Document:

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into on March 1 st. 2011, by BAETA Corp., a New Jersey corporation with its principal business offices located at 1 Bridge Plaza, Suite 275 Fort Lee, NJ 07024 (the “Company”), and Michael Semenovski, MD, an individual residing at 33 Pond Ave. Apt B1204, Brookline, MA 02245 (“Executive”).

The Company desires to employ Executive, and Executive desires to be employed by the Company on the terms set forth in this Agreement.

In consideration of the mutual covenants and premises contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Executive, the Company and Executive agree as follows:

1. Term of Employment. Upon the terms set forth in this Agreement, the Company employs Executive and Executive accepts employment with the Company for the period commencing on March 01, 2011 and ending on March 01, 2016 (such period, the “Original Term”), unless sooner terminated in accordance with the provisions of Section 4 below. Upon the expiration of the Original Term, the term of Executive’s employment will not automatically extend for any additional term.

  

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2. Title and Capacity. Executive will serve as the Chief Medical Officer of the Company, and will perform the duties commensurate with such positions and such other duties as the Company’s Board of Directors (the “Board”) or the Chairman may assign to Executive consistent with his position. Executive will devote attention and energies on a part-time basis to the above duties, and Executive will maintain, during the term of this Agreement, the ability to actively engage in any other for profit business activity.

3. Compensation and Benefits.

3.1        Compensation

(a) During the Original Term, the Executive will receive an annual base compensation of: 60,000 common shares of BAETA Corp.

3.2        Payment in Installments.

The Company will pay Executive’s annual base compensation in 12 (twelve) installments.

3.3        Stock Options.

(a) On March 1, 2011, the date on which the Board considered and approved the employment of Executive subject to the execution of this Agreement, the Company approved the grant to Executive of options to acquire 50,000 shares of the Company’s common stock under the Company’s 2009 Equity Compensation Plan (the “Plan Options”). The Plan Options will have a term of five years and will be first exercisable as follows:

10,000 shares on March 1, 2012;

10,000 shares on March 1, 2013;

10,000 shares on March 1, 2014;

 

  

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10,000 shares on March 1, 2015;

and 10,000 shares on March 1, 2016.

All options will be exercisable at $0.50 per share.

(b) The Plan Options will be vested and exercisable in full under the terms of the stock option agreement between the Company and Executive for at least 12 months (a) if the Company terminates Executive’s employment under Section 4.3 for any reason other than for cause, (b) if Executive terminates Executive’s employment under Section 4.5(b) for good reason, (c) in the event of Executive’s death or “disability,” as defined in the Equity Plan or (d) in the event of a “Change in Control,” as such term is defined in the Equity Plan. Except as provided in this Section 3.3, the Plan Options are in all respects subject to the terms of the Equity Plan and the stock option agreement between the Company and Executive covering the Plan Options.

3.4 Expenses.

(a) The Company will reimburse Executive for all reasonable travel, entertainment and other expenses incurred or paid by Executive in connection with, or related to, the performance of his duties under this Agreement in accordance with the Travel and Expense Policy published by the Company’s Finance Department for senior executives generally, as amended from time to time.

  

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3.5         Stock Purchase. Within 60 days of Executive’s first date of employment, Executive may purchase from the Company up to 120,000 shares of the Company’s common stock at a price of $0.50 per share. These shares will not be subject to any restrictions other than those applicable under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

4. Employment Termination. The employment of Executive by the Company under this Agreement will terminate upon the occurrence of any of the following:

4.1         Expiration of Term. At the election of Executive or the Company upon the expiration of the Original Term or any Additional Term if Executive or the Company notified the other pursuant to Section 1 above that Executive’s employment under this Agreement will not be extended for an Additional Term.

4.2          Cause. At the election of the Company, for “cause” as defined below, immediately upon written notice by the Company to Executive, except as provided below. “Cause” for termination is deemed to exist by reason of (a) any action by Executive resulting in the conviction of Executive of, or the entry of a plea of guilty or nolo contendere by Executive to, any crime involving moral turpitude, any felony, or any misdemeanor involving misconduct or fraud in business activities, (b) any breach of a fiduciary duty to the Company involving personal profit, (c) Executive’s willful misconduct, or recklessness or gross negligence in the performance of his duties under this Agreement, (d) any action by Executive that violates Section 6, or
(e) repeated refusals by Executive to comply with the reasonable directives of the Chief Executive Officer of the Company or the Board that are consistent with his position; provided, however, that the Company may terminate Executive’s employment under Sections 4.2 (d) or (e) above only after Executive fails to commence and continue to correct or cure each specific instance comprising cause within 10 days of receipt by Executive of written notice of the Board identifying each instance constituting cause or to correct or cure each identified instance within 45 days of receipt of such notice.

 

  

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4.3         Without Cause. At the election of the Company, at any time, upon 60 days written notice for any reason whatsoever other than for cause.

