<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>a2064712zex-10_1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<Page>
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SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND AMONG
ULTIMATE ELECTRONICS, INC.
AND
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO
AS BORROWERS,
THE LENDERS THAT ARE SIGNATORIES HERETO
AS THE LENDERS,
AND
WELLS FARGO RETAIL FINANCE, LLC
AS THE ARRANGER AND ADMINISTRATIVE AGENT
DATED AS OF SEPTEMBER 28, 2001
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SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"AGREEMENT"), is entered into as of September 28, 2001, between and among, on
the one hand, the lenders identified on the signature pages hereof (such
lenders, together with their respective successors and assigns, are referred to
hereinafter each individually as a "LENDER" and collectively as the "LENDERS"),
including, without limitation, WELLS FARGO RETAIL FINANCE, LLC, a Delaware
limited liability company ("WFRF"), and WFRF as the arranger and administrative
agent for the Lenders ("AGENT"), and, on the other hand, ULTIMATE ELECTRONICS,
INC., a Delaware corporation ("PARENT"), and each of Parent's Subsidiaries
identified on the signature pages hereof (such Subsidiaries, together with
Parent, are referred to hereinafter each individually as a "BORROWER", and
individually and collectively, jointly and severally, as the "BORROWERS", as
governed by the provisions of SECTION 1.6 of the Agreement).
A. Foothill Capital Corporation ("FOOTHILL") and Parent entered
into that certain Loan and Security Agreement dated as of September 30, 1998, as
amended, restated or otherwise modified from time to time, including, without
limitation, as amended and restated by that certain Amended and Restated Loan
and Security Agreement, dated as of November 24, 1998, executed by Foothill,
Parent, Fast Trak, Inc., a Minnesota corporation ("FAST TRAK") and Ultimate
Akquisition Corp., a Delaware corporation ("AKQUISITION") and by that certain
First Amendment to Amended and Restated Loan and Security Agreement, dated
September 24, 1999, executed by Foothill, Parent, Fast Trak, and Akquisition (as
amended, restated, and modified from time to time, the "EXISTING LOAN
AGREEMENT").
B. Akquisition has been merged with and into Parent, with Parent
as the surviving corporation.
C., Pursuant to that certain Assignment and Acceptance Agreement,
dated as of the date hereof, executed by Foothill and WFRF, WFRF has become and
is the present holder of all right, title and interest of Foothill in the
Existing Loan Agreement and all documentation executed in connection therewith
and in all indebtedness of Borrowers to Foothill created thereunder and in
connection therewith.
D. Borrowers have requested and, subject to the terms and
conditions of the Agreement, WFRF has agreed to entirely amend and restate the
Existing Loan Agreement to, among other things, (i) add Ultimate Leasing Corp.,
a Colorado corporation ("LEASING"), Ultimate Intangibles Corp., a Colorado
corporation ("INTANGIBLES"), Ultimate Electronics Texas LP, a Texas limited
partnership ("ELECTRONICS TEXAS"), Ultimate Electronics Leasing LP, a Texas
limited partnership ("ELECTRONICS LEASING") and Ultimate Electronics Partners
Corp., a Colorado corporation ("ELECTRONICS PARTNERS") to the revolving credit
facility established by the Existing Loan Agreement, (ii) provide for the
syndication of this Agreement and the addition of certain Lenders thereto, (iii)
increase the maximum revolving credit facility to $50,000,000, and (iv) provide
for the extension by all new Lenders to this Agreement of amounts necessary for
all
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Lenders to hold their respective Pro Rata Share (as defined below) of the
Commitments (as defined below), it being the intention of Borrowers, WFRF, and
all Lenders that the Advances (as defined below), and Letters of Credit (as
defined below), existing under the Existing Loan Agreement as of the Closing
Date (as defined below) shall continue, remain outstanding, and not be repaid on
the Closing Date, but shall be assigned and reallocated among the Lenders as
provided in this Agreement, and accordingly, the Advances and Commitments are
not in novation or discharge thereof.
E. The parties hereto desire to amend, restate and modify, but
not extinguish, the Existing Loan Agreement in its entirety as hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties intending to be legally bound, agree as
follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"ACCOUNT DEBTOR" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, chattel paper, or a
General Intangible.
"ACCOUNTS" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to "accounts" (as that term is defined
in the Code), and any and all supporting obligations in respect thereof
including any and all credit insurance, guaranties or security therefor.
"ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION 4.4.
"ADMINISTRATIVE BORROWER" has the meaning set forth in SECTION 17.9.
"ADVANCES" has the meaning set forth in SECTION 2.1.
"AFFILIATE" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; PROVIDED, HOWEVER, that, in any event: (a) any Person which owns
directly or indirectly 5% or more of the securities having ordinary voting power
for the election of directors or other members of the governing body of a Person
or 5% or more of the partnership or other ownership interests of a Person (other
than as a limited partner of such Person) shall be deemed to control such
Person; (b) each director (or comparable manager) of a Person shall be deemed to
be an Affiliate of such Person; and (c) each partnership or joint venture in
which a Person is a partner or joint venturer shall be deemed to be an Affiliate
of such Person.
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"AGENT" means Wells Fargo Retail Finance, LLC, solely in its capacity
as agent for the Lenders hereunder, and any successor thereto.
"AGENT ADVANCES" has the meaning set forth in SECTION 2.3(e)(i).
"AGENT'S LIENS" means the Liens granted by Borrowers to Agent for the
benefit of the Lender Group under this Agreement or the other Loan Documents.
"AGENT-RELATED PERSONS" means Agent together with its Affiliates,
officers, directors, employees, and agents.
"AGENT'S ACCOUNT" means an account at a bank designated by Agent from
time to time as the account into which Borrowers shall make all payments to
Agent for the benefit of the Lender Group and into which the Lender Group shall
make all payments to Agent under this Agreement and the other Loan Documents;
unless and until Agent notifies Administrative Borrower and the Lender Group to
the contrary, Agent's Account shall be that certain deposit account bearing
account number 323-266193 and maintained by Agent with The Chase Manhattan Bank,
4 New York Plaza, 15th Floor, New York, New York 10004, ABA #021000021.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"AKQUISITION" has the meaning set forth in the preamble hereto.
"APPLICABLE PREPAYMENT PREMIUM" means, as of any date of determination,
(a) if termination IS NOT DUE TO A SALE OF CONTROL and occurs at
any time during the period beginning on the Closing Date and continuing through
September 29, 2002, the amount of the Applicable Prepayment Premium shall be
THREE PERCENT (3%) of the Maximum Amount.
(b) if termination IS DUE TO A SALE OF CONTROL and occurs at any
time during the period beginning on the Closing Date and continuing through
September 29, 2002, the amount of the Applicable Prepayment Premium shall be ONE
PERCENT (1%) of the Maximum Amount.
(c) if termination IS NOT DUE TO A SALE OF CONTROL and occurs at
any time during the period beginning on September 30, 2002, and continuing
through September 29, 2003, the amount of the Applicable Prepayment Premium
shall be TWO PERCENT (2%) of the Maximum Amount.
(d) if termination IS DUE TO A SALE OF CONTROL and occurs at any
time during the period beginning on September 30, 2002, and continuing through
September 29, 2003, the amount of the Applicable Prepayment Premium shall be
THREE-FOURTHS OF ONE PERCENT (0.75%) of the Maximum Amount.
(e) if termination IS NOT DUE TO A SALE OF CONTROL and occurs on
or after September 30, 2003 (unless such termination is otherwise permitted by
the provisions of SECTION 3.4), the
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amount of the Applicable Prepayment Premium shall be ONE PERCENT (1%) of the
Maximum Amount.
(f) if termination IS DUE TO A SALE OF CONTROL and occurs on or
after September 30, 2003 (unless such termination is otherwise permitted by the
provisions in SECTION 3.4), the amount of the Applicable Prepayment Premium
shall be ONE-HALF OF ONE PERCENT (0.50%) of the Maximum Amount.
"ASSIGNEE" has the meaning set forth in SECTION 14.1.
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance in the
form of EXHIBIT A-1.
"AUTHORIZED PERSON" means any officer or other employee of
Administrative Borrower.
"AVAILABILITY" means, as of any date of determination, if such date is
a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrowers are entitled to borrow as Advances under SECTION 2.1
(after giving effect to all then outstanding Obligations and all sublimits and
reserves applicable hereunder).
"BANKRUPTCY CODE" means the United States Bankruptcy Code, as in effect
from time to time.
"BASE LIBOR RATE" means the rate per annum, determined by Agent in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate (rounded upwards, if necessary, to
the next 1/16%), on the basis of the rates at which Dollar deposits are offered
to major banks in the London interbank market on or about 11:00 a.m. (California
time) 2 Business Days prior to the commencement of the applicable Interest
Period, for a term and in amounts comparable to the Interest Period and amount
of the LIBOR Rate Loan requested by Administrative Borrower in accordance with
this Agreement, which determination shall be conclusive in the absence of
manifest error.
"BASE RATE" means, the rate of interest announced within Wells Fargo at
its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of Wells Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Wells Fargo may designate.
"BASE RATE LOAN" means any Advance (or portion of an Advance) that
bears interest at a rate determined by reference to the Base Rate.
"BASE RATE MARGIN" means, on each day:
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(a) as to each Real Estate Advance which is Base Rate Advance,
1.00% per annum, and
(b) as to Obligations other than Real Estate Advances:
(i) 0.00% per annum when the average daily Availability
for the previous fiscal quarter is less than $10,000,000; and
(ii) MINUS 0.375% per annum when the average daily
Availability for the previous fiscal quarter is equal to or greater than
$10,000,000.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in SECTION
3(35) of ERISA) for which any Borrower or any Subsidiary or ERISA Affiliate of
any Borrower has been an "employer" (as defined in SECTION 3(5) of ERISA) within
the past six years.
"BLOCKED ACCOUNT AGREEMENTS" has the meaning set forth in SECTION
2.8(a)(i).
"BOARD OF DIRECTORS" means the board of directors (or comparable
managers) of Parent or any committee thereof duly authorized to act on behalf
thereof.
"BOOKS" means all of each Borrower's now owned or hereafter acquired
books and records (including all of its Records indicating, summarizing, or
evidencing its assets (including the Collateral) or liabilities, all of its
Records relating to its business operations or financial condition, and all of
its goods or General Intangibles related to such information).
"BORROWER" and "BORROWERS" have the respective meanings set forth in
the preamble to this Agreement.
"BORROWING" means a borrowing hereunder consisting of Advances made on
the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in
the case of a Swing Loan, or by Agent in the case of an Agent Advance, in each
case, to Administrative Borrower.
"BORROWING BASE" has the meaning set forth in SECTION 2.1.
"BORROWING BASE CERTIFICATE" means a certificate in the form of EXHIBIT
B-1.
"BUSINESS DAY" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close, except that, if
a determination of a Business Day shall relate to a LIBOR Rate Loan, the term
"Business Day" also shall exclude any day on which banks are closed for dealings
in Dollar deposits in the London interbank market.
"BUSINESS PLAN" means the business plan of Parent submitted to Agent,
which business plan is hereby incorporated by reference, and any revision,
amendment or update to such business plan as to which Agent has given written
approval.
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"CAPITAL LEASE" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CHANGE OF CONTROL" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d) of the
Exchange Act) (other than William J. Pearse, Barbara A. Pearse and the various
immediate family trusts of William J. Pearse and Barbara A. Pearse, whether now
existing or hereafter created including, without limitation, the Williams James
Pearse III Trust No. 1, the William James Pearse III Trust No. 2, the Megan
Pearse Trust No. 1, the Megan Pearse Trust No. 2, the Bradford Pearse Trust No.
1 and the Bradford Pearse Trust N. 2, and with respect to Fast Trak, Lease and
Intangibles, other than Parent) become the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 20% of
the total voting power of all classes of stock then outstanding of any Borrower
entitled to vote in the election of directors.
"CLOSING DATE" means the date of execution of this Agreement.
"CODE" means the California Uniform Commercial Code, as in effect from
time to time.
"COLLATERAL" means all of each Borrower's now owned or hereafter
acquired property, including, without limitation, all of each Borrower's now
owned or hereafter acquired right, title, and interest in and to each of the
following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Real Property Collateral,
(i) money or other assets of each such Borrower that now or
hereafter come into the possession, custody, or control of any
member of the Lender Group, and
(j) the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all Accounts, Books,
Equipment, General Intangibles, Inventory, Investment
Property, Negotiable Collateral, Real Property, money, deposit
accounts, or other tangible or intangible property resulting
from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest
therein,
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and the proceeds thereof.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, mortgagee
waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman,
processor, consignee, or other Person in possession of, having a Lien upon, or
having rights or interests in the Equipment or Inventory, in each case, in form
and substance satisfactory to Agent.
"COLLECTIONS" means all cash, checks, notes, instruments, and other
items of payment (including, without limitation, all cash equivalents, checks,
and credit card slips and receipts as arise out of the sale of Collateral,
insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of
Borrowers.
"COMMITMENT" means, with respect to each Lender, its Commitment, and,
with respect to all Lenders, their Commitments, in each case as such Dollar
amounts are set forth beside such Lender's name under the applicable heading on
SCHEDULE C-1 or on the signature page of the Assignment and Acceptance pursuant
to which such Lender became a Lender hereunder in accordance with the provisions
of SECTION 14.1.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT C-1 delivered by the chief financial officer of Parent to Agent.
"CONCENTRATION ACCOUNT" means the Concentration Account Number
1018169963 established pursuant to the Blocked Account Agreement with the
Concentration Account Bank.
"CONCENTRATION ACCOUNT BANK" means Wells Fargo Colorado NA, whose
office is located at 1740 Broadway, Denver, Colorado 80274, and whose ABA number
is 102000076 or such then other banks as may be agreed to by Parent and Agent
from time to time.
"CONTROL AGREEMENT" means a control agreement, in form and substance
satisfactory to Agent, executed and delivered by the applicable Borrower, Agent,
and the applicable securities intermediary with respect to a Securities Account
or a bank with respect to a deposit account.
"COPYRIGHT SECURITY AGREEMENTS" means the copyright security agreements
executed and delivered by each Borrower and Agent, the form and substance of
which are satisfactory to Agent.
"COST" means the calculated cost of purchases, as determined from
invoices received by a Borrower, such Borrower's purchase journal or stock
ledger, based upon such Borrower's accounting principles, known to Agent, which
practices are in effect on the date on which this Agreement was executed. "Cost"
does not include any inventory capitalization costs inclusive of advertising,
but may include other charges used in such Borrower's determination of cost of
goods sold and bringing goods to market, all within Agent's reasonable
discretion and in accordance with GAAP.
"COST FACTOR" means the result of 1 minus a Borrower's then cumulative
markup percent derived from such Borrower's purchase journal.
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"DAILY BALANCE" means, with respect to each day during the term of this
Agreement, the amount of an Obligation owed at the end of such day.
"DATED ASSETS" has the meaning set forth in SECTION 2.17.
"DATED LIABILITIES" has the meaning set forth in SECTION 2.17.
"DEEMS ITSELF INSECURE" means that the Person deems itself insecure in
accordance with the provisions of Section 1208 of the Code.
"DEFAULT" means an event, condition, or default that, with the giving
of notice, the passage of time, or both, would be an Event of Default.
"DEFAULTING LENDER" means any Lender that fails to make any Advance (or
other extension of credit) that it is required to make hereunder on the date
that it is required to do so hereunder.
"DEFAULTING LENDER RATE" means (a) the Base Rate for the first 3 days
from and after the date the relevant payment is due, and (b) thereafter, at the
interest rate then applicable to Advances that are Base Rate Loans (inclusive of
the Base Rate Margin applicable thereto).
"DESIGNATED ACCOUNT" means account number 101816995 of Administrative
Borrower maintained with the Designated Account Bank, or such other deposit
account of Administrative Borrower (located within the United States) that has
been designated as such, in writing, by Administrative Borrower to Agent.
"DESIGNATED ACCOUNT BANK" means Wells Fargo Colorado NA, whose office
is located at 1740 Broadway, Denver, Colorado 80274 and whose ABA number is
102000076.
"DOLLARS" or "$" means United States dollars.
"ELECTRONICS LEASING" has the meaning set forth in the preamble to this
Agreement.
"ELECTRONICS PARTNERS" has the meaning set forth in the preamble to
this Agreement.
"ELECTRONICS PARTNERS PLEDGE AND SECURITY AGREEMENTS" means the Pledge
and Security Agreements executed by Electronics Partners, in favor of Agent,
granting Agent a first priority Lien in the partnership interests in Electronics
Texas and Electronics Leasing owned by Electronics Partners.
"ELECTRONICS TEXAS" has the meaning set forth in the preamble to this
Agreement.
"ELIGIBLE ACCOUNTS" means those Accounts created by one of the
Borrowers in the ordinary course of its business, that arise out of its sale of
goods or rendition of services, that strictly comply with each of the
representations and warranties respecting Accounts made by such Borrower under
the Loan Documents, and that are and at all times continue to be acceptable to
Agent in all respects; PROVIDED, HOWEVER, that standards of eligibility may be
fixed and revised
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from time to time by Agent in Agent's reasonable credit judgment. Eligible
Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay (i) within
90 days of original invoice date, or (ii) within 60 days of original due date.
(b) Accounts owed by an Account Debtor (or its Affiliates) where
50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above,
(c) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of any Borrower,
(d) Accounts with respect to which goods are placed on consignment
or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval,
a bill and hold, or any other terms by reason of which the payment by the
Account Debtor may be conditional,
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor either (i)
does not maintain its chief executive office in the United States, or (ii) is
not organized under the laws of the United States or any state thereof, or (iii)
is the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(y) the Account is supported by an irrevocable letter of credit reasonably
satisfactory to Agent (as to form, substance, and issuer or domestic confirming
bank) that has been delivered to Agent and is directly drawable by Agent, or (z)
the Account is covered by credit insurance in form, substance, and amount, and
by an insurer, reasonably satisfactory to Agent,
(g) Accounts with respect to which the Account Debtor is either
(i) the United States or any department, agency, or instrumentality of the
United States (exclusive, however, of Accounts with respect to which the
applicable Borrower has complied, to the reasonable satisfaction of Agent,
with the Assignment of Claims Act, 31 USC Section 3727), or (ii) any state
of the United States (exclusive, however, of (y) Accounts owed by any state
that does not have a statutory counterpart to the Assignment of Claims Act or
(z) Accounts owed by any state that does have a statutory counterpart to the
Assignment of Claims Act as to which the applicable Borrower has complied to
Agent's satisfaction),
(h) Accounts with respect to which the Account Debtor is a
creditor of any Borrower, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to the Account;
(i) Accounts with respect to an Account Debtor whose total
obligations owing to Borrowers exceed 10% of all Eligible Accounts, to the
extent of the obligations owing by such Account Debtor in excess of such
percentage, unless otherwise consented to by Agent;
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(j) Accounts with respect to which the Account Debtor is subject
to an Insolvency Proceeding, is not Solvent, or goes out of business;
(k) Accounts, the collection of which, Agent, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(l) Accounts with respect to which the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, or the services
giving rise to such Account have not been performed and accepted by the Account
Debtor, or the Account otherwise does not represent a final sale;
(m) Accounts with respect to which the Account Debtor is located
in the states of New Jersey, Minnesota, or West Virginia (or any other state
that requires a creditor to file a business activity report or similar document
in order to bring suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such state), unless the
applicable Borrower has qualified to do business in New Jersey, Minnesota, West
Virginia, or such other states, or has filed a business activities report with
the applicable division of taxation, the department of revenue, or with such
other state offices, as appropriate, for the then-current year, or is exempt
from such filing requirement;
(n) Accounts that represent the progress payments or other advance
billings that are due prior to the completion of performance by the applicable
Borrower of the subject contract for goods or services; and
(o) Accounts that are not subject to a valid and perfected first
priority Agent's Lien.
"ELIGIBLE INVENTORY" means consumer electronic products Inventory of
Borrowers consisting of first quality, finished goods held for sale in the
ordinary course of Borrowers' business, net of any unearned vendors' discounts
and Inventory Reserves (as defined below), that are located at Borrowers'
premises identified on SCHEDULE E-1, that strictly comply with each of and all
the representations and warranties respecting Inventory made by Borrowers in the
Loan Documents, and that are and continue to be acceptable to Agent in all
respect; PROVIDED, HOWEVER, that standards of eligibility may be fixed and
revised from time to time by Agent in Agent's reasonable credit judgment. In
determining the amount to be so included, Inventory shall be valued at the lower
of cost or market on a basis consistent with Borrowers' current and historical
accounting practices. Without limiting the foregoing, the following shall not be
Eligible Inventory:
(a) Inventory that is not owned solely by a Borrower or in which a
Borrower does not have good, valid and marketable title;
(b) Inventory that is not located at one of the locations set
forth on SCHEDULE E-1;
(c) Inventory that is located on real property owned or leased by a
Borrower or in a contract warehouse, in each case (except for the County Line
Store and Colorado Boulevard Store), unless it is subject to a Collateral Access
Agreement executed by the mortgagee, lessor,
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warehouseman, or other third party, as the case may be, and unless it is
segregated or otherwise separately identifiable from goods of others, if any,
stored on the premises,
(d) Inventory that is not subject to a valid and perfected first
priority Agent's Lien,
(e) Inventory that consists of goods in transit, other than goods
in transit between the locations specified in SCHEDULE E-1;
(f) Inventory of a Borrower that is damaged, defective, or not
currently saleable in the normal course of such Borrower's operations;
(g) Inventory of a Borrower in an amount equal to such Borrower's
invoice variance reserves;
(h) Discontinued consumer electronic products Inventory of a
Borrower (to include obsolete and slow-moving Inventory based upon it being on
hand beyond a number of days determined by Agent from time to time) in an amount
in excess of 12% of total net amount of such Borrower's consumer electronic
products Inventory (determined after deducting unearned vendors' discounts);
(i) Free goods;
(j) That portion of Borrowers' consumer electronic products
Inventory consisting of cellular phones in the net amount in excess of
$1,500,000 (determined after deducting unearned vendors' discounts);
(l) Inventory of a Borrower that is a restrictive or custom item,
work-in-process, a component that is not part of finished goods, or constitutes
parts, packaging and shipping materials, supplies used or consumed in such
Borrower's business, is subject to a Lien in favor of any third Person, consists
of bill and hold goods, or Inventory acquired on consignment; and
(m) Inventory that is non-SKU Inventory.
Agent may establish reserves ("INVENTORY RESERVES") from time to time in Agent's
discretion with respect to the determination of the saleability, at retail, of
the Eligible Inventory or which reflect such other factors as affect the current
Retail or market value of the Eligible Inventory. Without limiting the
generality of the foregoing, Inventory Reserves may include (but are not limited
to) reserves based on the following: (i) the estimated reclamation claims of
unpaid sellers of Inventory sold to a Borrower; (ii) change in Inventory
character, composition or mix; (iii) imbalance of Inventory; (iv) retail
markdowns or markups inconsistent with prior period practice and performance;
current business plans; or advertising calendar and planned advertising events;
(v) Inventory shrinkage; or (vi) the change in the Orderly Liquidation Value of
the Inventory.
"ELIGIBLE TRANSFEREE" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having total assets in
excess of $250,000,000, (b) a
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commercial bank organized under the laws of any other country which is a
member of the Organization for Economic Cooperation and Development or a
political subdivision of any such country and which has total assets in
excess of $250,000,000, provided that such bank is acting through a branch or
agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course
of its business and having (together with its Affiliates) total assets in
excess of $250,000,000, (d) any Affiliate (other than individuals) of a
Lender that was party hereto as of the Closing Date, (e) so long as no Event
of Default has occurred and is continuing, any other Person approved by Agent
and Administrative Borrower, and (f) during the continuation of an Event of
Default, any other Person approved by Agent.
"ENVIRONMENTAL ACTIONS" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
releases of Hazardous Materials from (a) any assets, properties, or businesses
of any Borrower or any predecessor in interest, (b) from adjoining properties or
businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by any Borrower or any predecessor in interest.
"ENVIRONMENTAL LAW" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or rule of
common law now or hereafter in effect and in each case as amended, or any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, to the extent binding on
Borrowers, relating to the environment, employee health and safety, or
Hazardous Materials, including CERCLA; RCRA; the Federal Water Pollution
Control Act, 33 USC Section 1251 ET SEQ; the Toxic Substances Control Act,
15 USC, Section 2601 ET SEQ; the Clean Air Act, 42 USC Section 7401 ET
SEQ.; the Safe Drinking Water Act, 42 USC. Section 3803 ET SEQ.; the Oil
Pollution Act of 1990, 33 USC. Section 2701 ET SEQ.; the Emergency Planning
and the Community Right-to-Know Act of 1986, 42 USC. Section 11001 ET SEQ.;
the Hazardous Material Transportation Act, 49 USC Section 1801 ET SEQ.; and
the Occupational Safety and Health Act, 29 USC. Section 651 ET SEQ. (to the
extent it regulates occupational exposure to Hazardous Materials); any state
and local or foreign counterparts or equivalents, in each case as amended
from time to time.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.
"ENVIRONMENTAL LIEN" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
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"EQUIPMENT" means all of Borrowers' now owned or hereafter acquired
right, title, and interest with respect to equipment, machinery, machine tools,
motors, furniture, furnishings, fixtures, vehicles (including motor vehicles and
trailers), tools, parts, goods (other than consumer goods, farm products, or
Inventory), wherever located, including (a) any interest of the Borrowers in any
of the foregoing and (b) all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"ERISA AFFILIATE" means (a) any Person subject to ERISA whose employees
are treated as employed by the same employer as the employees of a Borrower
under IRC Section 414(b), (b) any trade or business subject to ERISA whose
employees are treated as employed by the same employer as the employees of a
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which a Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with a Borrower and whose employees are aggregated with the employees of a
Borrower under IRC Section 414(o).
"ERISA EVENT" means (a) a Reportable Event with respect to any Benefit
Plan or Multiemployer Plan, (b) the withdrawal of Parent, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Parent, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Parent or its Subsidiaries or any of their ERISA
Affiliates.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCESS AVAILABILITY" means the amount as determined by Agent at any
time, in its Permitted Discretion equal to (a) the amount of Advances available
to Borrowers as of such time based upon the applicable lending formulas set
forth in SECTION 2.1, subject to the sublimits, Reserves Against Availability
and other reserves from time to time established in accordance with this
Agreement, MINUS (b) the amount of the outstanding Obligations (including
Letters of Credit).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as in effect
from time to time.
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"EXISTING LOAN AGREEMENT" has the meaning set forth in the preamble
hereto.
"FAST TRAK" has the meaning set forth in the preamble hereto.
"FEIN" means Federal Employer Identification Number.
"FUNDING DATE" means the date on which a Borrowing occurs.
"FUNDING LOSSES" has the meaning set forth in SECTION 2.14(b)(ii).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to general intangibles and
other personal property (including payment intangibles, contract rights, rights
to payment, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names [including, without limitation
the trade names "Soundtrack", "Ultimate Electronics", "Fast Trak", and "Audio
King"] trademarks, servicemarks, copyrights, blueprints, drawings, purchase
orders, customer lists, monies due or recoverable from pension funds, route
lists, rights to payment and other rights under any royalty or licensing
agreements, infringement claims, computer programs, information contained on
computer disks or tapes, software, literature, reports, catalogs, money, deposit
accounts, insurance premium rebates, tax refunds, and tax refund claims,
membership interests in limited liability companies and general partnership
interests in general partnerships and limited and general partnership interests
in limited partnerships), and any and all supporting obligations in respect
thereof, and any other personal property other than goods, Accounts, Investment
Property, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational or
governing documents of such Person.
