenders
now has or may hereafter have against Borrowers, any endorser or any guarantor
of all or any part of the Obligations, and any benefit of, and any right to
participate in, any security or collateral given to Agent and Lenders. Upon any
Event of Default and for so long as the same is continuing, Agent and Lenders
may proceed directly and at once, without notice, against any Borrower to
collect and recover the full amount, or any portion of the Obligations, without
first proceeding against the other Borrowers or any other Person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that Agent and Lenders shall be under no obligation to marshal any assets in
favor of Borrower(s) or against or in payment of any or all of the Obligations.
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2.14 DEFAULTING LENDER.
(a) Notwithstanding anything to the contrary contained herein, in
the event any Lender (i) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (ii) notifies either Agent or Borrowing Agent that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.14 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, Agent shall not be obligated to transfer to a Defaulting Lender any
payments received by Agent for the Defaulting Lender's benefit, nor shall a
Defaulting Lender be entitled to the sharing of any payments hereunder
(including any principal, interest or fees). Amounts payable to a Defaulting
Lender shall instead be paid to or retained by Agent. Agent may hold and, in its
discretion, relend to a Borrower the amount of all such payments received or
retained by it for the account of such Defaulting Lender.
(c) A Defaulting Lender shall not be entitled to give instructions
to Agent or to approve, disapprove, consent to or vote on any matters relating
to this Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
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(d) Other than as expressly set forth in this Section 2.14, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.14 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder. The operation of this Section shall not be
construed to increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by any Borrower of their duties and
obligations hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
3. INTEREST AND FEES.
3.1 INTEREST. Interest on Advances shall be payable in arrears on the last
day of each month with respect to Domestic Rate Loans and, with respect to LIBOR
Rate Loans, at the end of each Interest Period or, for LIBOR Rate Loans with an
Interest Period in excess of three months, at the earlier of (a) each three
months on the anniversary date of the commencement of such LIBOR Rate Loan or
(b) the end of the Interest Period. Interest charges shall be computed on the
actual principal of Advances outstanding during the month (the "Monthly
Advances") at a rate per annum equal to the applicable Revolving Interest Rate.
Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is
increased or decreased, the Revolving Interest Rate with respect to Domestic
Rate Loans and/or LIBOR Rate Loans shall be similarly changed without notice or
demand of any kind by an amount equal to the amount of such change in the
Alternate Base Rate during the time such change or changes remain in effect. In
the event that the aggregate outstanding amount of all Advances exceeds the
lesser of the Maximum Loan Amount and the Formula Amount for three (3) or more
Business Days in any month during the Term (such excess, an "Overadvance"), the
average daily balance of all Advances and other amounts charged or chargeable to
Borrowers' account for such month shall bear interest at the Overadvance Rate.
Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the Obligations shall bear interest at the Default Rate.
3.2 LETTER OF CREDIT FEES
(a) Borrowers shall pay Agent (i) for the benefit of Lenders, fees
for each Letter of Credit for the period from and excluding the date of issuance
of same to and including the date of expiration or termination, equal to the
average daily face amount of each outstanding Letter of Credit multiplied by the
then current Applicable Margin for LIBOR Rate Loans on the outstanding amount
thereof from time to time ("Letter of Credit Fees"), such fees to be calculated
on the basis of a 360-day year for the actual number of days elapsed and to be
payable monthly in arrears on the first day of each month and on the last day of
the Term and (ii) Bank's other customary charges payable in connection with
Letters of Credit, as in effect from time to time. Any such charge in effect at
the time of a particular transaction shall be the charge for that transaction,
notwithstanding any subsequent change in Bank's prevailing charges for that type
of transaction. All Letter of Credit Fees payable hereunder shall be deemed
earned in full on the date when the same are due and payable hereunder and shall
not be subject to rebate or proration upon the termination of this Agreement for
any reason.
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(b) On demand, Borrowers will cause cash to be deposited and
maintained in an account with Agent, as cash collateral, in an amount equal to
outstanding Letters of Credit, and each Borrower hereby irrevocably authorizes
Agent, in its discretion, on such Borrower's behalf and in such Borrower's name,
to open such an account and to make and maintain deposits therein, or in an
account opened by such Borrower, in the amounts required to be made by such
Borrower, out of the proceeds of Receivables or other Collateral or out of any
other funds of such Borrower coming into Agent's possession at any time. Agent
will invest such cash collateral (less applicable reserves) in such short-term
money-market items as to which Agent and such Borrower mutually agree and the
net return on such investments shall be credited to such account and constitute
additional cash collateral. No Borrower may withdraw amounts credited to any
such account except upon payment and performance in full of all Obligations and
termination of this Agreement.
3.3 FACILITY FEE. If, for any month during the Term, the average daily
unpaid balance of the Advances for each day of such month does not equal the
Maximum Loan Amount, then Borrowers shall pay to Agent, for the ratable benefit
of Lenders, a fee at a rate equal to one-quarter of one percent (.25%) per annum
on the amount by which the Maximum Loan Amount exceeds such average daily unpaid
balance. Such fee shall be payable to Agent in arrears on the last day of each
month and shall not be subject to rebate or proration for any reason.
3.4 COMPUTATION OF INTEREST AND FEES. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
Contract Rate during such extension.
3.5 MAXIMUM CHARGES. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that a court determines that Agent or any Lender has
received interest and other charges hereunder in excess of the highest rate
permissible hereto, such excess amount shall be first applied to any unpaid
principal balance owed by Borrowers, and if the then remaining excess amount is
greater than the previously unpaid principal balance, Lenders shall promptly
refund such excess amount to Borrowers and the provisions hereof shall be deemed
amended to provide for such permissible rate.
3.6 INCREASED COSTS. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.6, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any LIBOR Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
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(a) subject Agent or any Lender to any tax of any kind whatsoever
with respect to this Agreement or change the basis of taxation of payments to
Agent or any Lender of principal, fees, interest or any other amount payable
hereunder or under any Other Documents (except for changes in the rate of tax on
the overall net income of Agent or any Lender by the jurisdiction in which it
maintains its principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement, any Other Documents;
and the result of any of the foregoing is to increase the cost to Agent or
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material, then, in
any case Borrowers shall promptly pay Agent or such Lender, upon its demand,
such additional amount as will compensate Agent or such Lender for such
additional cost or such reduction, as the case may be. Agent or such Lender
shall certify the amount of such additional cost or reduced amount to Borrowers,
and such certification shall be conclusive absent manifest error.
3.7 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. In the event
that Agent or any Lender shall have determined that:
(a) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding LIBOR Rate Loan, a proposed LIBOR Rate Loan, or a
proposed conversion of a Domestic Rate Loan;
(b) reasonable means do not exist for ascertaining the LIBOR Rate
for any Interest Period;
then Agent shall give Borrowing Agent prompt written, telephonic or telegraphic
notice of such determination. If such notice is given, (i) any such requested
LIBOR Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent
shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of LIBOR Rate
Loan, (ii) any Domestic Rate Loan or LIBOR Rate Loan which was to have been
converted to an affected type of LIBOR Rate Loan shall be continued as or
converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent,
no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of LIBOR Rate
Loan, and (iii) any outstanding affected LIBOR Rate Loans shall be converted
into a Domestic Rate Loan, or, if the Borrowing Agent shall notify Agent, no
later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
last Business Day of the then current Interest Period applicable to such
affected LIBOR Rate Loan, shall be converted into an unaffected type of LIBOR
Rate Loan, on the last Business Day of the then current Interest Period for such
affected LIBOR Rate Loans. Until such notice has been withdrawn, Lenders shall
have no obligation to make an affected type of LIBOR Rate Loan or maintain
outstanding affected LIBOR Rate Loans and no Borrower shall have the right to
convert a Domestic Rate Loan or an unaffected type of LIBOR Rate Loan into an
affected type of LIBOR Rate Loan.
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3.8 CAPITAL ADEQUACY.
(a) In the event that Agent or any Lender shall have determined that
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.8, the term "Lender" shall include Agent
or any Lender and any corporation or bank controlling Agent or any Lender and
the office or branch where Agent or any Lender (as so defined) makes or
maintains any LIBOR Rate Loans) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on Agent's or any Lender's capital as a consequence of its obligations
hereunder (but not as a general regulatory condition generally applicable to
lending institutions) to a level below that which Agent or such Lender could
have achieved but for such adoption, change or compliance (taking into
consideration Agent's and each Lender's policies with respect to capital
adequacy) by an amount deemed by Agent or any Lender to be material, then, from
time to time, Borrowers shall pay upon demand to Agent or such Lender such
additional amount or amounts as will compensate Agent or such Lender for such
reduction. In determining such amount or amounts, Agent or such Lender may use
any reasonable averaging or attribution methods. The protection of this Section
3.8 shall be available to Agent and each Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law,
regulation or condition.
(b) A certificate of Agent or such Lender setting forth such amount
or amounts as shall be necessary to compensate Agent or such Lender with respect
to Section 3.8(a) hereof when delivered to Borrowing Agent shall be conclusive
absent manifest error.
4. COLLATERAL: GENERAL TERMS
4.1 SECURITY INTEREST IN THE COLLATERAL. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Borrower hereby
assigns, pledges and grants to Agent for itself and the ratable benefit of each
Lender a continuing security interest in and to all of its Collateral, whether
now owned or existing or hereafter acquired or arising and wheresoever located.
Each Borrower shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest ("Agent's
security interest") and shall cause its financial statements to reflect such
security interest.
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4.2 PERFECTION OF SECURITY INTEREST.
(a) Each Borrower irrevocably and unconditionally authorizes Agent
(or its agent) to file at any time and from time to time such financing
statements with respect to the Collateral naming Agent or its designee as the
secured party and Such Borrower as debtor, as Agent may require, and including
any other information with respect to Such Borrower or otherwise required by
part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent
may determine, together with any amendment and continuations with respect
thereto, which authorization shall apply to all financing statements filed on,
prior to or after the date hereof. Each Borrower hereby ratifies and approves
all financing statements naming Agent or its designee as secured party and Such
Borrower as debtor with respect to the Collateral (and any amendments with
respect to such financing statements) filed by or on behalf of Agent prior to
the date hereof and ratifies and confirms the authorization of Agent to file
such financing statements (and amendments, if any). Each Borrower hereby
authorizes Agent to adopt on behalf of such Borrower any symbol required for
authenticating any electronic filing. In no event shall any Borrower at any time
file, or permit or cause to be filed, any correction statement or termination
statement with respect to any financing statement (or amendment or continuation
with respect thereto) naming Agent or its designee as secured party and any such
Borrower as debtor.
(b) Each Borrower does not have any chattel paper (whether tangible
or electronic) or instruments as of the date hereof, except as set forth on
SCHEDULE 4.2(B) hereto. In the event that any Borrower shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, such
Borrower shall promptly notify Agent thereof in writing. Promptly upon the
receipt thereof by or on behalf of a Such Borrower (including by any agent or
representative), such Borrower shall deliver, or cause to be delivered to Agent,
all tangible chattel paper and instruments that such Borrower or may at any time
acquire, accompanied by such instruments of transfer or assignment duly executed
in blank as Agent may from time to time specify, in each case except as Agent
may otherwise agree. At Agent's option, such Borrower shall, or Agent may at any
time on behalf of Such Borrower, cause the original of any such instrument or
chattel paper to be conspicuously marked in a form and manner acceptable to
Agent with the following legend referring to chattel paper or instruments as
applicable: "This [chattel paper][instrument] is subject to the security
interest of GMAC COMMERCIAL FINANCE LLC, as Agent, and any sale, transfer,
assignment or encumbrance of this [chattel paper][instrument] violates the
rights of such secured party."
(c) In the event that any Borrower shall at any time hold or acquire
an interest in any electronic chattel paper or any "transferable record" (as
such term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), such Borrower shall
promptly notify Agent thereof in writing. Promptly upon Agent's request, such
Borrower shall take, or cause to be taken, such actions as Agent may reasonably
request to give Agent control of such electronic chattel paper under Section
9-105 of the UCC and control of such transferable record under Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act or, as the
case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect
in such jurisdiction.
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(d) No Borrower has any deposit accounts as of the date hereof,
except as set forth on SCHEDULE 4.2(D) hereto. No Borrower shall, directly or
indirectly, after the date hereof open, establish or maintain any deposit
account unless each of the following conditions is satisfied: (i) Agent shall
have received not less than five (5) Business Days prior written notice of the
intention of such Borrower to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of the
account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom such Borrower is dealing and the purpose of the account, (ii) the bank
where such account is opened or maintained shall be acceptable to Agent, and
((iii) on or before the opening of such deposit account, such Borrower shall as
Agent may specify either (A) deliver to Agent a Deposit Account Control
Agreement with respect to such deposit account duly authorized, executed and
delivered by Such Borrower and the bank at which such deposit account is opened
and maintained or (B) arrange for Agent to become the customer of the bank with
respect to the deposit account on terms and conditions acceptable to Agent. The
terms of this subsection (d) shall not apply to deposit accounts specifically
and exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of such Borrower's salaried employees.
(e) No Borrower owns or holds, directly or indirectly, beneficially
or as record owner or both, any investment property, as of the date hereof, or
have any investment account, securities account, commodity account or other
similar account with any bank or other financial institution or other securities
intermediary or commodity intermediary as of the date hereof, in each case
except as set forth on SCHEDULE 4.2(E) hereto.
(f) In the event that any Borrower shall be entitled to or shall at
any time after the date hereof hold or acquire any certificated securities, such
Borrower shall promptly endorse, assign and deliver the same to Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as Agent may from time to time specify. If any securities, now or hereafter
acquired by such Borrower are uncertificated and are issued to such Borrower or
its nominee directly by the issuer thereof, such Borrower shall immediately
notify Agent thereof and shall as Agent may specify, either (i) cause the issuer
to agree to comply with instructions from Agent as to such securities, without
further consent of such Borrower or such nominee, or (ii) arrange for Agent to
become the registered owner of the securities.
(g) No Borrower shall, directly or indirectly, after the date hereof
open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or commodity intermediary unless each of the
following conditions is satisfied: (i) Agent shall have received not less than
five (5) Business Days prior written notice of the intention of such Borrower to
open or establish such account which notice shall specify in reasonable detail
and specificity acceptable to Agent the name of the account, the owner of the
account, the name and address of the securities intermediary or commodity
intermediary at which such account is to be opened or established, the
individual at such intermediary with whom such Borrower is dealing and the
purpose of the account, (ii) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Agent, and (iii)on or before the opening of such
investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower shall as Agent
may specify either (A) execute and deliver, and cause to be executed and
delivered to Agent, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower and such
securities intermediary or commodity intermediary or (B)arrange for Agent to
become the entitlement holder with respect to such investment property on terms
and conditions acceptable to Agent.
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(h) No Borrower is the beneficiary or otherwise entitled to any
right to payment under any letter of credit, banker's acceptance or similar
instrument as of the date hereof, except as set forth on SCHEDULE 4.2(H) hereto.
In the event that any Borrower shall be entitled to or shall receive any right
to payment under any letter of credit, banker's acceptance or any similar
instrument, whether as beneficiary thereof or otherwise after the date hereof,
such Borrower shall promptly notify Agent thereof in writing. Such Borrower
shall immediately, as Agent may specify, either (i) deliver, or cause to be
delivered to Agent, with respect to any such letter of credit, banker's
acceptance or similar instrument, the written agreement of the issuer and any
other nominated person obligated to make any payment in respect thereof
(including any confirming or negotiating bank), in form and substance
satisfactory to Agent, consenting to the assignment of the proceeds of the
letter of credit to Agent by such Borrower and agreeing to make all payments
thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent
to become, at such Borrower's expense, the transferee beneficiary of the letter
of credit, banker's acceptance or similar instrument (as the case may be).