4.4         Death or Disability. Upon Executive’s death or 30 days after Executive’s disability. “Disability” means the inability of Executive, due to a physical or mental disability, to perform the duties contemplated under this Agreement for a period of 180 consecutive days. A physician satisfactory to Executive and the Company will determine if Executive is disabled. If Executive and the Company cannot agree on a physician within 30 days of either party’s written notice to the other, Executive and the Company will each select a physician, who will together select a third physician. The determination of the physician(s) as to disability will be binding on all parties.

 

  

  

  

4.5         Termination by Executive. At the election of Executive:

(a) at any time if his health should become impaired to an extent that makes the continued performance of his duties under this Agreement hazardous to his physical or mental health or his life, as certified by a physician designated by Executive and reasonably acceptable to the Company; (b) for “good reason” upon delivery of written notice of such “good reason” to the Company; or (c) upon 60 days written notice of termination. “Good reason” means:

(1) the failure by the Company to continue Executive in the position of Chief Medical Officer of the Company (or such other senior executive position as may be offered by the Company and which Executive may in his sole discretion accept);

(2) material diminution by the Chief Executive Officer of the Company or the Board of Executive’s responsibilities, duties, reporting relationships or authority as Chief Medical Officer of the Company (or such other senior executive position as may be offered by the Company and which Executive may in his sole discretion accept) or assignment to Executive of any duties inconsistent with Executive’s position as Chief Medical Officer of the Company (or such other senior executive position as may be offered by the Company and which Executive may in his sole discretion accept);

(3) failure by the Company to pay and provide to Executive the compensation provided in Section 3.1 above, which failure is not cured within 30 days after written notice of such failure is delivered by Executive to the Company;

 

  

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(4) requiring Executive to be permanently based anywhere other than within 50 miles of his present home in Brookline, MA(excluding reasonable business related travel as required by the Company’s business);

or (5) any other material breach of this Agreement by the Company, which breach is not cured within 14 days after written notice of such breach is delivered by Executive to the Company.

	
/s/ Dr. Michael Semenovski, MD

	
/s/ Mr. Leonid Pushkantser

	  	  
	
Dr. Michael Semenovski

	
Leonid Pushkantser, CEO Baeta Corp.

	 	 
	
Date

	
Date

	 	 
	
March 1, 2011

	
March 1, 2011

 

  

6a6636208ex10_1.htm

EXHIBIT 10.1

 

 

 

 

 

 

 

 

SECOND AMENDED AND RESTATED

CREDIT AGREEMENT

 

Dated as of July 1, 2009

 

among

 

iParty Retail Stores Corp.,

 

as the Lead Borrower

 

and

 

THE OTHER BORROWERS FROM TIME TO TIME PARTY HERETO

 

and

 

THE GUARANTORS FROM TIME TO TIME PARTY HERETO

 

and

 

WELLS FARGO RETAIL FINANCE, LLC,

 

as Administrative Agent, Collateral Agent and Swing Line Lender

 

and

 

THE OTHER LENDERS PARTY HERETO

 

 

 

 

 

* The asterik denotes that Confidential portions of this exhibit have been omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934.  The Confidential portions have been submitted separatedly to the Securities and Exchange Commision.

 

 

 

 

TABLE OF CONTENTS

 

	
Section

	  	
Page

	 	 	 
	
ARTICLE I

	  	  
	  	
DEFINITIONS AND ACCOUNTING TERMS

	
1

	 	 	 
	
1.01

	
Defined Terms

	
1

	
1.02

	
Other Interpretive Provisions

	
32

	
1.03

	
Accounting Terms

	
33

	
1.04

	
Rounding

	
33

	
1.05

	
Times of Day

	
33

	
1.06

	
Letter of Credit Amounts

	
33

	
1.07

	
Currency Equivalents Generally

	
34

	 	 	 
	
ARTICLE II

	  	  
	  	
THE COMMITMENTS AND CREDIT EXTENSIONS

	
34

	 	 	 
	
2.01

	
Committed Loans; Reserves

	
34

	
2.02

	
Borrowings, Conversions and Continuations of Committed Loans.

	
35

	
2.03

	
Letters of Credit.

	
37

	
2.04

	
Swing Line Loans.

	
45

	
2.05

	
Prepayments.

	
48

	
2.06

	
Termination or Reduction of Commitments.

	
49

	
2.07

	
Repayment of Loans

	
50

	
2.08

	
Interest.

	
50

	
2.09

	
Fees

	
50

	
2.10

	
Computation of Interest and Fees

	
51

	
2.11

	
Evidence of Debt.

	
51

	
2.12

	
Payments Generally; Administrative Agent’s Clawback.

	
52

	
2.13

	
Sharing of Payments by Lenders

	
54

	
2.14

	
Settlement Amongst Lenders.

	
54

	 	 	 
	
ARTICLE III

	  	  
	  	
TAXES, YIELD PROTECTION AND ILLEGALITY; APPOINTMENT OF LEAD BORROWER

	
55

	 	 	 
	
3.01

	
Taxes.