"GOVERNMENTAL AUTHORITY" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"GROSS MARGIN PERCENTAGE" means, with respect to the subject accounting
period for which it is being calculated, the following (determined in accordance
with the cost method of accounting):
sales (minus) cost of goods sold x 100
--------------------------------
sales
"HAZARDOUS MATERIALS" means (a) substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity,
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reactivity, carcinogenicity, reproductive toxicity, or "EP toxicity", (b)
oil, petroleum, or petroleum derived substances, natural gas, natural gas
liquids, synthetic gas, drilling fluids, produced waters, and other wastes
associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or
explosives or any radioactive materials, and (d) asbestos in any form or
electrical equipment that contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of 50 parts per million.
"INDEBTEDNESS" means, without duplication (a) all obligations of a
Borrower for borrowed money, (b) all obligations of a Borrower evidenced by
bonds, debentures, notes, or other similar instruments and all reimbursement or
other obligations of a Borrower in respect of letters of credit, bankers
acceptances, interest rate swaps, or other financial products, (c) all
obligations of a Borrower under Capital Leases, (d) all obligations or
liabilities of others secured by a Lien on any asset of a Borrower, irrespective
of whether such obligation or liability is assumed, (e) all obligations of a
Borrower for the deferred purchase price of assets (other than trade debt
incurred in the ordinary course of a Borrower's business and repayable in
accordance with customary trade practices), and (f) any obligation of a Borrower
guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse to a Borrower)
any such Indebtedness.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION 11.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION 11.3.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state
or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"INTANGIBLE ASSETS" means, with respect to any Person, that portion of
the book value of all of such Person's assets that would be treated as
intangibles under GAAP.
"INTANGIBLES" has the meaning set forth in the preamble to this
Agreement.
"INTERCOMPANY SUBORDINATION AGREEMENT" means a subordination agreement
executed and delivered by Borrowers and Agent, the form and substance of which
is satisfactory to Agent.
"INTEREST PERIOD" means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan and ending 1, 2, or
3 months thereafter; PROVIDED, HOWEVER, that (a) if any Interest Period would
end on a day that is not a Business Day, such Interest Period shall be extended
(subject to clauses (c)-(e) below) to the next succeeding Business Day, (b)
interest shall accrue at the applicable rate based upon the LIBOR Rate from and
including the first day of each Interest Period to, but excluding, the day on
which any Interest Period expires, (c) any Interest Period that would end on a
day that is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in another
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calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period), the Interest Period shall end on the last Business Day of
the calendar month that is 1, 2, or 3 months after the date on which the
Interest Period began, as applicable, and (e) Borrowers (or Administrative
Borrower on behalf thereof) may not elect an Interest Period which will end
after the Maturity Date.
"INVENTORY" means all Borrowers' now owned or hereafter acquired right,
title, and interest with respect to inventory, including goods held for sale or
lease or to be furnished under a contract of service, goods that are leased by a
Borrower as lessor, goods that are furnished by a Borrower under a contract of
service, and all of Borrowers' now-owned or hereafter acquired raw materials,
work in process, or materials used or consumed in a Borrower's business
including packing and shipping materials.
"INVESTMENT PROPERTY" means all of Borrowers' now owned or hereafter
acquired right, title, and interest with respect to "investment property" as
that term is defined in the Code, and any and all supporting obligations in
respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time
to time.
"ISSUING LENDER" means WFRF or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent agrees, in such Lender's
sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or
L/C Undertakings pursuant to SECTION 2.13.
"L/C" has the meaning set forth in SECTION 2.13(a).
"L/C DISBURSEMENT" means a payment made by the Issuing Lender pursuant
to a Letter of Credit.
"L/C UNDERTAKING" has the meaning set forth in SECTION 2.13(a).
"LANDLORD LIEN STATE" means any state or other jurisdiction under whose
statutory or common law the rights of a landlord in assets of that landlord's
tenant, for unpaid rent, may be senior to a perfected security interest in such
assets.
"LEASING" has the meaning set fort in the preamble to this Agreement.
"LEASING PLEDGE AND SECURITY AGREEMENT" means the Pledge and Security
Agreement executed by Leasing, in favor of Agent, granting Agent a first
priority Lien in the partnership interests in Electronics Leasing owned by
Leasing.
"LENDER" and "LENDERS" have the respective meanings set forth in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of SECTION 14.1.
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"LENDER GROUP" means, individually and collectively, each of the
Lenders (including the Issuing Lender) and Agent.
"LENDER GROUP EXPENSES" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by a Borrower under any of
the Loan Documents that are paid or incurred by the Lender Group, (b) fees or
charges actually paid or incurred by Agent in connection with the Lender Group's
transactions with Borrowers, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation, and UCC searches and including searches with
the patent and trademark office, the copyright office, or the department of
motor vehicles), filing, recording, publication, appraisal (including periodic
Collateral appraisals or business valuations to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement,
real estate surveys, real estate title policies and endorsements, and
environmental audits, (c) costs and expenses incurred by Agent in the
disbursement of funds to or for the account of Borrowers (by wire transfer or
otherwise), (d) charges paid or incurred by Agent resulting from the dishonor of
checks, (e) reasonable costs and expenses paid or incurred by the Lender Group
to correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit fees
and expenses of Agent related to audit examinations of the Books to the extent
of the fees and charges (and up to the amount of any limitation) contained in
this Agreement, (g) reasonable costs and expenses of third party claims or any
other suit paid or incurred by the Lender Group in enforcing or defending the
Loan Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group's relationship with any Borrower or any guarantor
of the Obligations, (h) Agent's and each Lender's reasonable fees and expenses
(including attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents, and (i) Agent's and
each Lender's reasonable fees and expenses (including attorneys fees) incurred
in terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any Borrower or in exercising rights or remedies under the Loan
Documents), or defending the Loan Documents, irrespective of whether suit is
brought, or in taking any Remedial Action concerning the Collateral.
"LENDER-RELATED PERSON" means, with respect to any Lender, such Lender,
together with such Lender's Affiliates, and the officers, directors, employees,
and agents of such Lender.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as the context
requires.
"LETTER OF CREDIT USAGE" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit PLUS 100% of the
amount of outstanding time drafts accepted by an Underlying Issuer as a result
of drawings under Underlying Letters of Credit.
"LIBOR DEADLINE" has the meaning set forth in SECTION 2.15(b)(i).
"LIBOR NOTICE" means a written notice in the form of EXHIBIT L-1.
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"LIBOR OPTION" has the meaning set forth in SECTION 2.15(a).
"LIBOR RATE" means, for each Interest Period for each LIBOR Rate Loan,
the rate per annum determined by Agent (rounded upwards, if necessary, to the
next 1/16%) by DIVIDING (a) the Base LIBOR Rate for such Interest Period, BY (b)
100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and as of
the effective day of any change in the Reserve Percentage.
"LIBOR RATE LOAN" means each Advance (or portion of an Advance) that
bears interest at a rate determined by reference to the LIBOR Rate.
"LIBOR RATE MARGIN" means, on each day:
(a) as to each Real Estate Advance which is a LIBOR Loan, 2.75%
per annum; and
(b) as to LIBOR Loans other than Real Estate Advances:
(i) 2.25% per annum when the average daily Availability
for the previous fiscal quarter is less than $10,000,000;
(ii) 2.00% per annum when the average daily Availability
for the previous fiscal quarter is equal to or greater than $10,000,000 and less
than $35,000,000; and
(iii) 1.75% per annum when the average daily Availability
for the previous fiscal quarter is equal to or greater than $35,000,000.
"LIEN" means any interest in an asset securing an obligation owed to,
or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.11.
"LOAN DOCUMENTS" means this Agreement, the Blocked Account Agreements,
the Control Agreements, the Copyright Security Agreements, the Stock Pledge
Agreements, the Letters of Credit, the Mortgages, the Trademark Security
Agreements, the Intercompany Subordination Agreement, the Pledge and Security
Agreements, any note or notes executed by a Borrower in connection with this
Agreement and payable to a member of the Lender Group, and any other
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agreement entered into, now or in the future, by any Borrower and the Lender
Group in connection with this Agreement.
"MANUFACTURER PAYABLES" means Indebtedness of any Borrower to the
manufacturers, suppliers, providers, vendors or distributors of such Borrower's
Inventory incurred by such Borrower for the acquisition of such Inventory, which
Indebtedness is not secured by any lien, security interest or encumbrance.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrowers taken as a whole, (b) a material
impairment of a Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or of the Lender Group's ability to enforce the
Obligations or realize upon the Collateral, or (c) a material adverse effect on
the value of the Collateral or the amount that Agent would be likely to receive
(after giving consideration to delays in payment and costs of enforcement) in
the liquidation of such Collateral, or (d) a material impairment of the
enforceability or priority of the Agent's Liens with respect to the Collateral
as a result of an action or failure to act on the part of a Borrower.
"MATERIAL INVENTORY SUPPLIER" means any supplier, provider,
manufacturer, vendor or distributor of a Borrower's Inventory from whom such
Borrower purchases directly or indirectly, two percent (2.00%) or more of the
total Inventory purchased by such Borrower.
"MATURITY DATE" means September 30, 2004, subject to extension as set
forth in SECTION 3.4.
"MAXIMUM AMOUNT" means $50,000,000.00.
"MORTGAGES" means, individually and collectively, one or more
mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a
Borrower in favor of Agent, for the benefit of the Lender Group, in form and
substance satisfactory to Agent, that encumber the Real Property Collateral and
the related improvements thereto.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which Parent, any of its Subsidiaries, or any
ERISA Affiliate has contributed, or was obligated to contribute, within the past
six years.
"NEGOTIABLE COLLATERAL" means all of Borrowers' now owned and hereafter
acquired right, title, and interest with respect to letters of credit, letter of
credit rights, instruments, promissory notes, drafts, documents, and chattel
paper (including electronic chattel paper and tangible chattel paper), and any
and all supporting obligations in respect thereof.
"OBLIGATIONS" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations with respect to
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrowers' Loan Account pursuant hereto), obligations, fees, charges,
costs, Lender Group Expenses (including any fees or expenses that, but for the
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provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by Borrowers
to the Lender Group pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all interest not paid when due and all Lender Group Expenses that
Borrowers are required to pay or reimburse by the Loan Documents, by law, or
otherwise. Any reference in this Agreement or in the Loan Documents to the
Obligations shall include all amendments, changes, extensions, modifications,
renewals replacements, substitutions, and supplements, thereto and thereof, as
applicable, both prior and subsequent to any Insolvency Proceeding.
"ONE TURN STATE" means any state or other jurisdiction under whose
statutory or common law the relative priority of the rights of a landlord in
assets of that landlord's tenant, for unpaid rent, VIS-A-VIS the rights of the
holder of a perfected security interest therein is dependent upon whether such
security interest arose prior or subsequent to the subject asset's coming onto
the demised premises.
"ORDERLY LIQUIDATION VALUE" means the liquidation value of Eligible
Inventory as determined from time to time by an appraiser reasonably acceptable
to Agent (in each case, as selected by Agent).
"ORGANIZATIONAL I.D. NUMBER" means with respect to a Person, other than
a natural person, the organizational identification number assigned to such
Person, if any, by the applicable governmental unit or agency of the
jurisdiction of organization of such Person.
"ORIGINATING LENDER" has the meaning set forth in SECTION 14.1(e).
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PARENT" has the meaning set forth in the preamble to this Agreement.
"PARENT PLEDGE AND SECURITY AGREEMENT" means the Pledge and Security
Agreement executed by Parent, in favor of Agent, granting Agent a first priority
Lien in the partnership interest in Electronics Texas owned by Parent.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(e).
"PERMITTED DISCRETION" means a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
"PERMITTED LIENS" means (a) Liens held by Agent for the benefit of
Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are not yet
due and payable, or (ii) are the subject of Permitted Protests, (c) Liens set
forth on SCHEDULE P-1, (d) the interests of lessors under operating leases, (e)
purchase money Liens or the interests of lessors under Capital Leases to the
extent that the acquisition or lease of the underlying asset is permitted under
SECTION 7.22 and so long as such Lien attaches only to the asset purchased or
acquired and the proceeds
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thereof and only secures the purchase price of the asset, (f) Liens arising
by operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of
Borrowers' business and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet due and payable, or (ii) are the
subject of Permitted Protests, (g) Liens arising from deposits made in
connection with obtaining worker's compensation or other unemployment
insurance, (h) Liens or deposits to secure performance of bids, tenders, or
leases (to the extent permitted under this Agreement) incurred in the
ordinary course of Borrowers' business and not in connection with the
borrowing of money, (i) Liens arising by reason of security for surety or
appeal bonds in the ordinary course of Borrowers' business, (j) Liens of or
resulting from any judgment or award that would not cause a Material Adverse
Change and as to which the time for the appeal or petition for rehearing of
which has not yet expired, or in respect of which a Borrower is in good faith
prosecuting an appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review has been
secured, (k) Liens with respect to the Real Property Collateral that are
exceptions to the commitments for title insurance issued in connection with
the Mortgages, as accepted by Agent, (l) with respect to any Real Property
that is not part of the Real Property Collateral, easements, rights of way,
and zoning restrictions that do not materially interfere with or impair the
use or operation thereof by Borrowers, and (m) Liens against the portion of
the Thornton Colorado Facility consisting of real property and improvements
upon real property to the extent such Liens secure Indebtedness permitted by
SECTION 7.1(f) of this Agreement.
"PERMITTED PROTEST" means the right of the applicable Borrower to
protest any Lien (other than any such Lien that secures the Obligations), taxes
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on the Books in an amount that is reasonably
satisfactory to Agent, (b) any such protest is instituted promptly and
prosecuted diligently by the applicable Borrower in good faith, and (c) Agent is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the Agent's Liens.
"PERSON" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"PERSONAL PROPERTY COLLATERAL" means all Collateral other than Real
Property.
"PLAN" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"PLEDGE AND SECURITY AGREEMENTS" means the Parent Pledge and Security
Agreement, the Electronics Partners Pledge and Security Agreements, and the
Leasing Pledge and Security Agreement.
"PROJECTIONS" means Parent's forecasted (a) balance sheets, (b) profit
and loss statements, and (c) cash flow statements, all prepared on a consistent
basis with Parent's historical financial
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statements, together with appropriate supporting details and a statement of
underlying assumptions.
"PRO RATA SHARE" means:
(a) with respect to a Lender's obligation to make Advances and
receive payments of principal, interest, fees, costs, and expenses with respect
thereto, the percentage obtained by dividing (i) such Lender's Commitment, by
(ii) the aggregate Commitments of all Lenders,
(b) with respect to a Lender's obligation to participate in
Letters of Credit, to reimburse the Issuing Lender, and to receive payments of
fees with respect thereto, the percentage obtained by dividing (i) such Lender's
Commitment, by (ii) the aggregate Commitments of all Lenders, and
(c) with respect to all other matters (including the
indemnification obligations arising under Section 16.7), the percentage obtained
by dividing (i) such Lender's Commitment, by (ii) the aggregate amount of
Commitments of all Lenders; PROVIDED, HOWEVER, that, in each case, in the event
all Commitments have been terminated, Pro Rata Share shall be determined
according to the Commitments in effect immediately prior to such termination.
"REAL ESTATE ADVANCE" means Advances made by the Lender Group to
Borrowers due to the "Real Estate Advance Amount" portion of the Borrowing Base.
"REAL ESTATE ADVANCE AMOUNT" means at any date of determination, the
lesser of (a) $20,000,000 or (b) 60% of the appraised fair market value of the
Thornton Colorado Facility.
"REAL PROPERTY" means any estates or interests in real property now
owned or hereafter acquired by any Borrower and the improvements thereto.
"REAL PROPERTY COLLATERAL" means the parcel or parcels of Real Property
identified on Schedule R-1, including without limitation, the Thornton Colorado
Facility, and any Real Property hereafter acquired by a Borrower and pledged as
security for the Obligations.
"REPORTABLE EVENT" means any of the events described in Section 4043(c)
of ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"RECORD" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"REMEDIAL ACTION" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-
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remedial operation and maintenance activities, or (d) conduct any other
actions authorized by 42 USC Section 9601.
"REPORT" has the meaning set forth in SECTION 16.17.
"REQUIRED LENDERS" means, at any time, (a) Agent, and (b) Lenders whose
Pro Rata Shares aggregate 66% of the total Commitments, or if the Commitments
have been terminated irrevocably, 66% of the Obligations then outstanding.
"RETAIL" means the Cost of Inventory divided by the Cost Factor.
"RESERVE PERCENTAGE" means, on any day, for any Lender, the maximum
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Lender, but so
long as such Lender is not required or directed under applicable regulations to
maintain such reserves, the Reserve Percentage shall be zero.
"RESERVES AGAINST AVAILABILITY" means such reserves as Agent, from time
to time determines in its discretion as being appropriate to reflect impediments
to Lender Group's ability to realize upon the Collateral. Without limiting the
generality of the foregoing, Reserves Against Availability may include (but are
not limited to) reserves based on the following:
(a) Rent
(i) based upon past due rent, and
(ii) based upon Borrowers' locations in a
Landlord Lien State or One-Turn State, if no landlord
waiver acceptable to Agent has been obtained.
(b) In store customer credits and gift certificates.
(c) Past due payables.
(d) Layaway and customer deposits, including special
order customer deposits.
(e) Past due or accrued taxes and other governmental charges,
including, ad valorem, personal property and other taxes which may have
priority over the security interests of Agent in the Collateral.
(f) Past due or accrued warehouse and storage charges.
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The foregoing notwithstanding, as long as Borrowers' Tangible Net Worth is in
excess of $90,000,000, no Reserves Against Availability will be established as
to either of the items described in clauses (b) and (d) above.
"REVOLVER USAGE" means, as of any date of determination, the sum of (a)
the then extant amount of outstanding Advances, PLUS (b) the then extant amount
of the Letter of Credit Usage.
"RISK PARTICIPATION LIABILITY" means, as to each Letter of Credit, all
reimbursement obligations of Borrowers to the Issuing Lender with respect to an
L/C Undertaking, consisting of (a) the amount available to be drawn or which may
become available to be drawn, (b) all amounts that have been paid by the Issuing
Lender to the Underlying Issuer to the extent not reimbursed by Borrowers,
whether by the making of an Advance or otherwise, and (c) all accrued and unpaid
interest, fees, and expenses payable with respect thereto.
"SALE OF CONTROL" means the acquisition by a Person and any of the
"affiliates" of such Person within the meaning of Rule 12b-2 promulgated under
the Exchange Act (other than any current affiliate of Parent) of an aggregate of
75% or more of the assets of the Borrowers, taken as a whole, or capital stock
of Parent.
"SEC" means the United States Securities and Exchange Commission and
any successor thereto.
"SECURITIES ACCOUNT" means a "securities account" as that term is
defined in the Code.
"SETTLEMENT" has the meaning set forth in SECTION 2.3(f)(i).
"SETTLEMENT DATE" has the meaning set forth in SECTION 2.3(f)(i).
"SOLVENT" means, with respect to any Person on a particular date, that
such Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).
"SPECIAL INVENTORY ADVANCE AMOUNT" means, at any date of determination,
the lesser of (a) $5,000,000 or (b) five percent (5%) of the Cost of Eligible
Inventory.
"SPECIAL INVENTORY ADVANCES" means Advances made by the Lender Group to
Borrowers due to the "Special Inventory Advance Amount" portion of the Borrowing
Base.
"STOCK" means all shares, options, warrants, interests, participations,
or other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the SEC under the Exchange Act).
"STOCK PLEDGE AGREEMENTS" means the Stock Pledge Agreements executed by
Parent in favor of Agent, granting Agent a first priority Lien in all the issued
and outstanding capital stock of each Subsidiary of Parent.
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"SUBSIDIARY" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of Stock having ordinary voting power to elect a
majority of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other entity.
"SWING LENDER" means WFRF or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent agrees, in such Lender's
sole discretion, to become the Swing Lender hereunder.
"SWING LOAN" has the meaning set forth in SECTION 2.3(d)(i).
"TANGIBLE NET WORTH" means, as of any date of determination, the result
of (a) the total stockholder's equity of Parent and its Subsidiaries, MINUS (b)
the sum of (i) all Intangible Assets of Parent and its Subsidiaries, (ii) all of
Parent's prepaid expenses, and (iii) all amounts due to Parent and its
Subsidiaries from Affiliates.
"THORNTON COLORADO FACILITY" means Parent's facility at 321 West 84th
Avenue, Thornton, Colorado, consisting of the headquarters of Parent, a
warehouse of Parent, and a retail store of Parent.
"TRADEMARK SECURITY AGREEMENTS" means the trademark security agreements
executed and delivered by each Borrower and Agent, the form and substance of
which is satisfactory to Agent.
"TYPE OF ORGANIZATION" means with respect to a Person other than a
natural person, the kind or type of entity by which such Person is organized,
such as corporation, limited partnership or limited liability company.
"UNDERLYING ISSUER" means a third Person which is the beneficiary of an
L/C Undertaking and which has issued a letter of credit at the request of the
Issuing Lender for the benefit of Borrowers.
"UNDERLYING LETTER OF CREDIT" means a letter of credit that has been
issued by an Underlying Issuer.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 17.7.
"WELLS FARGO" means Wells Fargo Bank, National Association, a national
banking association.
"WFRF" means Wells Fargo Retail Finance, LLC.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrowers" or the term "Parent" is
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used in respect of a financial covenant or a related definition, it shall be
understood to mean Parent and its Subsidiaries on a consolidated basis unless
the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, references to the plural include
the singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in the other Loan
Documents to any agreement, instrument, or document shall include all
alterations, amendments, restatements, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein). Any reference herein
to any Person shall be construed to include such Person's successors and
assigns. Any requirement of a writing contained herein or in the other Loan
Documents shall be satisfied by the transmission of a Record and any Record
transmitted shall constitute a representation and warranty as to the accuracy
and completeness of the information contained therein.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
(a) The Term "Borrower" or "Borrowers". Unless otherwise
specifically provided herein, all references to "Borrower" or "Borrowers" herein
shall refer to and include each Borrower separately and all representations
contained herein shall be deemed to be separately made by each of them, and each
of the covenants, agreements and obligations set forth herein shall be deemed to
be the joint and several covenants, agreements and obligations of them. Any
notice, request, consent, report or other information or agreement delivered to
Agent or any other member of the Lender Group by any Borrower shall be deemed to
be ratified by, consented to and also delivered by each other Borrower. Each
Borrower recognizes and agrees that each covenant and agreement of "Borrower" or
"Borrowers" under this Agreement and the other Loan Documents shall create a
joint and several obligation of the Borrowers, which may be enforced against
Borrowers, jointly or against each Borrower separately. Without limiting the
terms of this Agreement and the other Loan Documents, security interests, assets
and collateral shall extend to the properties, interests, assets and collateral
of each Borrower. Similarly, the term "Obligations" shall include, without
limitation, all obligations, liabilities and indebtedness of such entities, or
any one of them, to any member the Lender Group, whether such obligations,
liabilities and indebtedness shall be joint, several, joint and several or
individual. Unless otherwise specified in this Agreement, the parties hereto
anticipate that any notice, request,
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consent, report or other information or agreement to be delivered in
connection with this Agreement by Borrowers to Agent will be executed by
Parent as Administrative Borrower, on behalf of Borrowers, and that any such
notice, request, consent, report or other information or agreement delivered
to Agent and executed by Parent shall be deemed to be executed by Parent on
behalf of all the Borrowers. In addition, unless otherwise specified in this
Agreement, the parties hereto anticipate that any advances made hereunder by
any member of the Lender Group to Borrowers shall be disbursed directly to
Parent.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES.
(a) On the Closing Date the "Advances" (as defined in the
Existing Loan Agreement) held by WFRF under the Existing Loan Agreement shall
automatically, and without any action on the part of any Person, be deemed to be
Advances under this Agreement, and each of the Lenders shall by assignments from
WFRF (which assignments shall be deemed to occur automatically, and without the
requirement for additional documentation, on the Closing Date) acquire a portion
of the Advances made by WFRF so designated in such amounts, and the Lenders
shall, through the Agent, make such other adjustments among themselves as shall
be necessary so that after giving effect to such assignments and adjustments,
the Lenders shall hold Advances in an amount not greater than their Pro Rata
Share of the Commitments. On or prior to the Closing Date, the Agent shall
notify each Lender of any assignments or adjustments that the Agent deems
necessary and advisable such that after giving effect to the transactions
contemplated to occur on the Closing Date, each Lender's Commitment shall be in
accordance with the Commitment set forth opposite its name on SCHEDULE C-1. Each
Lender's Advances to the Borrowers shall not exceed its Pro Rata Share of all
Advances then outstanding to the Borrowers and the aggregate unused Commitment
of each Lender plus all outstanding Advances under the Agreement shall not
exceed the total Commitments. Any such assignments shall be deemed to occur
hereunder automatically on the Closing Date and without any requirement for
additional documentation, and in the case of any such assignment, the assigning
party shall be deemed to represent and warrant to each assignee that it has not
created any adverse claim upon the interest being assigned and that such
interest is free and clear of any adverse claim. Each Lender hereby agrees to
give effect to the instructions of the Agent to such Lender contained in the
notice described above.
(b) Subject to the terms and conditions of this
Agreement, and during the term of this Agreement, each Lender with a Commitment
agrees (severally, not jointly or jointly and severally) to make advances
("ADVANCES") to Borrowers in an amount at any one time outstanding not to exceed
such Lender's Pro Rata Share of an amount equal to THE LESSER OF (i) the Maximum
Amount LESS the Letter of Credit Usage, or (ii) the Borrowing Base LESS the
Letter of Credit Usage. For purposes of this Agreement, "BORROWING BASE," as of
any date of determination, shall mean the result of:
(v) THE LESSER OF
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(i) 75% of the amount of Eligible
Accounts, and
(ii) $2,500,000; PLUS
(w) 75% of the Cost of Eligible Inventory, PLUS
(x) the Special Inventory Advance Amount, PLUS
(y) the Real Estate Advance Amount, MINUS
(z) the aggregate of such Reserves Against
Availability as may have been established by Agent.
(c) The Lenders with Commitments shall have no obligation
to make additional Advances hereunder to the extent such additional Advances
would cause the Revolver Usage to exceed the Maximum Amount.
(d) Amounts borrowed pursuant to this section may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.
(e) Anything to the contrary herein notwithstanding, no
Lender shall have any obligation to make Advances with respect to Eligible
Accounts unless and until Borrowers shall have furnished Agent with an audit of
Eligible Accounts satisfactory to Agent.
2.2 [THIS SECTION IS INTENTIONALLY OMITTED].
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) Procedure for Borrowing. Each Borrowing shall be made
by an irrevocable written request by an Authorized Person delivered to Agent
(which notice must be received by Agent no later than 11:00 a.m. (California
time) on the Business Day prior to the date that is the requested Funding Date
in the case of a request for an Advance that is to bear interest at a rate based
on the Base Rate and two (2) Business Days prior to the date that is the
requested Funding Date in the case of an Advance that is to bear interest at a
rate based on the LIBOR Rate. Such request shall specify (i) the amount of such
Borrowing, and whether the requested Borrowing is a Real Estate Advance, (ii)
the requested Funding Date, which shall be a Business Day, (iii) whether the
Advance is to constitute a LIBOR Rate Loan or a Base Rate Loan (provided that a
Special Inventory Advance must be a Base Rate Loan), and (iv) if such Advance is
to constitute a LIBOR Rate Loan, the requested interest period therefor;
PROVIDED, HOWEVER, that in the case of a request for a Swing Loan in an amount
of $5,000,000 or less, such notice shall be timely received if it is received by
Agent no later than 11:00 a.m. (California time) on the Business Day that is the
requested Funding Date. At Agent's election, in lieu of delivering the
above-described written request, any Authorized Person may give Agent telephonic
notice of such request by the required time, with such telephonic notice to be
confirmed in writing within 24 hours of the giving of such notice.