(i) No Borrower has commercial tort claims as of the date hereof,
except as set forth on SCHEDULE 4.2(I) hereto. In the event that any Borrower
shall at any time after the date hereof have any commercial tort claims, such
Borrower shall promptly notify Agent thereof in writing, which notice shall (i)
set forth in reasonable detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by such Borrower to Agent of a security
interest in such commercial tort claim (and the proceeds thereof). In the event
that such notice does not include such grant of a security interest, the sending
thereof by such Borrower to Agent shall be deemed to constitute such grant to
Agent. Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein. Without limiting the authorization of Agent provided in Section 4.2(a)
hereof or otherwise arising by the execution by such Borrower of this Agreement
or any of the Other Documents, Agent is hereby irrevocably authorized from time
to time and at any time to file such financing statements naming Agent or its
designee as secured party and such Borrower as debtor, or any amendments to any
financing statements, covering any such commercial tort claim as Collateral. In
addition, such Borrower shall promptly upon Agent's request, execute and
deliver, or cause to be executed and delivered, to Agent such other agreements,
documents and instruments as Agent may require in connection with such
commercial tort claim.
(j) No Borrower has any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth on SCHEDULE 4.2(J) hereto, and except for goods
located in the United States in transit to a location of such Borrower permitted
herein in the ordinary course of business of such Borrower in the possession of
the carrier transporting such goods. In the event that any goods, documents of
the title or other Collateral are at any time after the date hereof in the
custody, control or possession of any other person not referred to on SCHEDULE
4.2(J) hereto or such carriers, such Borrower shall promptly notify Agent
thereof in writing. Promptly upon Agent's request, such Borrower shall deliver
to Agent a Collateral Access Agreement duly authorized, executed and delivered
by such person and such Borrower.
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(k) Each Borrower shall take any other actions reasonably requested
by Agent from time to time to cause the attachment, perfection and first
priority of, and the ability of Agent to enforce, the security interest of Agent
in any and all of the Collateral, including, without limitation, (i) executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the UCC or other applicable law, to the extent, if any,
that such Borrower's signature thereon is required therefor, (ii) causing
Agent's name to be noted as secured party on any certificate of title for a
titled good if such notation is a condition to attachment, perfection or
priority of, or ability of Agent to enforce, the security interest of Agent in
such Collateral, (iii) complying with any provision of any statute, regulation
or treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or ability of
Agent to enforce, the security interest of Agent in such Collateral, and (iv)
obtaining the consents and approvals of any Governmental Authority or third
party, including, without limitation, any consent of any licensor, lessor or
other person obligated on Collateral, and taking all actions required by any
earlier versions of the UCC or by other law, as applicable in any relevant
jurisdiction.
4.3 DISPOSITION OF COLLATERAL. Each Borrower will safeguard and protect
all Collateral for Agent's general account and make no disposition thereof
whether by sale, lease or otherwise except (a) the sale of Inventory in the
ordinary course of business and (b) the disposition or transfer of obsolete and
worn-out Equipment in the ordinary course of business during any fiscal year
having an aggregate fair market value of not more than $250,000 and only to the
extent that (i) the proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Agent's first priority security
interest or (ii) the proceeds of which are remitted to Agent as a payment in
respect of the Advances.
4.4 PRESERVATION OF COLLATERAL. In addition to the rights and remedies set
forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
Agent deems necessary to protect Agent's security interest in and to preserve
the Collateral, including the hiring of such security guards or the placing of
other security protection measures as Agent may deem appropriate; (b) may employ
and maintain at any Borrower's premises a custodian who shall have full
authority to do all acts necessary to protect Agent's security interests in the
Collateral; (c) may lease warehouse facilities to which Agent may move all or
part of the Collateral; (d) may use any Borrower's owned or leased lifts,
hoists, trucks and other facilities or equipment for handling or removing the
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any Borrower's owned or leased property. Each Borrower shall cooperate
fully with all of Agent's efforts to preserve the Collateral and will take such
actions to preserve the Collateral as Agent may direct. All of Agent's expenses
of preserving the Collateral, including any expenses relating to the bonding of
a custodian, shall be charged to Borrowers' account as a Revolving Advance and
added to the Obligations.
4.5 OWNERSHIP OF COLLATERAL. With respect to the Collateral, at the time
the Collateral becomes subject to Agent's security interest: (a) each Borrower
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority security interest in each and every item of
its respective Collateral to Agent; and, except for Permitted Encumbrances the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and agreement executed by each Borrower or delivered to Agent or
any Lender in connection with this Agreement shall be true and correct in all
material respects; (c) all signatures and endorsements of each Borrower that
appear on such documents and agreements shall be genuine and each Borrower shall
have full capacity to execute same; and (d) each Borrower's Equipment and
Inventory shall be located as set forth on SCHEDULE 4.5 and shall not be removed
from such location(s) without the prior written consent of Agent except with
respect to the sale of Inventory in the ordinary course of business and the sale
or disposition of Equipment to the extent permitted in Section 4.3 hereof.
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4.6 DEFENSE OF AGENT'S AND LENDER'S INTERESTS. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's security interests in the Collateral shall continue in full
force and effect. During such period no Borrower shall, without Agent's prior
written consent, pledge, sell (except Inventory in the ordinary course of
business and Equipment to the extent permitted in Section 4.3 hereof), assign,
transfer, create or suffer to exist a Lien upon or encumber or allow or suffer
to be encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Agent's security interests in the
Collateral against any and all Persons whatsoever. At any time following demand
by Agent for payment of all Obligations, Agent shall have the right to take
possession of the indicia of the Collateral and the Collateral in whatever
physical form contained, including without limitation: labels, stationery,
documents, instruments and advertising materials. If Agent exercises this right
to take possession of the Collateral, Borrowers shall, upon demand, assemble it
in the best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other applicable law. Each
Borrower shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehouses or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent's order and if they shall come into any
Borrower's possession, they, and each of them, shall be held by such Borrower in
trust as Agent's trustee, and such Borrower will immediately deliver them to
Agent in their original form together with any necessary endorsement.
4.7 BOOKS AND RECORDS. Each Borrower shall (a) keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including, without limitation, by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of the Accountants, as
shall then be regularly engaged by Borrowers.
4.8 FINANCIAL DISCLOSURE. Each Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
the Borrower's financial statements, trial balances or other accounting records
of any sort in the accountant's or auditor's possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower's financial status and business operations. Each Borrower hereby
authorizes all federal, state and municipal authorities to furnish to Agent and
each Lender copies of reports or examinations relating to such Borrower, whether
made by such Borrower or otherwise; however, Agent and each Lender will attempt
to obtain such information or materials directly from such Borrower prior to
obtaining such information or materials from such accountants or such
authorities.
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4.9 COMPLIANCE WITH LAWS. Each Borrower shall comply in all material
respects with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to its respective
Collateral or any part thereof or to the operation of such Borrower's business
the non-compliance with which could have a Material Adverse Effect. Each
Borrower may, however, contest or dispute any acts, rules, regulations, orders
and directions of those bodies or officials in any reasonable manner, provided
that any related Lien is inchoate or stayed and sufficient reserves are
established to the reasonable satisfaction of Agent to protect Agent's Lien on
or security interest in the Collateral. The Collateral at all times shall be
maintained in accordance with the requirements of all insurance carriers which
provide insurance with respect to the Collateral so that such insurance shall
remain in full force and effect.
4.10 INSPECTION OF PREMISES. At all reasonable times Agent and each Lender
shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower's books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of each
Borrower's business. Agent, any Lender and their agents may enter upon any
Borrower's premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower's business. Without in any way limiting the foregoing, so long as no
Default exists, Agent and Lenders will provide a Borrower with two (2) days
prior notice before entering such Borrower's premises for the purposes set forth
in this Section 4.10.
4.11 INSURANCE. Each Borrower shall bear the full risk of any loss of any
nature whatsoever with respect to the Collateral. At each Borrower's own cost
and expense in amounts and with carriers acceptable to Agent, each Borrower
shall (a) keep all its insurable properties and properties in which such
Borrower has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower's including, without limitation, business
interruption insurance; (b) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to such Borrower insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of such Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which Borrower is engaged in business; and
(e) furnish Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to Agent, naming Agent as a co-insured and loss
payee as its interests may appear with respect to all insurance coverage
referred to in CLAUSES (A), (C) AND (E) above, and providing (A) that all
proceeds thereunder shall be payable to Agent, (B) no such insurance shall be
affected by any act or neglect of the insured or owner of the property described
in such policy, and (C) that such policy and loss payable clauses may not be
cancelled, amended or terminated unless at least thirty (30) days' prior written
notice is given to Agent. In the event of any loss thereunder, the carriers
named therein hereby are directed by Agent and the applicable Borrower to make
payment for such loss to Agent and not to such Borrower and Agent jointly. If
any insurance losses are paid by check, draft or other instrument payable to any
Borrower and Agent jointly, Agent may endorse such Borrower's name thereon and
do such other things as Agent may deem advisable to reduce the same to cash.
Agent is hereby authorized to adjust and compromise claims in excess of $250,000
under insurance coverage referred to in CLAUSES (A), (B) AND (E) above. All loss
recoveries received by Agent upon any such insurance may be applied to the
Obligations, in such order as Agent in its sole discretion shall determine. Any
surplus shall be paid by Agent to Borrowers or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by Borrowers to Agent, on
demand.
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4.12 FAILURE TO PAY INSURANCE. If any Borrower fails to obtain insurance
as hereinabove provided, or to keep the same in force, Agent, if Agent so
elects, may obtain such insurance and pay the premium therefor for Borrowers'
account, and charge Borrowers' account therefor and such expenses so paid shall
be part of the Obligations.
4.13 PAYMENT OF TAXES. Each Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes. If any Charge by any
governmental authority is or may be imposed on or as a result of any transaction
between any Borrower, Agent and Lenders which Agent or any Lender may be
required to withhold or pay or if any Charges remain unpaid after the date fixed
for their payment, or if any claim shall be made which, in Agent's or Lenders'
opinion, may possibly create a valid Lien on the Collateral, Agent may without
notice to Borrowers pay the Charges and each Borrower hereby indemnifies and
holds Agent and each Lender harmless in respect thereof. Agent will not pay any
Charges to the extent that any Borrower has contested or disputed those Charges
in good faith, by expeditious protest, administrative or judicial appeal or
similar proceeding provided that any related Lien is stayed and sufficient
reserves are established to the reasonable satisfaction of Agent to protect
Agent's security interest in or Lien on the Collateral. The amount of any
payment by Agent under this Section 4.13 shall be charged to the Borrowers'
account as a Revolving Advance and added to the Obligations and, until Borrowers
shall furnish Agent with an indemnity therefor (or supply Agent with evidence
satisfactory to Agent that due provision for the payment thereof has been made),
Agent may hold without interest any balance standing to Borrowers' credit and
Agent shall retain Agent's security interest in any and all Collateral held by
Agent.
4.14 PAYMENT OF LEASEHOLD OBLIGATIONS. Each Borrower shall at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent's
request, will provide evidence of having done so.
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4.15 ACCOUNTS.
(a) NATURE OF ACCOUNTS. Each of the Accounts shall be a bona fide
and valid account representing a bona fide indebtedness incurred by the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto
(provided immaterial or unintentional invoice errors shall not be deemed to be a
breach hereof) with respect to an absolute sale or lease and delivery of goods
upon stated terms of a Borrower, or work, labor or services theretofore rendered
by a Borrower as of the date each Receivable is created. Same shall be due and
owing in accordance with the applicable Borrower's standard terms of sale
without dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrowers to Agent.
(b) SOLVENCY OF CUSTOMERS. Each Customer, to the best of each
Borrower's knowledge, as of the date each Receivable is created, is and will be
solvent and able to pay all Accounts on which the Customer is obligated in full
when due or with respect to such Customers of any Borrower who are not solvent
such Borrower has set up on its books and in its financial records bad debt
reserves adequate to cover such Accounts.
(c) LOCATIONS OF BORROWER. Each Borrower's chief executive office is
located at the addresses set forth on SCHEDULE 4.15(C) hereto. Until written
notice is given to Agent by Borrowing Agent of any other office at which any
Borrower keeps its records pertaining to Accounts, all such records shall be
kept at such executive office.
(d) COLLECTION OF ACCOUNTS. Until any Borrower's authority to do so
is terminated by Agent (which notice Agent may give at any time following the
occurrence of an Event of Default or a Default or when Agent in its sole
discretion deems it to be in Lenders' best interest to do so), each Borrower
will, at such Borrower's sole cost and expense, but on Agent's behalf and for
Agent's account, collect as Agent's property and in trust for Agent all amounts
received on Accounts, and shall not commingle such collections with any
Borrower's funds or use the same except to pay Obligations. Each Borrower shall,
upon request, deliver to Agent, the Blocked Account in original form and on the
date of receipt thereof, all checks, drafts, notes, money orders, acceptances,
cash and other evidences of Indebtedness.
(e) NOTIFICATION OF ASSIGNMENT OF ACCOUNTS. At any time following
the occurrence of an Event of Default or a Default, Agent shall have the right
to send notice of the assignment of, and Agent's security interest in, the
Accounts to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral. Thereafter, Agent shall have the sole
right to collect the Accounts, take possession of the Collateral, or both.
Agent's actual collection expenses, including, but not limited to, stationery
and postage, telephone and telegraph, secretarial and clerical expenses and the
salaries of any collection personnel used for collection, may be charged to
Borrowers' account and added to the Obligations.
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(f) POWER OF AGENT TO ACT ON BORROWERS' BEHALF. Agent shall have the
right to receive, endorse, assign and/or deliver in the name of Agent or any
Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Accounts, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent's designee as such Borrower's
attorney with power (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower's name on any invoice or bill of lading
relating to any of the Accounts, drafts against Customers, assignments and
verifications of Accounts; (iii) to send verifications of Accounts to any
Customer; (iv) to sign such Borrower's name on all financing statements or any
other documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent's security interest in the Collateral and to
file same; (v) to demand payment of the Accounts; (vi) to enforce payment of the
Accounts by legal proceedings or otherwise; (vii) to exercise all of such
Borrower's rights and remedies with respect to the collection of the Accounts
and any other Collateral; (viii) to settle, adjust, compromise, extend or renew
the Accounts; (ix) to settle, adjust or compromise any legal proceedings brought
to collect Accounts; (x) to prepare, file and sign such Borrower's name on a
proof of claim in bankruptcy or similar document against any Customer; (xi) to
prepare, file and sign such Borrower's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Accounts; and
(xii) to do all other acts and things necessary to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done
maliciously or with gross (not mere) negligence; this power being coupled with
an interest is irrevocable during the Term and thereafter while any of the
Obligations remain unpaid. Agent shall have the right at any time following the
occurrence of an Event of Default or Default, to change the address for delivery
of mail addressed to any Borrower to such address as Agent may designate and to
receive, open and dispose of all mail addressed to any Borrower and Agent agrees
to use its best efforts to deliver to Borrowing Agent any mail which does not
relate, either directly or indirectly, to the Obligations or the Collateral.
(g) NO LIABILITY. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Accounts or any instrument received in payment thereof, or for any
damage resulting therefrom. Following the occurrence of an Event of Default or
Default, Agent may, without notice or consent from any Borrower, sue upon or
otherwise collect, extend the time of payment of, compromise or settle for cash,
credit or upon any terms any of the Accounts or any other securities,
instruments or insurance applicable thereto and/or release any obligor thereof.
Agent is authorized and empowered to accept the return of the goods represented
by any of the Accounts, without notice to or consent by any Borrower, all
without discharging or in any way affecting any Borrower's liability hereunder.