	
55

	
3.02

	
Illegality

	
57

	
3.03

	
Inability to Determine Rates

	
57

	
3.04

	
Increased Costs; Reserves on LIBO Rate Loans.

	
57

	
3.05

	
Compensation for Losses

	
59

	
3.06

	
Mitigation Obligations; Replacement of Lenders.

	
59

	
3.07

	
Survival

	
60

	
3.08

	
Designation of Lead Borrower as Borrowers’ Agent.

	
60

	 	 	 
	
ARTICLE IV

	  	  
	  	
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

	
60

	 	 	 
	
4.01

	
Conditions of Initial Credit Extension

	
60

	
4.02

	
Conditions to all Credit Extensions

	
63

 

 

 

i

 

 

 

	 	 	 
	
ARTICLE V

	  	  
	  	
REPRESENTATIONS AND WARRANTIES

	
64

	 	 	 
	
5.01

	
Existence, Qualification and Power

	
64

	
5.02

	
Authorization; No Contravention

	
65

	
5.03

	
Governmental Authorization; Other Consents

	
65

	
5.04

	
Binding Effect

	
65

	
5.05

	
Financial Statements; No Material Adverse Effect.

	
65

	
5.06

	
Litigation

	
66

	
5.07

	
No Default

	
66

	
5.08

	
Ownership of Property; Liens.

	
66

	
5.09

	
Environmental Compliance.

	
67

	
5.10

	
Insurance

	
68

	
5.11

	
Taxes

	
68

	
5.12

	
ERISA Compliance.

	
68

	
5.13

	
Subsidiaries; Equity Interests

	
69

	
5.14

	
Margin Regulations; Investment Company Act; Public Utility Holding Company Act.

	
69

	
5.15

	
Disclosure

	
70

	
5.16

	
Compliance with Laws

	
70

	
5.17

	
Intellectual Property; Licenses, Etc

	
70

	
5.18

	
Labor Matters.

	
70

	
5.19

	
Security Documents.

	
71

	
5.20

	
Solvency.

	
72

	
5.21

	
Deposit Accounts; Credit Card Arrangements.

	
72

	
5.22

	
Brokers

	
73

	
5.23

	
Customer and Trade Relations

	
73

	
5.24

	
Material Contracts

	
73

	
5.25

	
Casualty

	
73

	
5.26

	
Anti-Terrorism Laws.

	
73

	 	 	 
	
ARTICLE VI

	  	  
	  	
AFFIRMATIVE COVENANTS

	
74

	 	 	 
	
6.01

	
Financial Statements

	
74

	
6.02

	
Certificates; Other Information

	
75

	
6.03

	
Notices

	
77

	
6.04

	
Payment of Obligations

	
78

	
6.05

	
Preservation of Existence, Etc

	
79

	
6.06

	
Maintenance of Properties.

	
79

	
6.07

	
Maintenance of Insurance.

	
80

	
6.08

	
Compliance with Laws

	
81

	
6.09

	
Books and Records; Accountants.

	
81

	
6.10

	
Inspection Rights.

	
82

	
6.11

	
Use of Proceeds

	
82

	
6.12

	
Additional Loan Parties

	
83

	
6.13

	
Cash Management.

	
83

	
6.14

	
Information Regarding the Collateral.

	
84

 

 

 

ii

 

 

 

	
6.15

	
Physical Inventories.

	
85

	
6.16

	
Environmental Laws.

	
86

	
6.17

	
Further Assurances.

	
86

	
6.18

	
Compliance with Terms of Leaseholds.

	
87

	
6.19

	
Material Contracts

	
87

	
6.20

	
ERISA.

	
87

	 	 	 
	
ARTICLE VII

	  	  
	  	
NEGATIVE COVENANTS

	
88

	 	 	 
	
7.01

	
Liens

	
88

	
7.02

	
Investments

	
88

	
7.03

	
Indebtedness; Disqualified Stock.

	
88

	
7.04

	
Fundamental Changes

	
89

	
7.05

	
Dispositions

	
89

	
7.06

	
Restricted Payments

	
89

	
7.07

	
Prepayments of Indebtedness

	
89

	
7.08

	
Change in Nature of Business.

	
89

	
7.09

	
Transactions with Affiliates

	
90

	
7.10

	
Burdensome Agreements

	
90

	
7.11

	
Use of Proceeds

	
90

	
7.12

	
Amendment of Material Documents.

	
90

	
7.13

	
Corporate Name; Fiscal Year.

	
90

	
7.14

	
Deposit Accounts; Blocked Accounts; Credit Card Processors.

	
91

	
7.15

	
Consignments

	
91

	
7.16

	
[Reserved]

	
91

	
7.17

	
Minimum Availability

	
91

	
7.18

	
Capital Expenditures

	
91

	
7.19

	
Locations.