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(b) Agent's Election. Promptly after receipt of a request
for a Borrowing pursuant to SECTION 2.3(a), Agent shall elect, in its
discretion, (i) to have the terms of SECTION 2.3(c) apply to such requested
Borrowing, or (ii) if the Borrowing is for an Advance, to request Swing Lender
to make a Swing Loan pursuant to the terms of SECTION 2.3(d) in the amount of
the requested Borrowing; PROVIDED, HOWEVER, that if Swing Lender declines in its
sole discretion to make a Swing Loan pursuant to SECTION 2.3(d), Agent shall
elect to have the terms of SECTION 2.3(C) apply to such requested Borrowing.
(c) Making of Advances.
(i) In the event that Agent shall elect to have
the terms of this SECTION 2.3(c) apply to a requested
Borrowing as described in SECTION 2.3(b), then promptly after
receipt of a request for a Borrowing pursuant to SECTION
2.3(a), Agent shall notify the Lenders, not later than 1:00
p.m. (California time) on the Business Day immediately
preceding the Funding Date applicable thereto, by facsimile,
telephone, or other similar form of transmission, of the
requested Borrowing. Each Lender shall make the amount of such
Lender's Pro Rata Share of the requested Borrowing available
to Agent in immediately available funds, to Agent's Account,
not later than 11:00 a.m. (California time) on the Funding
Date applicable thereto. After Agent's receipt of the proceeds
of such Advances, upon satisfaction of the applicable
conditions precedent set forth in SECTION 3 hereof, Agent
shall make the proceeds thereof available to Administrative
Borrower on the applicable Funding Date by transferring
immediately available funds equal to such proceeds received by
Agent to Administrative Borrower's Designated Account;
PROVIDED, HOWEVER, that, subject to the provisions of SECTION
2.3(i), Agent shall not request any Lender to make, and no
Lender shall have the obligation to make, any Advance if Agent
shall have actual knowledge that (1) one or more of the
applicable conditions precedent set forth in SECTION 3 will
not be satisfied on the requested Funding Date for the
applicable Borrowing unless such condition has been waived, or
(2) the requested Borrowing would exceed the Availability on
such Funding Date.
(ii) Unless Agent receives notice from a Lender
on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least one (1) Business
Day prior to the date of such Borrowing, that such Lender will
not make available as and when required hereunder to Agent for
the account of Borrowers the amount of that Lender's Pro Rata
Share of the Borrowing, Agent may assume that each Lender has
made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may
(but shall not be so required), in reliance upon such
assumption, make available to Borrowers on such date a
corresponding amount. If and to the extent any Lender shall
not have made its full amount available to Agent in
immediately available funds and Agent in such circumstances
has made available to Borrowers such amount, that Lender shall
on the Business Day following such Funding Date make
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such amount available to Agent, together with interest at the
Defaulting Lender Rate for each day during such period. A
notice submitted by Agent to any Lender with respect to
amounts owing under this subsection shall be conclusive,
absent manifest error. If such amount is so made available,
such payment to Agent shall constitute such Lender's Advance
on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to Agent on the Business
Day following the Funding Date, Agent will notify
Administrative Borrower of such failure to fund and, upon
demand by Agent, Borrowers shall pay such amount to Agent for
Agent's account, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum
equal to the interest rate applicable at the time to the
Advances composing such Borrowing. The failure of any Lender
to make any Advance on any Funding Date shall not relieve any
other Lender of any obligation hereunder to make an Advance on
such Funding Date, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by
such other Lender on any Funding Date.
(iii) Agent shall not be obligated to transfer to
a Defaulting Lender any payments made by Borrowers to Agent
for the Defaulting Lender's benefit, and, in the absence of
such transfer to the Defaulting Lender, Agent shall transfer
any such payments to each other non-Defaulting Lender member
of the Lender Group ratably in accordance with their
Commitments (but only to the extent that such Defaulting
Lender's Advance was funded by the other members of the Lender
Group) or, if so directed by Administrative Borrower and if no
Default or Event of Default had occurred and is continuing
(and to the extent such Defaulting Lender's Advance was not
funded by the Lender Group), retain same to be re-advanced to
Borrowers as if such Defaulting Lender had made Advances to
Borrowers. Subject to the foregoing, Agent may hold and, in
its Permitted Discretion, re-lend to Borrowers for the account
of such Defaulting Lender the amount of all such payments
received and retained by it for the account of such Defaulting
Lender. Solely for the purposes of voting or consenting to
matters with respect to the Loan Documents, such Defaulting
Lender shall be deemed not to be a "Lender" and such Lender's
Commitment shall be deemed to be zero. This section shall
remain effective with respect to such Defaulting Lender until
(x) the Obligations under this Agreement shall have been
declared or shall have become immediately due and payable, (y)
the non-Defaulting Lenders, Agent, and Administrative Borrower
shall have waived such Defaulting Lender's default in writing,
or (z) the Defaulting Lender makes its Pro Rata Share of the
applicable Advance and pays to Agent all amounts owing by
Defaulting Lender in respect thereof. The operation of this
Section shall not be construed to increase or otherwise affect
the Commitment of any Lender, to relieve or excuse the
performance by such Defaulting Lender or any other Lender of
its duties and obligations hereunder, or to relieve or excuse
the performance by Borrowers of their duties and obligations
hereunder to Agent or to the Lenders other than such
Defaulting Lender. Any such failure to fund by any Defaulting
Lender shall
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constitute a material breach by such Defaulting Lender of
this Agreement and shall entitle Administrative Borrower at
its option, upon written notice to Agent, to arrange for a
substitute Lender to assume the Commitment of such
Defaulting Lender, such substitute Lender to be acceptable
to Agent. In connection with the arrangement of such a
substitute Lender, the Defaulting Lender shall have no
right to refuse to be replaced hereunder, and agrees to
execute and deliver a completed form of Assignment and
Acceptance Agreement in favor of the substitute Lender (and
agrees that it shall be deemed to have executed and
delivered such document if it fails to do so) subject only
to being repaid its share of the outstanding Obligations
(including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of
any kind whatsoever; PROVIDED FURTHER, HOWEVER, that any
such assumption of the Commitment of such Defaulting Lender
shall not be deemed to constitute a waiver of any of the
Lender Groups' or Borrowers' rights or remedies against any
such Defaulting Lender arising out of or in relation to
such failure to fund.
(d) Making of Swing Loans.
(i) In the event Agent shall elect, with the
consent of Swing Lender, as a Lender, to have the terms of
this section 2.3(d) apply to a requested Borrowing as
described in SECTION 2.3(b), Swing Lender as a Lender shall
make such Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to
this SECTION 2.3(d) being referred to as a "SWING LOAN" and
such Advances being referred to collectively as "SWING LOANS")
available to Borrowers on the Funding Date applicable thereto
by transferring immediately available funds to Administrative
Borrower's Designated Account. Each Swing Loan is an Advance
hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that no such Swing Loan
shall be eligible for the LIBOR Option and all payments on any
Swing Loan shall be payable to Swing Lender as a Lender solely
for its own account (and for the account of the holder of any
participation interest with respect to such Swing Loan).
Subject to the provisions of SECTION 2.3(i), Agent shall not
request Swing Lender as a Lender to make, and Swing Lender as
a Lender shall not make, any Swing Loan if Agent has actual
knowledge that (i) one or more of the applicable conditions
precedent set forth in SECTION 3 will not be satisfied on the
requested Funding Date for the applicable Borrowing unless
such condition has been waived, or (ii) the requested
Borrowing would exceed the Availability on such Funding Date.
Swing Lender as a Lender shall not otherwise be required to
determine whether the applicable conditions precedent set
forth in SECTION 3 have been satisfied on the Funding Date
applicable thereto prior to making, in its sole discretion,
any Swing Loan.
(ii) The Swing Loans shall be secured by the
Agent's Liens, shall constitute Advances and Obligations
hereunder, and shall bear interest at the rate applicable from
time to time to Advances that are Base Rate Loans.
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(e) Agent Advances.
(i) Agent hereby is authorized by Borrowers and
the Lenders, from time to time in Agent's sole discretion, (1)
after the occurrence and during the continuance of a Default
or an Event of Default, or (2) at any time that any of the
other applicable conditions precedent set forth in SECTION 3
have not been satisfied, to make Advances to Borrowers on
behalf of the Lenders that Agent, in its Permitted Discretion
deems necessary or desirable (A) to preserve or protect the
Collateral, or any portion thereof, (B) to enhance the
likelihood of repayment of the Obligations, or (C) to pay any
other amount chargeable to Borrowers pursuant to the terms of
this Agreement, including Lender Group Expenses and the costs,
fees, and expenses described in SECTION 10 (any of the
Advances described in this SECTION 2.3(e) shall be referred to
as "AGENT ADVANCES"). Each Agent Advance is an Advance
hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that no such Agent
Advance shall be eligible for the LIBOR Option and all
payments thereon shall be payable to Agent solely for its own
account (and for the account of the holder of any
participation interest with respect to such Agent Advance).
(ii) The Agent Advances shall be repayable on
demand and secured by the Agent's Liens granted to Agent under
the Loan Documents, shall constitute Advances and Obligations
hereunder, and shall bear interest at the rate applicable from
time to time to Advances that are Base Rate Loans.
(f) Settlement. It is agreed that each Lender's funded
portion of the Advances is intended by the Lenders to equal, at all times, such
Lender's Pro Rata Share of the outstanding Advances. Such agreement
notwithstanding, Agent, Swing Lender, and the other Lenders agree (which
agreement shall not be for the benefit of or enforceable by Borrowers) that in
order to facilitate the administration of this Agreement and the other Loan
Documents, settlement among them as to the Advances, the Swing Loans, and the
Agent Advances shall take place on a periodic basis in accordance with the
following provisions:
(i) Agent shall request settlement
("SETTLEMENT") with the Lenders on a weekly basis, or on a
more frequent basis if so determined by Agent, (1) on behalf
of Swing Lender, with respect to each outstanding Swing Loan,
(2) for itself, with respect to each Agent Advance, and (3)
with respect to Collections received, as to each by notifying
the Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 2:00
p.m. (California time) on the Business Day immediately prior
to the date of such requested Settlement (the date of such
requested Settlement being the "SETTLEMENT DATE"). Such notice
of a Settlement Date shall include a summary statement of the
amount of outstanding Advances, Swing Loans, and Agent
Advances for the period since the prior Settlement Date.
Subject to the terms and conditions contained herein
(including SECTION 2.3(c)(iii)): (y) if a Lender's balance of
the Advances, Swing Loans, and Agent Advances exceeds such
Lender's Pro Rata
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Share of the Advances, Swing Loans, and Agent Advances as
of a Settlement Date, then Agent shall, by no later than
12:00 p.m. (California time) on the Settlement Date,
transfer in immediately available funds to the account of
such Lender as such Lender may designate, an amount such
that each such Lender shall, upon receipt of such amount,
have as of the Settlement Date, its Pro Rata Share of the
Advances, Swing Loans, and Agent Advances, and (z) if a
Lender's balance of the Advances, Swing Loans, and Agent
Advances is less than such Lender's Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a
Settlement Date, such Lender shall no later than 12:00 p.m.
(California time) on the Settlement Date transfer in
immediately available funds to the Agent's Account, an
amount such that each such Lender shall, upon transfer of
such amount, have as of the Settlement Date, its Pro Rata
Share of the Advances, Swing Loans, and Agent Advances.
Such amounts made available to Agent under clause (z) of
the immediately preceding sentence shall be applied against
the amounts of the applicable Swing Loan or Agent Advance
and, together with the portion of such Swing Loan or Agent
Advance representing Swing Lender's Pro Rata Share thereof,
shall constitute Advances of such Lenders. If any such
amount is not made available to Agent by any Lender on the
Settlement Date applicable thereto to the extent required
by the terms hereof, Agent shall be entitled to recover for
its account such amount on demand from such Lender together
with interest thereon at the Defaulting Lender Rate.
(ii) In determining whether a Lender's balance of
the Advances, Swing Loans, and Agent Advances is less than,
equal to, or greater than such Lender's Pro Rata Share of the
Advances, Swing Loans, and Agent Advances as of a Settlement
Date, Agent shall, as part of the relevant Settlement, apply
to such balance the portion of payments actually received in
good funds by Agent with respect to principal, interest, fees
payable by Borrowers and allocable to the Lenders hereunder,
and proceeds of Collateral. To the extent that a net amount is
owed to any such Lender after such application, such net
amount shall be distributed by Agent to that Lender as part of
such next Settlement.
(iii) Between Settlement Dates, Agent, to the
extent no Agent Advances or Swing Loans are outstanding, may
pay over to Swing Lender any payments received by Agent, that
in accordance with the terms of this Agreement would be
applied to the reduction of the Advances, for application to
Swing Lender's Pro Rata Share of the Advances. If, as of any
Settlement Date, Collections received since the then
immediately preceding Settlement Date have been applied to
Swing Lender's Pro Rata Share of the Advances other than to
Swing Loans, as provided for in the previous sentence, Swing
Lender shall pay to Agent for the accounts of the Lenders, and
Agent shall pay to the Lenders, to be applied to the
outstanding Advances of such Lenders, an amount such that each
Lender shall, upon receipt of such amount, have, as of such
Settlement Date, its Pro Rata Share of the Advances. During
the period between Settlement Dates, Swing Lender with respect
to Swing Loans, Agent with respect to Agent
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Advances, and each Lender (subject to the effect of letter
agreements between Agent and individual Lenders) with
respect to the Advances other than Swing Loans and Agent
Advances, shall be entitled to interest at the applicable
rate or rates payable under this Agreement on the daily
amount of funds employed by Swing Lender, Agent, or the
Lenders, as applicable.
(g) Notation. Agent shall record on its books the
principal amount of the Advances owing to each Lender, including the Swing Loans
owing to Swing Lender, and Agent Advances owing to Agent, and the interests
therein of each Lender, from time to time. In addition, each Lender is
authorized, at such Lender's option, to note the date and amount of each payment
or prepayment of principal of such Lender's Advances in its books and records,
including computer records, such books and records constituting conclusive
evidence, absent manifest error, of the accuracy of the information contained
therein.
(h) Lenders' Failure to Perform. All Advances (other than
Swing Loans and Agent Advances) shall be made by the Lenders contemporaneously
and in accordance with their Pro Rata Shares. It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform its
obligation to make any Advance (or other extension of credit) hereunder, nor
shall any Commitment of any Lender be increased or decreased as a result of any
failure by any other Lender to perform its obligations hereunder, and (ii) no
failure by any Lender to perform its obligations hereunder shall excuse any
other Lender from its obligations hereunder.
(i) Optional Overadvances. Any contrary provision of this
Agreement notwithstanding, the Lenders hereby authorize Agent or Swing Lender,
as applicable, and Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally, continue to make Advances (including
Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby
would be created, so long as (i) after giving effect to such Advances (including
a Swing Loan), the Revolver Usage does not exceed the Borrowing Base by more
than $5,000,000.00, (ii) after giving effect to such Advances (including a Swing
Loan) the outstanding Revolver Usage (except for and excluding amounts charged
to the Loan Account for interest, fees, or Lender Group Expenses) does not
exceed the Maximum Amount, and (iii) at the time of the making of any such
Advance (including a Swing Loan), Agent does not believe, in good faith, that
the Overadvance created by such Advance will be outstanding for more than 90
days. The foregoing provisions are for the exclusive benefit of Agent, Swing
Lender, and the Lenders and are not intended to benefit Borrowers in any way.
The Advances and Swing Loans, as applicable, that are made pursuant to this
SECTION 2.3(i) shall be subject to the same terms and conditions as any other
Advance or Swing Loan, as applicable, except that they shall not be eligible for
the LIBOR Option and the rate of interest applicable thereto shall be the rate
applicable to Advances that are Base Rate Loans under SECTION 2.6(c) hereof
without regard to the presence or absence of a Default or Event of Default.
(i) In the event Agent obtains actual knowledge
that the Revolver Usage exceeds the amounts permitted by the
preceding paragraph, regardless of the amount of, or reason
for, such excess, Agent shall notify Lenders as soon as
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practicable (and prior to making any (or any additional)
intentional Overadvances (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender
Group Expenses) unless Agent determines that prior notice
would result in imminent harm to the Collateral or its value),
and the Lenders with Commitments thereupon shall, together
with Agent, jointly determine the terms of arrangements that
shall be implemented with Borrowers and intended to reduce,
within a reasonable time, the outstanding principal amount of
the Advances to Borrowers to an amount permitted by the
preceding paragraph. In the event Agent or any Lender
disagrees over the terms of reduction or repayment of any
Overadvance, the terms of reduction or repayment thereof shall
be implemented according to the determination of the Required
Lenders.
(ii) Each Lender with a Commitment shall be
obligated to settle with Agent as provided in SECTION 2.3(f)
for the amount of such Lender's Pro Rata Share of any
unintentional Overadvances by Agent reported to such Lender,
any intentional Overadvances made as permitted under this
SECTION 2.3(i), and any Overadvances resulting from the
charging to the Loan Account of interest, fees, or Lender
Group Expenses.
2.4 PAYMENTS.
(a) Payments by Borrowers.
(i) Except as otherwise expressly
provided herein, all payments by Borrowers shall be
made to Agent's Account for the account of the Lender
Group and shall be made in immediately available
funds, no later than 11:00 a.m. (California time) on
the date specified herein. Any payment received by
Agent later than 11:00 a.m. (California time), shall
be deemed to have been received on the following
Business Day and any applicable interest or fee shall
continue to accrue until such following Business Day.
(ii) Unless Agent receives notice from
Administrative Borrower prior to the date on which
any payment is due to the Lenders that Borrowers will
not make such payment in full as and when required,
Agent may assume that Borrowers have made (or will
make) such payment in full to Agent on such date in
immediately available funds and Agent may (but shall
not be so required), in reliance upon such
assumption, distribute to each Lender on such due
date an amount equal to the amount then due such
Lender. If and to the extent Borrowers do not make
such payment in full to Agent on the date when due,
each Lender severally shall repay to Agent on demand
such amount distributed to such Lender, together with
interest thereon at the Defaulting Lender Rate for
each day from the date such amount is distributed to
such Lender until the date repaid.
(b) Apportionment and Application.
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(i) Except as otherwise provided with
respect to Defaulting Lenders and except as otherwise
provided in the Loan Documents (including letter
agreements between Agent and individual Lenders),
aggregate principal and interest payments shall be
apportioned ratably among the Lenders (according to
the unpaid principal balance of the Obligations to
which such payments relate held by each Lender) and
payments of fees and expenses (other than fees or
expenses that are for Agent's separate account, after
giving effect to any letter agreements between Agent
and individual Lenders) shall be apportioned ratably
among the Lenders having a Pro Rata Share of the type
of Commitment or Obligation to which a particular fee
relates. All payments shall be remitted to Agent and
all such payments (other than payments received while
no Default or Event of Default has occurred and is
continuing and which relate to the payment of
principal or interest of specific Obligations or
which relate to the payment of specific fees), and
all proceeds of Accounts or other Collateral received
by Agent, shall be applied as follows:
A. FIRST, to pay any Lender Group
Expenses then due to Agent under the Loan Documents,
until paid in full,
B. SECOND, to pay any Lender Group
Expenses then due to the Lenders under the Loan
Documents, on a ratable basis, until paid in full,
C. THIRD, to pay any fees then due to
Agent (for its separate accounts, after giving effect
to any letter agreements between Agent and the
individual Lenders) under the Loan Documents until
paid in full,
D. FOURTH, to pay any fees then due to
any or all of the Lenders (after giving effect to any
letter agreements between Agent and individual
Lenders) under the Loan Documents, on a ratable
basis, until paid in full,
E. FIFTH, to pay interest due in
respect of all Agent Advances, until paid in full,
F. SIXTH, ratably to pay interest due
in respect of the Advances (other than Agent
Advances), and the Swing Loans until paid in full,
G. SEVENTH, to pay the principal of
all Agent Advances until paid in full,
H. EIGHTH, to pay the principal of all
Swing Loans until paid in full,
I. NINTH, to pay the principal of all
Advances until paid in full,
J. TENTH, if an Event of Default has
occurred and is continuing, to Agent, to be held by
Agent, for the ratable benefit of Issuing Lender and
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those Lenders having a Commitment, as cash collateral
in an amount up to 110% of the then extant Letter of
Credit Usage until paid in full,
K. ELEVENTH, to pay any other
Obligations until paid in full, and
L. TWELFTH, to Borrowers (to be wired
to the Designated Account) or such other Person
entitled thereto under applicable law.
(ii) Agent promptly shall distribute to each
Lender, pursuant to the applicable wire instructions received
from each Lender in writing, such funds as it may be entitled
to receive, subject to a Settlement delay as provided in
SECTION 2.3(h).
(iii) In each instance, so long as no Default
or Event of Default has occurred and is continuing, SECTION
2.4(b) shall not be deemed to apply to any payment by
Borrowers specified by Borrowers to be for the payment of
specific Obligations then due and payable (or prepayable)
under any provision of this Agreement.
(iv) For purposes of the foregoing, "paid in
full" means payment of all amounts owing under the Loan
Documents according to the terms thereof, including loan fees,
service fees, professional fees, interest (and specifically
including interest accrued after the commencement of any
Insolvency Proceeding), default interest, interest on
interest, and expense reimbursements, whether or not the same
would be or is allowed or disallowed in whole or in part in
any Insolvency Proceeding.
(v) In the event of a direct conflict between
the priority provisions of this SECTION 2.4 and other
provisions contained in any other Loan Document, it is the
intention of the parties hereto that such priority provisions
in such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In
the event of any actual, irreconcilable conflict that cannot
be resolved as aforesaid, the terms and provisions of this
SECTION 2.4 shall control and govern.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrowers to the Lender Group pursuant to SECTIONS 2.1 AND
2.14 is greater than either the Dollar or percentage limitations set forth in
SECTION 2.1 OR 2.14, (an "OVERADVANCE"), Borrowers immediately shall pay to
Agent, in cash, the amount of such excess, which amount shall be used by Agent
to reduce the Obligations in accordance with the priorities set forth in SECTION
2.4(b). In addition, Borrowers hereby promise to pay the Obligations (including
principal, interest, fees, costs, and expenses) in Dollars in full to the Lender
Group as and when due and payable under the terms of this Agreement and the
other Loan Documents.
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2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND
CALCULATIONS.
(a) Interest Rates. Except as provided in clause (c)
below, all Obligations (except for undrawn Letters of Credit) that have been
charged to the Loan Account pursuant to the terms hereof shall bear interest on
the Daily Balance thereof as follows (i) each LIBOR Rate Loan shall bear
interest at a per annum rate equal to the LIBOR Rate plus the applicable LIBOR
Rate Margin, (ii) each Special Inventory Advance shall bear interest at a per
annum rate equal to the Base Rate plus 1.5%, and (iii) all other Obligations
shall bear interest at a per annum rate equal to the Base Rate plus (or minus,
as the case may be) the applicable Base Rate Margin.
(b) Letter of Credit Fee. Borrowers shall pay Agent (for
the ratable benefit of the Lenders with a Commitment, subject to any letter
agreement between Agent and individual Lenders), a Letter of Credit fee (in
addition to the charges, commissions, fees, and costs set forth in SECTION
2.14(e)) which shall accrue at a rate equal to 1.5% per annum times the Daily
Balance of the undrawn amount of all outstanding Letters of Credit.
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default (and at the election of Agent or the
Required Lenders),
(i) all Obligations (except for undrawn
Letters of Credit ) that have been charged to the
Loan Account pursuant to the terms hereof shall bear
interest on the Daily Balance thereof at a per annum
rate equal to two and one-half percentage points
(2.50%) above the per annum rate otherwise applicable
hereunder, and
(ii) the Letter of Credit fee provided
for in subsection (b) above shall be increased to 2.5
percentage points above the per annum rate otherwise
applicable hereunder.
(d) Payment. Interest, Letter of Credit fees, and all
other fees payable hereunder shall be due and payable, in arrears, on the first
day of each month at any time that Obligations or Commitments are outstanding.
Borrowers hereby authorize Agent, from time to time, without prior notice to
Borrowers, to charge such interest and fees, all Lender Group Expenses (as and
when incurred), the charges, commissions, fees, and costs provided for in
SECTION 2.14(e) (as and when accrued or incurred), the fees and costs provided
for in SECTION 2.13 (as and when accrued or incurred), and all other payments as
and when due and payable under any Loan Document to Borrowers' Loan Account,
which amounts thereafter constitute Advances hereunder and shall accrue interest
at the rate then applicable to Advances hereunder. Any interest not paid when
due shall be compounded by being charged to Borrowers' Loan Account and shall
thereafter constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances that are Base Rate Loans hereunder.
(e) Computation. All interest and fees chargeable under
the Loan Documents shall be computed on the basis of a 360 day year for the
actual number of days elapsed. In the event the Base Rate is changed from time
to time hereafter, the rates of interest hereunder based
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upon the Base Rate automatically and immediately shall be increased or
decreased by an amount equal to such change in the Base Rate.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrowers and the Lender Group, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; PROVIDED, HOWEVER, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, IPSO FACTO, as of the date of this Agreement, Borrowers are and shall
be liable only for the payment of such maximum as allowed by law, and payment
received from Borrowers in excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of the Obligations to the
extent of such excess.
2.7 CREDIT CARD COLLECTIONS.
(a) Annexed hereto is SCHEDULE 2.7, which describes all
arrangements to which each Borrower is a party with respect to the payment to
such Borrower of the proceeds of all credit card charges for sales by such
Borrower.
(b) Payment of all credit card charges submitted by
Borrowers to credit card clearinghouses or other processors identified on
SCHEDULE 2.7 or otherwise and any other amounts payable to Borrowers by such
clearinghouses or other processors shall be directed to such account as may be
designated by Agent.
2.8 DEPOSITORY ACCOUNTS. Annexed hereto is SCHEDULE 2.8 which
describes all present depository accounts of each Borrower, which schedule
includes, with respect to each such depository account (i) the name and address
of that depository; (ii) the account number(s) maintained with such depository;
and (iii) a contact person at such depository. In addition, the following
depository accounts have been or will be established (and are referred to
herein):
(a) The Concentration Account, the contents of which
shall constitute Collateral and Negotiable Collateral.
(i) Borrowers shall, prior to or contemporaneous
with the execution of this Agreement, (x) provide Agent with
such blocked account agreements (the "BLOCKED ACCOUNT
AGREEMENTS"), in form and substance satisfactory to Agent, of
the depository with which the Concentration Account is
maintained as may be satisfactory to Agent; and (y) not
establish any Concentration Account hereafter except upon not
less than thirty (30) days prior written notice to Agent and
the delivery to Agent of a similar such agreement acceptable
to Foothill.
(ii) Borrowers shall pay all fees and charges of,
and maintain such impressed balances as may be required by
Agent or by any bank in which any account is opened as
required hereby (even if such account is opened by Agent).
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(b) The Designated Account. No Borrower shall establish
any depository accounts hereafter unless such Borrower, contemporaneous with
such establishment, delivers to Agent an agreement (in form satisfactory to
Agent) executed on behalf of the depository with which such depository account
is being established.
2.9 COLLECTIONS.
(a) All Collections constitute Collateral and proceeds of
Collateral and shall be held in trust by Borrowers for Agent; shall not be
commingled with any of Borrowers' other funds; and shall be deposited and/or
transferred daily only to the Concentration Account.