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(h) ESTABLISHMENT OF A LOCKBOX ACCOUNT, DOMINION ACCOUNT. Each
Borrower shall establish and maintain, at its expense, blocked accounts or
lockboxes and related blocked accounts (in either case, "Blocked Accounts"), as
Agent may specify, with such banks as are acceptable to Agent into which such
Borrower shall promptly deposit and direct its account debtors to directly remit
all payments on Receivables and all payments constituting proceeds of Inventory
or other Collateral in the identical form in which such payments are made,
whether by cash, check or other manner. Each Borrower shall deliver, or cause to
be delivered to Agent, a Deposit Account Control Agreement duly authorized,
executed and delivered by each bank where a Blocked Account is maintained as
provided in this Section 4.15(h) hereof or at any time and from time to time
Agent may become bank's customer with respect to the Blocked Accounts and
promptly upon Agent's request, such Borrower shall execute and deliver such
agreements or documents as Agent may require in connection therewith. Each
Borrower agrees that all payments made to such Blocked Accounts or other funds
received and collected by Agent, whether in respect of the Receivables, as
proceeds of Inventory or other Collateral or otherwise shall be treated as
payments to Agent in respect of the Obligations and therefore shall constitute
the property of Agent to the extent of the then outstanding Obligations.
(i) Each Borrower shall deposit all proceeds from sales of
Inventory in every form, including, without limitation, cash, checks, credit
card sales drafts, credit card sales or charge slips or receipts and other forms
of daily store receipts, from each retail store location of such Borrower on
each business day into the deposit accounts of such Borrower used solely for
such purpose and identified to each retail store location as set forth on
SCHEDULE 4.2(D) hereto. All such funds deposited into the separate deposit
accounts shall be sent by ACH or by wire transfer on a daily basis and all other
proceeds of Collateral shall be sent by ACH or by wire transfer, to the Blocked
Accounts. Each Borrower shall irrevocably authorize and direct in writing, in
form and substance satisfactory to Agent, each of the banks into which proceeds
from sales of Inventory from each retail store location of such Borrower are at
any time deposited as provided above to send all funds deposited in such account
by ACH or by wire transfer on a daily basis to the Blocked Accounts and such
banks shall agree in writing to do so. Such authorization and direction shall
not be rescinded, revoked or modified without the prior written consent of
Agent.
(ii) Each Borrower shall promptly either cause all amounts on
deposit in its deposit accounts used by each retail store location to be sent as
provided in Section 4.15(h)(i) above or shall itself deposit or cause to be
deposited all proceeds from sales of Inventory, all amounts payable to such
Borrower from Credit Card Issuers and Credit Card Processors and all other
proceeds of Collateral. Without in any way limiting the foregoing, each Borrower
shall establish and maintain a Blocked Account into which all proceeds from the
sale of Wholesale Inventory will be deposited and a Blocked Account into which
all proceeds from the sale of Retail Inventory will be deposited. The banks at
which the Blocked Accounts are established shall enter into an agreement, in
form and substance satisfactory to Agent, providing that all items received or
deposited in the Blocked Accounts are the property of Agent, that the depository
bank has no lien upon, or right of setoff against, the Blocked Accounts, the
items received for deposit therein, or the funds from time to time on deposit
therein and that the depository bank will wire, or otherwise transfer, in
immediately available funds, on a daily basis, all funds received or deposited
into the Blocked Accounts to such bank account of Agent as Agent may from time
to time designate for such purpose ("Payment Account"). Each Borrower agrees
that all amounts deposited in such Blocked Accounts or other funds received and
collected by Agent, whether as proceeds of inventory or other Collateral or
otherwise shall be the property of Agent. In the event that no Event of Default
exists and is continuing and no Obligations are outstanding, Agent agrees, upon
the written request of Borrowing Agent, to deliver to Borrowers, to an account
specified in writing by Borrowing Agent, any credit balance in the Payment
Account or any other account maintained by Agent for the Borrowers' account.
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(iii) To the extent any Borrower may elect, at such Borrower's
option, to use the Armored Car Companies to pick up and collect cash or other
proceeds of sales of Inventory from a retail store location, such Borrower shall
deliver to the Armored Car Companies all proceeds from sales of Inventory and
other Collateral from such retail store location of such Borrower. Each Borrower
electing to use an Armored Car Company shall irrevocably authorize and direct
the Armored Car Companies in writing, in form and substance satisfactory to
Agent, to remit all such proceeds at any time received by the Armored Car
Companies only to the deposit account identified on SCHEDULE 4.2(D) hereto for
such purpose and thereafter to the Blocked Accounts. Such authorization and
direction to the Armored Car Companies shall not be rescinded, revoked or
modified without the prior written consent of Agent. As of the date hereof, the
only Armored Car Companies used by the Borrowers are Safe & Sound Armed Courier,
Inc. and Dunbar Armored, Inc. Borrowers shall not use any other Armored Car
Companies for any purpose, except if (A) Agent shall have received not less than
ten (10) days' prior written notice of the intention of any such Borrower to use
such other Armored Car Companies, (B) Agent shall have received an agreement in
writing from such other Armored Car Companies, in form and substance
satisfactory to Agent, acknowledging the security interests of Agent in the
Collateral, waiving any security interest, lien or other claim to cash and other
items delivered by such Borrower to the Armored Car Company and agreeing to send
all cash and other items received by them only to the Blocked Accounts and to
otherwise follow the instructions of Agent with respect thereto upon Agent's
request, duly authorized, executed and delivered by and other Armored Car
Companies, and (C) no Event of Default shall exist or have occurred.
(i) ADJUSTMENTS. No Borrower will, without Agent's consent,
compromise or adjust any Accounts (or extend the time for payment thereof) or
accept any returns of merchandise or grant any additional discounts, allowances
or credits thereon except for those compromises, adjustments, returns,
discounts, credits and allowances as have been heretofore customary in the
business of such Borrower.
4.16 INVENTORY. If applicable, all Inventory manufactured by Borrowers has
been, and will be, produced by Borrowers in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules, regulations and orders
thereunder.
4.17 MAINTENANCE OF EQUIPMENT. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation. Each Borrower shall have the right to sell
Equipment except to the extent set forth in Section 4.3 hereof.
4.18 EXCULPATION OF LIABILITY. Nothing herein contained shall be construed
to constitute Agent or any Lender as any Borrower's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof. Neither
Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any Borrower's obligations under any contract or agreement
assigned to Agent or such Lender, and neither Agent nor any Lender shall be
responsible in any way for the performance by any Borrower of any of the terms
and conditions thereof.
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4.19 ENVIRONMENTAL MATTERS.
(a) Borrowers shall ensure that the Real Property remains in
compliance with all Environmental Laws and they shall not place or permit to be
placed any Hazardous Substances on any Real Property except as not prohibited by
applicable law or appropriate governmental authorities.
(b) Borrowers shall dispose of any and all Hazardous Waste generated
at the Real Property only at facilities and with carriers that maintain valid
permits under RCRA and any other applicable Environmental Laws. Borrowers shall
use their commercially reasonable efforts to obtain certificates of disposal,
such as hazardous waste manifest receipts, from all treatment, transport,
storage or disposal facilities or operators employed by Borrowers in connection
with the transport or disposal of any Hazardous Waste generated at the Real
Property.
(c) In the event any Borrower obtains, gives or receives notice of
any Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in the Real Property
and is not intended to create nor shall it create any obligation upon Agent or
any Lender with respect thereto.
(d) Borrowers shall promptly forward to Agent copies of any request
for information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by any Borrower
to dispose of Hazardous Substances and shall continue to forward copies of
correspondence between any Borrower and the Authority regarding such claims to
Agent until the claim is settled. Borrowers shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent's
security interest in the Real Property and the Collateral.
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(e) Borrowers shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If any Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Borrower shall fail to comply with
any of the requirements of any Environmental Laws, Agent on behalf of Lenders
may, but without the obligation to do so, for the sole purpose of protecting
Agent's security interest in Collateral: (i) give such notices or (ii) enter
onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Agent (or such third parties as directed by
Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.
(f) After the occurrence of a Hazardous Discharge, promptly upon the
written request of Agent from time to time, Borrowers shall provide Agent, at
Borrowers' expense, with an environmental site assessment or environmental audit
report prepared by an environmental engineering firm acceptable in the
reasonable opinion of Agent, to assess with a reasonable degree of certainty the
existence of a Hazardous Discharge and the potential costs in connection with
abatement, cleanup and removal of any Hazardous Substances found on, under, at
or within the Real Property. Any report or investigation of such Hazardous
Discharge proposed and acceptable to an appropriate Authority that is charged to
oversee the clean-up of such Hazardous Discharge shall be acceptable to Agent.
If such estimates, individually or in the aggregate, exceed $100,000, Agent
shall have the right to require Borrowers to post a bond, letter of credit or
other security reasonably satisfactory to Agent to secure payment of these costs
and expenses.
(g) Borrowers shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective employees, agents, directors and officers
harmless from and against all loss, liability, damage and expense, claims,
costs, fines and penalties, including attorney's fees, suffered or incurred by
Agent or Lenders under or on account of any Environmental Laws, including,
without limitation, the assertion of any Lien thereunder, with respect to any
Hazardous Discharge, the presence of any Hazardous Substances affecting the Real
Property, whether or not the same originates or emerges from the Real Property
or any contiguous real estate, including any loss of value of the Real Property
as a result of the foregoing except to the extent such loss, liability, damage
and expense is attributable to any Hazardous Discharge resulting from actions on
the part of Agent or any Lender. Borrowers' obligations under this Section 4.19
shall arise upon the discovery of the presence of any Hazardous Substances at
the Real Property, whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with the presence of any
Hazardous Substances. Borrowers' obligation and the indemnifications hereunder
shall survive the termination of this Agreement.
(h) For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of Borrowers' right, title and interest
in and to its owned and leased premises.
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4.20 FINANCING STATEMENTS. Except as respects the financing statements
filed by Agent and the financing statements described on SCHEDULE 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
5. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1 AUTHORITY. Each Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within such
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of such Borrower's by-laws, certificate of incorporation or
other applicable documents relating to such Borrower's formation or to the
conduct of such Borrower's business or of any material agreement or undertaking
to which such Borrower is a party or by which such Borrower is bound, and (b)
will not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the provisions of
any agreement, charter document, instrument, by-law, or other instrument to
which such Borrower or its property is a party or by which it may be bound.
5.2 FORMATION AND QUALIFICATION.
(a) Each Borrower is duly incorporated and in good standing under
the laws of the state listed on SCHEDULE 5.2(A) and is qualified to do business
and is in good standing in the states listed on SCHEDULE 5.2(A) which constitute
all states in which qualification and good standing are necessary for such
Borrower to conduct its business and own its property and where the failure to
so qualify could have a Material Adverse Effect. Each Borrower has delivered to
Agent true and complete copies of its certificate of incorporation and by-laws
and will promptly notify Agent of any amendment or changes thereto.
(b) The only Subsidiaries of each Borrower are listed on SCHEDULE
5.2(B).
(c) The exact legal name of each Borrower is as set forth on the
signature page of this Agreement and on SCHEDULE 5.2(A) hereto. No Borrower has,
during the past five years, been known by or used any other corporate or
fictitious name or been a party to any merger or consolidation, or acquired all
or substantially all of the assets of any Person, or acquired any of its
property or assets out of the ordinary course of business, except as set forth
on SCHEDULE 5.6 hereto.
(d) Each Borrower is an organization of the type and organized in
the jurisdiction set forth on SCHEDULE 5.2(A) hereto. SCHEDULE 5.2(A) accurately
sets forth the organizational identification number of such Borrower or
accurately states that such Borrower has none and accurately sets forth the
federal employer identification number of such Borrower.
(e) The chief executive office and mailing address of each Borrower
and each Borrower's Records concerning Accounts are located only at the address
identified as such on SCHEDULE 4.15(C) hereto and its only other places of
business and the only other locations of Collateral, if any, are the addresses
set forth in SCHEDULE 4.5 hereto, subject to the right of such Borrower to
establish new locations in accordance with Section 6.2 below. SCHEDULE 4.5
hereto correctly identifies any of such locations which are not owned by a
Borrower and sets forth the owners and/or operators thereof.
44
5.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of each Borrower contained in this Agreement and the Other Documents
shall be true at the time of such Borrower's execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto. Any misrepresentation or breach of any
representation or warranty whatsoever contained in this Agreement or the Other
Documents shall be deemed material.
5.4 TAX RETURNS. Each Borrower's federal tax identification number is set
forth on SCHEDULE 5.4 hereto. Each Borrower has filed all federal, state and
local tax returns and other reports each is required by law to file and has paid
all taxes, assessments, fees and other governmental charges that are due and
payable. Except as set forth on SCHEDULE 5.4 hereto, all Federal, state and
local income tax returns of each Borrower have been examined and reported upon
by the appropriate taxing authority or closed by applicable statute and
satisfied for all fiscal years prior to and including the fiscal year ending
January 31, 2003. The provision for taxes on the books of the Borrowers on a
Consolidated Basis are adequate in all material respects for all years not
closed by applicable statutes, and for its current fiscal year, and no Borrower
has knowledge of any deficiency or additional assessment in connection therewith
not provided for on its books.
5.5 FINANCIAL STATEMENTS.
(a) The pro forma balance sheet of Borrowers on a Consolidated Basis
(the "Pro Forma Balance Sheet") furnished to Agent on the Closing Date reflects
the consummation of the transactions contemplated by the Subordinated Debt
Documentation and under this Agreement (the "Transactions") and is accurate,
complete and correct and fairly reflects the financial condition of Borrowers on
a Consolidated Basis, after giving effect to the Transactions, as of the
accounting closing date for the month of February, 2004. The Pro Forma Balance
Sheet has been certified as accurate, complete and correct in all material
respects by the President and Chief Financial Officer of Perfumania. All
financial statements referred to in this Section 5.5(a), including the related
schedules and notes thereto, have been prepared, in accordance with GAAP, except
as may be disclosed in such financial statements or as limited in the definition
used in this Agreement.
(b) The twelve-month cash flow projections of the Borrowers and
their projected balance sheets as of the Closing Date, copies of which are
annexed hereto as EXHIBIT 5.5(B) (the "Projections") were prepared by the Chief
Financial Officer of Borrowers, are based on underlying assumptions which
provide a reasonable basis for the projections contained therein and reflect
Borrowers' good faith judgment based on present circumstances. The cash flow
Projections together with the Pro Forma Balance Sheet, are referred to as the
"Pro Forma Financial Statements".
45
5.6 CORPORATE NAME. Except as set forth on SCHEDULE 5.6 hereto, no
Borrower has been known by any other corporate name in the past five years and
does not sell Inventory or perform services under any other name, nor has any
Borrower been the surviving corporation of a merger or consolidation or acquired
all or substantially all of the assets of any Person during the preceding five
(5) years.
5.7 O.S.H.A. AND ENVIRONMENTAL COMPLIANCE.
(a) Each Borrower has duly complied with, and its facilities,
business, assets, property, leaseholds and Equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act, the Environmental Protection Act, RCRA and all other Environmental
Laws; there have been no outstanding citations, notices or orders of
non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or Equipment under any such laws, rules or regulations
which would result in a Material Adverse Effect.
(b) Each Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws, other than those that the failure to have obtained would not have a
Material Adverse Effect.