	
91

	
7.20

	
Subordinated Debt Payments

	
91

	 	 	 
	
ARTICLE VIII

	  	  
	  	
EVENTS OF DEFAULT AND REMEDIES

	
92

	 	 	 
	
8.01

	
Events of Default

	
92

	
8.02

	
Remedies Upon Event of Default

	
95

	
8.03

	
Application of Funds

	
96

	 	 	 
	
ARTICLE IX

	  	  
	  	
ADMINISTRATIVE AGENT

	
97

	 	 	 
	
9.01

	
Appointment and Authority.

	
97

	
9.02

	
Rights as a Lender

	
98

	
9.03

	
Exculpatory Provisions

	
98

	
9.04

	
Reliance by Agents.

	
99

	
9.05

	
Delegation of Duties

	
99

	
9.06

	
Resignation of Agents

	
99

	
9.07

	
Non-Reliance on Administrative Agent and Other Lenders

	
100

	
9.08

	
Administrative Agent May File Proofs of Claim

	
101

	
9.09

	
Collateral and Guaranty Matters

	
101

 

 

 

iii

 

 

 

	
9.10

	
Notice of Transfer.

	
102

	
9.11

	
Reports and Financial Statements.

	
102

	
9.12

	
Agency for Perfection.

	
103

	
9.13

	
Indemnification of Agents

	
103

	
9.14

	
Relation among Lenders

	
103

	
9.15

	
Defaulting Lender.

	
103

	 	 	 
	
ARTICLE X

	  	  
	  	
MISCELLANEOUS

	
104

	 	 	 
	
10.01

	
Amendments, Etc

	
104

	
10.02

	
Notices, Financial Statements and Other Documents; Effectiveness; Electronic Communications.

	
106

	
10.03

	
No Waiver; Cumulative Remedies

	
107

	
10.04

	
Expenses; Indemnity; Damage Waiver.

	
107

	
10.05

	
Payments Set Aside

	
109

	
10.06

	
Successors and Assigns.

	
109

	
10.07

	
Treatment of Certain Information; Confidentiality

	
113

	
10.08

	
Right of Setoff

	
114

	
10.09

	
Interest Rate Limitation

	
114

	
10.10

	
Counterparts; Integration; Effectiveness

	
114

	
10.11

	
Survival

	
115

	
10.12

	
Severability

	
115

	
10.13

	
Replacement of Lenders

	
115

	
10.14

	
Governing Law; Jurisdiction; Etc.

	
116

	
10.15

	
Waiver of Jury Trial

	
117

	
10.16

	
No Advisory or Fiduciary Responsibility

	
117

	
10.17

	
USA PATRIOT Act Notice

	
118

	
10.18

	
Foreign Asset Control Regulations

	
118

	
10.19

	
Time of the Essence

	
118

	
10.20

	
Press Releases.

	
118

	
10.21

	
Additional Waivers.

	
119

	
10.22

	
Amendment and Restatement.

	
120

	
10.23

	
No Strict Construction.

	
121

	
10.24

	
Attachments.

	
121

	 	 	 
	
SIGNATURES

	  	
S-1

 

 

 

 

iv

 

 

SCHEDULES

1.01(a)                  Borrowers

1.01(b)                 Guarantors

2.01                      Commitments and Applicable Percentages

2.03                      Existing Letters of Credit

5.01                      Loan Parties Organizational Information

5.05                      Material Indebtedness*

5.06                      Litigation

5.08(b)                 Leased Real Estate*

5.09                      Environmental Matters

5.10                      Insurance*

5.13                      Subsidiaries; Other Equity Investments; Equity Interests in the Borrower

5.17                      Intellectual Property Matters

5.18                      Labor Matters

5.21(a)                 DDAs*

5.21(b)                 Credit Card Arrangements

5.24                      Material Contracts

6.02                      Financial and Collateral Reporting

7.01                      Existing Liens

7.02                      Existing Investments

7.03                      Existing Indebtedness

10.02                    Administrative Agent’s Office; Certain Addresses for Notices

 

 

	EXHIBITS
	
 

	    Form of
	
A

	Committed Loan Notice  
	B 	Swing Line Loan Notice
	C-1 	Committed Loan Note
	C-2 	Swing Line Loan Note
	D 	Compliance Certificate
	E 	Borrowing Base Certificate*
	F 	Assignment and Assumption
	G 	Credit Card Notification
	H 	DDA Notification
	I 	Joinder Agreement
	J 	Business Plan*

 

*The asterisk denotes that confidential portions of the exhibits and schedules have been omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934.  The confidential portions have been submitted separately to the Securities and Exchange Commission.

 

  

v

  

 

CREDIT AGREEMENT

 

This SECOND AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of July 1, 2009, among

 

(i)           iPARTY RETAIL STORES CORP., a Delaware corporation (the “Lead Borrower”), as agent for the Borrowers now or hereafter party hereto,

 

(ii)         the BORROWERS now or hereafter party hereto,

 

(iv)        the GUARANTORS now or hereafter party hereto,

 

(v)         each lender from time to time party hereto (each individually, a “Lender” and collectively, the “Lenders”), and

 

(vi)        WELLS FARGO RETAIL FINANCE, LLC, as Administrative Agent, Collateral Agent and Swing Line Lender.