(b) Administrative Borrower shall cause the ACH or wire
transfer to the Concentration Account, no less than daily (and whether or not
there is then an outstanding balance in the Loan Account) of all Collections,
including, without limitation:
(i) The then contents of each depository account
(other than the Designated Account), each such transfer to be
net of any minimum balance, not to exceed $1,500, as may be
required to be maintained in the subject depository account by
the bank at which such depository account is maintained.
(ii) The proceeds of all credit card charges not
otherwise provided for pursuant hereto.
(c) Agent shall transfer to the Designated Account any
surplus (attributable to Borrowers) in excess of the Obligations in Agent
Account remaining after the application to the Obligations referred to in
Section 2.12 (less those amounts which are to be netted out as provided
therein).
(d) Upon terms and conditions set forth in the Blocked
Account Agreement, all Collections received in the Concentration Account shall
be wired into the Agent Account.
2.10 CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any payment
item by Agent (whether from transfers to Agent by the depository account banks
or Concentration Account Banks or otherwise) immediately shall be applied
provisionally to reduce the Obligations outstanding under SECTION 2.1, but shall
not be considered a payment on account unless such payment item is a wire
transfer of immediately available federal funds made to the Agent's Account or
unless and until such payment item is honored when presented for payment. Should
any payment item not be honored when presented for payment, then Borrowers shall
be deemed not to have made such payment and interest shall be calculated
accordingly. Anything to the contrary contained herein notwithstanding, any
payment item shall be deemed received by Agent only if it is received into the
Agent's Account on a Business Day on or before 11:00 a.m. (California time). If
any payment item is received into the Agent's Account on a non-Business Day or
after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have
been received by Agent as of the opening of business on the immediately
following Business Day. Agent shall be entitled to charge Borrowers for one-half
of one (1) Business Day of `clearance' or `float' at the rate applicable to
LIBOR Rate Loans under SECTION 2.6 on all Collections that are
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received by Agent (regardless of whether forwarded by the depository account
banks or Concentration Account Banks to Agent). This across-the-board one-half
of one (1) Business Day clearance or float charge on all Collections is
acknowledged by the parties to constitute an integral aspect of the pricing of
the financing of Borrowers and shall apply irrespective of whether or not there
are any outstanding monetary Obligations; the effect of such clearance or float
charge being the equivalent of charging one-half of one (1) Business Day of
interest on such Collections. The parties acknowledge and agree that the
economic benefit of the foregoing provisions of this SECTION 2.10 shall be for
the exclusive benefit of Agent.
2.11 DESIGNATED ACCOUNT. Agent is authorized to make the Advances,
and Issuing Lender is authorized to issue the Letters of Credit, under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
SECTION 2.6(d). Administrative Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrowers and made by Agent or the
Lenders hereunder. Unless otherwise agreed by Agent and Administrative Borrower,
any Advance, Agent Advance, or Swing Loan requested by Borrowers and made by
Agent or the Lenders hereunder shall be made to the Designated Account.
2.12 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Agent
shall maintain an account on its books in the name of Borrowers (the "LOAN
ACCOUNT") on which Borrowers will be charged with all Advances (including Agent
Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to
Borrowers or for Borrowers' account, the Letters of Credit issued by Issuing
Lender for Borrowers' account, and with all other payment Obligations hereunder
or under the other Loan Documents, including, accrued interest, fees and
expenses, and Lender Group Expenses. In accordance with SECTION 2.10, the Loan
Account will be credited with all payments received by Agent from Borrowers or
for Borrowers' account, including all amounts received in the Agent's Account
from any depository account bank or Concentration Account Bank. Agent shall
render statements regarding the Loan Account to Administrative Borrower,
including principal, interest, fees, and including an itemization of all charges
and expenses constituting Lender Group Expenses owing, and such statements shall
be conclusively presumed to be correct and accurate and constitute an account
stated between Borrowers and the Lender Group unless, within 30 days after
receipt thereof by Administrative Borrower, Administrative Borrower shall
deliver to Agent written objection thereto describing the error or errors
contained in any such statements.
2.13 FEES. Borrowers shall pay to Agent the following fees and
charges, which fees and charges shall be non-refundable when paid (irrespective
of whether this Agreement is terminated thereafter) and shall be apportioned
among the Lenders in accordance with the terms of letter agreements between
Agent and individual Lenders:
(a) UNUSED LINE FEE. On the first day of each month
during the term of this Agreement, an unused line fee in the amount equal to the
lesser of (i) $5,000 or (ii) 0.125% per annum times the result of (A) the
Maximum Amount, less (B) the sum of (x) the average Daily
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Balance of Advances that were outstanding during the immediately preceding
month, plus (y) the average Daily Balance of the Letter of Credit Usage during
the immediately preceding month,
(b) FACILITY FEE. On the Closing Date, a facility fee in
an amount equal to $200,000, which facility fee shall be deemed fully earned and
payable as of the Closing Date.
(c) RESTRUCTURE FEE. On the Closing Date, a restructure
fee in an amount equal to $100,000, which fee shall be deemed fully earned and
payable on such Closing Date.
(d) SERVICING FEE. On the first day of each month during
the term of this Agreement and thereafter so long as any Obligations are
outstanding, a servicing fee in the amount of $5,000.
(e) AUDIT, APPRAISAL, AND VALUATION CHARGES. For the
separate account of Agent, audit, appraisal, and valuation fees and charges as
follows, (i) a fee of $750 per day, per auditor, plus out-of-pocket expenses for
each financial audit of a Borrower performed by personnel employed by Agent,
(ii) if implemented, a one time charge of $3,000 plus out-of-pocket expenses for
expenses for the establishment of electronic collateral reporting systems, (iii)
a fee of $1,500 per day per appraiser, plus out-of-pocket expenses, for each
appraisal of the Collateral performed by personnel employed by Agent, and (iv)
the actual charges paid or incurred by Agent if it elects to employ the services
of one or more third Persons to perform financial audits of Borrowers, to
appraise the Collateral, or any portion thereof, or to assess a Borrower's
business valuation. Notwithstanding the foregoing, (i) as long as no Event of
Default has occurred, Borrowers shall not be required to pay more than $25,000
in the aggregate in audit fees to Agent pursuant to this SECTION 2.13(e) during
any calendar year; PROVIDED, HOWEVER, that if an Event of Default has occurred,
there shall be no $25,000 cap on audit fees payable by Borrowers pursuant to
this SECTION 2.13(e) during any calendar year, and (ii) as long as no Event of
Default has occurred, Borrowers shall not be required to pay more than $25,000
in the aggregate in appraisal fees to Agent pursuant to this SECTION 2.13(e)
during any calendar year; PROVIDED, HOWEVER (i) that if an Event of Default has
occurred, there shall be no $25,000 cap on appraisal fees payable by Borrower
pursuant to this SECTION 2.13(e) during any calendar year, and (ii) the $25,000
cap on appraisal fees is not applicable to the appraisals required by SECTION
6.17(d) hereof.
2.14 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this
Agreement, the Issuing Lender agrees to issue letters of credit for the account
of Borrowers (each, an "L/C") or to purchase participations or execute
indemnities or reimbursement obligations (each such undertaking, an "L/C
UNDERTAKING") with respect to letters of credit issued by an Underlying Issuer
(as of the Closing Date, the prospective Underlying Issuer is to be Wells Fargo)
for the account of Borrowers. To request the issuance of an L/C or an L/C
Undertaking (or the amendment, renewal, or extension of an outstanding L/C or
L/C Undertaking), Administrative Borrower shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for doing so have been
approved by the Issuing Lender) to the Issuing Lender and Agent (reasonably in
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advance of the requested date of issuance, amendment, renewal, or extension) a
notice requesting the issuance of an L/C or L/C Undertaking, or identifying the
L/C or L/C Undertaking to be amended, renewed, or extended, the date of
issuance, amendment, renewal, or extension, the date on which such L/C or L/C
Undertaking is to expire, the amount of such L/C or L/C Undertaking, the name
and address of the beneficiary thereof (or of the Underlying Letter of Credit,
as applicable), and such other information as shall be necessary to prepare,
amend, renew, or extend such L/C or L/C Undertaking. If requested by the Issuing
Lender, Borrowers also shall be an applicant under the application with respect
to any Underlying Letter of Credit that is to be the subject of an L/C
Undertaking. The Issuing Lender shall have no obligation to issue a Letter of
Credit if any of the following would result after giving effect to the requested
Letter of Credit:
(i) the Letter of Credit Usage would exceed the
Borrowing Base LESS the amount of outstanding Advances, or
(ii) the Letter of Credit Usage would exceed
$1,000,000, or
(iii) the Letter of Credit Usage would exceed the
Maximum Amount LESS the then extant amount of outstanding
Advances.
Borrowers and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall have an expiry date no later
than 30 days prior to the Maturity Date and all such Letters of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrowers immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement not later
than 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Administrative Borrower shall have received written or telephonic
notice of such L/C Disbursement prior to 10:00 a.m., California time, on such
date, or, if such notice has not been received by Administrative Borrower prior
to such time on such date, then not later than 11:00 a.m., California time, on
(i) the Business Day that Administrative Borrower receives such notice, if such
notice is received prior to 10:00 a.m., California time, on the date of receipt,
and, in the absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be a an Advance hereunder and, thereafter,
shall bear interest at the rate then applicable to Advances that are Base Rate
Loans under SECTION 2.6. To the extent an L/C Disbursement is deemed to be on
Advance hereunder, Borrowers' obligation to reimburse such L/C Disbursement
shall be discharged and replaced by the resulting Revolver Advance. Promptly
following receipt by Agent of any payment from Borrowers pursuant to this
paragraph, Agent shall distribute such payment to the Issuing Lender or, to the
extent that Lenders have made payments pursuant to SECTION 2.14(c) to reimburse
the Issuing Lender, then to such Lenders and the Issuing Lender as their
interest may appear.
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(b) Promptly following receipt of a notice of L/C
Disbursement pursuant to SECTION 2.14(a), each Lender with a Commitment agrees
to fund its Pro Rata Share of any Revolver Advance deemed made pursuant to the
foregoing subsection on the same terms and conditions as if Borrowers had
requested such Revolver Advance and Agent shall promptly pay to Issuing Lender
the amounts so received by it from the Lenders. By the issuance of a Letter of
Credit (or an amendment to a Letter of Credit increasing the amount thereof) and
without any further action on the part of the Issuing Lender or the Lenders with
Commitment, the Issuing Lender shall be deemed to have granted to each Lender
with a Commitment, and each Lender with a Commitment shall be deemed to have
purchased, a participation in each Letter of Credit, in an amount equal to its
Pro Rata Share of the Risk Participation Liability of such Letter of Credit, and
each such Lender agrees to pay to Agent, for the account of the Issuing Lender,
such Lender's Pro Rata Share of any payments made by the Issuing Lender under
such Letter of Credit. In consideration and in furtherance of the foregoing,
each Lender with a Commitment hereby absolutely and unconditionally agrees to
pay to Agent, for the account of the Issuing Lender, such Lender's Pro Rata
Share of each L/C Disbursement made by the Issuing Lender and not reimbursed by
Borrowers on the date due as provided in clause (a) of this Section, or of any
reimbursement payment required to be refunded to Borrowers for any reason. Each
Lender with a Commitment acknowledges and agrees that its obligation to deliver
to Agent, for the account of the Issuing Lender, an amount equal to its
respective Pro Rata Share pursuant to this SECTION 2.14(b) shall be absolute and
unconditional and such remittance shall be made notwithstanding the occurrence
or continuation of an Event of Default or Default or the failure to satisfy any
condition set forth in SECTION 3 hereof. If any such Lender fails to make
available to Agent the amount of such Lender's Pro Rata Share of any payments
made by the Issuing Lender in respect of such Letter of Credit as provided in
this Section, Agent (for the account of the Issuing Lender) shall be entitled to
recover such amount on demand from such Lender together with interest thereon at
the Defaulting Lender Rate until paid in full.
(c) Each Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless from any loss, cost, expense, or
liability, and reasonable attorneys fees incurred by the Lender Group arising
out of or in connection with any Letter of Credit; PROVIDED, HOWEVER, that no
Borrower shall be obligated hereunder to indemnify for any loss, cost, expense,
or liability that is caused by the gross negligence or willful misconduct of the
Issuing Lender or any other member of the Lender Group. Each Borrower agrees to
be bound by the Underlying Issuer's regulations and interpretations of any
Underlying Letter of Credit or by Issuing Lender's interpretations of any L/C
issued by Issuing Lender to or for such Borrower's account, even though this
interpretation may be different from such Borrower's own, and each Borrower
understands and agrees that the Lender Group shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrowers' instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Each Borrower understands
that the L/C Undertakings may require Issuing Lender to indemnify the Underlying
Issuer for certain costs or liabilities arising out of claims by Borrowers
against such Underlying Issuer. Each Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless with respect to any loss, cost,
expense (including reasonable attorneys fees), or liability incurred by the
Lender Group under any L/C Undertaking as a result of the Lender Group's
indemnification of any Underlying Issuer; PROVIDED, HOWEVER, that no Borrower
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shall be obligated hereunder to indemnify for any loss, cost, expense, or
liability that is caused by the gross negligence or willful misconduct of the
Issuing Lender or any other member of the Lender Group.
(d) Each Borrower hereby authorizes and directs any
Underlying Issuer to deliver to the Issuing Lender all instruments, documents,
and other writings and property received by such Underlying Issuer pursuant to
such Underlying Letter of Credit and to accept and rely upon the Issuing
Lender's instructions with respect to all matters arising in connection with
such Underlying Letter of Credit and the related application.
(e) Any and all charges, commissions, fees, and costs
incurred by the Issuing Lender relating to Underlying Letters of Credit shall be
Lender Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrowers to Agent for the account of the Issuing Lender; it
being acknowledged and agreed by each Borrower that, as of the Closing Date, the
issuance charge imposed by the prospective Underlying Issuer is .825% per annum
times the face amount of each Underlying Letter of Credit, that such issuance
charge may be changed from time to time, and that the Underlying Issuer also
imposes a schedule of charges for amendments, extensions, drawings, and
renewals.
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by the Underlying
Issuer or the Lender Group with any direction, request, or requirement
(irrespective of whether having the force of law) of any Governmental Authority
or monetary authority including, Regulation D of the Federal Reserve Board as
from time to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement
is or shall be imposed or modified in respect of any Letter of
Credit issued hereunder, or
(ii) there shall be imposed on the Underlying
Issuer or the Lender Group any other condition regarding any
Underlying Letter of Credit or any Letter of Credit issued
pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay on demand such amounts
as Agent may specify to be necessary to compensate the Lender Group for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate then
applicable to Base Rate Loans hereunder. The determination by Agent of any
amount due pursuant to this section, as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.
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2.15 LIBOR OPTION.
(a) INTEREST AND INTEREST PAYMENT DATES. In lieu of
having interest charged at the rate based upon the Base Rate, Borrowers shall
have the option (the "LIBOR OPTION") to have interest on all or a portion of the
Advances (other than the Special Inventory Advances) be charged at the LIBOR
Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the
last day of the Interest Period applicable thereto, (ii) the occurrence of an
Event of Default in consequence of which the Required Lenders or Agent on behalf
thereof elect to accelerate the maturity of the Obligations, (iii) termination
of this Agreement pursuant to the terms hereof, or (iv) the first day of each
month that such LIBOR Rate Loan is outstanding. On the last day of each
applicable Interest Period, unless Administrative Borrower properly has
exercised the LIBOR Option with respect thereto, the interest rate applicable to
such LIBOR Rate Loan automatically shall convert to the rate of interest then
applicable to Base Rate Loans of the same type hereunder. At any time that an
Event of Default has occurred and is continuing, Borrowers no longer shall have
the option to request that Advances bear interest at the LIBOR Rate and Agent
shall have the right to convert the interest rate on all outstanding LIBOR Rate
Loans to the rate then applicable to Base Rate Loans hereunder.
(b) LIBOR Election.
(i) Administrative Borrower may, at any time and
from time to time, so long as no Event of Default has occurred
and is continuing, elect to exercise the LIBOR Option by
notifying Agent prior to 11:00 a.m. (California time) at least
two (2) Business Days prior to the commencement of the
proposed Interest Period (the "LIBOR DEADLINE"). Notice of
Administrative Borrower's election of the LIBOR Option for a
permitted portion of the Advances and an Interest Period
pursuant to this section shall be made by delivery to Agent of
a LIBOR Notice received by Agent before the LIBOR Deadline, or
by telephonic notice received by Agent before the LIBOR
Deadline (to be confirmed by delivery to Agent of a LIBOR
Notice received by Agent prior to 5:00 p.m. (California time)
on the same day. Promptly upon its receipt of each such LIBOR
Notice, Agent shall provide a copy thereof to each of the
Lenders having a Commitment. Anything to the contrary herein
notwithstanding, no Special Inventory Advance may be converted
or continued as a LIBOR Rate Loan.
(ii) Each LIBOR Notice shall be irrevocable and
binding on Borrowers. In connection with each LIBOR Rate Loan,
each Borrower shall indemnify, defend, and hold Agent and the
Lenders harmless against any loss, cost, or expense incurred
by Agent or any Lender as a result of (a) the payment of any
principal of any LIBOR Rate Loan other than on the last day of
an Interest Period applicable thereto (including as a result
of an Event of Default), (b) the conversion of any LIBOR Rate
Loan other than on the last day of the Interest Period
applicable thereto, or (c) the failure to borrow, convert,
continue or prepay any LIBOR Rate Loan on the date specified
in any LIBOR Notice delivered pursuant hereto (such losses,
costs, and expenses, collectively, "FUNDING LOSSES").
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Funding Losses shall, with respect to Agent or any Lender, be
deemed to equal the amount determined by Agent or such Lender
to be the excess, if any, of (i) the amount of interest that
would have accrued on the principal amount of such LIBOR Rate
Loan had such event not occurred, at the LIBOR Rate that would
have been applicable thereto, for the period from the date of
such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or
continue, for the period that would have been the Interest
Period therefor), MINUS (ii) the amount of interest that would
accrue on such principal amount for such period at the
interest rate which Agent or such Lender would be offered were
it to be offered, at the commencement of such period, Dollar
deposits of a comparable amount and period in the London
interbank market. A certificate of Agent or a Lender delivered
to Administrative Borrower setting forth any amount or amounts
that Agent or such Lender is entitled to receive pursuant to
this section shall be conclusive absent manifest error.
(iii) Borrowers shall have not more than 5 LIBOR
Rate Loans in effect at any given time. Borrowers only may
exercise the LIBOR Option for LIBOR Rate Loans of at least
$1,000,000 and integral multiples of $500,000 in excess
thereof.
(c) PREPAYMENTS. Borrowers may prepay LIBOR Rate Loans at
any time; PROVIDED, HOWEVER, that in the event that LIBOR Rate Loans are prepaid
on any date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Agent of proceeds of Collections in accordance with SECTION
2.4(b) or for any other reason, including early termination of the term of this
Agreement or acceleration of the Obligations pursuant to the terms hereof, each
Borrower shall indemnify, defend, and hold Agent and the Lenders and their
Participants harmless against any and all Funding Losses in accordance with
clause (b) above.
(d) Special Provisions Applicable to LIBOR Rate.
(i) The LIBOR Rate may be adjusted by Agent with
respect to any Lender on a prospective basis to take into
account any additional or increased costs to such Lender of
maintaining or obtaining any eurodollar deposits or increased
costs due to changes in applicable law occurring subsequent to
the commencement of the then applicable Interest Period,
including changes in tax laws (except changes of general
applicability in corporate income tax laws) and changes in the
reserve requirements imposed by the Board of Governors of the
Federal Reserve System (or any successor), excluding the
Reserve Percentage, which additional or increased costs would
increase the cost of funding loans bearing interest at the
LIBOR Rate. In any such event, the affected Lender shall give
Administrative Borrower and Agent notice of such a
determination and adjustment and Agent promptly shall transmit
the notice to each other Lender and, upon its receipt of the
notice from the affected Lender, Administrative Borrower may,
by notice to such affected Lender (y) require such Lender to
furnish to
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Administrative Borrower a statement setting forth the basis
for adjusting such LIBOR Rate and the method for determining
the amount of such adjustment, or (z) repay the LIBOR Rate
Loans with respect to which such adjustment is made (together
with any amounts due under clause (b)(ii) above).
(ii) In the event that any change in market
conditions or any law, regulation, treaty, or directive, or
any change therein or in the interpretation of application
thereof, shall at any time after the date hereof, in the
reasonable opinion of any Lender, make it unlawful or
impractical for such Lender to fund or maintain LIBOR Rate
Loans or to continue such funding or maintaining, or to
determine or charge interest rates at the LIBOR Rate, such
Lender shall give notice of such changed circumstances to
Agent and Administrative Borrower and Agent promptly shall
transmit the notice to each other Lender and (y) in the case
of any LIBOR Rate Loans of such Lender that are outstanding,
the date specified in such Lender's notice shall be deemed to
be the last day of the Interest Period of such LIBOR Rate
Loans, and interest upon the LIBOR Rate Loans of such Lender
thereafter shall accrue interest at the rate then applicable
to Base Rate Loans, and (z) Borrowers shall not be entitled to
elect the LIBOR Option until such Lender determines that it
would no longer be unlawful or impractical to do so.
(e) NO REQUIREMENT OF MATCHED FUNDING. Anything to the
contrary contained herein notwithstanding, neither Agent, nor any Lender, nor
any of their Participants, is required actually to acquire eurodollar deposits
to fund or otherwise match fund any Obligation as to which interest accrues at
the LIBOR Rate. The provisions of this section shall apply as if each Lender or
its Participants had match funded any Obligation as to which interest is
accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest
Period in the amount of the LIBOR Rate Loans.
2.16 CAPITAL REQUIREMENTS. If, after the date hereof, any Lender
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), the effect of reducing the return on such Lender's or such
holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof. Following receipt
of such notice, Borrowers agree to pay such Lender on demand the amount of such
reduction of return of capital as and when such reduction is determined, payable
within 90 days after presentation by such Lender of a statement in the amount
and setting forth in reasonable detail such Lender's calculation thereof and the
assumptions upon which such calculation was based (which statement shall be
deemed true and correct absent manifest error).
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In determining such amount, such Lender may use any reasonable averaging and
attribution methods.
2.17 JOINT AND SEVERAL LIABILITY OF BORROWERS; RIGHTS OF
CONTRIBUTION.
(a) Each of Borrowers is accepting joint and several
liability hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Agent and the Lenders under this
Agreement, for the mutual benefit, directly and indirectly, of each of Borrowers
and in consideration of the undertakings of the other Borrowers to accept joint
and several liability for the Obligations.
(b) Each of Borrowers, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Borrowers, with respect to
the payment and performance of all of the Obligations (including, without
limitation, any Obligations arising under this SECTION 2.17), it being the
intention of the parties hereto that all the Obligations shall be the joint and
several obligations of each Person composing Borrowers without preferences or
distinction among them.
(c) If and to the extent that any of Borrowers shall fail
to make any payment with respect to any of the Obligations as and when due or to
perform any of the Obligations in accordance with the terms thereof, then in
each such event the other Persons composing Borrowers will make such payment
with respect to, or perform, such Obligation.
(d) The Obligations of each Person composing Borrowers
under the provisions of this SECTION 2.17 constitute the absolute and
unconditional, full recourse Obligations of each Person composing Borrowers
enforceable against each such Borrower to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Agreement or any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this
Agreement, each Person composing Borrowers hereby waives notice of acceptance of
its joint and several liability, notice of any Advances or Letters of Credit
issued under or pursuant to this Agreement, notice of the occurrence of any
Default, Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by Agent or Lenders
under or in respect of any of the Obligations, any requirement of diligence or
to mitigate damages and, generally, to the extent permitted by applicable law,
all demands, notices and other formalities of every kind in connection with this
Agreement (except as otherwise provided in this Agreement). Each Person
composing Borrowers hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Agent or Lenders at any time or times in respect of any default by any Person
composing Borrowers in the performance or satisfaction of any term, covenant,
condition or provision of this Agreement, any and all other indulgences
whatsoever by Agent or Lenders in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Obligations or the
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addition, substitution or release, in whole or in part, of any Person
composing Borrowers. Without limiting the generality of the foregoing, each
of Borrowers assents to any other action or delay in acting or failure to act
on the part of any Agent or Lender with respect to the failure by any Person
composing Borrowers to comply with any of its respective Obligations,
including, without limitation, any failure strictly or diligently to assert
any right or to pursue any remedy or to comply fully with applicable laws or
regulations thereunder, which might, but for the provisions of this SECTION
2.17 afford grounds for terminating, discharging or relieving any Person
composing Borrowers, in whole or in part, from any of its Obligations under
this SECTION 2.17, it being the intention of each Person composing Borrowers
that, so long as any of the Obligations hereunder remain unsatisfied, the
Obligations of such Person composing Borrowers under this SECTION 2.17 shall
not be discharged except by performance and then only to the extent of such
performance. The Obligations of each Person composing Borrowers under this
SECTION 2.17 shall not be diminished or rendered unenforceable by any winding
up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any Person composing Borrowers or any Agent or
Lender. The joint and several liability of the Persons composing Borrowers
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
constitution or place of formation of any of the Persons composing Borrowers
or any Agent or Lender.
(f) Each Person composing Borrowers represents and
warrants to Agent and Lenders that such Borrower is currently informed of the
financial condition of Borrowers and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Each Person composing Borrowers further represents and warrants to
Agent and Lenders that such Borrower has read and understands the terms and
conditions of the Loan Documents. Each Person composing Borrowers hereby
covenants that such Borrower will continue to keep informed of Borrowers'
financial condition, the financial condition of other guarantors, if any, and of
all other circumstances which bear upon the risk of nonpayment or nonperformance
of the Obligations.
(g) Each of the Persons composing Borrowers waives all
rights and defenses arising out of an election of remedies by the Agent or any
Lender, even though that election of remedies, such as a nonjudicial foreclosure
with respect to security for a guaranteed obligation, has destroyed the Agent's
or such Lender's rights of subrogation and reimbursement against such Borrower
by the operation of Section 580(d) of the California Code of Civil Procedure or
otherwise.
(h) Each of the Persons composing Borrowers waives all
rights and defenses that such Borrower may have because the Obligations are
secured by Real Property. This means, among other things:
(i) Agent and Lenders may collect from such
Borrower without first foreclosing on any Real or Personal
Property Collateral pledged by Borrowers.
(ii) If Agent or any Lender forecloses on any
Real Property Collateral pledged by Borrowers:
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A. The amount of the Obligations may
be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if
the collateral is worth more than the sale price.
B. Agent and Lenders may collect from
such Borrower even if Agent or Lenders, by
foreclosing on the Real Property Collateral, has
destroyed any right such Borrower may have to collect
from the other Borrowers.
This is an unconditional and irrevocable waiver of any rights and
defenses such Borrower may have because the Obligations are secured by Real
Property. These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of
Civil Procedure.
(i) Each Borrower states and acknowledges that: (i)
pursuant to this Agreement, Borrowers desire to utilize their borrowing
potential on a consolidated basis to the same extent possible if they were
merged into a single corporate entity; (ii) it has determined that it will
benefit specifically and materially from the advances of credit contemplated by
this Agreement; (iii) it is both a condition precedent to the obligations of the
Lender Group and a desire of the Borrowers that each Borrower execute and
deliver to the Lender Group this Agreement; and (iv) Borrowers have requested
and bargained for the structure and terms of and security for the Advances
contemplated by this Agreement.