(c) (i) There are no visible signs of releases, spills, discharges,
leaks or disposal (collectively referred to as "Releases") of Hazardous
Substances at, upon, under or within any Real Property or any premises leased by
any Borrower; (ii) there are no underground storage tanks or polychlorinated
biphenyls on the Real Property or any premises leased by any Borrower; (iii)
neither the Real Property nor any premises leased by any Borrower has ever been
used as a treatment, storage or disposal facility of Hazardous Waste; and (iv)
no Hazardous Substances are present on the Real Property or any premises leased
by a Borrower, excepting such quantities as are handled in accordance with all
applicable manufacturer's instructions and governmental regulations and in
proper storage containers and as are necessary for the operation of the
commercial business of any Borrower or of its tenants.
5.8 SOLVENCY; NO LITIGATION, VIOLATION, INDEBTEDNESS OR DEFAULT.
(a) Borrowers, individually and collectively, are solvent, able to
pay their debts as they mature, have capital sufficient to carry on their
business and all businesses in which they is about to engage, and as of the
Closing Date, the fair present saleable value of their assets, calculated on a
going concern basis, is in excess of the amount of their liabilities and
subsequent to the Closing Date, the fair saleable value of its assets
(calculated on a going concern basis) will be in excess of the amount of its
liabilities.
(b) Except as disclosed in Schedule 5.8(b) hereto or in the
financial statements of Borrowers on a Consolidated Basis, no Borrower has (i)
any pending or threatened litigation, arbitration, actions or proceedings which
involve the reasonable likelihood of having a Material Adverse Effect, and (ii)
any liabilities or indebtedness other than the Obligations other than
liabilities incurred subsequent to the date of such financial statements in the
ordinary course of business.
46
(c) No Borrower is in violation of any applicable statute,
regulation or ordinance in any respect which could have a Material Adverse
Effect, nor is any Borrower in violation of any order of any court, governmental
authority or arbitration board or tribunal.
(d) No Borrower nor any member of the Controlled Group maintains or
contributes to any Plan other than those listed on SCHEDULE 5.8(D) hereto.
Except as set forth in SCHEDULE 5.8(D) hereto, (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) at this time, the current value of the assets
of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the Controlled Group
knows of any facts or circumstances which would materially change the value of
such assets and accrued benefits and other liabilities, (vi) no Borrower or any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan, (vii) no
Borrower or any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code, and no fact exists
which could give rise to any such liability, (viii) no Borrower or any member of
the Controlled Group or any fiduciary of, or any trustee to, any Plan, has
engaged in a "prohibited transaction" described in Section 406 of the ERISA or
Section 4975 of the Code or taken any action which would constitute or result in
a Termination Event with respect to any such Plan which is subject to ERISA,
(ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan, (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period contained in 29 CFR ss.2615.3 has not been waived, and (xi) no
Borrower or any member of the Controlled Group has any fiduciary responsibility
for investments with respect to any plan existing for the benefit of persons
other than employees or former employees of any Borrower and any member of the
Controlled Group, and no Borrower or any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980.
5.9 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on SCHEDULE 5.9 hereto, are to the extent owned by Borrowers, valid
and have been duly registered or filed with all appropriate governmental
authorities and constitute all of the intellectual property rights which are
necessary for the operation of its business; there is no objection to or pending
challenge to the validity of any such material patent, trademark, copyright,
design right, tradename, trade secret or license and no Borrower is aware of any
grounds for any challenge, except as set forth in SCHEDULE 5.9 hereto. Each
patent, patent application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service mark license,
copyright, copyright application and copyright license owned or held by any
Borrower and all trade secrets used by any Borrower consist of original material
or property developed by such Borrower or to such Borrower's knowledge, was
lawfully acquired by such Borrower from the proper and lawful owner thereof.
Each of such items has been maintained so as to preserve the value thereof from
the date of creation or acquisition thereof.
47
5.10 LICENSES AND PERMITS. Except as set forth in SCHEDULE 5.10 hereto,
each Borrower (a) is in compliance with and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state or local law or regulation for the operation of its business in
each jurisdiction wherein it is now conducting or proposes to conduct business
and where the failure to procure such licenses or permits could have a Material
Adverse Effect.
5.11 DEFAULT OF INDEBTEDNESS. No Borrower is in default in the payment of
the principal of or interest on any Indebtedness or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder, which default
would have a Material Adverse Effect.
5.12 NO DEFAULT. No Borrower is in default in the payment or performance
of any of its obligations with respect to any material contract and no Default
has occurred.
5.13 NO BURDENSOME RESTRICTIONS. No Borrower is party to any contract or
agreement the performance of which could have a Material Adverse Effect. No
Borrower has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.
5.14 NO LABOR DISPUTES. No Borrower is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Borrower's
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on SCHEDULE 5.14 hereto.
5.15 MARGIN REGULATIONS. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
48
5.16 INVESTMENT COMPANY ACT. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17 DISCLOSURE. No representation or warranty made by any Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to any
Borrower or which reasonably should be known to any Borrower which Borrowers
have not disclosed to Agent in writing with respect to the Transactions which
could have a Material Adverse Effect.
5.18 SUBORDINATED DEBT DOCUMENTATION. Agent has received complete copies
of the Subordinated Debt Documentation (including all exhibits, schedules and
disclosure letters referred to therein or delivered pursuant thereto, if any)
and all amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent.
5.19 SWAPS. No Borrower is a party to, nor will it be a party to, any swap
agreement whereby such Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.
5.20 CONFLICTING AGREEMENTS. No provision of any material mortgage,
indenture, contract, agreement, judgment, decree or order binding on any
Borrower or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement or the Other
Documents.
5.21 APPLICATION OF CERTAIN LAWS AND REGULATIONS. No Borrower or any
Affiliate of any Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.22 BUSINESS AND PROPERTY OF BORROWERS. Upon and after the Closing Date,
Borrowers do not propose to engage in any business other than the retail and
wholesale sale of perfumes and activities necessary to conduct the foregoing. On
the Closing Date, each Borrower will own all the property and possess all of the
rights and Consents necessary for the conduct of the business of such Borrower.
49
5.23 CREDIT CARD AGREEMENTS. Set forth in SCHEDULE 5.23 hereto is a
correct and complete list of (a) all of the Credit Card Agreements and all other
agreements, documents and instruments existing as of the date hereof between or
among each Borrower, any of its affiliates, the Credit Card Issuers, the Credit
Card Processors and any of their affiliates, (b) the percentage of each sale
payable to the Credit Card Issuer or Credit Card Processor under the terms of
the Credit Card Agreements, (c) all other fees and charges payable by each
Borrower under or in connection with the Credit Card Agreements and (d) the term
of such Credit Card Agreements. The Credit Card Agreements constitute all of
such agreements necessary for each Borrower to operate its business as presently
conducted with respect to credit cards and debit cards and no Receivables of any
Borrower arise from purchases by customers of Inventory with credit cards or
debit cards, other than those which are issued by Credit Card Issuers with whom
a Borrower has entered into one of the Credit Card Agreements set forth on
SCHEDULE 5.23 hereto or with whom such Borrower has entered into a Credit Card
Agreement in accordance with this Section 5.23. Each of the Credit Card
Agreements constitutes the legal, valid and binding obligations of the
applicable Borrower and to the best of such Borrower's knowledge, the other
parties thereto, enforceable in accordance with their respective terms and are
in full force and effect. No default or event of default, or act, condition or
event which after notice or passage of time or both, would constitute a default
or an event of default under any of the Credit Card Agreements exists or has
occurred. Each Borrower, as applicable, and the other parties thereto have
complied with all of the terms and conditions of the Credit Card Agreements to
the extent necessary for such Borrower to be entitled to receive all payments
thereunder. Borrowers have delivered, or caused to be delivered to Agent, true,
correct and complete copies of all of the Credit Card Agreements.
6. AFFIRMATIVE COVENANTS.
Until payment in full of the Obligations and termination of this
Agreement:
6.1 PAYMENT OF FEES. Each Borrower shall pay to Agent on demand all usual
and customary fees and expenses which Agent incurs in connection with (a) the
forwarding of Advance proceeds and (b) the establishment and maintenance of any
Blocked Accounts as provided for in Section 4.15(h). Agent may, without making
demand, charge the account of Borrowers for all such fees and expenses. 6.2
CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS. Each Borrower shall
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business, (c) no Borrower shall change its name
unless each of the following conditions is satisfied: (i) Agent shall have
received not less than thirty (30) days prior written notice from such Borrower
of such proposed change in its corporate name, which notice shall accurately set
forth the new name; and (ii) Agent shall have received a copy of the amendment
to the Certificate of Incorporation of such Borrower providing for the name
change certified by the Secretary of State of the jurisdiction of incorporation
or organization of such Borrower as soon as it is available; and (d) such
Borrower shall not change its chief executive office or its mailing address or
organizational identification number (or if it does not have one, shall not
acquire one) unless Agent shall have received not less than thirty (30) days'
prior written notice from Borrower of such proposed change, which notice shall
set forth such information with respect thereto as Agent may require and Agent
shall have received such agreements as Agent may reasonably require in
connection therewith. No Borrower shall change its type of organization,
jurisdiction of organization or other legal structure.
50
6.3 VIOLATIONS. Each Borrower shall promptly notify Agent in writing of
any violation of any law, statute, regulation or ordinance of any Governmental
Body, or of any agency thereof, applicable to any Borrower which may have a
Material Adverse Effect.
6.4 GOVERNMENT RECEIVABLES. Each Borrower shall take all steps necessary
and legally permissible to protect Agent's interest in the Collateral under the
Federal Assignment of Claims Act or other applicable state or local statutes or
ordinances and deliver to Agent appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of contracts between any
Borrower and the United States, any state or any department, agency or
instrumentality of any of them.
6.5 FIXED CHARGE COVERAGE RATIO. Borrowers shall maintain, on a
consolidated basis, as at the end of each fiscal quarter (July 31, October 31,
January 31 and April 30 in any given year), a Fixed Charge Coverage Ratio not
less than the amounts set forth below for each computation period as set forth
below:
- --------------------------------------------------------------------------------
FIXED CHARGE
COMPUTATION PERIOD COVERAGE RATIO
- --------------------------------------------------------------------------------
3 months ending April 30, 2004 (2.5) : 1.0
- --------------------------------------------------------------------------------
6 months ending July 31, 2004 (0.9) : 1.0
- --------------------------------------------------------------------------------
9 months ending October 31, 2004 (1.7) : 1.0
- --------------------------------------------------------------------------------
12 months ending January 31, 2005 1.3 : 1.0
- --------------------------------------------------------------------------------
the 12 consecutive month period To be determined based on 85% of
ending as of the end each fiscal the projections as set forth in
quarter commencing with the fiscal Borrower's yearly business plan,
quarter ending April 30, 2005 delivered pursuant to Section 9.12
hereof which shall be acceptable to
Agent and Required Lenders, in
their sole discretion
- --------------------------------------------------------------------------------
6.6 MINIMUM EBITDA. Borrowers shall maintain, on a consolidated basis, as
at the end of each fiscal quarter (July 31, October 31, January 31 and April 30
in any given year), EBITDA in an amount not less than the amounts set forth
below for each computation period as set forth below:
- --------------------------------------------------------------------------------
COMPUTATION PERIOD EBITDA
- --------------------------------------------------------------------------------
3 months ending April 30, 2004 ($775,000)
- --------------------------------------------------------------------------------
6 months ending July 31, 2004 $805,000
- --------------------------------------------------------------------------------
9 months ending October 31, 2004 ($340,000)
- --------------------------------------------------------------------------------
12 months ending January 31, 2005 $7,730,000
- --------------------------------------------------------------------------------
the 12 consecutive month period To be determined based on 85% of the
ending as of the end each fiscal projections as set forth in
quarter commencing with the fiscal Borrower's yearly business plan,
quarter ending April 30, 2005 delivered pursuant to Section 9.12
hereof which shall be acceptable to
Agent and Required Lenders, in their
sole discretion
- --------------------------------------------------------------------------------
51
6.7 MINIMUM UNDRAWN AVAILABILITY. Borrowers shall maintain, at all times,
a minimum Undrawn Availability of not less than $2,000,000, EXCEPT, THAT, for
the calendar months of July, August, September and October, Borrowers shall
maintain, at all times, a minimum Undrawn Availability of not less than
$1,000,000.
6.8 EXECUTION OF SUPPLEMENTAL INSTRUMENTS. Each Borrower shall execute and
deliver to Agent from time to time, upon demand, such supplemental agreements,
statements, assignments and transfers, or instructions or documents relating to
the Collateral, and such other instruments as Agent may request, in order that
the full intent of this Agreement may be carried into effect.
6.9 PAYMENT OF INDEBTEDNESS. Each Borrower shall pay, discharge or
otherwise satisfy at or before maturity (subject, where applicable, to specified
grace periods and, in the case of the trade payables, to normal payment
practices) all its obligations and liabilities of whatever nature, except when
the amount or validity thereof is currently being contested in good faith by
appropriate proceedings and each Borrower shall have provided for such reserves
as Agent may reasonably deem proper and necessary, subject at all times to any
applicable subordination arrangement in favor of Lenders.
6.10 STANDARDS OF FINANCIAL STATEMENTS. Each Borrower shall cause all
financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and
9.13 as to which GAAP is applicable to be complete and correct in all material
respects (subject, in the case of interim financial statements, to normal
year-end audit adjustments and absence of notes) and to be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein (except as concurred in by such reporting
accountants or officer, as the case may be, and disclosed therein) and in all
cases except as modified by the definitions contained in this Agreement.
6.11 CREDIT CARD AGREEMENTS. Each Borrower shall (a) observe and perform
all material terms, covenants, conditions and provisions of the Credit Card
Agreements to be observed and performed by it at the times set forth therein;
(b) not do, permit, suffer or refrain from doing anything, as a result of which
there could be a default under or breach of any of the terms of any of the
Credit Card Agreements, (c) at all times maintain in full force and effect the
Credit Card Agreements and not terminate, cancel, surrender, modify, amend,
waive or release any of the Credit Card Agreements, or consent to or permit to
occur any of the foregoing; except, that, a Borrower may terminate or cancel any
of the Credit Card Agreements in the ordinary course of the business of such
Borrower; provided, that, such Borrower shall give Agent not less than fifteen
(15) days prior written notice of its intention to so terminate or cancel any of
the Credit Card Agreements; (d) not enter into any new Credit Card Agreements
with any new Credit Card Issuer unless (i) Agent shall have received not less
than thirty (30) days prior written notice of the intention of such Borrower to
enter into such agreement (together with such other information with respect
thereto as Agent may request) and (ii) such Borrower delivers, or causes to be
delivered to Agent, a Credit Card Acknowledgment in favor of Agent; (e) give
Agent immediate written notice of any Credit Card Agreement entered into by such
Borrower after the date hereof, together with a true, correct and complete copy
thereof and such other information with respect thereto as Agent may request;
and (f) furnish to Agent, promptly upon the request of Agent, such information
and evidence as Agent may require from time to time concerning the observance,
performance and compliance by such Borrower or the other party or parties
thereto with the terms, covenants or provisions of the Credit Card Agreements.
52
7. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1 MERGER, CONSOLIDATION, ACQUISITION AND SALE OF ASSETS. Enter into any
merger, consolidation or other reorganization with or into any other Person or
acquire all or a substantial portion of the assets or stock of any Person or
permit any other Person to consolidate with or merge with it ; except that, a
Borrower may merge with any other Borrower provided that Borrowers provide Agent
with thirty (30) days' prior written notice. Sell, lease, transfer or otherwise
dispose of any of its properties or assets, except as permitted under Section
4.3 hereof.
7.2 CREATION OF LIENS. Create or suffer to exist any Lien or transfer upon
or against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.
7.3 GUARANTEES. Become liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on SCHEDULE 7.3 hereto, (b) the endorsement of checks in
the ordinary course of business.