 

WHEREAS, Wells Fargo Retail Finance, LLC (as successor in interest to Wells Fargo Retail Finance II, LLC), as Lender and the Borrowers are parties to the Existing Credit Agreement; and

 

WHEREAS, the Lenders, the Borrowers and the Agent are willing to amend and restate the Existing Credit Agreement on the terms and subject to the conditions set forth herein; provided, that as of the Closing Date the terms and conditions related to the grant of security interests pursuant to Article 2 of the Existing Credit Agreement shall be ratified pursuant to the Security Agreement.

 

NOW, THEREFORE, in consideration of the premises and the covenants and agreements herein contained, the receipt and adequacy of which are hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS AND ACCOUNTING TERMS

 

1.01        Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:

 

“ACH” means automated clearing house transfers.

 

“Accommodation Payment” as defined in Section 10.21(d).

 

“Account” means “accounts” as defined in the UCC, and also means a right to payment of a monetary obligation, whether or not earned by performance, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a policy of insurance issued or to be issued, (d) for a secondary obligation incurred or to be incurred, (e) for energy provided or to be provided, (f) for the use or hire of a vessel under a charter or other contract, (g) arising out of the use of a credit or charge card or information contained on or for use with the card, or (h) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state.  The term “Account” includes health-care-insurance receivables.

 

“Acquisition” means, with respect to any Person (a) an Investment in, or a purchase of a Controlling interest in, the Equity Interests of any other Person, (b) a purchase or other acquisition of all or substantially all of the assets or properties of, another Person or of any business unit of another Person, (c) any merger or consolidation of such Person with any other Person or other transaction or series of transactions resulting in the acquisition of all or substantially all of the assets, or a Controlling interest in the Equity Interests, of any Person, or (d) any acquisition of any Store locations of any other Person, in each case in any transaction or group of transactions which are part of a common plan.

 

“Act” shall have the meaning provided in Section 10.17.

 

  

  

  

 

 

“Adjusted LIBO Rate” means:

 

(a)         for any Interest Period with respect to any LIBO Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of one percent) equal to (i) the LIBO Rate for such Interest Period multiplied by (ii) the Statutory Reserve Rate; and

 

(b)         for any interest rate calculation with respect to any Base Rate Loan, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of one percent) equal to (i) the LIBO Rate for an Interest Period commencing on the date of such calculation and ending on the date that is thirty (30) days thereafter multiplied by (ii) the Statutory Reserve Rate.

 

The Adjusted LIBO Rate will be adjusted automatically as of the effective date of any change in the Statutory Reserve Rate.

 

“Adjustment Date” means the first day of each Fiscal Quarter, commencing October 1, 2009.

 

“Administrative Agent” means Wells Fargo Retail Finance, LLC, in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

 

“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify the Lead Borrower and the Lenders.

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

 

“Affiliate” means, with respect to any Person, (i) another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified, (ii) any director, officer, managing member, partner, trustee, or beneficiary of that Person, (iii) any other Person directly or indirectly holding 10% or more of any class of the Equity Interests of that Person, and (iv) any other Person 10% or more of any class of whose Equity Interests is held directly or indirectly by that Person.  Notwithstanding anything herein to the contrary, in no event shall the Agent or any Lender be considered an “Affiliate” of any Loan Party.

 

“Agent(s)” means, individually, the Administrative Agent or the Collateral Agent, and collectively means both of them.

 

“Aggregate Commitments” means the Commitments of all the Lenders.

 

“Agreement” means this Credit Agreement.

 

“Allocable Amount” has the meaning specified in Section 10.21(d).

 

“Applicable Margin” means:

 

                (a)          From and after the Closing Date until the first Adjustment Date, the percentages set forth in Level II of the pricing grid below; and

 

                (b)          On the first Adjustment Date, and on each Adjustment Date thereafter, the Applicable Margin shall be determined from the following pricing grid based upon the average daily Excess Availability during the Fiscal Quarter ended immediately preceding such Adjustment Date as determined by Lender based upon the Borrowing Base Certificate(s) delivered pursuant to Section 6.01; provided, however, that notwithstanding anything to the contrary set forth herein, upon the occurrence and during the continuation of an Event of Default, the Administrative Agent may, and at the direction of the Required Lenders shall, immediately increase the Applicable Margin to that set forth in Level III (even if the Excess Availability requirements for a different Level have been met) and interest shall accrue at the Default Rate; provided, further if any of the financial statements delivered pursuant to Section 6.01 of this Agreement or any Borrowing Base Certificate is at any time restated or otherwise revised (including as 

 

 

  

1

  

 

a result of an audit) or if the information set forth in any such financial statements or Borrowing Base Certificate otherwise proves to be false or incorrect such that the Applicable Margin would have been higher than was otherwise in effect during any period, without constituting a waiver of any Default or Event of Default arising as a result thereof, interest due under this Agreement shall be immediately recalculated at such higher rate for any applicable periods and shall be due and payable on demand.