(j) It is the intent of each Borrower that the
indebtedness, obligations and liability hereunder of no one of them be subject
to challenge on any basis. Accordingly, as of the date hereof, the liability of
each Borrower under this SECTION 2.17, together with all of its other
liabilities to all Persons as of the date hereof and as of any other date on
which a transfer is deemed to occur by virtue of this Agreement, calculated in
amount sufficient to pay its probable net liabilities on its existing
Indebtedness as the same become absolute and matured ("DATED LIABILITIES") is,
and is to be, less than the amount of the aggregate of a fair valuation of its
property as of such corresponding date ("DATED ASSETS"). To this end, each
Borrower under this SECTION 2.17 (i) grants to and recognizes in each other
Borrower, ratably, rights of subrogation and contribution in the amount, if any,
by which the Dated Assets of such Borrower, but for the aggregate of subrogation
and contribution in its favor recognized herein, would exceed the Dated
Liabilities of such Borrower or, as the case may be, and (ii) acknowledges
receipt of and recognizes its right to subrogation and contribution ratably from
each other Borrower in the amount, if any by which the Dated Liabilities of such
Borrower, but for the aggregate of subrogation and contribution in its favor
recognized herein, would exceed the Dated Assets of such Borrower under this
SECTION 2.17. In recognizing the value of the Dated Assets and the Dated
Liabilities, it is understood that Borrowers will recognize, to at least the
same extent of their aggregate recognition of liabilities hereunder, their
rights to subrogation and contribution hereunder. It is a material objective of
this SECTION 2.17 that each Borrower recognizes rights to subrogation and
contribution rather than be deemed to be insolvent (or in contemplation thereof)
by reason of any arbitrary interpretation of its joint and several obligations
hereunder.
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(k) The provisions of this section are made for the
benefit of the Agent, the Lenders and their respective successors and assigns,
and may be enforced by it or them from time to time against any or all of the
Persons composing Borrowers as often as occasion therefor may arise and without
requirement on the part of any such Agent, Lender, successor or assign first to
marshal any of its or their claims or to exercise any of its or their rights
against any of the other Persons composing Borrowers or to exhaust any remedies
available to it or them against any of the other Persons composing Borrowers or
to resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy. The provisions of this
section shall remain in effect until all of the Obligations shall have been paid
in full or otherwise fully satisfied. If at any time, any payment, or any part
thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by any Agent or Lender upon the insolvency,
bankruptcy or reorganization of any of the Persons composing Borrowers, or
otherwise, the provisions of this section will forthwith be reinstated in
effect, as though such payment had not been made.
(l) Each of the Persons composing Borrowers hereby agrees
that it will not enforce any of its rights of contribution or subrogation
against the other Persons composing Borrowers with respect to any liability
incurred by it hereunder or under any of the other Loan Documents, any payments
made by it to the Agent or the Lenders with respect to any of the Obligations or
any collateral security therefor until such time as all of the Obligations have
been paid in full in cash. Any claim which any Borrower may have against any
other Borrower with respect to any payments to any Agent or Lender hereunder or
under any other Loan Documents are hereby expressly made subordinate and junior
in right of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full in cash of the
Obligations and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether
voluntary or involuntary, all such Obligations shall be paid in full in cash
before any payment or distribution of any character, whether in cash, securities
or other property, shall be made to any other Borrower therefor.
(m) Each of the Persons composing Borrowers hereby agrees
that, after the occurrence and during the continuance of any Default or Event of
Default, the payment of any amounts due with respect to the indebtedness owing
by any Borrower to any other Borrower is hereby subordinated to the prior
payment in full in cash of the Obligations. Each Borrower hereby agrees that
after the occurrence and during the continuance of any Default or Event of
Default, such Borrower will not demand, sue for or otherwise attempt to collect
any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any amounts
in respect of such indebtedness, such amounts shall be collected, enforced and
received by such Borrower as trustee for the Agent, and the Agent shall deliver
any such amounts to the Administrative Agent for application to the Obligations
in accordance with SECTION 2.4(b).
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3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS
AGREEMENT. The effectiveness of this Agreement is subject to the fulfillment,
to the satisfaction of Agent, of each of the conditions precedent set forth
below:
(a) the Closing Date shall occur on or before
September 28, 2001;
(b) Agent shall have received all financing statements
required by Agent, duly executed by the applicable Borrowers, and Agent shall
have received searches reflecting the filing of all such financing statements;
(c) Agent shall have received each of the following
documents, in form and substance satisfactory to Agent, duly executed, and
each such document shall be in full force and effect:
(i) the Copyright Security Agreements,
(ii) the Stock Pledge Agreements, together with
all certificates representing the shares of Stock pledged
thereunder, as well as Stock powers with respect thereto
endorsed in blank,
(iii) the Trademark Security Agreements,
(iv) the Intercompany Subordination Agreement,
(v) all documentation executed or issued in
connection with the establishment by Parent of Leasing,
Intangibles, Electronics Partners, Electronics Leasing and
Electronics Texas,
(vi) all documentation executed or issued in
connection with the transfer of assets by Parent to
Intangibles described in SECTION 7.3 hereof, and
(vii) the Pledge and Security Agreements.
(d) Agent shall have received a certificate from the
Secretary of each Borrower attesting to the resolutions of such Borrower's Board
of Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which such Borrower is a party and
authorizing specific officers of such Borrower to execute the same;
(e) Agent shall have received copies of each Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of such Borrower;
(f) Agent shall have received a certificate of status
with respect to each Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the
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appropriate officer of the jurisdiction of organization of such Borrower,
which certificate shall indicate that such Borrower is in good standing in
such jurisdiction;
(g) Agent shall have received certificates of status with
respect to each Borrower, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions (other
than the jurisdiction of organization of such Borrower) in which its failure to
be duly qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that such Borrower is in good standing in such
jurisdictions;
(h) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.9, the form
and substance of which shall be satisfactory to Agent;
(i) Agent shall have received opinions of Borrowers'
counsel in form and substance satisfactory to Agent; and
(j) all other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to Agent.
3.2 [THIS SECTION IS INTENTIONALLY OMITTED.]
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make all Advances (or
to extend any other credit hereunder) shall be subject to the following
conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred
and be continuing on the date of such extension of credit, nor shall either
result from the making thereof;
(c) no injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any Governmental Authority
against any Borrower, Agent, any Lender, or any of their Affiliates; and
(d) no Material Adverse Change shall have occurred.
3.4 CONDITIONS PRECEDENT TO REAL ESTATE ADVANCES. The obligation
of the Lender Group to make the initial Real Estate Advance,
is subject to the fulfillment, to the satisfaction of Agent,
of each of the conditions precedent set forth below
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(a) Receipt by the Agent of the following:
(i) Appraisal of the fair market value of the
Thornton Colorado Facility, such appraisal to be in form and
substance satisfactory to Agent and prepared by an appraiser
satisfactory to Agent.
(ii) Mortgage duly executed by Parent, granting
Agent, for the benefit of the Lender Group, a first priority
Lien in the Thornton Colorado Facility.
(iii) Mortgagee title insurance policies (or
marked commitments to issue the same) for the Thornton
Colorado Facility issued by a title insurance company
satisfactory to Agent (each a "MORTGAGE POLICY" and,
collectively, the "MORTGAGE POLICIES") in amounts satisfactory
to Agent assuring Agent that the Mortgage on the Thornton
Colorado Facility are valid and enforceable first priority
mortgage Liens on the Thornton Colorado Facility free and
clear of all defects and encumbrances except Permitted Liens,
and the Mortgage Policies otherwise shall be in form and
substance satisfactory to Agent;
(iv) a phase-I environmental report on the
Thornton Colorado Facility.
(v) a real estate survey with respect to each
parcel composing the Thornton Colorado Facility.
(b) The obligation of the Lender Group to continue to make Real
Estate Advances is subject to the Agent's determination that the reports,
appraisals and surveys furnished pursuant to SUBSECTION (a) hereof are accurate
and complete and reflect the current condition and the market value of the
property.
(c) The environmental consultants, appraisers and surveyors
retained for such reports, appraisals or surveys, the scope of the reports,
appraisals or surveys, and the results thereof shall be acceptable to Agent in
the sole discretion of Agent.
3.5 TERM. This Agreement shall become effective upon the execution
and delivery hereof by Borrowers, Agent, and the Lenders and shall continue in
full force and effect for a term ending on the Maturity Date and automatically
shall be renewed for successive one year periods thereafter, unless sooner
terminated pursuant to the terms hereof. Either party may terminate this
Agreement effective on the Renewal Date or on any one year anniversary of the
Renewal Date by giving the other party at least 90 days' prior written notice.
The foregoing notwithstanding, the Lender Group, upon the election of the
Required Lenders, shall have the right to terminate its obligations under this
Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.
3.6 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrowers with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrowers of
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their duties, Obligations, or covenants hereunder and the Agent's Liens in
the Collateral shall remain in effect until all Obligations have been fully
and finally discharged and the Lender Group's obligations to provide
additional credit hereunder have been terminated. When this Agreement has
been terminated and all of the Obligations have been fully and finally
discharged and the Lender Group's obligations to provide additional credit
under the Loan Documents have been terminated irrevocably, the Agent's Liens
shall automatically terminate and be of no further force and effect, and
Agent will, at Borrowers' sole expense, execute and deliver any UCC
termination statements, lien releases, mortgage releases, re-assignments of
trademarks, discharges of security interests, and other similar discharge or
release documents (and, if applicable, in recordable form) as are reasonably
necessary to release, as of record, the Agent's Liens and all notices of
security interests and liens previously filed by Agent with respect to the
Obligations.
3.7 EARLY TERMINATION BY BORROWERS. Borrowers have the option, at
any time upon 90 days prior written notice by Administrative Borrower to Agent,
to terminate this Agreement by paying to Agent, for the benefit of the Lender
Group, in cash, the Obligations (including either (i) providing cash collateral
to be held by Agent for the benefit of those Lenders with a Commitment in an
amount equal to 110% of the then extant Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to the Issuing Lender), in full,
together with the Applicable Prepayment Premium (to be allocated based upon
letter agreements between Agent and individual Lenders). If Administrative
Borrower has sent a notice of termination pursuant to the provisions of this
section, then the Commitments shall terminate and Borrowers shall be obligated
to repay the Obligations (including either (i) providing cash collateral to be
held by Agent for the benefit of those Lenders with a Commitment in an amount
equal to 110% of the then extant Letter of Credit Usage, or (ii) causing the
original Letters of Credit to be returned to the Issuing Lender), in full,
together with the Applicable Prepayment Premium, on the date set forth as the
date of termination of this Agreement in such notice. In the event of the
termination of this Agreement and repayment of the Obligations at any time prior
to the Maturity Date, for any other reason, including (a) termination upon the
election of the Required Lenders to terminate after the occurrence of an Event
of Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral
in any Insolvency Proceeding, or (iv) restructure, reorganization or compromise
of the Obligations by the confirmation of a plan of reorganization, or any other
plan of compromise, restructure, or arrangement in any Insolvency Proceeding,
then, in view of the impracticability and extreme difficulty of ascertaining the
actual amount of damages to the Lender Group or profits lost by the Lender Group
as a result of such early termination, and by mutual agreement of the parties as
to a reasonable estimation and calculation of the lost profits or damages of the
Lender Group, Borrowers shall pay the Applicable Prepayment Premium to Agent (to
be allocated based upon letter agreements between Agent and individual Lenders),
measured as of the date of such termination. Anything herein to the contrary
notwithstanding, no Applicable Prepayment Premium shall be payable if
termination occurs within eighteen (18) months of the Closing Date and in
connection with such termination the Obligations are refinanced by WFRF, any
Affiliate of WFRF, or any successor thereto.
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4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby grants to
Agent, for the benefit of the Lender Group, a continuing security interest in
all of its right, title, and interest in all currently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all of the Obligations in accordance with the terms and conditions of the Loan
Documents and in order to secure prompt performance by Borrowers of each of
their covenants and duties under the Loan Documents. The Agent's Liens in and to
the Collateral shall attach to all Collateral without further act on the part of
Agent or Borrowers. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except for Permitted Dispositions,
Borrowers have no authority, express or implied, to dispose of any item or
portion of the Collateral.
As to Parent and Fast Trak, the security interests granted by each in
the Collateral are given in renewal, extension and modification of the security
interests previously granted in the Collateral to Foothill (and assigned by
Foothill to WFRP) by Parent and Fast Trak pursuant to the Existing Loan
Agreement; such existing security interests granted by Parent and Fast Trak to
Foothill (and assigned by Foothill to WFRP) in the Collateral described above
are not extinguished hereby; and the making, perfection and priority of such
existing security interests in the Collateral described above shall continue in
full force and effect.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, and if
and to the extent that perfection or priority of Agent's security interest is
dependent on or enhanced by possession, the applicable Borrower, immediately
upon the request of Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time Agent or Agent's designee may (a) notify Account Debtors
of Borrowers that the Accounts, chattel paper, or General Intangibles have been
assigned to Agent or that Agent has a security interest therein, or (b) after
the occurrence of a Default, collect the Accounts, chattel paper, or General
Intangibles directly and charge the collection costs and expenses to the Loan
Account. Each Borrower agrees that it will hold in trust for the Lender Group,
as the Lender Group's trustee, any Collections that it receives and immediately
will deliver said Collections to Agent in their original form as received by the
applicable Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED; LIEN
PERFECTION. At any time upon the request of Agent, Borrowers shall execute and
deliver to Agent, any and all financing statements, original financing
statements in lieu of continuation statements, fixture filings, security
agreements, pledges, assignments, endorsements of certificates of title, and all
other documents (the "ADDITIONAL DOCUMENTS") that Agent may reasonably request,
in form and substance satisfactory to Agent, to perfect and continue perfected
or better perfect the Agent's Liens in the Collateral (whether now owned or
hereafter arising or acquired), to create and perfect Liens in favor of Agent in
any Real Property acquired after the Closing Date, and in order to fully
consummate all of the transactions contemplated hereby and under the other Loan
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Documents. To the maximum extent permitted by applicable law, each Borrower (a)
authorizes Agent to execute any such Additional Documents in the applicable
Borrower's name and authorizes Agent to file such executed Additional Documents
in any appropriate filing office, and (b) authorizes Agent to file any or all of
such Additional Documents pursuant to Code and otherwise without such Borrower's
signature. Each Borrower hereby ratifies its authorization for Agent to have
filed in any jurisdiction any like Additional Documents if filed prior to the
date hereof. The parties agree that a photographic or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof. In addition, on such periodic basis as Agent
shall require, Borrowers shall (a) provide Agent with a report of all new
patentable, copyright table, or trademarkable materials acquired or generated by
Borrowers during the prior period, (b) cause all patents, copyrights, and
trademarks acquired or generated by Borrowers that are not already the subject
of a registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in a
manner sufficient to impart constructive notice of Borrowers' ownership thereof,
and (c) cause to be prepared, executed, and delivered to Agent supplemental
schedules to the applicable Loan Documents to identify such patents, copyrights,
and trademarks as being subject to the security interests created thereunder.
4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably makes,
constitutes, and appoints Agent (and any of Agent's officers, employees, or
agents designated by Agent) as such Borrower's true and lawful attorney, with
power to (a) if such Borrower refuses to, or fails timely to execute and deliver
any of the documents described SECTION 4.4, sign the name of such Borrower on
any of the documents described in SECTION 4.4, (b) at any time that an Event of
Default has occurred and is continuing or Agent, in its credit judgment as an
asset-based lender, deems itself insecure, sign such Borrower's name on any
invoice or bill of lading relating to the Collateral, drafts against Account
Debtors, or notices to Account Debtors, (c) send requests for verification of
Accounts, (d) endorse such Borrower's name on any Collection item that may come
into the Lender Group's possession, (e) at any time that an Event of Default has
occurred and is continuing or Agent in its credit judgment as an asset based
lender deems itself insecure, notify the post office authorities to change the
address for delivery of Borrowers' mail to an address designated by Agent, to
receive and open all mail addressed to Borrowers, and to retain all mail
relating to the Collateral and forward all other mail to Borrowers, (f) at any
time that an Event of Default has occurred and is continuing or Agent in its
credit judgment as an asset based lender deems itself insecure, make, settle,
and adjust all claims under such Borrower's policies of insurance and make all
determinations and decisions with respect to such policies of insurance, and (g)
at any time that an Event of Default has occurred and is continuing, settle and
adjust disputes and claims respecting the Accounts, chattel paper, or General
Intangibles directly with Account Debtors, for amounts and upon terms that Agent
determines to be reasonable, and Agent may cause to be executed and delivered
any documents and releases that Agent determines to be necessary. The
appointment of Agent as each Borrower's attorney, and each and every one of its
rights and powers, being coupled with an interest, is irrevocable until all of
the Obligations have been fully and finally repaid and performed and the Lender
Group's obligations to extend credit hereunder are terminated.
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4.6 RIGHT TO INSPECT. Agent and each Lender (through any of their
respective officers, employees, or agents) shall have the right, from time to
time hereafter to inspect the Books and to check, test, and appraise the
Collateral in order to verify Borrowers' financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
4.7 CONTROL AGREEMENTS. Each Borrower agrees that it will not
transfer assets out of any Securities Accounts other than as permitted under
SECTION 7.19 and, if to another securities intermediary, unless each of the
applicable Borrower, Agent, and the substitute securities intermediary have
entered into a Control Agreement, if such a Control Agreement is required by
Agent. No arrangement contemplated hereby or by any Control Agreement in respect
of any Securities Accounts or other Investment Property shall be modified by
Borrowers without the prior written consent of Agent. Upon the occurrence and
during the continuance of an Event of Default, Agent may notify any securities
intermediary to liquidate the applicable Securities Account or any related
Investment Property maintained or held thereby and remit the proceeds thereof to
the Agent's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement, each
Borrower makes the following representations and warranties to the Lender Group
which shall be true, correct, and complete, in all material respects, as of the
date hereof, and shall be true, correct, and complete, in all material respects,
as of the Closing Date, and at and as of the date of the making of each Advance
(or other extension of credit) made thereafter, as though made on and as of the
date of such Advance (or other extension of credit) (except to the extent that
such representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 NO ENCUMBRANCES. Each Borrower has good and indefeasible
title to its Collateral and the Real Property, free and clear of Liens except
for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of a Borrower's
business, unconditionally owed to such Borrower without defenses, disputes,
offsets, counterclaims, or rights of return or cancellation. The property giving
rise to such Eligible Accounts has been delivered to the Account Debtor, or to
the Account Debtor's agent for immediate shipment to and unconditional
acceptance by the Account Debtor. Such Borrower has not received notice of
actual or imminent bankruptcy, insolvency, or material impairment of the
financial condition of any Account Debtor regarding any Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good and
merchantable quality, free from defects.
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrowers' business and is fit for such purposes.
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5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (without
Agent's prior written consent) and are located only at the locations identified
on SCHEDULE 5.16 or otherwise permitted by SECTION 6.10.
5.6 INVENTORY RECORDS. Each Borrower keeps correct and accurate
records itemizing and describing the type, quality, and quantity of its
Inventory and the book value thereof.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN; ORGANIZATIONAL I.D.
NUMBER; NAMES. The chief executive office of each Borrower is located at the
address indicated in SCHEDULE 5.7, each Borrower's FEIN is identified in
SCHEDULE 5.7, each Borrower's state of organization, Type of Organization and
Organizational I.D. Number is set forth on SCHEDULE 5.7, and the exact legal
name of each Borrower is set forth on SCHEDULE 5.7.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES
(a) Each Borrower is duly organized and existing and in
good standing under the laws of the jurisdiction of its organization and
qualified to do business in any state where the failure to be so qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on SCHEDULE 5.8(b), is a complete and
accurate description of the authorized capital Stock of each Borrower, by class,
and, as of the Closing Date, a description of the number of shares of each such
class that are issued and outstanding. Other than as described on SCHEDULE
5.8(b), there are no subscriptions, options, warrants, or calls relating to any
shares of each Borrower's capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Borrower is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital Stock or any security convertible
into or exchangeable for any of its capital Stock.
(c) Set forth on SCHEDULE 5.8(c), is a complete and
accurate list of each Borrower's direct and indirect Subsidiaries, showing: (i)
the jurisdiction of their organization, their Type of Organization, their
Organizational I.D. Number and their exact legal name; (ii) the number of shares
of each class of common and preferred Stock authorized for each of such
Subsidiaries; and (iii) the number and the percentage of the outstanding shares
of each such class owned directly or indirectly by the applicable Borrower. All
of the outstanding capital Stock of each such Subsidiary has been validly issued
and is fully paid and non-assessable.
(d) Except as set forth on SCHEDULE 5.8(c), there are no
subscriptions, options, warrants, or calls relating to any shares of any
Borrower's Subsidiaries' capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. No Borrower or any
of its respective Subsidiaries is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any
Borrower's Subsidiaries' capital Stock or any security convertible into or
exchangeable for any such capital Stock.
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5.9 DUE AUTHORIZATION; NO CONFLICT. (a) As to each Borrower,
the execution, delivery, and performance by such Borrower of this Agreement
and the Loan Documents to which it is a party have been duly authorized by
all necessary action on the part of such Borrower.
(b) As to each Borrower, the execution, delivery, and
performance by such Borrower of this Agreement and the Loan Documents to which
it is a party do not and will not (i) violate any provision of federal, state,
or local law or regulation applicable to any Borrower, the Governing Documents
of any Borrower, or any order, judgment, or decree of any court or other
Governmental Authority binding on any Borrower, (ii) conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both) a default
under any material contractual obligation of any Borrower, (iii) result in or
require the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of Borrower, other than Permitted Liens, or (iv) require
any approval of any Borrower's interest holders or any approval or consent of
any Person under any material contractual obligation of any Borrower.
(c) Other than the filing of financing statements,
fixture filings, and Mortgages, the execution, delivery, and performance by each
Borrower of this Agreement and the Loan Documents to which such Borrower is a
party do not and will not require any registration with, consent, or approval
of, or notice to, or other action with or by, any Governmental Authority or
other Person.
(d) As to each Borrower, this Agreement and the other
Loan Documents to which such Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Borrower
will be the legally valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms, except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally.
(e) The Agent's Liens are validly created, and upon
filing of appropriate financing statements with respect to Collateral covered by
Article 9 of the Code in appropriate locations and the filing of a mortgage in
the appropriate location, will be perfected, and first priority Liens, subject
only to Permitted Liens
5.10 LITIGATION. Other than those matters disclosed on SCHEDULE
5.10, there are no actions, suits, or proceedings pending or, to the best
knowledge of Borrowers, threatened against Borrowers, or any of their
Subsidiaries, as applicable, except for (a) matters that are fully covered by
insurance (subject to customary deductibles), or (b) matters arising after the
Closing Date that, if decided adversely to Borrowers, or any of their
Subsidiaries, as applicable, reasonably could not be expected to result in a
Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating
to Borrowers that have been delivered by Borrowers to the Lender Group have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and present fairly in all material respects, Borrowers' financial
condition as of the date thereof and results of operations for the period then
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ended. There has not been a Material Adverse Change with respect to Borrowers
since the date of the latest financial statements submitted to the Lender Group
on or before the Closing Date.
5.12 FRAUDULENT TRANSFER.
(a) Each Borrower is Solvent.
(b) No transfer of property is being made by any
Borrower and no obligation is being incurred by any Borrower in connection
with the transactions contemplated by this Agreement or the other Loan
Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrowers.
5.13 EMPLOYEE BENEFITS.
None of Parent, any of its Subsidiaries, or any of their ERISA
Affiliates maintains or contributes to any Benefit Plan other than other than
those listed on Schedule 5.13. Borrower, each of its Subsidiaries and each ERISA
Affiliate have satisfied the minimum funding standards of ERISA and the IRC with
respect to each Benefit Plan to which it is obligated to contribute. No ERISA
Event has occurred nor has any other event occurred that may result in an ERISA
Event that reasonably could be expected to result in a Material Adverse Change.
None of Parent, its Subsidiaries, any ERISA Affiliate, or any fiduciary of any
Benefit Plan is subject to any direct or indirect liability with respect to any
Benefit Plan under any applicable law, treaty, rule, regulation, or agreement.
None of Parent, its Subsidiaries or any ERISA Affiliate is required to provide
security to any Benefit Plan under Section 401(a)(29) of the IRC.
5.14 ENVIRONMENTAL CONDITION. Except as set forth on SCHEDULE 5.14,
(a) to Borrowers' knowledge, none of Borrowers' properties or assets has ever
been used by Borrowers or by previous owners or operators in the disposal of, or
to produce, store, handle, treat, release, or transport, any Hazardous
Materials, where such production, storage, handling, treatment, release or
transport was in violation, in any material respect, of applicable Environmental
Law, (b) to Borrowers' knowledge, none of Borrowers' properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, (c) none of Borrowers
have received notice that a Lien arising under any Environmental Law has
attached to any revenues or to any Real Property owned or operated by Borrowers,
and (d) none of Borrowers have received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal or state
governmental agency concerning any action or omission by any Borrower resulting
in the releasing or disposing of Hazardous Materials into the environment.
5.15 INTELLECTUAL PROPERTY. Each Borrower owns, or holds licenses
in, all trademarks, trade names, copyrights, patents, patent rights, and
licenses that are necessary to the conduct of its business as currently
conducted. Attached hereto as SCHEDULE 5.15 is a true, correct, and complete
listing of all material patents, patent applications, trademarks, trademark
applications, copyrights, and copyright registrations as to which each Borrower
is the owner or is an exclusive licensee.
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5.16 LOCATIONS; LEASES
(a) The Collateral, and the Books of each Borrower
pertaining thereto, are kept and maintained solely at Parent's chief executive
office at 321 West 84th Avenue, Suite A, Thornton, Colorado 80260, and at those
locations which are listed on SCHEDULE 5.16 annexed hereto, which SCHEDULE
includes all service bureaus with which any such records are maintained and the
names and addresses of each of each Borrower's landlords. Except (i) to
accomplish sales of Inventory in the ordinary course of business or (ii) to
utilize such of the Collateral as is removed in the ordinary course of business
(such as motor vehicles and laptop computers), no Borrower shall remove any
Collateral from said executive office or those locations listed on SCHEDULE
5.16.
(b) No Borrower will:
(i) Alter, modify or amend any provisions of any
Lease which pertain to any Lien rights of the lessor
thereunder or the waiver or compromise of the same without the
prior written consent of Agent.
(ii) Except after prior written notice to Agent,
commit to, or open or close any location at which such
Borrower maintains, offers for sale or stores any of the
Collateral.
(c) Fail to promptly send to Agent copies of any
amendments, modifications or alterations to any existing Leases and copies of
any newly executed Leases; PROVIDED, HOWEVER, the foregoing shall not limit the
obligations of Borrowers under SECTION 5.16(b) above.
(d) Except as otherwise agreed by Agent, no tangible
personal property of any Borrower is in the care or custody of any third party
or stored or entrusted with a bailee or other third party and none shall
hereafter be placed under such care, custody, storage or entrustment.
5.17 COMPLETE DISCLOSURE. All factual information (taken as a
whole) furnished by or on behalf of Borrowers in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with this Agreement, the other
Loan Documents or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of Borrowers in writing to the Agent or any Lender will be, true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information (taken as a whole) not misleading in any material respect
at such time in light of the circumstances under which such information was
provided. As of the date on which any Projections are delivered to Agent, such
Projections represent Borrowers' good faith best estimate of its future
performance for the periods covered thereby.