7.4 INVESTMENTS. Purchase or acquire obligations or stock of, or any other
interest in, any Person, except (a) obligations issued or guaranteed by the
United States of America or any agency thereof; (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating); (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency; and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
7.5 LOANS. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection with the
sale of Inventory in the ordinary course of its business, (b) loans outstanding
as of the date hereof as set forth on SCHEDULE 7.5 hereto (so long as the
aggregate principal amount of such loans does not exceed $200,000) and loans to
employees in the ordinary course of business not to exceed the aggregate amount
of $100,000 outstanding at any one time; and (c) advances, loans or extensions
of credit made from one Borrower to another Borrower in the ordinary course of
business consistent with historical practices.
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7.6 CAPITAL EXPENDITURES. Contract for, purchase or make any expenditure
or commitments for fixed or capital assets (including capitalized leases) in any
fiscal year in an amount in excess of $4,500,000.
7.7 DIVIDENDS. Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of any Borrower, provided, however, that after giving effect to the
payment of such dividends there shall not exist any Event of Default or Default.
7.8 INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (a) Indebtedness to
Lenders; (b) Indebtedness outstanding as of the date hereof as set forth on
SCHEDULE 7.8 hereto; (c) Indebtedness due under the Subordinated Debt
Documentation; and (d) Indebtedness incurred for capital expenditures permitted
under Section 7.6 hereof.
7.9 NATURE OF BUSINESS. Substantially change the nature of the business in
which it is presently engaged, nor except as specifically permitted herein
purchase or invest, directly or indirectly, in any assets or property other than
in the ordinary course of business for assets or property which are useful in,
necessary for and are to be used in its business as presently conducted.
7.10 TRANSACTIONS WITH AFFILIATES. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions in the ordinary
course of business, on an arm's-length basis on terms no less favorable than
terms which would have been obtainable from a Person other than an Affiliate.
7.11 LEASES. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed in any one fiscal year 105% of the amount of annual rental
payments for all leased property for such fiscal year as set forth in the
Projected Operating Budget for such fiscal year.
7.12 SUBSIDIARIES.
(a) Form any Subsidiary.
(b) Enter into any partnership, joint venture or similar
arrangement.
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7.13 FISCAL YEAR AND ACCOUNTING CHANGES. Change its fiscal year from the
Saturday closest to January 31 or make any change (a) in accounting treatment
and reporting practices except as required by GAAP or (b) in tax reporting
treatment except as required by law.
7.14 PLEDGE OF CREDIT. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower's business as conducted
on the date of this Agreement.
7.15 AMENDMENT OF ARTICLES OF INCORPORATION, BY-LAWS. Amend, modify or
waive any term or material provision of its Articles of Incorporation or By-Laws
unless such amendment, modification or waiver would not have a Material Adverse
Effect upon such Borrower.
7.16 COMPLIANCE WITH ERISA.
(a) (i) Maintain, or permit any member of the Controlled Group to
maintain, or (ii) become obligated to contribute, or permit any member of the
Controlled Group to become obligated to contribute, to any Plan, other than
those Plans disclosed on SCHEDULE 5.8(D) hereto; (b) engage, or permit any
member of the Controlled Group to engage, in any non-exempt "prohibited
transaction", as that term is defined in section 406 of ERISA and Section 4975
of the Code; (c) incur, or permit any member of the Controlled Group to incur,
any "accumulated funding deficiency", as that term is defined in Section 302 of
ERISA or Section 412 of the Code; (d) terminate, or permit any member of the
Controlled Group to terminate, any Plan where such event could result in any
liability of any Borrower or any member of the Controlled Group or the
imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA; (e) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on SCHEDULE 5.8(D) hereto; (f) incur, or permit
any member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (g) fail promptly to notify Agent of the occurrence of any
Termination Event; (h) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
applicable laws in respect of any Plan; or (i) fail to meet, or permit any
member of the Controlled Group to fail to meet, all minimum funding requirements
under ERISA or the Code or postpone or delay or allow any member of the
Controlled Group to postpone or delay any funding requirement with respect of
any Plan.
7.17 SUBORDINATED NOTE. At any time, directly or indirectly, pay, prepay,
repurchase, redeem, retire or otherwise acquire, or make any payment on account
of any principal of, interest on or premium payable in connection with the
repayment or redemption of the Subordinated Note, except as expressly permitted
in the Subordination Agreement.
7.18 PREPAYMENT OF INDEBTEDNESS. At any time, directly or indirectly,
prepay any Indebtedness (other than to Agent), or repurchase, redeem, retire or
otherwise acquire any Indebtedness of any Borrower.
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7.19 ADDITIONAL LOANS AND INVESTMENTS BY ORIGINAL OWNER. Notwithstanding
anything to the contrary contained herein, from and after the date hereof,
Original Owners may make additional cash equity capital contributions and/or
loans to the Borrowers (the "Additional Investments"). Original Owners and
Borrowing Agent shall provide Agent and Lenders with written notice of each such
Additional Investment and, on a quarterly basis, a summary of the outstanding
amount of all such Additional Investments. All Additional Investments consisting
of loans or advances to any Borrower shall constitute Subordinated Indebtedness
and shall be subject to the terms and provisions of the Subordinated Agreement
unless Required Lenders, in their documents, agree otherwise.
8. CONDITIONS PRECEDENT.
8.1 CONDITIONS TO INITIAL ADVANCES. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) FILINGS, REGISTRATIONS AND RECORDINGS. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any Other Document or under law or reasonably requested by the
Agent to be filed, registered or recorded in order to create, in favor of Agent,
a perfected security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested, and Agent shall
have received an acknowledgment copy, or other evidence satisfactory to it, of
each such filing, registration or recordation and satisfactory evidence of the
payment of any necessary fee, tax or expense relating thereto;
(b) CORPORATE PROCEEDINGS OF BORROWERS AND GUARANTOR. Agent shall
have received, in form and substance satisfactory to Agent, a copy of the
resolutions in form and substance reasonably satisfactory to Agent, of the Board
of Directors of each Borrower and Guarantor authorizing (i) the execution,
delivery and performance of this Agreement, the Other Documents, the
Subordinated Debt Documentation, and any related agreements, (collectively the
"Documents") and (ii) the granting by each Borrower of the Liens upon the
Collateral and by each Guarantor upon all of such Guarantor's property, in favor
of Agent for itself and the ratable benefit of Lenders, in each case certified
by the Secretary or an Assistant Secretary of each Borrower and Guarantor as of
the Closing Date; and, such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate;
(c) INCUMBENCY CERTIFICATES OF BORROWERS AND GUARANTOR. Agent shall
have received, in form and substance satisfactory to Agent, a certificate of the
Secretary or an Assistant Secretary of each Borrower and Guarantor, dated the
Closing Date, as to the incumbency and signature of the officers of each
Borrower executing this Agreement, and each Borrower and Guarantor executing any
of the other Documents or any certificate or other documents to be delivered by
it pursuant hereto, together with evidence of the incumbency of such Secretary
or Assistant Secretary;
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(d) CERTIFICATES. Agent shall have received, in form and substance
satisfactory to Agent, a copy of the Articles or Certificate of Incorporation or
other charter documents of each Borrower and Guarantor, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws of each
Borrower and Guarantor, and all agreements of each Borrower's shareholders
certified as accurate and complete by the Secretary of each Borrower and
Guarantor;
(e) GOOD STANDING CERTIFICATES. Agent shall have received, in form
and substance satisfactory to Agent, good standing certificates for each
Borrower and Guarantor dated not more than thirty (30) days prior to the Closing
Date, issued by the Secretary of State or other appropriate official of each
Borrower's and Guarantor's jurisdiction of incorporation and each jurisdiction
where the conduct of each Borrower's and each Guarantor's business activities or
the ownership of its properties necessitates qualification;
(f) NO LITIGATION. (i) Except as set forth on SCHEDULE 5.8(B)
hereto, no litigation, investigation or proceeding before or by any arbitrator
or Governmental Body shall be continuing or threatened against any Borrower or
Guarantor against the officers or directors of any Borrower or Guarantor (A) in
connection with the Documents or any of the Transactions and which, in the
reasonable opinion of Agent, is deemed material or (B) which if adversely
determined, could, in the reasonable opinion of Agent, have a Material Adverse
Effect; and (ii) no injunction, writ, restraining order or other order of any
nature materially adverse to any Borrower or Guarantor or the conduct of its
business or inconsistent with the due consummation of the Transactions shall
have been issued by any Governmental Body;
(g) FINANCIAL CONDITION CERTIFICATES. Agent shall have received
executed Officers Certificates satisfactory in form and substance satisfactory
to Agent, executed Officers Certificates certifying the solvency of Borrowers on
a Consolidated Basis after giving effect to the Indebtedness contemplated hereby
and by the Subordinated Debt Documentation and as to Borrowers' financial
resources and their ability to meet their obligations and liabilities as they
become due; to the effect that as of the Closing Date and after giving effect to
the Transactions:
(i) the assets of Borrowers on a Consolidated Basis, at a fair
valuation, exceed the total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of Borrowers on a Consolidated Basis;
(ii) current projections which are based on underlying assumptions which provide
a reasonable basis for the projections and which reflect each Borrower's good
faith judgment based on present circumstances that each Borrower will have
sufficient cash flow to enable it to pay its debts as they mature; and
(iii) no Borrower has an unreasonably small capital base with
which to engage in its anticipated business.
For purposes of this subsection (h), the "fair valuation" of the assets of each
Borrower shall be determined on the basis of the amount which may be realized
within a reasonable time, either through collection or sale of such assets at
market value, conceiving the latter as the amount which could be obtained for
the property in question within such period by a capable and diligent
businessman from an interested buyer who is willing to purchase under ordinary
selling conditions;
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(h) COLLATERAL EXAMINATION. Agent shall have completed Collateral
examinations and received any required appraisals, the results of which shall be
satisfactory in form and substance to Agent, of the Receivables, Inventory and
General Intangibles, of each Borrower and all books and records in connection
therewith;
(i) FEES. Agent shall have received all fees payable to Agent and
Lenders on or prior to the Closing Date pursuant to Article 3 hereof;
(j) PRO FORMA FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION.
Agent shall have received, in form and substance satisfactory to Agent, a copy
of the Pro Forma Financial Statements, a copy of a pro forma statement of
sources and uses of cash as of the Closing Date, and a current summary inventory
report and aging of accounts receivable and accounts payable for Borrowers which
shall be satisfactory in all respects to Agent;
(k) OTHER DOCUMENTS. Agent shall have received final executed copies
of the Subordinated Debt Documentation and of all Other Documents, each in form
and substance satisfactory to Agent, and all related agreements, documents and
instruments as in effect on the Closing Date and the transactions contemplated
by such documentation shall be consummated concurrently with the making of the
initial Advances;
(l) SUBORDINATION AGREEMENT. Agent shall have entered into a
Subordination Agreement with Borrowers and Subordinated Lender which shall set
forth the basis upon which the Subordinated Lender may receive, and Borrowers
may make, payments under the Subordinated Note, which basis shall be
satisfactory in form and substance to Agent in its sole discretion;
(m) INSURANCE. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrowers' casualty insurance
policies, together with loss payable endorsements on Agent's standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrowers' liability insurance policies, together with endorsements naming Agent
as a co-insured;
(n) PAYMENT INSTRUCTIONS. Agent shall have received, in form and
substance satisfactory to Agent, written instructions from Borrowers directing
the application of proceeds of the initial Advances made pursuant to this
Agreement;
(o) BLOCKED ACCOUNTS. Agent shall have received, in form and
substance satisfactory to Agent, duly executed agreements establishing the
Blocked Accounts with financial institutions acceptable to Agent for the
collection or servicing of the Receivables and proceeds of the Collateral;
(p) CONSENTS. Agent shall have received, in form and substance
satisfactory to Agent, any and all Consents necessary to permit the effectuation
of the transactions contemplated by this Agreement and the Other Documents; and,
Agent shall have received such Consents and waivers of such third parties as
might assert claims with respect to the Collateral, as Agent and its counsel
shall deem reasonably necessary;
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(q) FINANCIAL STATEMENTS. Agent shall have received, in form and
substance satisfactory to Agent, unaudited consolidated financial statements for
Borrowers for fiscal year ending January 31, 2004, and Borrowers' monthly
financial statements through and including February, 2004.
(r) NO ADVERSE MATERIAL CHANGE. (i) Since April 30, 2004, there
shall not have occurred (A) any material adverse change in the condition,
financial or otherwise, operations, properties or prospects of the Borrowers,
taken as a whole, (B) any material damage or destruction to any of the
Collateral nor any material depreciation in the value thereof and (C)any event,
condition or state of facts which could reasonably be expected to have a
Material Adverse Effect, and (D) any material deviation from the forecasts
furnished to Agent with respect to the Borrowers, taken as a whole, and (ii) no
representations made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect;
(s) LEASEHOLD AGREEMENTS. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrowers at which books and records relating to Receivables
are located;
(t) SUBORDINATED DEBT DOCUMENTATION. Agent shall have received, in
form and substance satisfactory to Agent, final executed copies of the
Subordinated Debt Documentation which shall contain such terms and provisions
including, without limitation, subordination terms, satisfactory to Agent;
(u) GUARANTEES AND OTHER DOCUMENTS. Agent shall have received (i) an
acknowledgment by Guarantor that the Guaranty and Stock Pledge and Security
Agreement previously executed by Guarantor, each remain in full force and effect
in accordance with their respective terms and provisions, and (ii) the executed
Fee Letter and Other Documents in addition to the foregoing, all in form and
substance satisfactory to Agent;
(v) CONTRACT REVIEW. Agent shall have reviewed all material
contracts of Borrowers including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
(w) CLOSING CERTIFICATE. Agent shall have received, in form and
substance satisfactory to Agent, a closing certificate signed by the Chief
Financial Officer of each Borrower dated as of the date hereof, stating that (i)
all representations and warranties set forth in this Agreement and the Other
Documents are true and correct on and as of such date, (ii) Borrowers are on
such date in compliance with all the terms and provisions set forth in this
Agreement and the Other Documents and (iii) on such date no Default or Event of
Default has occurred or is continuing;
(x) BORROWING BASE. Agent shall have received, in form and substance
satisfactory to Agent, a Borrowing Base Certificate sufficient to support the
Advances in the amount requested by Borrowers on the Closing Date;
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(y) BUSINESS PLAN AND PROJECTIONS. Agent shall have received, in
form and substance satisfactory to Agent, Borrowers' business plan and monthly
financial projections for Borrowers' fiscal year ending January 31, 2005, and
such further information and documentation as Agent shall reasonably require
with respect to each Borrower.
(z) UNDRAWN AVAILABILITY. After giving effect to the initial
Advances hereunder, Borrowers shall have Undrawn Availability of at least
$6,500,000; and
(aa) OTHER. Agent shall have received in form and substance
satisfactory to Agent, evidence of all corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be reasonably satisfactory in form and substance to Agent,
Lenders and their counsel.
8.2 CONDITIONS TO EACH ADVANCE. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by any Borrower in or pursuant to this Agreement and any related
agreements to which it is a party, and each of the representations and
warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement or
any related agreement shall be true and correct in all material respects on and
as of such date as if made on and as of such date, except to the extent made as
of a specific date;
(b) NO DEFAULT. No Event of Default or Default shall have occurred
and be continuing on such date, or would exist after giving effect to the
Advances requested to be made, on such date, provided, however that Lenders, in
their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and
(c) MAXIMUM ADVANCES. In the case of any Advances requested to be
made, after giving effect thereto, the Advances shall not exceed the maximum
amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by Borrowers hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
9. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1 DISCLOSURE OF MATERIAL MATTERS. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
a material amount of goods or claims or disputes asserted by any Customer or
other obligor.