 

	
Level

	
Excess Availability

	
LIBOR

Margin

	
Base Rate

Margin

	
I

	
Greater than $6,000,000

	
3.00%

	
3.00%

	
II

	
Less than or equal to $6,000,000 but

greater than $3,000,000

	
3.25%

	
3.25%

	
III

	
Less than or equal to $3,000,000

	
3.50%

	
3.50%

 

“Applicable Percentage” means with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Commitments represented by such Lender’s Commitment at such time.  If the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 or if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments.  The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

 

“Applicable Rate” means, at any time of calculation, with respect to Commercial Letters of Credit and Standby Letters of Credit, a per annum rate equal to the Applicable Margin for Loans which are LIBO Rate Loans.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

 

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit F or any other form approved by the Administrative Agent.

 

“Attributable Indebtedness” means, on any date, in respect of any Capital Lease Obligation of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.

 

“Audited Financial Statements” means the audited Consolidated balance sheet of the Parent and its Subsidiaries for the Fiscal Year ended on or about December 27, 2008, and the related consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year of the Parent and its Subsidiaries, including the notes thereto.

 

“Auto-Extension Letter of Credit” shall have the meaning specified in Section 2.03(b)(iii).

 

“Availability” means, as of any date of determination thereof by the Administrative Agent, the result, if a positive number, of:

 

  

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(a)           the Loan Cap

minus

 

(b)          the aggregate Outstanding Amount of all Credit Extensions to, or for the account of, the Borrowers.

 

In calculating Availability at any time and for any purpose under this Agreement, the Lead Borrower shall certify to the Administrative Agent that all accounts payable and Taxes are being paid on a timely basis and consistent with past practices (absent which the Administrative Agent may establish a Reserve therefor).

 

“Availability Period” means the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments pursuant to Section 2.06, and (c) the date of termination of the commitment of each Lender to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

“Availability Reserves” means, without duplication of any other Reserves or items that are otherwise addressed or excluded through eligibility criteria, such reserves as the Administrative Agent from time to time determines in its reasonable discretion as being appropriate (a) to reflect the impediments to the Agents’ ability to realize upon the Collateral, (b) to reflect claims and liabilities that the Administrative Agent determines will need to be satisfied in connection with the realization upon the Collateral, (c) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Borrowing Base, or the assets, business, financial performance or financial condition of any Loan Party, or (d) to reflect that a Default or an Event of Default then has occurred and is continuing. Without limiting the generality of the foregoing, Availability Reserves may include (but are not limited to), in the Administrative Agent’s reasonable discretion, reserves based on: (i) rent (based upon past due rent and/or whether or not a Collateral Access Agreement, reasonably acceptable to the Collateral Agent, has been received by the Collateral Agent); (ii) customs duties, and other costs to release Inventory which is being imported into the United States; (iii) outstanding Taxes and other governmental charges, including, without limitation, ad valorem, real estate, personal property, sales, and other Taxes which may have priority over the interests of the Collateral Agent in the Collateral; (iv) Customer Credit Liabilities, (v) warehousemen’s or bailee’s charges and other Permitted Encumbrances which may have priority over the interests of the Collateral Agent in the Collateral, (vi) amounts due to vendors on account of consigned goods, (vii) Cash Management Reserves, (viii) Bank Products Reserves, (ix) payables (based upon payables which are past due normal trade terms) to the extent failure to make such payments would have a Material Adverse Effect on the Borrowers, (x) held or post-dated checks and (xi) the Minimum Availability Block.

 

“Bank Products” means any services or facilities provided to any Loan Party by a Lender or any of its Affiliates, including, without limitation, on account of (a) credit cards, (b) purchase cards, and (c) leasing, but excluding Cash Management Services.

 

“Bank Products Reserves” means such reserves as the Administrative Agent from time to time determines in its discretion as being appropriate to reflect the liabilities and obligations of the Loan Parties with respect to Bank Products then provided or outstanding.

 

“Bankruptcy Code” means Title 11 of the United States Code, as amended and in effect.

 

“Base Rate”  means, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate, as in effect from time to time, plus one and one-half of one percent (1.50%), (b) except during any period of time during which a notice delivered to the Lead Borrower in accordance with Section 3.03 shall remain in full force and effect, the Adjusted LIBO Rate plus 

 

  

3

  

 

one percent (1.00%), or (c) the rate of interest in effect for such day as publicly announced from time to time by Wells Fargo Bank as its “prime rate.”  The “prime rate” is a rate set by Wells Fargo Bank based upon various factors including Wells Fargo Bank’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such rate announced by Wells Fargo Bank shall take effect at the opening of business on the day specified in the public announcement of such change.