5.18 INDEBTEDNESS. Set forth on SCHEDULE 5.18 is a true and
complete list of all Indebtedness (other than the Obligations) of each Borrower
outstanding immediately prior to the
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Closing Date that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such
Indebtedness and the principal terms thereof.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers shall and shall cause each of their respective
Subsidiaries to do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that
enables Borrowers to produce financial statements in accordance with GAAP and
maintain records pertaining to the Collateral that contain information as from
time to time reasonably may be requested by Agent. Borrowers also shall keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to the Inventory.
6.2 COLLATERAL REPORTING. Provide Agent (and if so requested by
Agent, with copies for each Lender) with the following documents at the
following times in form satisfactory to Agent:
(a) WEEKLY REPORTS. Weekly, not later than Wednesday for
the immediately preceding fiscal week:
(i) a Borrowing Base Certificate (in the form of
EXHIBIT B-1 annexed hereto, (as such form may be revised from
time to time by Agent). Such Certificate may be sent to Agent
by facsimile or e-mail transmission, provided that the
original thereof is forwarded to Agent on the date of such
transmission. No adjustments to the Borrowing Base Certificate
may be made without support documentation and such other
documentation as may be requested by Agent from time to time.
(ii) sales audit report to include daily sales
report with a month to date sales by store and geographic
region.
(iii) collateral activity summary ("ROLL FORWARD
INVENTORY REPORT"), to include, without limitation, Borrowers'
report number 30 or a future report equivalent thereto.
(b) MONTHLY REPORTS. Monthly, Borrowers shall provide
Agent with original counterparts of (each in such form as Agent from time to
time may specify):
(i) Within fifteen (15) days of the end of the
previous month:
A. stock ledger (extract) inventory
report by department, to include each Borrower's, as
applicable, report number 30 or a future report
equivalent thereto.
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B. stock ledger (extract) inventory
report by store, to include each Borrower's, as
applicable, report number 3 or a future report
equivalent thereto.
C. upon request, open to buy report.
D. month end daily sales report which
includes comparable same store information.
E. purchases and accounts payable
aging report.
(ii) Within thirty (30) days of the end of the
previous month:
A. Statement of gross margin in a
format satisfactory to Agent.
B. stock ledger inventory report
reconciliation to availability and to general ledger
in a format satisfactory to Agent.
In addition, each Borrower agrees to cooperate fully with Agent to
facilitate and implement a system of electronic collateral reporting in order to
provide electronic reporting of each of the items set forth above.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Agent,
with copies to each Lender:
(a) as soon as available, but in any event within 30 days
(45 days in the case of a month that is the end of one of the first 3 fiscal
quarters in a fiscal year) after the end of each month during each of Parent's
fiscal years,
(i) a company prepared consolidated balance
sheet, income statement, and statement of cash flow covering
Parent's and its Subsidiaries' operations during such period,
(ii) an inventory certificate, and
(iii) a certificate signed by the chief financial
officer of Parent to the effect that:
A. the financial statements delivered
hereunder have been prepared in accordance with GAAP
(except for the lack of footnotes and being subject
to year-end audit adjustments) and fairly present in
all material respects the consolidated financial
condition of Parent and its Subsidiaries,
B. the representations and warranties
of Borrowers contained in this Agreement and the
other Loan Documents are true and correct in all
material respects on and as of the date of such
certificate, as though made
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on and as of such date (except to the extent that
such representations and warranties relate solely to
an earlier date),
C. there does not exist any condition
or event that constitutes a Default or Event of
Default (or, to the extent of any non-compliance,
describing such non-compliance as to which he or she
may have knowledge and what action Borrowers have
taken, are taking, or propose to take with respect
thereto),
D. all rent and additional rent due
pursuant to any store lease have or have not been
paid (and if not paid, broken down by store
location); PROVIDED, HOWEVER, that Borrowers need not
report unpaid additional rent based on year end
adjustments for common area expenses to the extent
such additional rent is disputed by such Borrower,
and
E. premiums for insurance required
under SECTION 6.9 hereof have or have not been paid.
(iv) for each month that is the date on which a
financial covenant in SECTION 7.21 is to be tested, a
Compliance Certificate demonstrating, in reasonable detail,
compliance at the end of such period with the applicable
financial covenants contained in SECTION 7.21, and
(b) as soon as available, but in any event within 90 days
after the end of each of Parent's fiscal years,
(i) financial statements of Parent and its
Subsidiaries for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Agent
and certified, without any qualifications, by such accountants
to have been prepared in accordance with GAAP (such audited
financial statements to include a balance sheet, income
statement, and statement of cash flow and, if prepared, such
accountants' letter to management),
(ii) a certificate of such accountants addressed
to Agent and the Lenders stating that such accountants do not
have knowledge of the existence of any Default or Event of
Default under SECTION 7.21,
(c) as soon as available, but in any event within 30
days after the start of each of Parent's fiscal years, copies of Borrowers'
Projections, in form and substance (including as to scope and underlying
assumptions) satisfactory to Agent, in its sole discretion, for the
forthcoming 3 years, year by year, and for the forthcoming fiscal year, month
by month, certified by the chief financial officer of Parent as being such
officer's good faith best estimate of the financial performance of Parent and
its Subsidiaries during the period covered thereby,
(d) if and when filed by any Borrower,
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(i) 10-Q quarterly reports, Form 10-K annual
reports, and Form 8-K current reports,
(ii) any other filings made by any Borrower with
the SEC,
(iii) copies of Borrowers' federal income tax
returns, and any amendments thereto, filed with the Internal
Revenue Service, and
(iv) any other information that is provided by
Parent to its shareholders generally,
(e) if and when filed by any Borrower and as requested
by Agent, satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) any Borrower conducts business or is required to
pay any such excise tax, (ii) where any Borrower's failure to pay any such
applicable excise tax would result in a Lien on the properties or assets of
any Borrower, or (iii) where any Borrower's failure to pay any such
applicable excise tax reasonably could be expected to result in a Material
Adverse Change,
(f) At such times and with such frequency as is
requested by Agent, such information and documentation as is determined by
Agent to be appropriate based upon Agent's review and analysis of the
Accounts and the information and documentation from time to time available to
Agent,
(g) as soon as a Borrower has knowledge of any event
or condition that constitutes a Default or an Event of Default, notice
thereof and a statement of the curative action that Borrowers propose to take
with respect thereto,
(h) upon the request of Agent, any other report
reasonably requested relating to the financial condition of Borrowers, and
(i) cause any guarantor of any of the Obligations to
deliver its annual financial statements at the time when Borrower provides
its audited financial statements to Agent and copies of all federal income
tax returns as soon as the same are available and in any event no later than
30 days after the same are required to be filed by law.
In addition to the financial statements referred to above, Borrowers
agree to deliver financial statements prepared on both a consolidated and
consolidating basis and that no Borrower, or any Subsidiary of a Borrower, will
have a fiscal year different from that of Parent. Borrowers agree that their
independent certified public accountants are authorized to communicate with
Agent and to release to Agent whatever financial information concerning
Borrowers that Agent reasonably may request. Each Borrower waives the right to
assert a confidential relationship, if any, it may have with any accounting firm
or service bureau in connection with any information requested by Agent pursuant
to or in accordance with this Agreement, and agrees that Agent may contact
directly any such accounting firm or service bureau in order to obtain such
information. Agent hereby agrees to use its best efforts to give
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such Borrower at least simultaneous notice that Agent is so contacting
directly any such accounting firm or service bureau.
6.4 RETURN. Cause returns and allowances as between Borrowers and
their Account Debtors, to be on the same basis and in accordance with the usual
customary practices of the applicable Borrower, as they exist at the time of the
execution and delivery of this Agreement, unless changed with consent of Agent.
If, at a time when no Event of Default has occurred and is continuing, any
Account Debtor returns any Inventory to any Borrower, the applicable Borrower
promptly shall determine the reason for such return and, if the applicable
Borrower accepts such return, issue a credit memorandum (with a copy to be sent
to Agent) in the appropriate amount to such Account Debtor. If, at a time when
an Event of Default has occurred and is continuing, any Account Debtor returns
any Inventory to any Borrower, the applicable Borrower promptly shall determine
the reason for such return and, if Agent consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to
Agent) in the appropriate amount to such Account Debtor.
6.5 MAINTENANCE OF PROPERTIES; TITLE TO EQUIPMENT. Maintain and
preserve all of its properties that are necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted, and comply at all times with the material provisions of all
leases to which it is a party as lessee, so as to prevent any loss or forfeiture
thereof or thereunder, involving property with a value of over $100,000.
6.6 TITLE TO EQUIPMENT. Upon Agent's request, each Borrower
immediately shall deliver to Agent, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items of
Equipment of such Borrower.
6.7 MAINTENANCE OF EQUIPMENT. Maintain the Equipment which is
necessary or useful in the conduct of Borrower's business in good operating
condition and repair (ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Other than those items of Equipment that
constitute fixtures on the Closing Date, Borrowers shall use their best efforts
not to permit any item of Equipment to become a fixture to real estate or an
accession to other property, and such Equipment shall at all times remain
personal property.
6.8 TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrowers or any of their assets to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Borrowers shall make due and timely payment or deposit of all such federal,
state, and local taxes, assessments, or contributions required of it by law,
unless the subject of a Permitted Protest, and will execute and deliver to
Agent, on demand, appropriate certificates attesting to the payment thereof or
deposit with respect thereto. Borrowers will make timely payment or deposit of
all tax payments and withholding taxes required of it by applicable laws,
including those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Agent with
proof satisfactory to Agent indicating that the applicable
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Borrower has made such payments or deposits. Borrowers shall deliver
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which any Borrower is required to pay any such excise tax.
6.9 INSURANCE.
(a) At Borrowers' expense, maintain insurance respecting
its property and assets wherever located, covering loss or damage by fire,
theft, explosion, and all other hazards and risks as ordinarily are insured
against by other Persons engaged in the same or similar businesses. Borrowers
also shall maintain business interruption, public liability, and product
liability insurance, as well as insurance against larceny, embezzlement, and
criminal misappropriation.
(b) All such policies of insurance shall be in such
amounts and with such insurance companies as are reasonably satisfactory to
Agent. All hazard insurance and such other insurance as Agent shall specify
shall contain a mortgagee endorsement or an equivalent satisfactory to Agent
showing Agent as sole loss payee thereof. Every policy of insurance referred to
in this SECTION 6.9 shall contain an agreement by the insurer that it will not
cancel such policy for any reason (other than non-payment of premium) except
after 30 days prior written notice to Agent (and in the case of cancellation
because of non-payment of premium except after 10 days prior written notice to
Agent) and that any loss payable thereunder shall be payable notwithstanding any
act or negligence of any Borrower and any member of the Lender Group which
might, absent such agreement, result in a forfeiture of all or a part of such
insurance payment. Administrative Borrower shall deliver to Agent certified
copies of such insurance and delivery of the payment of all premiums therefor.
Original policies or certificates thereof satisfactory to Agent evidencing such
insurance shall be delivered to Agent at least 30 days prior to the expiration
of the existing or preceding policies.
(c) Administrative Borrower shall give Agent prompt
notice of any loss covered by such insurance in excess of $250,000. Agent shall
have the exclusive right to adjust any losses payable under any such insurance
policies in excess of $250,000, without any liability to Borrowers whatsoever in
respect of such adjustments. Any monies received as payment for any loss under
any insurance policy mentioned above or as payment of any award or compensation
for condemnation or taking by eminent domain, shall be paid over to Agent to be
applied at the option of the Required Lenders either to the prepayment of the
Obligations or shall be disbursed to Administrative Borrower under staged
payment terms reasonably satisfactory to the Required Lenders for application to
the cost of repairs, replacements, or restorations. Any such repairs,
replacements, or restorations shall be effected with reasonable promptness and
shall be of a value at least equal to the value of the items or property
destroyed prior to such damage or destruction. Upon the occurrence of an Event
of Default, Agent shall have the right to apply all prepaid premiums to the
payment of the Obligations in such order or form as Agent shall determine.
Notwithstanding the preceding provisions of this SECTION 6.9(c), in any
situation involving a loss under an insurance policy where each of the following
statements is true and accurate, Borrowers shall have the exclusive right to
adjust the loss payable under the insurance policy and to determine whether the
insurance proceeds shall be applied to the Obligations or
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applied to the cost of repairs, replacements or restorations: (i) no Event
of Default exists under the Agreement or is caused by such loss, and (ii)
giving effect to such loss, Borrowers shall have not less than $3,000,000
of Excess Availability.
(d) Borrowers shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this SECTION 6.9, unless Agent is included thereon as named
insured with the loss payable to Agent under a standard mortgagee endorsement or
its equivalent. Administrative Borrower immediately shall notify Agent whenever
such separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and copies of such policies
promptly shall be provided to Agent.
6.10 LOCATION OF INVENTORY AND EQUIPMENT
Keep the Inventory and Equipment only at the locations identified on
Schedule 5.16; provided, however, that Administrative Borrower may amend
Schedule 5.16 so long as such amendment occurs by written notice to Agent not
less than 30 days prior to the date on which the Inventory or Equipment is moved
to such new location, so long as such new location is within the continental
United States, and so long as, at the time of such written notification, the
applicable Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected the Agent's Liens on such assets and
also provides to Agent a Collateral Access Agreement.
6.11 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
6.12 LEASES. Pay when due all rents and other amounts payable under
any leases to which any Borrower is a party or by which any Borrower's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest. To the extent Borrowers fail timely to make payment of such
rent and other amounts payable when due under its leases, Agent shall be
entitled, in its discretion, to reserve an amount equal to such unpaid amounts
against the Borrowing Base.
6.13 BROKERAGE COMMISSIONS. Pay any and all brokerage commission or
finders fees incurred in connection with or as a result of Borrowers' obtaining
financing from the Lender Group under this Agreement. Borrowers agree and
acknowledge that payment of all such brokerage commissions or finders fees shall
be the sole responsibility of Borrowers, and each Borrower agrees to indemnify,
defend, and hold Agent and the Lender Group harmless from and against any claim
of any broker or finder arising out of Borrowers' obtaining financing from the
Lender Group under this Agreement.
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6.14 EXISTENCE. At all times preserve and keep in full force and
effect each Borrower's valid existence and good standing and any rights and
franchises material to Borrowers' businesses.
6.15 ENVIRONMENTAL. (a) Keep any property either owned or operated
by any Borrower free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply, in all material respects, with Environmental
Laws and provide to Agent documentation of such compliance which Agent
reasonably requests, (c) promptly notify Agent of any release of a Hazardous
Material of any reportable quantity from or onto property owned or operated by
any Borrower and take any Remedial Actions required to abate said release or
otherwise to come into compliance with applicable Environmental Law, and (d)
promptly provide Agent with written notice within 10 days of the receipt of any
of the following: (i) notice that an Environmental Lien has been filed against
any of the real or personal property of any Borrower, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Borrower, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.
6.16 DISCLOSURE UPDATES. Promptly and in no event later than 5
Business Days after obtaining knowledge thereof, (a) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
6.17 INVENTORIES, APPRAISALS, AND AUDITS.
(a) Agent, at the expense of Borrowers, may participate
in and/or observe each physical count and/or inventory of so much of the
Collateral as consists of Inventory which is undertaken on behalf of any
Borrower.
(b) Upon Agent's request from time to time, Borrowers
shall obtain, or shall permit Agent to obtain financial or SKU based physical
counts and/or inventories of the Collateral, conducted by such inventory takers
as are satisfactory to Agent and following such methodology as may be required
by Agent, each of which physical counts and/or financial or SKU based
inventories shall be observed by Borrower's accountants; provided, however, that
as long as there has not occurred an Event of Default, Agent will not require
full on-site appraisal, more than once per calendar year (but may in addition
require "desktop" appraisals up to once per calendar quarter). Notwithstanding
the foregoing, Agent hereby agrees that the methodology in place on the Closing
Date used by Borrowers to conduct SKU based physical counts and inventories of
Collateral (as to what Persons take inventory, when Borrower's accountants
observe such counts and inventories, etc.) are acceptable; PROVIDED, HOWEVER,
changes in such methodology may be required by Agent after the occurrence of an
Event of Default. For each
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fiscal year in which this Agreement is in effect, Borrower shall perform (at
their expense) one (1) full physical inventory as of fiscal year end for all
locations. Agent may require mid-year physical counts during any fiscal year of
Parent (at Borrower's expense) if any physical inventory conducted in the prior
year reveals shrinkage equal to or greater than five percent (5.00%) of retail
sales. Agent shall have the right to increase Reserves Against Availability
based on any variance revealed by any physical inventory counts. The results of
such mid-year counts shall be provided to Agent within ten (10) Business Days of
completion of the count. The draft or unaudited results of such required
mid-year inventories or counts shall be furnished to Agent within five (5)
Business Days of the taking of such inventories or counts.
(c) Agent from time to time may request the results of
"mystery shopping" (so-called) visits to all or any of any Borrower's business
premises as conducted by or on behalf of Borrower.
(d) Provided that the Thornton Colorado Facility is a
component of the Borrowing Base, Borrowers shall obtain and deliver to Agent, at
Borrowers' expense, once every calendar year, appraisal reports in form and
substance and from appraisers satisfactory to Agent, stating the then current
fair market value of the Thornton Colorado Facility. Borrowers hereby agree and
acknowledge that the $25,000 cap on appraisal fees specified in SECTION 2.13(e)
hereof shall not cover or apply to the appraisals required by this SECTION
6.17(d).
6.18 ELECTRONIC REPORTING. At Agent's option all information and
reports required to be submitted to Agent by Borrower shall be transmitted
electronically pursuant to an electronic transmitting reporting system and
shall be in a record layout format designated by Agent from time to time.
Employee Benefits.
(a) Promptly, and in any event within ten (10) Business
Days after Parent or any of its Subsidiaries knows or has reason to know that an
ERISA Event has occurred that reasonably could be expected to result in a
Material Adverse Change, a written statement of the chief financial officer of
Parent describing such ERISA Event and any action that is being taking with
respect thereto by Parent, any such Subsidiary or ERISA Affiliate, and any
action taken or threatened by the IRS, Department of Labor, or PBGC. Parent or
such Subsidiary, as applicable, shall (i) be deemed to know all facts known by
the administrator of any Benefit Plan of which it is the plan sponsor, (ii)
promptly, and in any event within three (3) Business Days after the filing
thereof with the IRS, deliver, or cause to be delivered, to Agent a copy of each
funding waiver request filed with respect to any Benefit Plan and all
communications received by Parent, any of its Subsidiaries or, to the knowledge
of Parent, any ERISA Affiliate with respect to such request, and (iii) promptly,
and in any event within three (3) Business Days after receipt by Parent, any of
its Subsidiaries or, to the knowledge of Parent, any ERISA Affiliate, of notice
of the PBGC's intention to terminate a Benefit Plan or to have a trustee
appointed to administer a Benefit Plan, deliver, or cause to be delivered, to
Agent copies of each such notice.
(b) Cause to be delivered to Agent, upon Agent's request,
each of the following: (i) a copy of each Plan (or, where any such plan is not
in writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and
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all amendments thereto, all written interpretations thereof and written
descriptions thereof that have been distributed to employees or former
employees of Parent or its Subsidiaries; (ii) the most recent determination
letter issued by the IRS with respect to each Benefit Plan; (iii) for the
three most recent plan years, annual reports on Form 5500 Series required to be
filed with any governmental agency for each Benefit Plan; (iv) all actuarial
reports prepared for the last three plan years for each Benefit Plan; (v) a
listing of all Multiemployer Plans, with the aggregate amount of the most
recent annual contributions required to be made by any Borrower or any ERISA
Affiliate to each such plan and copies of the collective bargaining agreements
requiring such contributions; (vi) any information that has been provided to
any Borrower or any ERISA Affiliate regarding withdrawal liability under any
Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Parent or its Subsidiaries under any
Retiree Health Plan.
6.19 LANDLORD WAIVERS AND CONSENTS. Use its best efforts (i) to
promptly obtain and deliver to Agent within ninety (90) days following the
opening of a new store location for a Borrower, a consent, waiver and
subordination (satisfactory to Agent) by the landlord for such location of such
Borrower, and (ii) within ninety (90) days following the Closing Date, a
consent, waiver and subordination (satisfactory to Agent) by the landlord for
existing locations of Borrowers for which such a consent, waiver and
subordination has not previously been obtained (except for the County Line Store
and Colorado Boulevard Store).
6.20 MATERIAL INVENTORY SUPPLIER. Promptly after entering into any
agreement with any Material Inventory Supplier or any amendment to any agreement
with any Material Inventory Supplier, provide Agent with a copy of such
agreement or amendment (other than oral agreements and amendments).
6.21 NO SETOFF OR COUNTERCLAIMS. Make payments hereunder and under
the other Loan Documents by or on behalf of Borrowers without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state or federal taxes.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrowers will not and will not permit any of their respective
Subsidiaries to do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the
other Loan Documents, together with Indebtedness owed to Underlying Issuers with
respect to Underlying Letters of Credit;
(b) Indebtedness set forth on SCHEDULE 5.18;
(c) Indebtedness secured by Permitted Liens;
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(d) Manufacturer Payables; and
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this SECTION 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not, in Agent's
judgment, materially impair the prospects of repayment of the Obligations by
Borrowers or materially impair Borrowers' creditworthiness, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the principal amount of, or interest rate with respect to, the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of the average
weighted maturity of the Indebtedness so refinanced, renewed, or extended, nor
are they on terms or conditions, that, taken as a whole, are materially more
burdensome or restrictive to the applicable Borrower, and (iv) if the
Indebtedness that is refinanced, renewed, or extended was subordinated in right
of payment to the Obligations, then the subordination terms and conditions of
the refinancing, renewal, or extension Indebtedness must be include
subordination terms and conditions that are at least as favorable to the Lender
Group as those that were applicable to the refinanced, renewed, or extended
Indebtedness; and
(f) Indebtedness secured solely by a Lien against the
portion the Thornton Colorado Facility consisting of real property and
improvements upon the real property; PROVIDED, HOWEVER, (i) that immediately
upon the incurrence of such Indebtedness, the Real Estate Advance Amount
shall be immediately and permanently reduced to $0.00, and (ii) the
incurrence of such Indebtedness will be permitted only if each of the
following conditions are satisfied: (A) the proceeds of such Indebtedness are
immediately applied to the Obligations, (B) no Event of Default exists at the
time of the incurrence of such Indebtedness or will result as a result of the
incurrence of such Indebtedness, and (C) no Overadvance will be created by
the permanent reduction at such time of the Real Estate Advance Amount to
$0.00.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under SECTION 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its Stock, or
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution) or convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets, other than a liquidation or dissolution of any
of Parent's Subsidiaries or a transfer or dissolution of all or any substantial
part of the property or assets of any of Parent's Subsidiaries, in which Parent
becomes the owner of such property or assets. Notwithstanding the foregoing,
Agent and Lenders hereby consent to the transfer by Parent to Intangibles of the
assets of Parent described on Schedule 7.3, provided (i) that each such transfer
is expressly made subject to the existing Agent's Lien in such assets, and (ii)
all documentation executed or otherwise issued in
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each such transfer is in form and substance satisfactory to Agent, and copies of
all such documentation are delivered to Agent.
7.4 DISPOSAL OF ASSETS. Convey, sell, lease, license, assign,
transfer, or otherwise dispose of any of the assets of any Borrower other than
(a) sales of Inventory to buyers in the ordinary course of such Borrower's
business as currently conducted and (b) (i) licenses of property by Intangibles
to Parent and to Electronics Texas, (ii) leases of property by Leasing to
Parent, and (iii) leases of property by Electronics Leasing to Electronics Texas
(as long as such licenses and leases comply with SECTION 7.14 hereof); PROVIDED,
HOWEVER, that as long as no Default or Event of Default has occurred or would
result therefrom, Borrowers may dispose of furniture and fixtures in an
aggregate for all Borrowers which does not exceed a net book value of $500,000
during any fiscal year of Borrowers. Notwithstanding the foregoing, a
transaction permitted pursuant to SECTION 7.3 hereof shall also be a transaction
permitted by this SECTION 7.4.
7.5 CHANGE NAME. Change any Borrower's name, FEIN, corporate
structure or identity, or add any new fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrowers or which
are transmitted or turned over to Agent or guaranties of obligations of
employees in an amount not to exceed for all Borrowers $400,000 in the aggregate
at any time outstanding or guaranties by Parent of goods purchased by a
Subsidiary of Parent in the ordinary course of business of such Subsidiary .
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrowers' business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
SECTION 7.1(e), prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Borrower, other than the Obligations in accordance with this
Agreement, and
(b) Directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement, instrument,
document, indenture, or other writing evidencing or concerning Indebtedness
permitted under SECTIONS 7.1(b), (c), or (e).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory (except that all Borrowers
in the aggregate may be a consignee of up to $200,000 of Inventory at any
particular time) or sell any Inventory on bill and hold, sale or return, sale on
approval, or other conditional terms of sale.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than common Stock) on, or purchase,
acquire, redeem, or retire any of any
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Borrower's Stock, of any class, whether now or hereafter outstanding; provided,
however, that (i) as long as no Default or Event of Default has occurred or
would result therefrom and, after giving effect thereto, Borrowers would have
Availability of not less than $5,000,000, Parent may repurchase its outstanding
capital stock from Persons that are not Affiliates, directors or officers of
Parent pursuant to Parent's stock buy-back program, provided that the aggregate
amount of such repurchase and redemption by Parent shall not exceed $1,500,000
during any fiscal year of Parent, and (ii) any subsidiary of Parent may make
distributions and declare and pay dividends to Parent.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting
(other than as may be required to conform to GAAP) or enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
or storage of Borrowers' accounting records without said accounting firm or
service bureau agreeing to provide Agent information regarding the Collateral or
Borrowers' financial condition. Borrowers waive the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Agent pursuant to
or in accordance with this Agreement, and agrees that Agent may contact directly
any such accounting firm or service bureau in order to obtain such information.
Agent hereby agrees to use its best efforts to give Borrowers at least
simultaneous notice that Agent is so contacting directly any such accounting
firm or services bureau.
7.13 INVESTMENTS. Directly or indirectly, make or acquire
or incur any liabilities (including contingent obligations) for or in connection
with (a) the acquisition of the securities (whether debt or equity) of, or other
interests in, a Person, (b) loans, advances, capital contributions or transfers
of property to a Person (except that Parent may make advances to the other
Borrowers provided that such advances are short-term in nature, are reflected as
inter-company advances on the records of Parent and such Borrower, and are made
and repaid in the ordinary course of business of Parent and such Borrower, and
except that so long as no Default or Event of Default has occurred or would
result therefrom, Borrowers may make loans and advances to Persons provided that
the aggregate outstanding principal amount of all such advances and loans may
not at any time exceed $250,000), or (c) the acquisition of all or substantially
all of the properties or assets of a Person. Notwithstanding the foregoing, a
transaction permitted pursuant to SECTION 7.3 hereof shall also be a transaction
permitted by this SECTION 7.13. Agent and Lenders hereby consent to the
establishment by Parent of Leasing, Intangibles, Electronics Partners,
Electronics Leasing, and Electronics Texas, provided that (i) the initial
capital contribution into each of such Subsidiaries has been disclosed to and
approved by Agent, and (ii) Agent shall have received copies of all
documentation executed and certificates issued in connection with each such
establishment and all such documentation and certificates shall be in form and
substance satisfactory to Agent.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction between any Borrower with
another Borrower or between any Borrower with any other Affiliate of such
Borrower except for transactions that are in the ordinary course of such
Borrowers' business, upon fair and reasonable terms, that are fully disclosed to
Agent,
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and that are no less favorable to such Borrower than would be obtained in
an arm's length transaction with a non-Affiliate.
7.15 SUSPENSION. Except as permitted by SECTION 7.3 hereof, suspend
or go out of a substantial portion of its business.