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9.2 SCHEDULES. Deliver to Agent Inventory reports not later than the third
(3rd) Business Day of each week for the immediately preceding week. In addition,
(a) deliver to Agent on or before the fifteenth (15th) day of each month as and
for the prior month, or more frequently as Agent may require from time to time,
accounts receivable agings, accounts payable schedules and a certification duly
signed by an officer of Borrowing Agent that all obligations of the Borrowers
under all real or personal property leases have been paid, (b) deliver to
Hilco/Great American or such other person as Agent may direct, from time to
time, not later than the third (3rd) Business Day of each fiscal quarter a
summary report of the Borrowers' Inventory, prepared by category, and (c)
deliver to Agent, at Borrowers' expense, on or before the thirtieth (30) day
after the end of each fiscal quarter as and for the prior fiscal quarter, or at
any time or times as Agent may request on or after an Event of Default, written
Inventory appraisals in form, scope and methodology acceptable to Agent and by
an appraiser acceptable to Agent, addressed to Agent or upon which Agent is
expressly permitted to rely. In addition to and not in limitation of the
foregoing, Borrowers shall deliver to Agent at such intervals as Agent may
reasonably require: (i) copies of Customer's invoices, (ii) evidence of shipment
or delivery, and (iii) such further schedules, documents and/or information
regarding the Collateral as Agent may require including, without limitation,
trial balances and test verifications. Agent shall have the right to confirm and
verify all Receivables by any manner and through any medium it considers
advisable and do whatever it may deem reasonably necessary to protect its
interests hereunder. The items to be provided under this Section are to be in
form reasonably satisfactory to Agent and executed by Borrowers and delivered to
Agent from time to time solely for Agent's convenience in maintaining records of
the Collateral, and Borrowers' failure to deliver any of such items to Agent
shall not affect, terminate, modify or otherwise limit Agent's security interest
with respect to the Collateral.
9.3 ENVIRONMENTAL REPORTS. Furnish Agent, concurrently with the delivery
of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President and/or Chief Financial Officer of each
Borrower stating, to the best of his knowledge, that each Borrower is in
compliance in all material respects with all federal, state and local laws
relating to environmental protection and control and occupational safety and
health. To the extent any Borrower is not in compliance with the foregoing laws,
the certificate shall set forth with specificity all areas of non-compliance and
the proposed action such Borrower will implement in order to achieve full
compliance.
9.4 LITIGATION. Promptly notify Agent in writing of any litigation, suit
or administrative proceeding affecting any Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which may
have a Material Adverse Effect.
9.5 MATERIAL OCCURRENCES. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event of default
under the Subordinated Debt Documentation; (c) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied except as limited in the definitions included in this
Agreement, the financial condition or operating results of any Borrower as of
the date of such statements; (d) any accumulated retirement plan funding
deficiency which, if such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the Code, could subject any Borrower to
a tax imposed by Section 4971 of the Code; (e) each and every default by any
Borrower which might result in the acceleration of the maturity of any
Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (f) any other development in the business or affairs of any
Borrower which might have a Material Adverse Effect; in each case describing the
nature thereof and the action Borrowers propose to take with respect thereto.
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9.6 GOVERNMENT RECEIVABLES. Notify Agent immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7 ANNUAL FINANCIAL STATEMENTS. Furnish Agent within one hundred twenty
(120) days after the end of each fiscal year of Borrowers, consolidating and
consolidated financial statements for Borrowers including, but not limited to,
statements of income and stockholders' equity and cash flow from the beginning
of the current fiscal year to the end of such fiscal year and the balance sheet
as at the end of such fiscal year, all prepared in accordance with GAAP applied
on a basis consistent with prior practices, except as limited in the definitions
included in this Agreement and in reasonable detail together with audited
consolidating and consolidated financial statements for E Com Ventures, Inc.,
prepared in accordance with GAAP applied on a basis consistent with prior
periods reported upon without qualification by an independent certified public
accounting firm reasonably satisfactory to Agent (the "Accountants"). The
reports shall be accompanied by a certificate of the President and/or Chief
Financial Officer of each Borrower which shall state that, based on an
examination sufficient to permit him to make an informed statement, no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default, its nature, when it occurred, whether it is continuing and
the steps being taken by such Borrower with respect to such default and, such
certificate shall have appended thereto calculations which set forth Borrowers'
compliance with the requirements or restrictions imposed by Sections 6.5, 6.6
and 6.7 hereof.
9.8 MONTHLY FINANCIAL STATEMENTS. Furnish Agent within thirty (30) days
after the end of each month, consolidating and consolidated unaudited balance
sheet of Borrowers and unaudited statements of income and stockholders' equity
and cash flow of Borrowers reflecting results of operations from the beginning
of the fiscal year to the end of such month and for such month, prepared on a
basis consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate signed by the President and/or Chief Financial
Officer of each Borrower, which shall state that, based on an examination
sufficient to permit him to make an informed statement, (a) no Default or Event
of Default exists, or, if such is not the case, specifying such Default or Event
of Default, its nature, when it occurred, whether it is continuing and the steps
being taken by Borrowers with respect to such event, (b) Borrowers are current
with respect to payment of all amounts due or to become due in respect of (i)
sales, use and/or withholding taxes, (ii) Real Property taxes, and (iii) lease
payments, and (c) such certificate shall have appended thereto calculations
which set forth Borrowers' compliance with the requirements or restrictions
imposed by Sections 6.5, 6.6 and 6.7 hereof.
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9.9 BORROWING BASE CERTIFICATE. Furnish Agent, not later than the third
(3rd) Business Day of each week for the immediately preceding week, and together
with each request for a Revolving Advance, a Borrowing Base Certificate duly
completed and executed by the chief financial officer or other appropriate
financial officer of Borrowing Agent and delivered to Agent. Nothing contained
in any Borrowing Base Certificate shall be deemed to limit, impair or otherwise
affect the rights of Agent and Lenders in the event of any conflict or
inconsistency between any amounts or calculations as set forth in any Borrower
Base Certificate and any amounts or calculations as determined by Agent and
Lenders in good faith, the determination of Agent and Lenders shall govern and
be conclusive and binding upon Borrowing Agent and each Borrower. Without
limiting the foregoing, each Borrower shall furnish to Agent and Lenders any
information which Agent and Lenders may reasonably request regarding the
determination and calculation of any of the amounts set forth in any Borrowing
Base Certificate.
9.10 OTHER REPORTS. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, (a) with copies of such
financial statements, reports and returns as each Borrower shall send to its
stockholders, and (b) copies of all notices sent pursuant to the Subordinated
Debt Documentation.
9.11 ADDITIONAL INFORMATION. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement have been complied with by Borrowers including, without limitation and
without the necessity of any request by Agent, (a) at least thirty (30) days
prior thereto, notice of any Borrower's opening of any new office or place of
business or any Borrower's closing of any existing office or place of business,
and (b) promptly upon any Borrower's learning thereof, notice of any labor
dispute to which any Borrower may become a party, any strikes or walkouts
relating to any of its plants or other facilities, and the expiration of any
labor contract to which any Borrower is a party or by which any Borrower is
bound.
9.12 PROJECTED OPERATING BUDGET. Furnish Agent, no later than thirty (30)
days prior to the beginning of each Borrower's fiscal years commencing with
fiscal year 2005, a month by month projected operating budget (with written
assumptions) and cash flow of Borrowers on a consolidated and consolidating
basis for such fiscal year (including an income statement, statements of cash
disbursements, cash collections, balance sheet, statements of cash flow and
borrowing base projections for each month), such projections to be accompanied
by a certificate signed by the President or Chief Financial Officer of each
Borrower to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
9.13 VARIANCES FROM OPERATING BUDGET. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7 and each monthly
report, a written report summarizing all material variances from budgets
submitted by Borrowers pursuant to Section 9.12 and a discussion and analysis by
management with respect to such variances.
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9.14 NOTICE OF SUITS, ADVERSE EVENTS. Furnish Agent with prompt notice of
(a) any lapse or other termination of any Consent issued to any Borrower by any
Governmental Body or any other Person that is material to the operation of any
Borrower's business, (b) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (c) copies of any periodic or
special reports filed by any Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of any Borrower, or if copies thereof are requested by Agent, and
(d) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Borrower.
9.15 ERISA NOTICES AND REQUESTS. Furnish Agent with immediate written
notice in the event that (a) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (b) any Borrower or any member of the Controlled Group knows or
has reason to know that a prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (c) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Borrower or any member of the
Controlled Group with respect to such request, (d) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which (e) any Borrower or any member of the
Controlled Group was not previously contributing shall occur, any Borrower or
any member of the Controlled Group shall receive from the PBGC a notice of
intention to terminate a Plan or to have a trustee appointed to administer a
Plan, together with copies of each such notice, (f) any Borrower or any member
of the Controlled Group shall receive any favorable or unfavorable determination
letter from the Internal Revenue Service regarding the qualification of a Plan
under Section 401(a) of the Code, together with copies of each such letter; (g)
any Borrower or any member of the Controlled Group shall receive a notice
regarding the imposition of withdrawal liability, together with copies of each
such notice; (h) any Borrower or any member of the Controlled Group shall fail
to make a required installment or any other required payment under Section 412
of the Code on or before the due date for such installment or payment; or (i)
any Borrower or any member of the Controlled Group knows that (i) a
Multiemployer Plan has been terminated, (ii) the administrator or plan sponsor
of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (iii) the
PBGC has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.16 ADDITIONAL DOCUMENTS. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
10. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1 failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein or in any Other Document when due;
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10.2 any representation or warranty made or deemed made by any Borrower in
this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3 failure by any Borrower to (a) furnish financial information when due
or when requested by Agent within a reasonable time of such request, or
(b)permit the inspection of its books or records;
10.4 issuance of a notice of Lien (other than a Permitted Encumbrance),
levy, assessment, injunction or attachment against a material portion of any
Borrower's property;
10.5 failure or neglect of any Borrower to perform, keep or observe any
term, provision, condition, covenant herein contained, or contained in any other
agreement or arrangement, now or hereafter entered into between any Borrower and
any Lender;
10.6 any judgment is rendered or judgment liens filed against any Borrower
for an amount in excess of $250,000 which within thirty (30) days of such
rendering or filing is not either satisfied, stayed or discharged of record, or
which at any time is unstayed;
10.7 any Borrower shall (a) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (b) make a general assignment for the benefit of creditors, (c)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (d) be adjudicated a bankrupt or insolvent, (e) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (f) acquiesce to, or fail to have dismissed, within forty-five (45)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (g) take any action for the purpose of effecting any of the
foregoing; except that with respect to Section 10.7(f) above, so long as a
petition is pending against any Borrower, Agent and Lenders shall have no
obligation whatsoever to make any loans or advances or provide financial
accommodations to any Borrower hereunder;
10.8 any Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.9 any Affiliate of any Borrower, or any Guarantor, shall (a) apply for,
consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (b) admit in writing its inability,
or be generally unable, to pay its debts as they become due or cease operations
of its present business, (c) make a general assignment for the benefit of
creditors, (d) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (e) be adjudicated a bankrupt or
insolvent, (f) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (g) acquiesce to, or fail to have
dismissed, within forty-five (45) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (h)take any action for the
purpose of effecting any of the foregoing;
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10.10 any change in the Borrowers' condition or affairs (financial or
otherwise) which, taken as a whole, in Lenders' reasonable opinion materially
impairs the Collateral;
10.11 any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;
10.12 an event of default has occurred and been declared under the
Subordinated Debt Documentation which default shall not have been cured or
waived within any applicable grace period and for which Subordinated Lender is
permitted to take action under the Subordination Agreement;
10.13 a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which causes, with respect to the
Borrowers taken as a whole, a Material Adverse Effect which default is not cured
or waived by the non-defaulting party within thirty (30) days of its occurrence;
10.14 termination or breach of any Guaranty or similar agreement executed
and delivered to Agent in connection with the Obligations of any Borrower, or if
any Guarantor attempts to terminate, challenges the validity of, or its
liability under, any such Guaranty or similar agreement;
10.15 any Change of Ownership or Change of Control shall occur;
10.16 any material provision of this Agreement shall, for any reason,
cease to be valid and binding on any Borrower, or any Borrower shall so claim in
writing to Agent;
10.17 (a) any Governmental Body shall (i) revoke, terminate, suspend or
adversely modify any license, permit, patent, trademark or tradename of any
Borrower, or (ii) commence proceedings to suspend, revoke, terminate or
adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(iii) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of any Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent, in any case, which could
have a Material Adverse Effect; or (b) any agreement which is necessary or
material to the operation of any Borrower's business shall be revoked or
terminated and not replaced by a substitute reasonably acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement could have a Material Adverse
Effect;
10.18 any material portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower or
any other Person with respect to any material portion of the Collateral shall
have become the subject matter of litigation which might, in the opinion of
Lenders, exercised in good faith, upon final determination, result in impairment
or loss of the security provided by this Agreement or the Other Documents;
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10.19 an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the opinion of Lenders be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Lenders, could have a Material Adverse Effect; or
10.20 any bank at which any deposit account of any Borrower is maintained
shall fail to comply with any of the terms of any Deposit Account Control
Agreement to which such bank is a party or any securities intermediary,
commodity intermediary or other financial institution at any time in custody,
control or possession of any investment property of such Borrower shall fail to
comply with any of the terms of any Investment Property Control Agreement to
which such person is a party.
11. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 RIGHTS AND REMEDIES. Upon the occurrence of (a) an Event of Default
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and (b) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances. Upon the occurrence of any Event of
Default, Agent in its discretion shall have the right to exercise, or, at the
written direction of Required Lenders, shall exercise, any and all other rights
and remedies provided for herein, under the UCC and at law or equity generally,
including, without limitation, the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. Agent may enter any Borrower's premises or
other premises without legal process and without incurring liability to any
Borrower therefor, and Agent may thereupon, or at any time thereafter, in its
discretion without notice or demand, take the Collateral and remove the same to
such place as Agent may deem advisable and Agent may require Borrowers to make
the Collateral available to Lenders at a convenient place. With or without
having the Collateral at the time or place of sale, Agent may sell the
Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Agent may elect. Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Agent shall
give Borrowers reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrowers at least five (5) days
prior to such sale or sales is reasonable notification. At any public sale Agent
or any Lender may bid for and become the purchaser, and Agent, any Lender or any
other purchaser at any such sale thereafter shall hold the Collateral sold
absolutely free from any claim or right of whatsoever kind, including any equity
of redemption and such right and equity are hereby expressly waived and released
by each Borrower. In connection with the exercise of the foregoing remedies,
Agent is granted permission, without charge, to use all of Borrowers'
trademarks, trade styles, trade names, patents, patent applications, licenses,
franchises and other proprietary rights which are used in connection with (i)
Inventory for the purpose of disposing of such Inventory and (ii) Equipment. The
proceeds realized from the sale of any Collateral shall be applied as follows:
first, to the reasonable costs, expenses and attorneys' fees and expenses
incurred by Agent and Lenders for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second, to
interest due upon any of the Obligations; and, third, to the principal of the
Obligations. If any deficiency shall arise, Borrowers shall remain liable to
Agent and Lenders therefor.
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11.2 AGENT'S DISCRETION. Agent shall have the right in its sole discretion
to determine which rights, Liens, security interests or remedies Agent may at
any time pursue, relinquish, subordinate, or modify or to take any other action
with respect thereto and such determination will not in any way modify or affect
any of Agent's or Lenders' rights hereunder.