 

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

 

“Blocked Account” has the meaning provided in Section 6.13(a)(iii).

 

“Blocked Account Agreement” means with respect to a Blocked Account established by a Loan Party, an agreement, in form and substance reasonably satisfactory to the Collateral Agent, establishing Control (as defined in the Security Agreement) of such account by the Collateral Agent.

 

“Blocked Account Bank” means each bank with whom deposit accounts are maintained in which any funds of any of the Loan Parties from one or more DDAs are concentrated and with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.

 

“Borrowers” means, collectively, the Lead Borrower, each Person listed on Schedule 1.01(a) annexed hereto, and each other Person who shall from time to time execute and deliver a Joinder Agreement as a Borrower or such other document as the Administrative Agent deems appropriate in accordance with Section 6.12.

 

“Borrowing” means a Committed Borrowing or a Swing Line Borrowing, as the context may require.

 

“Borrowing Base” means, at any time of calculation, an amount equal to:

 

(a)           (i) for the period between October 1st and June 30th, the lesser of (x) the Cost of Eligible Inventory (net of Inventory Reserves), multiplied by 70%, and (y) 85% of the Net Retail Liquidation Value of Eligible Inventory (net of Inventory Reserves) and (ii) for the period between July 1st and September 30th, the lesser of (x) the Cost of Eligible Inventory (net of Inventory Reserves), multiplied by 75%, and (y) 90% of the Net Retail Liquidation Value of Eligible Inventory (net of Inventory Reserves);

 

plus

 

(b)            the lesser of (i) the amount of Eligible Credit Card Receivables multiplied by the Credit Card Advance Rate and (ii) $2,000,000;

 

plus

 

(c)           the then amount of all Availability Reserves..

 

“Borrowing Base Certificate” means a certificate substantially in the form of Exhibit E hereto (with such changes therein as may be required by the Administrative Agent to reflect the components of and Reserves against the Borrowing Base as provided for hereunder from time to time), executed and certified as accurate and complete by a Responsible Officer of the Lead Borrower which shall include appropriate exhibits, schedules, supporting documentation, and additional reports as reasonably requested by the Administrative Agent.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, if such day relates to any LIBO Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank market.

 

  

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“Business Plan” means the Borrowers’ business plan annexed hereto as Exhibit J and any revision, amendment or update of such business plan to which the Administrative Agent has approved.

 

“Capital Expenditures” means, with respect to any Person for any period, (a) all expenditures made (whether made in the form of cash or other property) or costs incurred for the acquisition or improvement of fixed or capital assets of such Person (excluding normal replacements and maintenance which are properly charged to current operations), in each case that are (or should be) set forth as capital expenditures in a Consolidated statement of cash flows of such Person for such period, in each case prepared in accordance with GAAP, and (b) Capital Lease Obligations incurred by a Person during such period.

 

“Capital Leases” shall mean any and all lease obligations that, in accordance with GAAP, are required to be capitalized on the books of a lessee.

 

“Capital Lease Obligations” means, with respect to any Person for any period, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as liabilities on a balance sheet of such Person under GAAP and the amount of which obligations shall be the capitalized amount thereof determined in accordance with GAAP.

 

“Cash Collateral Account” means a non-interest bearing account established by one or more of the Loan Parties with Wells Fargo Bank, and in the name of, the Collateral Agent (as the Collateral Agent shall otherwise direct) and under the sole and exclusive dominion and control of the Collateral Agent, in which deposits are required to be made in accordance with Section 2.03(g).

 

“Cash Collateralize” has the meaning specified in Section 2.03(g).

 

“Cash Management Reserves” means such reserves as the Administrative Agent, from time to time, determines in its discretion as being appropriate to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Cash Management Services then provided or outstanding.

 

“Cash Management Services” means any one or more of the following types or services or facilities provided to any Loan Party by the Administrative Agent or any of its Affiliates: (a) ACH transactions, (b) cash management services, including, without limitation, controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) foreign exchange facilities, (d) credit or debit cards, and (e) merchant services not constituting a Bank Product.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.

 

“CERCLIS” means the Comprehensive Environmental Response, Compensation, and Liability Information System maintained by the United States Environmental Protection Agency.

 

“CFC” means a Person that is a controlled foreign corporation under Section 957 of the Code.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any Law, rule, regulation or treaty, (b) any change in any Law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

 

“Change of Control” means (a) Salvatore Perisano (unless replaced by an individual or individuals reasonably satisfactory to the Administrative Agent) fails to remain as Chief 

 

  

5

  

 

Executive Officer of the Parent; (b) the acquisition, directly or indirectly, by any person or group (within the meaning of Section 13(d) and 14(d) of the Exchange Act), other than the existing shareholders of the Parent or a “person” or “group” “controlled” by one or more of such existing shareholders, of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 30% of the Equity Interests of the Parent having the right to vote for the election of members of the board of directors of the Parent on a fully diluted basis, (c) any “change in control” or “sale” or “disposition” or similar event as defined in any Organizational Document of any Loan Party, or any other document governing Material Indebtedness of any Loan Party; or (d) the Parent fails at any time to own, directly or indirectly 100% of the Equity Interests of the Lead Borrower or any of its Subsidiaries.