7.16 [INTENTIONALLY OMITTED]
7.17 USE OF PROCEEDS. Use the proceeds of the Advances for any
purpose inconsistent with the terms and conditions hereof, or for purposes not
permitted hereunder or for unlawful purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without Administrative Borrower providing 30 days prior written notification
thereof to Agent and so long as, at the time of such written notification, the
applicable Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected the Agent's Liens and also provides
to Agent a Collateral Access Agreement with respect to such new location. The
Inventory and Equipment shall not at any time now or hereafter be stored with a
bailee, warehouseman, or similar party without Agent's prior written consent.
7.19 SECURITIES ACCOUNTS. If Agent has notified Administrative
Borrower that a Control Agreement will thereafter be required for any Securities
Account, establish or maintain any Securities Account unless Agent shall have
received a Control Agreement in respect of such Securities Account. Borrowers
agree to not transfer assets out of any Securities Account; PROVIDED, HOWEVER,
that, so long as no Event of Default has occurred and is continuing or would
result therefrom, Borrowers may use such assets (and the proceeds thereof) to
the extent not prohibited by this Agreement.
7.20 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or
indirectly:
(a) engage in any prohibited transaction which is
reasonably likely to result in a civil penalty or excise tax described in
Sections 406 of ERISA or 4975 of the IRC for which a statutory or class
exemption is not available or a private exemption has not been previously
obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail to pay timely required contributions or annual
installments due with respect to any waived funding deficiency to any Benefit
Plan;
(d) terminate any Benefit Plan where such event would
result in any liability of Parent, any of its Subsidiaries or any ERISA
Affiliate under Title IV of ERISA;
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(e) fail to make any required contribution or payment to
any Multiemployer Plan;
(f) fail to pay any required installment or any other
payment required under Section 412 of the IRC on or before the due date for such
installment or other payment;
(g) amend a Plan resulting in an increase in current
liability for the plan year such that either of any Borrower, any Subsidiary of
any Borrower or any ERISA Affiliate is required to provide security to such Plan
under Section 401(a)(29) of the IRC; or
(h) withdraw from any Multiemployer Plan where such
withdrawal is reasonably likely to result in any liability of any such entity
under Title IV of ERISA; which, individually or in the aggregate, results in or
reasonably would be expected to result in a claim against or liability of
Borrowers, any of their Subsidiaries or any ERISA Affiliate in excess of
$100,000.
7.21 FINANCIAL COVENANTS. Borrowers on a consolidated basis shall
observe and comply with each of the following:
(a) GROSS MARGIN. Tested monthly, Gross Margin
Percentage, measured on a rolling three-month basis, shall not vary negatively
from the Business Plan by more than three (3%) percentage points and on a
rolling twelve-month basis, measured monthly, the Gross Margin Percentage shall
not be less than twenty-six percent (26%).
(b) INVENTORY LEVELS. Borrowers shall not permit end of
the month inventory at cost, as measured on a rolling three (3) month basis, to
be below a level of at least ninety percent (90%) of the Business Plan or to be
above a level of more than one hundred twenty percent (120%) of the Business
Plan, provided that for purposes of computing the amount of Inventory for this
paragraph Inventory shall be exclusive of any "opportunistic buys" (which are
those purchases deemed extraordinary given trade terms granted which are
different than those typically offered to Borrowers which such exclusion is
subject to Agent's sole satisfaction upon receipt of supporting documentation).
(c) TANGIBLE NET WORTH. Borrowers shall not permit, as of
the last day of each month indicated below, their consolidated Tangible Net
Worth to be less than the amount shown below:
<Table>
<Caption>
DATE AMOUNT
<S> <C>
a) October 31, 2001 a) $100,000,000
b) January 31, 2002 b) $104,000,000
c) April 30, 2002, c) $100,000,000
July 31, 2002,
October 31, 2002
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<S> <C>
d) January 31, 2003, d) $104,000,000
April 30, 2003,
July 31, 2003,
October 31, 2003
e) January 31, 2004 and e) $108,000,000
the last day of each
thereafter occurring
April, July, October
and January
</Table>
7.22 CAPITAL EXPENDITURES. Make capital expenditures in any period
set forth below in excess of the corresponding aggregate amount set forth below
(exclusive of capitalized leased financing incurred for financing the
acquisition of real estate in conjunction with the opening of a new store
located on such real estate):
<Table>
<Caption>
PERIOD AMOUNT
<S> <C>
a) February 1, 2001 through January 31, 2002 a) $45,000,000
b) February 1, 2002 through January 31, 2003 b) the sum of (i) $40,000,000
PLUS (ii) the lesser of (A)
$15,000,000 or (B) the net
proceeds received by Borrowers
during the period beginning
February 1, 2002 and continuing
through January 31, 2003 from
the issuance of additional
Stock by Borrowers
</Table>
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c) February 1, 2003 through January 31, 2004 c) the sum of (i)
$25,000,000 PLUS (ii)
the lesser of (A)
$15,000,000 or (B) the
net proceeds received
by Borrowers during the
period beginning
February 1, 2003 and
continuing through
January 31, 2004 from
the issuance of
additional Stock by
Borrowers
d) February 1, 2004 through January 31, 2005 d) $25,000,000
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "EVENT OF DEFAULT") under this Agreement:
8.1 If Borrowers fail to pay when due and payable or when declared
due and payable, all or any portion of the Obligations (whether of principal,
interest [including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts], fees and charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2 (a) If any Borrower neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in SECTION 6.2
(Collateral and Financial Reporting), Section 6.4 (Tax Returns), SECTION 6.7
(Title to Equipment), the portion of SECTION 6.9 (Taxes) as pertains to state
franchise taxes, SECTION 6.12 (Location of Inventory and Equipment), SECTION
6.13 (Compliance with Laws), SECTION 6.14 (Employee Benefits), or SECTION 6.15
(Leases) of this Agreement and such failure continues for a period of five (5)
Business Days; (ii) If Borrower fails or neglects to perform, keep, or observe
any term, provision, condition, covenant, or agreement contained in SECTION 6.1
(Accounting System), SECTION 6.6 (Returns), SECTION 6.8 (Maintenance of
Equipment), SECTION 6.17 (Material Inventory Supplier) of this Agreement and
such failure continues for a period of 15 Business Days; or (iii) If Borrower
fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant, or agreement contained in this Agreement, or in any of the
other Loan Documents (giving effect to any grace periods, cure periods, or
required notices, if any, expressly provided for in such Loan Documents); in
each case, other than any such term, provision, condition, covenant, or
agreement that is the subject of another provision of this SECTION 8, in which
event such other provision of this SECTION 8 shall govern); provided that,
during any period of time that any such failure or neglect of Borrower referred
to in this paragraph exists, even if such failure or neglect is not yet an Event
of Default by virtue of the existence of a grace or cure period or the
pre-condition of the giving of a
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notice, each member of the Lender Group shall be relieved of its obligation
to extend credit hereunder;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of any Borrower's or any of its
Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Borrower or
any of its Subsidiaries;
8.6 If an Insolvency Proceeding is commenced against any Borrower,
or any of its Subsidiaries, and any of the following events occur: (a) the
applicable Borrower or the Subsidiary consents to the institution of the
Insolvency Proceeding against it, (b) the petition commencing the Insolvency
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed within sixty (60) calendar days of the
date of the filing thereof; provided, however, that, during the pendency of such
period, Agent (including any successor agent) and each other member of the
Lender Group shall be relieved of their obligation to extend credit hereunder,
(d) an interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, any Borrower or any of its Subsidiaries, or (e) an
order for relief shall have been entered therein;
8.7 If any Borrower or any of its Subsidiaries is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs;
8.8 (i) If a notice of Lien, levy, or assessment is filed of
record with respect to any Borrower's or any of its Subsidiaries' assets by the
United States, or any department, agency, or instrumentality thereof, and the
Lien, levy or assessment is not fully released or discharged within ten (10)
days of the date of such filing, or (ii) if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether choate or
otherwise, upon any Borrower's or any of its Subsidiaries' assets and the same
is not paid on the payment date thereof, unless the same is the subject of a
Permitted Protest;
8.9 (i) If one or more notice of Lien, levy, or assessment with
respect to taxes or debts owing is filed of record with respect to any
Borrower's properties or assets by any state, county, municipal or other
non-federal governmental agency, and the Lien, levy, or assessment is not (A)
fully released, discharged or bonded against before the earlier of 30 days of
the date that it first arises or 5 days of the date when such property or asset
is subject to being forfeited, or (B) the subject of a Permitted Protest, or
(ii) if any taxes or debts owing at any time hereafter to any one or more of any
state, county, municipal or other non-federal governmental agency becomes a
Lien, whether choate or otherwise, upon any Borrower's properties or assets and
the Lien is not fully (A) fully released, discharged or bonded against before
the due date of such tax or debt or
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five (5) days of the date when such property or asset is subject to being
forfeited or (B) the subject of a Permitted Protest;
8.10 If a judgment or other claim, in excess of $250,000
individually or in the aggregate for all such judgments or other claims becomes
a Lien or encumbrance upon any material portion of any Borrower's or any of its
Subsidiaries' properties or assets;
8.11 If any Borrower shall fail to pay when due the principal or
interest on any Indebtedness of such Borrower in excess of $250,000 individually
or in the aggregate of all such Indebtedness, or a default by a Borrower in the
observance or performance of any term, covenant or agreement of such Borrower in
any agreement relating to any indebtedness of such Borrower in excess of
$250,000 individually or in the aggregate, and the passage of any grace period
with respect thereto, the effect of which default in either case is to permit
the holder of such Indebtedness, irrespective of whether exercised, to
accelerate the maturity of the applicable Borrower's or its Subsidiaries'
obligations thereunder;
8.12 If there is a default in any material agreement to which
Parent is a party (or to which any Subsidiary or Parent is a party if such
agreement is material to Borrowers considered as a whole) with one or more third
persons (other than as described in SECTION 8.11) and such default (a) occurs at
the final maturity of the obligations thereunder, or (b) results in a right by
such third Person(s), irrespective of whether exercised, to accelerate the
maturity of the applicable Borrower's or its Subsidiaries' obligations
thereunder;
8.13 If any Borrower or any of its Subsidiaries makes any payment
on account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.14 If any material misstatement or misrepresentation exists now
or hereafter in any warranty, representation, statement, or Record made to the
Lender Group by any Borrower, its Subsidiaries, or any officer, employee, agent,
or director of any Borrower or any of its Subsidiaries, or any such warranty,
representation, statement or Record is withdrawn;
8.15 If the obligation of any guarantor under its guaranty or other
third Person under any Loan Document is limited or terminated by operation of
law or by the guarantor or other third Person thereunder, or any such guarantor
or other third Person becomes the subject of an Insolvency Proceeding;
8.16 If this Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except with respect to Permitted Liens and to the extent
permitted by the terms hereof or thereof, first priority Lien on or security
interest in the Collateral covered hereby or thereby; or
8.17 Any provision of any Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Borrower, or a proceeding shall be commenced
by any Borrower, or by any Governmental Authority having
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jurisdiction over any Borrower, seeking to establish the invalidity or
unenforceability thereof, or any Borrower shall deny that any Borrower has
any liability or obligation purported to be created under any Loan Document.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may authorize and
instruct Agent to do any one or more of the following on behalf of the Lender
Group (and Agent, acting upon the instructions of the Required Lenders, shall do
the same on behalf of the Lender Group), all of which are authorized by
Borrowers:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Load Documents, or otherwise, immediately due
and payable;
(b) Cease advancing money or extending credit to or for
the benefit of Borrowers under this Agreement, under any of the Loan Documents,
or under any other agreement between Borrowers and the Lender Group;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting any of the Agent's Liens in the Collateral and without
affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Agent considers advisable, and
in such cases, Agent will credit the Loan Account with only the net amounts
received by Agent in payment of such disputed Accounts after deducting all
Lender Group Expenses incurred or expended in connection therewith;
(e) Cause Borrowers to hold all returned Inventory in
trust for the Lender Group, segregate all returned Inventory from all other
assets of Borrowers or in Borrowers' possession and conspicuously label said
returned Inventory as the property of the Lender Group;
(f) Without notice to or demand upon any Borrower, make
such payments and do such acts as Agent considers necessary or reasonable to
protect its security interests in the Collateral. Each Borrower agrees to
assemble the Personal Property Collateral if Agent so requires, and to make the
Personal Property Collateral available to Agent at a place that Agent may
designate which is reasonably convenient to both parties. Each Borrower
authorizes Agent to enter the premises where the Personal Property Collateral is
located, to take and maintain possession of the Personal Property Collateral, or
any part of it, and to pay, purchase, contest, or compromise any Lien that in
Agent's determination appears to conflict with the Agent's Liens and to pay all
expenses incurred in connection therewith and to charge Borrowers' Loan Account
therefor. With respect to any of Borrowers' owned or leased premises, each
Borrower hereby grants Agent a license to enter into possession of such premises
and to occupy the same, without charge, in order to exercise any of the Lender
Group's rights or remedies provided herein, at law, in equity, or otherwise;
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(g) Without notice to any Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of any Borrower
held by the Lender Group (including any amounts received in the Concentration
Accounts), or (ii) Indebtedness at any time owing to or for the credit or the
account of any Borrower held by the Lender Group;
(h) Hold, as cash collateral, any and all balances and
deposits of any Borrower held by the Lender Group, and any amounts received in
the Concentration Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property Collateral. Each Borrower hereby grants to
Agent a license or other right to use, without charge, such Borrower's labels,
patents, copyrights, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, in completing production of, advertising for sale,
and selling any Personal Property Collateral and such Borrower's rights under
all licenses and all franchise agreements shall inure to the Lender Group's
benefit;
(j) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrowers' premises) as Agent determines is commercially reasonable. It is not
necessary that the Personal Property Collateral be present at any such sale;
(k) Agent shall give notice of the disposition of the
Personal Property Collateral as follows:
(i) Agent shall give Administrative Borrower
(for the benefit of the applicable Borrower) a notice in
writing of the time and place of public sale, or, if the sale
is a private sale or some other disposition other than a
public sale is to be made of the Personal Property Collateral,
the time on or after which the private sale or other
disposition is to be made; and
(ii) The notice shall be personally delivered or
mailed, postage prepaid, to Administrative Borrower as
provided in SECTION 12, at least 5 days before the earliest
time of disposition set forth in the notice; no notice needs
to be given prior to the disposition of any portion of the
Personal Property Collateral that is perishable or threatens
to decline speedily in value or that is of a type customarily
sold on a recognized market;
(l) Agent, on behalf of the Lender Group may credit bid
and purchase at any public sale;
(m) Agent may seek the appointment of a receiver or
keeper to take possession of all or any portion of the Collateral or to operate
same and, to the maximum extent permitted
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by law, may seek the appointment of such a receiver without the requirement
of prior notice or a hearing;
(n) The Lender Group shall have all other rights and
remedies available to it at law or in equity pursuant to any other Loan
Documents; and
(o) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Borrowers. Any excess will be returned, without interest and subject to the
rights of third Persons, by Agent to Administrative Borrower (for the benefit of
the applicable Borrower).
9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender
Group under this Agreement, the other Loan Documents, and all other agreements
shall be cumulative. The Lender Group shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
9.3 LICENSE. Effective upon the occurrence of an Event of Default,
each Borower hereby grants to Agent a royalty free non-exclusive license to use,
apply and affix any trademark, tradename, logo or the like in which any Borrower
now or hereafter has rights, such license being with respect to Agent's exercise
of the rights hereunder, including, without limitation, in connection with any
completion of the manufacture of Inventory or sale or other disposition of
Inventory.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent to the extent Agent
determines that such failure by Borrowers could result in a Material Adverse
Change, in its sole discretion and without prior notice to any Borrower, may do
any or all of the following: (a) make payment of the same or any part thereof,
(b) set up such reserves in Borrowers' Loan Account as Agent deems necessary to
protect the Lender Group from the exposure created by such failure, or (c) in
the case of the failure to comply with SECTION 6.9 hereof, obtain and maintain
insurance policies of the type described in SECTION 6.9 and take any action with
respect to such policies as Agent deems prudent. Any such amounts paid by Agent
shall constitute Lender Group Expenses and any such payments shall not
constitute an agreement by the Lender Group to make similar payments in the
future or a waiver by the Lender Group of any Event of Default under this
Agreement. Agent need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
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11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Each Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which any such Borrower may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Each Borrower
hereby agrees that: (a) so long as the Lender Group complies with its
obligations, if any, under the Code, Agent shall not in any way or manner be
liable or responsible for: (i) the safekeeping of the Collateral, (ii) any loss
or damage thereto occurring or arising in any manner or fashion from any cause,
(iii) any diminution in the value thereof, or (iv) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all
risk of loss, damage, or destruction of the Collateral shall be borne by
Borrowers.
11.3 INDEMNIFICATION. Each Borrower shall pay, indemnify, defend,
and hold the Agent-Related Persons, the Lender-Related Persons with respect to
each Lender, each Participant, and each of their respective officers, directors,
employees, agents, and attorneys-in-fact (each, an "INDEMNIFIED PERSON")
harmless (to the fullest extent permitted by law) from and against any and all
claims, demands, suits, actions, investigations, proceedings, and damages, and
all reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of or
related to the execution, delivery, enforcement, performance, or administration
of this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby, and (b) with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event,
or circumstance in any manner related thereto (all the foregoing, collectively,
the "INDEMNIFIED LIABILITIES"). The foregoing to the contrary notwithstanding,
Borrowers shall have no obligation to any Indemnified Person under this SECTION
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrowers were required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
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12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrowers or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Administrative Borrower or Agent, as applicable, may
designate to each other in accordance herewith), or telefacsimile to Borrowers
in care of Administrative Borrower or to Agent, as the case may be, at its
address set forth below:
IF TO BORROWERS: Ultimate Electronics, Inc.
321 West 84th Avenue, Suite A
Thornton, Colorado 80260
Attn: Chief Financial Officer
Fax No. (303) 412-2502
WITH COPIES TO: Davis, Graham & Stubbs LLP
1550 17th Street, Suite 500
Denver, Colorado 80202
Attn: Alison C. Conover, Esq.
Fax No. (303) 892-7400
IF TO AGENT: Wells Fargo Retail Finance LLC
One Boston Place, 18th Floor
Boston, Massachusetts 02108
Attn: President
Fax No. (617) 523-4027
WITH COPIES TO: Patton Boggs LLP
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201
Attn: Kenneth M. Vesledahl, Esq.
Fax No. (214) 758-1550
Agent and Borrowers may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this SECTION 12,
other than notices by Agent in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Each Borrower acknowledges and agrees that notices sent by
the Lender Group in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
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13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN
RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO
WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWERS AND
THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
13(b).
BORROWERS AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWERS AND THE LENDER GROUP REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 ASSIGNMENTS AND PARTICIPATIONS
(a) Any Lender may, with the written consent of Agent
(provided that no written consent of Agent shall be required in connection with
any assignment and delegation by a Lender to an Eligible Transferee), assign and
delegate to one or more assignees (each an "Assignee") all, or any ratable part
of all, of the Obligations, the Commitments and the other
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rights and obligations of such Lender hereunder and under the other Loan
Documents, in a minimum amount of $5,000,000; provided, however, that
Borrowers and Agent may continue to deal solely and directly with such Lender
in connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, have been given to
Administrative Borrower and Agent by such Lender and the Assignee, (ii) such
Lender and its Assignee have delivered to Administrative Borrower and Agent
an Assignment and Acceptance in form and substance satisfactory to Agent, and
(iii) the assignor Lender or Assignee has paid to Agent for Agent's separate
account a processing fee in the amount of $5,000. Anything contained herein
to the contrary notwithstanding, the consent of Agent shall not be required
(and payment of any fees shall not be required) if such assignment is in
connection with any merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of the business or loan
portfolio of such Lender.
(b) From and after the date that Agent notifies the
assignor Lender (with a copy to Administrative Borrower) that it has received an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (except with respect to SECTION 11.3 hereof) and be released from its
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto), and such assignment shall affect
a novation between Borrowers and the Assignee.
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (1) other
than as provided in such Assignment and Acceptance, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrowers or the performance or observance by Borrowers of any of their
obligations under this Agreement or any other Loan Document furnished pursuant
hereto, (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance, (4) such Assignee will, independently and without
reliance upon Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement, (5) such Assignee appoints and authorizes Agent to take such
actions and to exercise such powers under this Agreement as
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are delegated to Agent, by the terms hereof, together with such powers as are
reasonably incidental thereto, and (6) such Assignee agrees that it will
perform all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its
processing fee payment under the Assignment and Acceptance and receipt and
acknowledgment by Agent of such fully executed Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Lender PRO TANTO.
(e) Any Lender may at any time, with the written consent
of Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "PARTICIPANT") participating interests
in its Obligations, the Commitment, and the other rights and interests of that
Lender (the "ORIGINATING LENDER") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); PROVIDED, HOWEVER, that (i) the Originating Lender shall remain a
"Lender" for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a "Lender" hereunder or under the other Loan
Documents and the Originating Lender's obligations under this Agreement shall
remain unchanged, (ii) the Originating Lender shall remain solely responsible
for the performance of such obligations, (iii) Borrowers, Agent, and the Lenders
shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender's rights and obligations under this
Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant
any participating interest under which the Participant has the right to approve
any amendment to, or any consent or waiver with respect to, this Agreement or
any other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating, (C) release
all or a material portion of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant through such Lender, or (E) change the amount or due dates of
scheduled principal repayments or prepayments or premiums; and (v) all amounts
payable by Borrowers hereunder shall be determined as if such Lender had not
sold such participation; except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement. The rights of any Participant only shall be derivative through
the Originating Lender with whom such Participant participates and no
Participant shall have any rights under this Agreement or the other Loan
Documents or any direct rights as to the other Lenders, Agent,
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Borrowers, the Collections, the Collateral, or otherwise in respect of the
Obligations. No Participant shall have the right to participate directly in
the making of decisions by the Lenders among themselves.
(f) In connection with any such assignment or
participation or proposed assignment or participation, a Lender may disclose all
documents and information which it now or hereafter may have relating to
Borrowers or Borrowers' business.
(g) Any other provision in this Agreement
notwithstanding, any Lender may at any time create a security iterest in, or
pledge, all or any portion of its rights under and interest in this Agreement in
favor of any Federal Reserve Bank in accordance with Regulation A of the Federal
Reserve Bank or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal
Reserve Bank may enforce such pledge or security interest in any manner
permitted under applicable law.
14.2 SUCCESSORS. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; PROVIDED,
HOWEVER, that Borrowers may not assign this Agreement or any rights or duties
hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void AB INITIO. No consent to assignment by the
Lenders shall release any Borrower from its Obligations. A Lender may assign
this Agreement and the other Loan Documents and its rights and duties hereunder
and thereunder pursuant to SECTION 14.1 hereof and, except as expressly required
pursuant to SECTION 14.1 hereof, no consent or approval by any Borrower is
required in connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrowers therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) and Administrative Borrower (on behalf
of all Borrowers) and then any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that no such waiver, amendment, or consent shall, unless in writing and
signed by all of the Lenders affected thereby and Administrative Borrower (on
behalf of all Borrowers) and acknowledged by Agent, do any of the following:
(a) increase or extend any Commitment of any Lender,
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees, or other
amounts due hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of interest on,
any loan or other extension of credit hereunder, or reduce any fees or other
amounts payable hereunder or under any other Loan Document,
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(d) change the percentage of the Commitments that is
required to take any action hereunder,
(e) amend this section or any provision of the Agreement
providing for consent or other action by all Lenders,
(f) release Collateral other than as permitted by SECTION
16.12,
(g) change the definition of "Required Lenders",
(h) contractually subordinate any of the Agent's Liens,
(i) release any Borrower from any obligation for the
payment of money, or
(j) change the definition of Borrowing Base or the
definitions of Eligible Accounts, Eligible Inventory, or Maximum Amount; or
(k) amend any of the provisions of SECTION 16.
and, PROVIDED FURTHER, HOWEVER, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, Issuing Lender, or Swing Lender, affect
the rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable,
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent, termination, or release of, or
with respect to, any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrowers, shall not require
consent by or the agreement of Borrowers.
15.2 REPLACEMENT OF HOLDOUT LENDER If any action to be taken by the
Lender Group or Agent hereunder requires the unanimous consent, authorization,
or agreement of all Lenders, and a Lender ("HOLDOUT LENDER") fails to give its
consent, authorization, or agreement, then Agent, upon at least 5 Business Days
prior irrevocable notice to the Holdout Lender, may permanently replace the
Holdout Lender with one or more substitute Lenders (each, a "REPLACEMENT
LENDER"), and the Holdout Lender shall have not right to refuse to be replaced
hereunder. Such notice to replace the Holdout Lender shall specify an effective
date for such replacement, which date shall not be later than 15 Business Days
after the date such notice is given.
Prior to the effective date of such replacement, the Holdout Lender and
each Replacement Lender shall execute and deliver an Assignment and Acceptance
Agreement, subject only to the Holdout Lender being repaid its share of the
outstanding Obligations (including an assumption of its Pro Rata Share of the
Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. The replacement of any Holdout Lender
shall be made in accordance
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with the terms of SECTION 14.1. Until such time as the Replacement Lenders
shall have acquired all of the Obligations, the Commitments, and the other
rights and obligations of the Holdout Lender hereunder and under the other
Loan Documents, the Holdout Lender shall remain obligated to make the Holdout
Lender's Pro Rata Share of Advances and to purchase a participation in each
Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit.
15.3 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or any
Lender to exercise any right, remedy, or option under this Agreement or, any
other Loan Document, or delay by Agent or any Lender in exercising the same,
will operate as a waiver thereof. No waiver by Agent or any Lender will be
effective unless it is in writing, and then only to the extent specifically
stated. No waiver by Agent or any Lender on any occasion shall affect or
diminish Agent's and each Lender's rights thereafter to require strict
performance by Borrowers of any provision of this Agreement. Agent's and each
Lender's rights under this Agreement and the other Loan Documents will be
cumulative and not exclusive of any other right or remedy that Agent or any
Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
designates and appoints WFRF as its representative under this Agreement and the
other Loan Documents and each Lender hereby irrevocably authorizes Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to Agent by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this SECTION 16.
The provisions of this SECTION 16 are solely for the benefit of Agent, and the
Lenders, and Borrowers shall have no rights as a third party beneficiary of any
of the provisions contained herein. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only, that WFRF is
merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Obligations, the Collateral,
the Collections, and related matters, (b) execute or file any and all financing
or similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of
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claim, notices and other written agreements with respect to the Loan
Documents, (c) make Advances, for itself or on behalf of Lenders as provided
in the Loan Documents, (d) exclusively receive, apply, and distribute the
Collections as provided in the Loan Documents, (e) open and maintain such
bank accounts and cash management accounts as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections, (f) perform, exercise,
and enforce any and all other rights and remedies of the Lender Group with
respect to Borrowers, the Obligations, the Collateral, the Collections, or
otherwise related to any of same as provided in the Loan Documents, and (g)
incur and pay such Lender Group Expenses as Agent may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents.
16.2 DELEGATION OF DUTIES. Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
16.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall
(i) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by any Borrower or any
Subsidiary or Affiliate of any Borrower, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
any Borrower or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the Books or properties of Borrowers or the
books or records or properties of any of Borrowers' Subsidiaries or Affiliates.
16.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrowers
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting,
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or in refraining from acting, under this Agreement or any other Loan Document
in accordance with a request or consent of the Lenders and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
of the Lenders.