11.3 SETOFF. In addition to any other rights which Agent or any Lender may
have under applicable law, upon the occurrence of an Event of Default hereunder,
Agent and each Lender shall have a right to apply any Borrower's property held
by Agent, such Lender or by the Bank to reduce the Obligations. If any Lender
(including Agent) shall obtain from any Borrower payment of any principal of or
interest on any Advance owing to it or payment of any other amount under this
Agreement or any of the Other Documents through the exercise of any right of
setoff, banker's lien or counterclaim or similar right or otherwise (other than
from Agent as provided herein), and, as a result of such payment, such Lender
shall have received more than its pro rata share of the principal of the
Advances or more than its share of such other amounts then due hereunder or
thereunder by any Borrower to such Lender than the percentage thereof received
by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders,
the amount of such excess and simultaneously purchase from such other Lenders a
participation in the Advances or such other amounts, respectively, owing to such
other Lenders (or such interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all Lenders shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving such excess payment) in accordance with their respective pro rata
shares or as otherwise agreed by Lenders. To such end, all Lenders shall make
appropriate adjustments among themselves (by the resale of participation sold or
otherwise) if such payment is rescinded or must otherwise be restored.
11.4 RIGHTS AND REMEDIES NOT EXCLUSIVE. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
12. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1 WAIVER OF NOTICE. Each Borrower hereby waives notice of non-payment
of any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
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12.2 DELAY. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3 JURY TRIAL WAIVER. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY
HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
13. EFFECTIVE DATE AND TERMINATION.
13.1 TERM. This Agreement, which shall inure to the benefit of and shall
be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until the last day of the Term unless
sooner terminated as herein provided. Borrowers may terminate this Agreement at
any time upon sixty (60) days' prior written notice upon payment in full of the
Obligations. The Term shall be automatically extended for successive periods of
one (1) year each unless terminated by either party at the end of such initial
Term or any successive Term by giving the other party sixty (60) days prior
written notice. Borrowers may terminate this Agreement at any time upon sixty
(60) days' prior written notice upon payment in full of the Obligations. In the
event that the Obligations are prepaid in full prior to the last day of the Term
(the date of such prepayment hereinafter referred to as the "Prepayment Date")
Borrowers shall pay to Agent for the benefit of Lenders an early termination fee
(the "Early Termination Fee") in an amount equal to (a) three percent (3%) of
the Maximum Loan Amount if the Prepayment Date occurs on or after the Closing
Date to and including the date immediately preceding the first anniversary of
the Closing Date, (b) two percent (2%) of the Maximum Loan Amount if the
Prepayment Date occurs on or after the first anniversary of the Closing Date to
and including the date immediately preceding the second anniversary of the
Closing Date, and (c) one percent (1%) of the Maximum Loan Amount if the
Prepayment Date occurs on or after the second anniversary of the Closing Date to
and including the date immediately preceding the third anniversary of the
Closing Date or prior to the end of any extended term.
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13.2 TERMINATION. The termination of the Agreement shall not affect any
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The Liens and rights granted to Agent and
Lenders hereunder and the financing statements filed hereunder shall continue in
full force and effect, notwithstanding the termination of this Agreement or the
fact that any Borrower's respective account may from time to time be temporarily
in a zero or credit position, until all of the Obligations of each Borrower have
been paid or performed in full after the termination of this Agreement or each
Borrower has furnished Agent and Lenders with an indemnification satisfactory to
Agent and Lenders with respect thereto. Accordingly, each Borrower waives any
rights which it may have under Section 9-513 of the Uniform Commercial Code to
demand the filing of termination statements with respect to the Collateral, and
Agent shall not be required to send such termination statements to each
Borrower, or to file them with any filing office, unless and until this
Agreement shall have been terminated in accordance with its terms and all
Obligations paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are paid or performed in full.
14. REGARDING AGENT.
14.1 APPOINTMENT. Each Lender hereby designates GMAC CF to act as Agent
for such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Section
3.2 and in the Fee Letter), charges and collections (without giving effect to
any collection days) received pursuant to this Agreement, for the ratable
benefit of Lenders. Agent may perform any of its duties hereunder by or through
its agents or employees. As to any matters not expressly provided for by this
Agreement (including, without limitation, the collection of any note evidencing
any of the Obligations,) Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding;
provided, however, that Agent shall not be required to take any action which
exposes Agent to liability or which is contrary to this Agreement or the Other
Documents or applicable law unless Agent is furnished with an indemnification
reasonably satisfactory to Agent with respect thereto.
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14.2 NATURE OF DUTIES. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(a) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their willful misconduct or gross (not
mere) negligence, or (b) responsible in any manner for any recitals, statements,
representations or warranties made by any Borrower or any officer thereof
contained in this Agreement, or in any of the Other Documents 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 of the
Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of any Borrower to perform its obligations hereunder. Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the Other Documents, or to inspect the
properties, books or records of any Borrower. The duties of Agent as respects
the Advances to Borrowers shall be mechanical and administrative in nature;
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement except as expressly set forth herein.
14.3 LACK OF RELIANCE ON AGENT AND RESIGNATION.
(a) Independently and without reliance upon Agent or any other
Lender, each Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of each Borrower in
connection with the making and the continuance of the Advances hereunder and the
taking or not taking of any action in connection herewith, and (ii) its own
appraisal of the creditworthiness of each Borrower. Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before making of the Advances or at any time or times thereafter
except as shall be provided by any Borrower pursuant to the terms hereof. Agent
shall not be responsible to any Lender for any recitals, statements,
information, representations or warranties herein or in any agreement, document,
certificate or a statement delivered in connection with or for the execution,
effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of this Agreement or any Other Document, or of the financial
condition of any Borrower, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement, the Other Documents or the financial condition of any Borrower,
or the existence of any Event of Default or any Default.
(b) Agent may resign on sixty (60) days' written notice to each of
Lenders and Borrowing Agent and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrowers.
(c) Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent. After any Agent's resignation as Agent, the provisions of
this Article 14 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
14.4 CERTAIN RIGHTS OF AGENT. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
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14.5 RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6 NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or a
Borrower referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
14.7 INDEMNIFICATION. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Loan Document; provided that, Lenders shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence (but not mere negligence) or willful misconduct.
14.8 AGENT IN ITS INDIVIDUAL CAPACITY. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with any Borrower
as if it were not performing the duties specified herein, and may accept fees
and other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
14.9 DELIVERY OF DOCUMENTS. To the extent Agent receives documents and
information from any Borrower pursuant to the terms of this Agreement, Agent
will promptly furnish such documents and information to Lenders.
14.10 BORROWERS' UNDERTAKING TO AGENT. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
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14.11 DOCUMENTATION AGENT. The Lender identified on the signature pages of
this Agreement as the "Documentation Agent" shall have no right, power,
obligation, liability, responsibility or duty under this Agreement or any of the
Other Documents other than those applicable to all Lenders as such. Without
limiting the foregoing, the Lender so identified shall not have or be deemed to
have any fiduciary relationship with any Lender. Each Lender acknowledges that
it has not relied, and will not rely, on the Lender so identified in deciding to
enter into this Agreement or in taking or not taking action hereunder.
15. INTERRELATED BUSINESSES; BORROWING AGENCY.
15.1 INTERRELATED BUSINESSES. Borrowers hereby represent and warrant to
Agent and Lenders that (a) Borrowers make up a related organization of various
entities constituting a single economic and business enterprise so that
Borrowers share an identity of interests such that any benefit received by any
one of them benefits the others; (b) certain of Borrowers render services to or
for the benefit of other Borrowers, as the case may be, purchase or sell and
supply goods to or from or for the benefit of the others, make loans, advances
and provide other financial accommodations to or for the benefit of the other
Borrowers (including, inter alia, the payment by Borrowers of creditors of the
other Borrowers and guarantees by Borrowers of indebtedness of the other
Borrowers and provide administrative, marketing, payroll and management services
to or for the benefit of the other Borrowers), and (c) Borrowers have
centralized accounting and legal service, common officers and directors and are
identified to creditors as a single economic and business enterprise doing
business as "Perfumania."
15.2 BORROWING AGENCY PROVISIONS.
(a) Each Borrower hereby irrevocably designates Borrowing Agent to
be its attorney and agent and in such capacity to borrow, sign and endorse
notes, and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower or
Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds
hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing facility
with a borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Agent or any Lender on any request or instruction
from Borrowing Agent or any other action taken by Agent or any Lender with
respect to this Section 15.2 except due to willful misconduct or gross (not
mere) negligence by the indemnified party.
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(c) All Obligations shall be joint and several, and each Borrower
shall make payment upon the maturity of the Obligations by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be affected by any extensions, renewals and forbearance granted to
Agent or any Lender to any Borrower, failure of Agent or any Lender to give any
Borrower notice of borrowing or any other notice, any failure of Agent or any
Lender to pursue or preserve its rights against any Borrower, the release by
Agent or any Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by Agent or
any Lender to the other Borrowers or any Collateral for such Borrower's
Obligations or the lack thereof.
15.3 WAIVER OF SUBROGATION. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement.
16. MISCELLANEOUS.
16.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against any Borrower with respect to any of the Obligations, this
Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New York, United States of America, and, by
execution and delivery of this Agreement, each Borrower accepts for itself and
in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 16.7 and service so made shall be deemed completed seven (7) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Agent's and/or any Lender's option, by service upon
Borrowing Agent which each Borrower irrevocably appoints as such Borrower's
Agent for the purpose of accepting service within the State of New York. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of Agent or any Lender to bring proceedings against any
Borrower in the courts of any other jurisdiction. Each Borrower waives any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. Any judicial proceeding by any Borrower against Agent or
any Lender involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in the City
of New York, State of New York.
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16.2 AMENDED AND RESTATED AGREEMENT; AMENDMENTS TO OTHER DOCUMENTS. This
Agreement amends, restates, replaces, and supercedes in its entirety, without a
breach in continuity, the Existing Agreement, as it has heretofore been amended,
restated, renewed, supplemented, substituted or otherwise modified. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. With respect to any of the Other Documents
heretofore executed and delivered by any Borrower or Guarantor in connection
with the Existing Agreement, each such Other Document is hereby amended as
follows: (a) all references to the Existing Agreement are hereby amended to mean
this Agreement, and (b) all references to GMAC Commercial Credit LLC are hereby
amended to mean GMAC CF, in its capacity as Agent hereunder.
16.3 ENTIRE UNDERSTANDING
(a) This Agreement and the documents executed concurrently herewith
contain the entire understanding between each Borrower, Agent and each Lender
and supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. Any promises, representations, warranties or guarantees
not herein contained and hereinafter made shall have no force and effect unless
in writing, signed by each Borrower's, Agent's and each Lender's respective
officers. Neither this Agreement nor any portion or provisions hereof may be
changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged. Each Borrower
acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.
(b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrowers may, subject to the provisions of this Section
16.3(b), from time to time enter into written supplemental agreements to this
Agreement or the Other Documents executed by Borrowers, for the purpose of
adding or deleting any provisions or otherwise changing, varying or waiving in
any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:
(i) increase the Commitment Percentage of any Lender;
(ii) increase the Maximum Revolving Advance Amount;
(iii) extend the maturity of any instrument evidencing any of
the Obligations or the due date for any amount payable hereunder, or decrease
the rate of interest or reduce any fee payable by Borrowers to Lenders pursuant
to this Agreement;
(iv) alter the definition of the term Required Lenders or
alter, amend or modify this Section 16.3(b);
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(v) alter the definition of any of the following terms (A)
EBITDA, (B) Fixed Charge Coverage Ratio, (C) Inventory Advance Rates, (D) Rent
Reserve, (E) Formula Amount, or (F) Undrawn Availability;
(vi) release any Borrower or Guarantor, or release any
Collateral during any calendar year having an aggregate value in excess of
$2,000,000; or
(vii) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
16.4 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Advances held by it or other Obligations payable hereunder as fully as if such
Transferee were the direct holder thereof provided that Borrowers shall not be
required to pay to any Transferee more than the amount which it would have been
required to pay to Lender which granted an interest in its Advances or other
Obligations payable hereunder to such Transferee had such Lender retained such
interest in the Advances hereunder or other Obligations payable hereunder and in
no event shall Borrowers be required to pay any such amount arising from the
same circumstances and with respect to the same Advances or other Obligations
payable hereunder to both such Lender and such Transferee. Each Borrower hereby
grants to any Transferee a continuing security interest in any deposits, moneys
or other property actually or constructively held by such Transferee as security
for the Transferee's interest in the Advances.
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(c) Any Lender may sell, assign or transfer all or any part of its
rights under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender"),
in minimum amounts of not less than $5,000,000, pursuant to a Commitment
Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and
Agent and delivered to Agent for recording. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrowers hereby consent to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrowers shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Advances owing to each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrowers, Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Advance recorded therein
for the purposes of this Agreement. The Register shall be available for
inspection by Borrowers or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in the amount of
$2,500 payable by the applicable Purchasing Lender upon the effective date of
each transfer or assignment to such Purchasing Lender.
(e) Borrowers authorize each Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in such Lender's possession concerning Borrowers which
has been delivered to such Lender by or on behalf of Borrowers pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrowers.
16.5 APPLICATION OF PAYMENTS. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
Borrowers make a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
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16.6 INDEMNITY. Each Borrower shall indemnify Agent, each Lender and each
of their respective officers, directors, Affiliates, employees and agents from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against Agent or any
Lender in any litigation, proceeding or investigation instituted or conducted by
any governmental agency or instrumentality or any other Person with respect to
any aspect of, or any transaction contemplated by, or referred to in, or any
matter related to, this Agreement or the Other Documents, whether or not Agent
or any Lender is a party thereto, except to the extent that any of the foregoing
arises out of the willful misconduct or gross (not mere) negligence of the party
being indemnified.
16.7 NOTICE. Any notice or request hereunder may be given to any Borrower
or to Agent or any Lender at their respective addresses set forth below or at
such other address as may hereafter be specified in a notice designated as a
notice of change of address under this Section. Any notice or request hereunder
shall be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, or (d) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with telephone communication to a duly
authorized officer of the recipient confirming its receipt as subsequently
confirmed by registered or certified mail. Any notice or other communication
required or permitted pursuant to this Agreement shall be deemed given (i)when
personally delivered to any officer of the party to whom it is addressed, (ii)on
the earlier of actual receipt thereof or three (3) days following posting
thereof by certified or registered mail, postage prepaid, OR (iii) upon actual
receipt thereof when sent by a recognized overnight delivery service or (iv)
upon actual receipt thereof when sent by telecopier to the number set forth
below with telephone communication confirming receipt and subsequently confirmed
by registered, certified or overnight mail to the address set forth below, in
each case addressed to each party at its address set forth below or at such
other address as has been furnished in writing by a party to the other by like
notice:
(A) If to Agent at: GMAC COMMERCIAL FINANCE LLC
2810 Interstate Tower
121 West Trade Street
Charlotte, North Carolina 28202
Attention: Corporate Loan
Administration
Telephone: 704 342-5360
Telecopier: 704 342-5353
(B) If to a Lender other
than Agent, as specified
on the signature pages hereof
(C) If to Borrowing Agent at: PERFUMANIA, INC.
251 International Parkway
Sunrise, Florida 33325
Attention: Mr. Donovan Chin
Telephone: 954 335-9030
Telecopier: 954 335-9179
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With a copy to:
Greenberg Traurig, P.A.
777 South Flagler Drive
Suite 300 East Tower
West Palm Beach, Florida 33401
Attention: Morris C. Brown, Esq.
Telephone: (561) 650-7928
Telecopier: (561) 805-7841
16.8 SURVIVAL. The obligations of Borrowers under Sections 2.10, 3.6, 3.7,
3.8 and 16.6 shall survive termination of this Agreement and the Other Documents
and payment in full of the Obligations.
16.9 SEVERABILITY. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
16.10 EXPENSES. All costs and expenses including, without limitation,
reasonable attorneys' fees and disbursements incurred by Agent, Agent on behalf
of Lenders and Lenders (a) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (b) in connection with the
entering into, modification, amendment, administration and enforcement of this
Agreement or any consents or waivers hereunder and all related agreements,
documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent's security interest in or Lien on any of the
Collateral, whether through judicial proceedings or otherwise, or (d) in
defending or prosecuting any actions or proceedings arising out of or relating
to Agent's or any Lender's transactions with any Borrower, or (e) in connection
with any advice given to Agent or any Lender with respect to its rights and
obligations under this Agreement and all related agreements, may be charged to
Borrowers' account and shall be part of the Obligations.
16.11 INJUNCTIVE RELIEF. Each Borrower recognizes that, in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders; therefore, each Lender, if such Lender so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.
16.12 CONSEQUENTIAL DAMAGES. Neither Agent, any Lender nor any agent or
attorney for any of them shall be liable to any Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
16.13 CAPTIONS. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
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16.14 COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement may be executed
in any number of and by different parties hereto, on separate counterparts, all
of which when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16.15 CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.16 CONFIDENTIALITY.
(a) Agent, each Lender and each Transferee shall hold all non-public
information obtained by Agent, such Lender or such Transferee pursuant to the
requirements of this Agreement in accordance with Agent's, such Lender's and
such Transferee's customary procedures for handling confidential information of
this nature; provided, however, Agent, each Lender and each Transferee may
disclose such confidential information (a) to its examiners, affiliates, outside
auditors, counsel and other professional advisors, (b) to Agent, any Lender or
to any prospective Transferees and Purchasing Lenders, and (c) as required or
requested by any Governmental Body or representative thereof or pursuant to
legal process; provided, further that (i) unless specifically prohibited by
applicable law or court order, Agent, each Lender and each Transferee shall use
reasonable efforts prior to disclosure thereof, to notify the Borrowing Agent of
the applicable request for disclosure of such non-public information (A) by a
Governmental Body or representative thereof (other than any such request in
connection with an examination of the financial condition of a Lender or a
Transferee by such Governmental Body) or (B) pursuant to legal process and (ii)
in no event shall Agent, any Lender or any Transferee be obligated to return any
materials furnished by any Borrower other than those documents and instruments
in possession of Agent or any Lender in order to perfect its Lien on the
Collateral once the Obligations have been paid in full and this Agreement has
been terminated. Each Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
such Borrower or one or more of its Affiliates (in connection with this
Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Borrower hereby authorizes each Lender to
share any information delivered to such Lender by such Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provision of this
Section 16.16 as if it were a Lender hereunder. Such authorization shall survive
the repayment of the Obligations and the termination of this Agreement.
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(b) Notwithstanding anything to the contrary set forth herein or in
any of the Other Documents or any other written or oral understanding or
agreement, (i) any obligations of confidentiality contained herein, in any of
the Other Documents or any such other understanding or agreement do not apply
and have not applied from the commencement of discussions between the parties to
the tax treatment and tax structure of the transactions contemplated herein (and
any related transactions or arrangements), and (ii) each party (and each of its
employees, representatives, or other agents) may disclose to any and all persons
the tax treatment and tax structuring of the transactions contemplated herein
and all materials of any kind (including opinions or other tax analyses) that
are provided to such party relating to such tax treatment and tax structure, all
within the meaning of Treasury Regulation Section 1.6011-4; provided, that, each
party recognizes that the privilege that it may, in its discretion, maintain
with respect to the confidentiality of a communication relating to the
transactions contemplated herein, including a confidential communication with
its attorney or a confidential communication with a federally authorized tax
practitioner under Section 7525 of the Internal Revenue Code, is not intended to
be affected by the foregoing. Borrowers do not intend to treat the Advances,
loans and related transactions as being a "reportable transaction" (within the
meaning of Treasury Regulation Section 1.6011-4). In the event Borrowers
determine to take any action inconsistent with such intention, it will promptly
notify Agent thereof. Each Borrower acknowledges that one or more of Lenders may
treat its Advances and loans as part of a transaction that is subject to
Treasury Regulation Section 1.6011-4 or Section 301.6112-1, and the Agent and
such Lender or Lenders, as applicable, may file such IRS forms or maintain such
lists and other records as they may determine is required by such Treasury
Regulations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Each of the parties has signed this Agreement as of the day and year first
above written.
PERFUMANIA, INC.
By:
------------------------------------------
Its:
-----------------------------------------
PERFUMANIA PUERTO RICO, INC.
By:
------------------------------------------
Its:
-----------------------------------------
MAGNIFIQUE PARFUMES AND
COSMETICS, INC.
By:
------------------------------------------
Its:
-----------------------------------------
TEN KESEF II, INC.
By:
------------------------------------------
Its:
-----------------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GMAC COMMERCIAL FINANCE LLC,
as Lender and as Agent
By:
------------------------------------------
Its:
-----------------------------------------
Address: 2810 Interstate Tower
121 West Trade Street
Charlotte, North Carolina 28202
Commitment Percentage: 58.3333334%
CONGRESS FINANCIAL CORPORATION (FLORIDA),
as Lender and as Documentation Agent
By:
------------------------------------------
Its:
-----------------------------------------
Address: 777 Brickell Avenue, Suite 808
Miami, Florida 33131
Commitment Percentage: 41.6666666%
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EXHIBIT 16.4
COMMITMENT TRANSFER SUPPLEMENT
COMMITMENT TRANSFER SUPPLEMENT, dated as of _________, 200_ among
___________________________ (the "Transferor Lender"),
__________________________ ("Purchasing Lender"), and GMAC COMMERCIAL FINANCE
LLC, as agent for the Lenders under the Amended and Restated Revolving Credit
and Security Agreement described below (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, this Commitment Transfer Supplement is being executed and
delivered in accordance with Section 16.4 of the Amended and Restated Revolving
Credit and Security Agreement dated as of May __, 2004 (this "Agreement") by and
among PERFUMANIA, INC., a corporation organized under the laws of the State of
Florida ("Perfumania"), TEN KESEF II, INC., a corporation organized under the
laws of the State of Florida ("Ten Kesef"), PERFUMANIA PUERTO RICO, INC., a
corporation organized under the laws of the Commonwealth of Puerto Rico
("Perfumania-Puerto Rico"), and MAGNIFIQUE PARFUMES AND COSMETICS, INC., a
corporation organized under the laws of the State of Florida ("Magnifique"; and
together with Perfumania, Ten Kesef and Perfumania-Puerto Rico, each
individually, a "Borrower" and collectively, the "Borrowers"), the financial
institutions from time to time parties thereto (collectively, the "Lenders" and
individually a "Lender"), GMAC COMMERCIAL FINANCE LLC, as successor by merger
with GMAC Commercial Credit LLC ("GMAC CF"), a limited liability company formed
under the laws of the State of Delaware, as agent for Lenders (GMAC CF, in such
capacity, the "Agent"), and CONGRESS FINANCIAL CORPORATION (FLORIDA), as
documentation agent (in such capacity, the "Documentation Agent") (as from time
to time amended, restated, renewed, extended, replaced, substituted,
supplemented or otherwise modified in accordance with the terms thereof, the
"Credit Agreement");
WHEREAS, Purchasing Lender wishes to become a Lender party to the Credit
Agreement; and
WHEREAS, the Transferor Lender is selling and assigning to Purchasing
Lender rights, obligations and commitments under the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. All capitalized terms used herein which are not defined shall have the
meanings given to them in the Credit Agreement.
2. Upon receipt by the Agent of four counterparts of this Commitment
Transfer Supplement, to each of which is attached a fully completed SCHEDULE I,
and each of which has been executed by the Transferor Lender and Agent, together
with payment to Agent of the transfer fee payable under Section 16.4(d) of the
Credit Agreement and if the Purchasing Lender is not incorporated under the laws
of the United States of America or a State thereof, four (4) duplicate executed
copies of the United States Internal Revenue Service Form 1001 or 4224, Agent
will transmit to Transferor Lender and Purchasing Lender a Transfer Effective
Notice, substantially in the form of SCHEDULE II to this Commitment Transfer
Supplement (a "Transfer Effective Notice"). Such Transfer Effective Notice shall
set forth, INTER ALIA, the date on which the transfer affected by this
Commitment Transfer Supplement shall become effective (the "Transfer Effective
Date") which date shall not be earlier than the first (1st) Business Day
following the date such Transfer Effective Notice is received. From and after
the Transfer Effective Date, Purchasing Lender shall be a Lender party to the
Credit Agreement for all purposes thereof.
3. At or before 12:00 Noon (New York City time) on the Transfer Effective
Date, Purchasing Lender shall pay to Transferor Lender, in immediately available
funds, an amount equal to the purchase price, as agreed between Transferor
Lender and such Purchasing Lender (the "Purchase Price"), of the portion being
purchased by such Purchasing Lender (such Purchasing Lender's "Purchased
Percentage") of the outstanding Advances and other amounts owing to the
Transferor Lender under the Credit Agreement. Effective upon receipt by
Transferor Lender of the Purchase Price from a Purchasing Lender, Transferor
Lender hereby irrevocably sells, assigns and transfers to such Purchasing
Lender, without recourse, representation or warranty, and Purchasing Lender
hereby irrevocably purchases, takes and assumes from Transferor Lender, such
Purchasing Lender's Purchased Percentage of the Advances and other amounts owing
to the Transferor Lender under the Credit Agreement together with all
instruments, documents and collateral security pertaining thereto.
4. Transferor Lender has made arrangements with Purchasing Lender with
respect to the portion, if any, to be paid, and the date or dates for payment,
by Transferor Lender to such Purchasing Lender of any fees heretofore received
by Transferor Lender pursuant to the Credit Agreement prior to the Transfer
Effective Date and the portion, if any, to be paid, and the date or dates for
payment, by such Purchasing Lender to Transferor Lender of fees or interest
received by such Purchasing Lender pursuant to the Credit Agreement from and
after the Transfer Effective Date.
5. (a) All principal payments that would otherwise be payable from and
after the Transfer Effective Date to or for the account of Transferor Lender
pursuant to the Credit Agreement shall, instead, be payable to or for the
account of Transferor Lender and Purchasing Lender, as the case may be, in
accordance with their respective interests as reflected in this Commitment
Transfer Supplement.
(b) All interest, fees and other amounts that would otherwise accrue for
the account of Transferor Lender from and after the Transfer Effective Date
pursuant to the Credit Agreement shall, instead, accrue for the account of, and
be payable to, Transferor Lender and Purchasing Lender, as the case may be, in
accordance with their respective interests as reflected in this Commitment
Transfer Supplement. In the event that any amount of interest, fees or other
amounts accruing prior to the Transfer Effective Date was included in the
Purchase Price paid by any Purchasing Lender, Transferor Lender and Purchasing
Lender will make appropriate arrangements for payment by Transferor Lender to
such Purchasing Lender of such amount upon receipt thereof from Borrowers.
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6. Concurrently with the execution and delivery hereof, Transferor Lender
will provide to Purchasing Lender conformed copies of the Credit Agreement and
all related documents delivered to Transferor Lender.
7. Each of the parties to this Commitment Transfer Supplement agrees that
at any time and from time to time upon the written request of any other party,
it will execute and deliver such further documents and do such further acts and
things as such other party may reasonably request in order to effect the
purposes of this Commitment Transfer Supplement.
8. By executing and delivering this Commitment Transfer Supplement,
Transferor Lender and Purchasing Lender confirm to and agree with each other and
Agent and Lenders as follows: other than the representation and warranty that it
is the legal and beneficial owner of the interest being assigned hereby free and
clear of any adverse claim, Transferor Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; Transferor Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Borrowers
or the performance or observance by Borrowers of any of its obligations under
the Credit Agreement or any other instrument or document furnished pursuant
hereto; Purchasing Lender confirms that it has received a copy of the Credit
Agreement, together with copies of such financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Commitment Transfer Supplement;
Purchasing Lender will, independently and without reliance upon Agent,
Transferor Lender or any other Lenders 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 the Credit Agreement;
Purchasing Lender appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Agent by the terms thereof; Purchasing Lender agrees that it
will perform all of its respective obligations as set forth in the Credit
Agreement to be performed by it as a Lender; and Purchasing Lender represents
and warrants to Transferor Lender, Lenders, Agent, and Borrowers that it is
either (x) entitled to the benefits of an income tax treaty with the United
States of America that provides for an exemption from the United States
withholding tax on interest and other payments made by Borrowers under the
Credit Agreement and the Other Documents or (y) is engaged in trade or business
within the United States of America.
9. SCHEDULE I hereto sets forth the revised Commitment Percentages of
Transferor Lender and the Commitment Percentage of Purchasing Lender as well as
administrative information with respect to Purchasing Lender.
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10. This Commitment Transfer Supplement shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Commitment
Transfer Supplement to be executed by their respective duly authorized officers
on the date set forth above.
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as Transferor Lender
By:
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Name:
-----------------------------------------
Title:
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as a Purchasing Lender
By:
------------------------------------------
Name:
-----------------------------------------
Title:
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GMAC COMMERCIAL FINANCE LLC, as Agent
By:
------------------------------------------
Name:
-----------------------------------------
Title:
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SCHEDULE I TO COMMITMENT TRANSFER SUPPLEMENT
LIST OF OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS
[Transferor Lender] Revised Commitment Amount $
Revised Commitment
Percentage: %
[Purchasing Lender] Commitment Amount $
Commitment Percentage: %
ADDRESSES FOR NOTICES
Attention:
Telephone:
Telecopier:
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SCHEDULE II TO COMMITMENT TRANSFER SUPPLEMENT
[Form of Transfer Effective Notice]
To: ____________________, as Transferor Lender and ____________________, as
Purchasing Lender:
The undersigned, as Agent under the Amended and Restated Revolving Credit
and Security Agreement dated as of May __, 2004 (this "Agreement") by and among
PERFUMANIA, INC. ("Perfumania"), TEN KESEF II, INC. ("Ten Kesef"), PERFUMANIA
PUERTO RICO, INC. ("Perfumania-Puerto Rico"), and MAGNIFIQUE PARFUMES AND
COSMETICS, INC. ("Magnifique"; and together with Perfumania, Ten Kesef and
Perfumania-Puerto Rico, each individually, a "Borrower" and collectively, the
"Borrowers"), the financial institutions from time to time parties thereto,
(collectively, the "Lenders" and individually a "Lender"), GMAC COMMERCIAL
FINANCE LLC, as successor by merger with GMAC Commercial Credit LLC ("GMAC CF"),
a limited liability company formed under the laws of the State of Delaware, as
agent for Lenders (GMAC CF, in such capacity, the "Agent"), and CONGRESS
FINANCIAL CORPORATION (FLORIDA), as documentation agent (in such capacity, the
"Documentation Agent") (as from time to time amended, restated, renewed,
extended, replaced, substituted, supplemented or otherwise modified in
accordance with the terms thereof, the "Credit Agreement") acknowledges receipt
of four (4) executed counterparts of a completed Commitment Transfer Supplement
in the form attached hereto, [and four (4) duplicate executed copies of United
States Internal Revenue Service Form [specify]. [Note: Attach copy of Commitment
Transfer Supplement.] Terms defined in such Commitment Transfer Supplement are
used herein as therein defined.
Pursuant to such Commitment Transfer Supplement, you are advised that the
Transfer Effective Date will be [Insert date of Transfer Effective Notice.]
GMAC COMMERCIAL FINANCE LLC,
AS AGENT
By:
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Title:
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ACCEPTED FOR RECORDATION
IN REGISTER:
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