16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to Agent for the account of the Lenders,
except with respect to Events of Default of which Agent has actual knowledge,
unless Agent shall have received written notice from a Lender or Administrative
Borrower referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a "notice of default." Agent promptly
will notify the Lenders of its receipt of any such notice or of any Event of
Default of which Agent has actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
SECTION 16.4, Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Required Lenders in accordance with
SECTION 9; PROVIDED, HOWEVER, that unless and until Agent has received any such
request, Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable.
16.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrowers
and their Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrowers. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrowers and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
16.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and pay
Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and
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fulfillment of its functions, powers, and obligations pursuant to the Loan
Documents, including court costs, reasonable attorneys fees and expenses,
costs of collection by outside collection agencies and auctioneer fees and
costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrowers are obligated to reimburse Agent or
Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent
is authorized and directed to deduct and retain sufficient amounts from
Collections received by Agent to reimburse Agent for such out-of-pocket costs
and expenses prior to the distribution of any amounts to Lenders. In the
event Agent is not reimbursed for such costs and expenses from Collections
received by Agent, each Lender hereby agrees that it is and shall be
obligated to pay to or reimburse Agent for the amount of such Lender's Pro
Rata Share thereof. Whether or not the transactions contemplated hereby are
consummated, the Lenders shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of Borrowers and
without limiting the obligation of Borrowers to do so), according to their
Pro Rata Shares, from and against any and all Indemnified Liabilities;
PROVIDED, HOWEVER, that no Lender shall be liable for the payment to any
Agent-Related Person of any portion of such Indemnified Liabilities resulting
solely from such Person's gross negligence or willful misconduct nor shall
any Lender be liable for the obligations of any Defaulting Lender in failing
to make an Advance or other extension of credit hereunder. Without limitation
of the foregoing, each Lender shall reimburse Agent upon demand for such
Lender's ratable share of any costs or out-of-pocket expenses (including
attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that Agent is not reimbursed for such
expenses by or on behalf of Borrowers. The undertaking in this section shall
survive the payment of all Obligations hereunder and the resignation or
replacement of Agent.
16.8 AGENT IN INDIVIDUAL CAPACITY. WFRF and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in, and generally engage in any kind of banking, trust,
financial advisory, underwriting, or other business with Borrowers and their
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents as though WFRF were not Agent hereunder, and, in
each case, without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, WFRF or its Affiliates may receive information regarding Borrowers
or their Affiliates and any other Person (other than the Lender Group) party to
any Loan Documents that is subject to confidentiality obligations in favor of
Borrowers or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include WFRF in its individual capacity.
16.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45 days notice
to the Lenders. If Agent resigns under this Agreement, the Required Lenders
shall appoint a successor
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Agent for the Lenders. If no successor Agent is appointed prior to the
effective date of the resignation of Agent, Agent may appoint, after
consulting with the Lenders, a successor Agent. If Agent has materially
breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and
replace Agent with a successor Agent from among the Lenders. In any such
event, upon the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers, and duties of
the retiring Agent and the term "Agent" shall mean such successor Agent and
the retiring Agent's appointment, powers, and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this SECTION 16 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
If no successor Agent has accepted appointment as Agent by the date which is
45 days following a retiring Agent's notice of resignation, the retiring
Agent's resignation shall nevertheless thereupon become effective and the
Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.
16.10 LENDER IN INDIVIDUAL CAPACITY. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with
Borrowers and their Subsidiaries and Affiliates and any other Person (other than
the Lender Group) party to any Loan Documents as though such Lender were not a
Lender hereunder without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, such Lender and its respective Affiliates may receive information
regarding Borrowers or their Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrowers or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of the
Agent.
16.11 WITHHOLDING TAXES. (a) If any Lender is a "foreign
corporation, partnership or trust" within the meaning of the IRC and such Lender
claims exemption from, or a reduction of, U.S. withholding tax under Sections
1441 or 1442 of the IRC, such Lender agrees with and in favor of Agent and
Borrowers, to deliver to Agent and Administrative Borrower:
(i) if such Lender claims an exemption from withholding
tax pursuant to its portfolio interest exception, (a) a statement of
the Lender, signed under penalty of perjury, that it is not a (I) a
"bank" as described in Section 881(c)(3)(A) of the IRC, (II) a 10%
shareholder (within the meaning of Section 881(c)(3)(B) of the IRC), or
(III) a controlled foreign corporation described in Section
881(c)(3)(C) of the IRC, and (B) a properly completed IRS Form W-8BEN,
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before the first payment of any interest under this Agreement and at
any other time reasonably requested by Agent or Administrative
Borrower;
(ii) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Form W-8BEN before the first payment of any
interest under this Agreement and at any other time reasonably
requested by Agent or Administrative Borrower;
(iii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form W-8ECI
before the first payment of any interest is due under this Agreement
and at any other time reasonably requested by Agent or Administrative
Borrower;
(iv) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Administrative Borrower of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrowers to such Lender, such
Lender agrees to notify Agent of the percentage amount in which it is no longer
the beneficial owner of Obligations of Borrowers to such Lender. To the extent
of such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no
longer valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless for all amounts
paid, directly or indirectly, by Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Agent under this section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
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this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.
(e) All payments made by Borrowers hereunder or under any note or
other Loan Document will be made without setoff, counterclaim, or other defense,
except as required by applicable law other than for Taxes (as defined below).
All such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction (other than the United States) or by any political subdivision or
taxing authority thereof or therein (other than of the United States) with
respect to such payments (but excluding, any tax imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein (i) measured
by or based on the net income or net profits of a Lender, or (ii) to the extent
that such tax results from a change in the circumstances of the Lender,
including a change in the residence, place of organization, or principal place
of business of the Lender, or a change in the branch or lending office of the
Lender participating in the transactions set forth herein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively as "TAXES"). If any Taxes are so levied or imposed,
each Borrower agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement or under any note, including any amount paid pursuant to this SECTION
16.11(e) after withholding or deduction for or on account of any Taxes, will not
be less than the amount provided for herein; PROVIDED, HOWEVER, that Borrowers
shall not be required to increase any such amounts payable to Agent or any
Lender (i) that is not organized under the laws of the United States, if such
Person fails to comply with the other requirements of this SECTION 16.11, or
(ii) if the increase in such amount payable results from Agent's or such
Lender's own willful misconduct or gross negligence. Borrowers will furnish to
Agent as promptly as possible after the date the payment of any Taxes is due
pursuant to applicable law certified copies of tax receipts evidencing such
payment by Borrowers.
16.12 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, at
its option and in its sole discretion, to release any Lien on any Collateral (i)
upon the termination of the Commitments and payment and satisfaction in full by
Borrowers of all Obligations, (ii) constituting property being sold or disposed
of if a release is required or desirable in connection therewith and if
Administrative Borrower certifies to Agent that the sale or disposition is
permitted under SECTION 7.4 of this Agreement or the other Loan Documents (and
Agent may rely conclusively on any such certificate, without further inquiry),
(iii) constituting property in which no Borrower owned any interest at the time
the security interest was granted or at any time thereafter, or (iv)
constituting property leased to a Borrower under a lease that has expired or is
terminated in a transaction permitted under this Agreement. Except as provided
above, Agent will not execute and deliver a release of any Lien on any
Collateral without the prior written authorization of (y) if the release is of
all or substantially all of the Collateral, all of the Lenders, or (z)
otherwise, the Required Lenders. Upon request by Agent or Administrative
Borrower at any time, the Lenders will confirm in writing Agent's authority to
release any such Liens on
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particular types or items of Collateral pursuant to this SECTION 16.12;
PROVIDED, HOWEVER, that (1) Agent shall not be required to execute any
document necessary to evidence such release on terms that, in Agent's opinion,
would expose Agent to liability or create any obligation or entail any
consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of Borrowers in respect of) all
interests retained by Borrowers, including, the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by Borrowers or is
cared for, protected, or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission, or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.
16.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without
the express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the Obligations,
any amounts owing by such Lender to Borrowers or any deposit accounts of
Borrowers now or hereafter maintained with such Lender. Each of the Lenders
further agrees that it shall not, unless specifically requested to do so by
Agent, take or cause to be taken any action, including, the commencement of any
legal or equitable proceedings, to foreclose any Lien on, or otherwise enforce
any security interest in, any of the Collateral the purpose of which is, or
could be, to give such Lender any preference or priority against the other
Lenders with respect to the Collateral.
(b) If, at any time or times any Lender shall receive (i)
by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender's ratable portion of all such
distributions by Agent, such Lender promptly shall (1) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in immediately available funds, as applicable, for the account
of all of the Lenders and for application to the Obligations in accordance with
the applicable provisions of this Agreement, or (2) purchase, without recourse
or warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the
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Lenders in accordance with their Pro Rata Shares; provided, however, that if all
or part of such excess payment received by the purchasing party is thereafter
recovered from it, those purchases of participations shall be rescinded in whole
or in part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
16.14 AGENCY FOR PERFECTION. Agent hereby appoints each other Lender
as its agent (and each Lender hereby accepts such appointment) for the purpose
of perfecting the Agent's Liens in assets which, in accordance with Article 9 of
the UCC can be perfected only by possession. Should any Lender obtain possession
of any such Collateral, such Lender shall notify Agent thereof, and, promptly
upon Agent's request therefor shall deliver such Collateral to Agent or in
accordance with Agent's instructions.
16.15 PAYMENTS BY AGENT TO THE LENDERS. All payments to be made by
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, or interest of the Obligations.
16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each
member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by Agent in accordance with the terms of this Agreement or the
other Loan Documents relating to the Collateral and the exercise by Agent of its
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.
16.17 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By becoming a party to
this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "REPORT" and collectively, "REPORTS") prepared by
Agent, and Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does not
(i) make any representation or warranty as to the accuracy of any Report, and
(ii) shall not be liable for any information contained in any Report,
(c) expressly agrees and acknowledges that the Reports
are not comprehensive audits or examinations, that Agent or other party
performing any audit or examination will inspect only specific information
regarding Borrowers and will rely significantly upon the Books, as well as on
representations of Borrowers' personnel,
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(d) agrees to keep all Reports and other material,
non-public information regarding Borrowers and their Subsidiaries and their
operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by Borrowers that in any
event such Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) reasonably required by any BONA
FIDE potential or actual Assignee or Participant in connection with any
contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, (c) of
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as
required or requested by any court, governmental or administrative agency,
pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; PROVIDED, HOWEVER, that, unless prohibited by
applicable law, statute, regulation, or court order, such Lender shall notify
Administrative Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or where
practicable, prior to the disclosure thereof, and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrowers, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrowers; and (ii) to pay and protect, and indemnify,
defend and hold Agent, and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses,
and other amounts (including, attorneys fees and costs) incurred by Agent and
any such other Lender preparing a Report as the direct or indirect result of any
third parties who might obtain all or part of any Report through the
indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrowers to Agent that has not been contemporaneously
provided by Borrowers to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender, (y) to the extent that Agent is
entitled, under any provision of the Loan Documents, to request additional
reports or information from Borrowers, any Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Lender's
notice to Agent, whereupon Agent promptly shall request of Administrative
Borrower the additional reports or information reasonably specified by such
Lender, and, upon receipt thereof from Administrative Borrower, Agent promptly
shall provide a copy of same to such Lender, and (z) any time that Agent renders
to Administrative Borrower a statement regarding the Loan Account, Agent shall
send a copy of such statement to each Lender.
16.18 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that
certain of the Loan Documents now or hereafter may have been or will be executed
only by or in favor of Agent in its capacity as such, and not by or in favor of
the Lenders, any and all obligations on the part of
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Agent (if any) to make any credit available hereunder shall constitute the
several (and not joint) obligations of the respective Lenders on a ratable
basis, according to their respective Commitments, to make an amount of such
credit not to exceed, in principal amount, at any one time outstanding, the
amount of their respective Commitments. Nothing contained herein shall confer
upon any Lender any interest in, or subject any Lender to any liability for,
or in respect of, the business, assets, profits, losses, or liabilities of any
other Lender. Each Lender shall be solely responsible for notifying its
Participants of any matters relating to the Loan Documents to the extent any
such notice may be required, and no Lender shall have any obligation, duty, or
liability to any Participant of any other Lender. Except as provided in
SECTION 16.7, no member of the Lender Group shall have any liability for the
acts or any other member of the Lender Group. No Lender shall be responsible to
any Borrower or any other Person for any failure by any other Lender to fulfill
its obligations to make credit available hereunder, nor to advance for it or on
its behalf in connection with its Commitment, nor to take any other action on
its behalf hereunder or in connection with the financing contemplated herein.
16.19 LEGAL REPRESENTATION OF AGENT. In connection with the
negotiation, drafting, and execution of this Agreement and the other Loan
Documents, or in connection with future legal representation relating to loan
administration, amendments, modifications, waivers, or enforcement of remedies,
Patton Boggs LLP ("PATTON BOGGS") only has represented and only shall represent
WFRF in its capacity as Agent and as a Lender. Each other Lender hereby
acknowledges that Patton Boggs does not represent it in connection with any such
matters.
16.20 CONFIDENTIALITY. Except as otherwise provided in this
Agreement, Agent shall not disclose any confidential information to any Person
without the consent of Borrower, other than (a) to Agent's Affiliates and its
officers, directors, employees, agents and advisors and to actual or prospective
assignees and participants, and then only on a confidential basis; (b) as
required by any law, rule or regulation or judicial process; and (c) as
requested or required by any state, federal or foreign authority or examiner
regulating banks or banking. If Agent is required by any law, rule or regulation
or judicial process to disclose any confidential information, Agent will
promptly give notice to Borrower so that Borrower may seek a protective order or
other appropriate remedy. If Borrower shall not obtain such protective order or
other remedy, Agent will endeavor to furnish only that portion of the
confidential information which Agent reasonably believes to be legally required.
17. GENERAL PROVISIONS.
17.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrowers, Agent, and each Lender whose signature is
provided for on the signature pages hereof.
17.2 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.
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17.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrowers, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
17.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
17.5 AMENDMENTS IN WRITING. This Agreement only can be amended by a
writing in accordance with SECTION 15.1.
17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document MUTATIS
MUTANDIS.
17.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by any Borrower or the transfer to the Lender Group
of any property should for any reason subsequently be declared to be void or
voidable under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "VOIDABLE TRANSFER"), and if the Lender Group is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that the Lender Group is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of the Lender Group related thereto, the liability of Borrowers
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
17.8 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
17.9 PARENT AS AGENT FOR BORROWERS. Each Borrower hereby
irrevocably appoints Parent as the borrowing agent and attorney-in-fact for all
Borrowers (the "ADMINISTRATIVE BORROWER") which appointment shall remain in full
force and effect unless and until Agent shall
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have received prior written notice signed by each Borrower that such appointment
has been revoked and that another Borrower has been appointed Administrative
Borrower. Each Borrower hereby irrevocably appoints and authorizes the
Administrative Borrower (i) to provide Agent with all notices with respect to
Advances and Letters of Credit obtained for the benefit of any Borrower and all
other notices and instructions under this Agreement and (ii) to take such action
as the Administrative Borrower deems appropriate on its behalf to obtain
Advances and Letters of Credit and to exercise such other powers as are
reasonably incidental thereto to carry out the purposes of this Agreement. It is
understood that the handling of the Loan Account and Collateral of Borrowers in
a combined fashion, as more fully set forth herein, is done solely as an
accommodation to Borrowers in order to utilize the collective borrowing powers
of Borrowers in the most efficient and economical manner and at their request,
and that Lender Group shall not incur liability to any Borrower as a result
hereof. Each Borrower expects to derive benefit, directly or indirectly, from
the handling of the Loan Account and the Collateral in a combined fashion since
the successful operation of each Borrower is dependent on the continued
successful performance of the integrated group. To induce the Lender Group to do
so, and in consideration thereof, each Borrower hereby jointly and severally
agrees to indemnify each member of the Lender Group and hold each member of the
Lender Group harmless against any and all liability, expense, loss or claim of
damage or injury, made against the Lender Group by any Borrower or by any third
party whosoever, arising from or incurred by reason of (a) the handling of the
Loan Account and Collateral of Borrowers as herein provided, (b) the Lender
Group's relying on any instructions of the Administrative Borrower, or (c) any
other action taken by the Lender Group hereunder or under the other Loan
Documents, except that Borrowers will have no liability to the relevant
Agent-Related Person or Lender-Related Person under this SECTION 17.9 with
respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Agent-Related Person or Lender-Related Person, as the
case may be.
17.10 AMENDMENT AND RESTATEMENT. This Agreement and the financing
commitments set forth herein constitute an amendment, modification and
restatement, but not an extinguishment or novation, of the Existing Loan
Agreement and the financing commitments set forth therein. This Agreement and
the Loan Documents are not intended as, and shall not be construed as, a
release, impairment or novation of the indebtedness, liabilities and obligations
of the Borrowers under the Existing Loan Agreement and the other documents
contemplated thereby or the liens and security interests granted therein, all of
which liens and security interests are hereby modified and affirmed. With
respect to matters relating to the period of this Agreement prior to the date
hereof, all of the provisions of the Existing Loan Agreement are hereby ratified
and confirmed, and shall remain in full force and effect. The Existing Loan
Agreement, as modified by the provisions of this Agreement, shall be construed
as one agreement.
[SIGNATURE PAGE TO FOLLOW.]
105
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
ULTIMATE ELECTRONICS, INC.,
a Delaware corporation
By: /s/ Alan E. Kessock
------------------------------------------
Alan E. Kessock, Senior Vice President
ULTIMATE INTANGIBLES CORP.,
a Colorado corporation
By: /s/ John Bauer-Martinez
------------------------------------------
John Bauer-Martinez, President
ULTIMATE LEASING CORP.,
a Colorado corporation
By: /s/ John Bauer-Martinez
------------------------------------------
John Bauer-Martinez, President
FAST TRAK, INC.,
a Minnesota corporation
By: /s/ Alan E. Kessock
------------------------------------------
Alan E. Kessock, Secretary
ULTIMATE ELECTRONICS PARTNERS CORP.,
a Colorado corporation
By: /s/ John Bauer-Martinez
------------------------------------------
John Bauer-Martinez, President
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ULTIMATE ELECTRONICS LEASING LP,
a Texas limited partnership
By: Ultimate Leasing Corp., its General Partner
By: /s/ John Bauer-Martinez
---------------------------------------
John Bauer-Martinez, President
ULTIMATE ELECTRONICS TEXAS LP,
a Texas limited partnership
By: Ultimate Electronics, Inc., its General
Partner
By: /s/ Alan E. Kessock
---------------------------------------
Alan E. Kessock, Senior Vice President
WELLS FARGO RETAIL FINANCE, LLC,
a Delaware limited liability company, as Agent and
as a Lender
By: /s/ Robert Castine
-----------------------------------------
Name: Robert Castine
-----------------------------------------
Title: Senior Vice President
-----------------------------------------
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TABLE OF CONTENTS
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SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT................................................1
1. DEFINITIONS AND CONSTRUCTION..................................................................2
1.1 Definitions..........................................................................2
1.2 Accounting Terms....................................................................25
1.3 Code................................................................................26
1.4 Construction........................................................................26
1.5 Schedules and Exhibits..............................................................26
2. LOAN AND TERMS OF PAYMENT....................................................................27
2.1 Revolver Advances...................................................................27
2.2 [This Section is intentionally omitted].............................................28
2.3 Borrowing Procedures and Settlements................................................28
2.4 Payments............................................................................35
2.5 Overadvances........................................................................37
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations.........38
2.7 Credit Card Collections.............................................................39
2.8 Depository Accounts.................................................................39
2.9 Collections.........................................................................40
2.10 Crediting Payments; Float Charge....................................................40
2.11 Designated Account..................................................................41
2.12 Maintenance of Loan Account; Statements of Obligations..............................41
2.13 Fees................................................................................41
2.14 Letters of Credit...................................................................42
2.15 LIBOR Option........................................................................46
2.16 Capital Requirements................................................................48
2.17 Joint and Several Liability of Borrowers; Rights of Contribution....................49
3. CONDITIONS; TERM OF AGREEMENT................................................................53
3.1 Conditions Precedent to the Effectiveness of this Agreement.........................53
3.2 [This Section is intentionally omitted.]............................................54
3.3 Conditions Precedent to all Extensions of Credit....................................54
3.4 Conditions Precedent to Real Estate Advances........................................54
3.5 Term................................................................................55
3.6 Effect of Termination...............................................................55
3.7 Early Termination by Borrowers......................................................56
4. CREATION OF SECURITY INTEREST................................................................57
4.1 Grant of Security Interest..........................................................57
4.2 Negotiable Collateral...............................................................57
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral..............57
4.4 Delivery of Additional Documentation Required; Lien Perfection......................57
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4.5 Power of Attorney...................................................................58
4.6 Right to Inspect....................................................................59
4.7 Control Agreements..................................................................59
5. REPRESENTATIONS AND WARRANTIES...............................................................59
5.1 No Encumbrances.....................................................................59
5.2 Eligible Accounts...................................................................59
5.3 Eligible Inventory..................................................................59
5.4 Equipment...........................................................................59
5.5 Location of Inventory and Equipment.................................................60
5.6 Inventory Records...................................................................60
5.7 Location of Chief Executive Office; FEIN; Organizational I.D. Number; Names.........60
5.8 Due Organization and Qualification; Subsidiaries....................................60
5.9 Due Authorization; No Conflict......................................................61
5.10 Litigation..........................................................................61
5.11 No Material Adverse Change..........................................................61
5.12 Fraudulent Transfer.................................................................62
5.13 Employee Benefits...................................................................62
5.14 Environmental Condition.............................................................62
5.15 Intellectual Property...............................................................62
5.16 Locations; Leases...................................................................63
5.17 Complete Disclosure.................................................................63
5.18 Indebtedness........................................................................63
6. AFFIRMATIVE COVENANTS........................................................................64
6.1 Accounting System...................................................................64
6.2 Collateral Reporting................................................................64
6.3 Financial Statements, Reports, Certificates.........................................65
6.4 Return..............................................................................68
6.5 Maintenance of Properties; Title to Equipment.......................................68
6.6 Title to Equipment..................................................................68
6.7 Maintenance of Equipment............................................................68
6.8 Taxes...............................................................................68
6.9 Insurance...........................................................................69
6.10 Location of Inventory and Equipment.................................................70
Keep the Inventory and Equipment only at the locations identified on Schedule 5.16;
provided, however, that Administrative Borrower may amend Schedule 5.16
so long as such amendment occurs by written notice to Agent not less
than 30 days prior to the date on which the Inventory or Equipment is
moved to such new location, so long as such new location is within the
continental United States, and so long as, at the time of such written
notification, the applicable Borrower provides any financing statements
or fixture filings necessary to perfect and continue perfected the Agent's
Liens on such assets and also provides to Agent a Collateral Access Agreement.......70
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6.11 Compliance with Laws.................................................70
6.12 Leases...............................................................70
6.13 Brokerage Commissions................................................70
6.14 Existence............................................................71
6.15 Environmental........................................................71
6.16 Disclosure Updates...................................................71
6.17 Inventories, Appraisals, and Audits..................................71
6.18 Electronic Reporting.................................................72
6.19 Landlord Waivers and Consents........................................73
6.20 Material Inventory Supplier..........................................73
6.21 No Setoff or Counterclaims...........................................73
7. NEGATIVE COVENANTS............................................................73
7.1 Indebtedness.........................................................73
7.2 Liens................................................................74
7.3 Restrictions on Fundamental Changes..................................74
7.4 Disposal of Assets...................................................75
7.5 Change Name..........................................................75
7.6 Guarantee............................................................75
7.7 Nature of Business...................................................75
7.8 Prepayments and Amendments...........................................75
7.9 Change of Control....................................................75
7.10 Consignments.........................................................75
7.11 Distributions........................................................75
7.12 Accounting Methods...................................................76
7.13 Investments..........................................................76
7.14 Transactions with Affiliates.........................................76
7.15 Suspension...........................................................77
7.16 [Intentionally Omitted]..............................................77
7.17 Use of Proceeds......................................................77
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees...............................................77
7.19 Securities Accounts..................................................77
7.20 No Prohibited Transactions Under ERISA...............................77
7.21 Financial Covenants..................................................78
7.22 Capital Expenditures.................................................79
8. EVENTS OF DEFAULT.............................................................80
9. THE LENDER GROUP'S RIGHTS AND REMEDIES........................................83
9.1 Rights and Remedies..................................................83
9.2 Remedies Cumulative..................................................85
9.3 License..............................................................85
10. TAXES AND EXPENSES............................................................85
11. WAIVERS; INDEMNIFICATION......................................................86
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11.1 Demand; Protest; etc.................................................86
11.2 The Lender Group's Liability for Collateral..........................86
11.3 Indemnification......................................................86
12. NOTICES.......................................................................87
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER....................................88
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS....................................88
14.1 Assignments and Participations.......................................88
14.2 Successors...........................................................91
15. AMENDMENTS; WAIVERS...........................................................91
15.1 Amendments and Waivers...............................................91
15.2 Replacement of Holdout Lender........................................92
15.3 No Waivers; Cumulative Remedies......................................93
16. AGENT; THE LENDER GROUP.......................................................93
16.1 Appointment and Authorization of Agent...............................93
16.2 Delegation of Duties.................................................94
16.3 Liability of Agent...................................................94
16.4 Reliance by Agent....................................................94
16.5 Notice of Default or Event of Default................................95
16.6 Credit Decision......................................................95
16.7 Costs and Expenses; Indemnification..................................95
16.8 Agent in Individual Capacity.........................................96
16.9 Successor Agent......................................................96
16.10 Lender in Individual Capacity........................................97
16.11 Withholding Taxes....................................................97
16.12 Collateral Matters...................................................99
16.13 Restrictions on Actions by Lenders; Sharing of Payments.............100
16.14 Agency for Perfection...............................................101
16.15 Payments by Agent to the Lenders....................................101
16.16 Concerning the Collateral and Related Loan Documents................101
16.17 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and
Information.........................................................101
16.18 Several Obligations; No Liability...................................102
16.19 Legal Representation of Agent.......................................103
16.20 Confidentiality.....................................................103
17. GENERAL PROVISIONS...........................................................103
17.1 Effectiveness.......................................................103
17.2 Section Headings....................................................103
17.3 Interpretation......................................................104
17.4 Severability of Provisions..........................................104
17.5 Amendments in Writing...............................................104
17.6 Counterparts; Telefacsimile Execution...............................104
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17.7 Revival and Reinstatement of Obligations............................104
17.8 Integration.........................................................104
17.9 Parent as Agent for Borrowers.......................................104
17.10 Amendment and Restatement...........................................105
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EXHIBITS AND SCHEDULES
Exhibit A-1 Form of Assignment and Acceptance
Exhibit B-1 Form of Borrowing Base Certificate
Exhibit C-1 Form of Compliance Certificate
Exhibit L-1 Form of LIBOR Notice
Schedule C-1 Commitments
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 2.7 Credit Card Collection Arrangements
Schedule 2.8 Depository Account Schedule
Schedule 5.7 Chief Executive Office; FEIN; Organizational I.D.
Number; Names
Schedule 5.8(b) Capitalization of Borrowers
Schedule 5.8(c) Capitalization of Borrowers' Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Environmental Matters
Schedule 5.15 Intellectual Property
Schedule 5.16 Locations; Leased Locations
Schedule 5.18 Existing Indebtedness
Schedule 7.3 Assets Transferred to Intangibles by Parent
</Table>
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<Table>
<Caption>
SCHEDULE C-1
COMMITMENTS
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LENDER COMMITMENT
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Wells Fargo Retail Finance LLC $50,000,000
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</Table>
</TEXT>
</DOCUMENT>