 

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01.

 

“Closing Fee” has the meaning set forth in Section 2.09(d).

 

“Code” means the Internal Revenue Code of 1986, and the regulations promulgated thereunder, as amended and in effect.

 

“Collateral” means any and all “Collateral” as defined in any Security Document and all other property that is or is intended under the terms of the Security Documents to be subject to Liens in favor of the Collateral Agent.

 

“Collateral Access Agreement” means an agreement reasonably satisfactory in form and substance to the Collateral Agent executed by (a) a bailee or other Person in possession of Collateral, and (b) a landlord of Real Estate leased by any Loan Party, pursuant to which such Person (i) acknowledges the Collateral Agent’s Lien on the Collateral, (ii) releases or subordinates such Person’s Liens in the Collateral held by such Person or located on such Real Estate, (iii) as to any landlord, provides the Collateral Agent with access to the Collateral located in or on such Real Estate and a reasonable time to sell and dispose of the Collateral from such Real Estate, and (iv) makes such other agreements with the Collateral Agent as the Collateral Agent may reasonably require.

 

“Collateral Agent” means Wells Fargo Retail Finance, LLC, acting in such capacity for its own benefit and the ratable benefit of the other Credit Parties, or any successor collateral agent.

 

“Collateral Monitoring Fee” has the meaning set forth in Section 2.09(c).

 

“Commercial Letter of Credit” means any Letter of Credit issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by a Borrower in the ordinary course of business of such Borrower.

 

“Commitment” means, as to each Lender, its obligation to (a) make Committed Loans to the Borrowers pursuant to Section 2.01, (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

 

“Committed Borrowing” means a borrowing consisting of simultaneous Committed Loans of the same Type and, in the case of LIBO Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01.

 

“Committed Loan” has the meaning specified in Section 2.01.

 

  

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“Committed Loan Note” means (a) the Second Amended and Restated Master Note, dated as of the Closing Date and (b) any other promissory note made by the Borrowers in favor of a Lender evidencing Committed Loans made by such Lender, substantially in the form of Exhibit C.

 

“Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a conversion of Committed Loans from one Type to the other, or (c) a continuation of LIBO Rate Loans, pursuant to Section 2.02, which, if in writing, shall be substantially in the form of Exhibit A.

 

“Compliance Certificate” means a certificate substantially in the form of Exhibit D.

 

“Concentration Account” has the meaning provided in Section 6.13(c).

 

“Consent” means actual consent given by a Lender from whom such consent is sought; or the passage of seven (7) Business Days from receipt of written notice to a Lender from the Administrative Agent of a proposed course of action to be followed by the Administrative Agent without such Lender’s giving the Administrative Agent written notice of that Lender’s objection to such course of action.

 

“Consolidated” means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries.

 

“Contractual Obligation” means, as to any Person, any provision of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  Included among such powers, with respect to a corporation, are power to cause any of the following:  (a) the election of a majority of its board of directors; (b) the authorization of the issuance of additional shares of its common stock; (c) the authorization of the issuance and designation of rights and shares of its preferred stock (if any); (d) the distribution and timing of dividends; (e) the award of performance bonuses to its executive officers; (f) the termination or severance of its executive officers; and (g) all or any similar matters.  “Controlling” and “Controlled” have meanings correlative thereto.

 

“Cost” means the lower of cost or market value of Inventory, based upon, and in accordance with, the Borrowers’ historical accounting practices, known to the Administrative Agent, which practices are in effect on the Closing Date as such calculated cost is determined from invoices received by the Borrowers, the Borrowers’ purchase journals or the Borrowers’ stock ledger.  “Cost” does not include inventory capitalization costs or other non-purchase price charges (such as freight and warehouse markups) used in the Borrowers’ calculation of cost of goods sold.

 

“Credit Card Advance Rate” means 85%.

 

“Credit Card Notifications” has the meaning provided in Section 6.13(a)(ii).

 

“Credit Card Receivables” means each “Account” (as defined in the UCC) together with all income, payments and proceeds thereof, owed by a major credit or debit card issuer (including, but not limited to, Visa, Mastercard, Discover and American Express and such other issuers approved by the Administrative Agent) to a Loan Party resulting from charges by a customer of a Loan Party on credit or debit cards issued by such issuer in connection with the sale of goods by a Loan Party, or services performed by a Loan Party, in each case in the ordinary course of its business.

 

“Credit Extensions” mean each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

 

  

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“Credit Party” or “Credit Parties” means (a) individually, (i) each Lender and its Affiliates, (ii) each Agent, (iii) each L/C Issuer, (iv) each beneficiary of each indemnification obligation undertaken by any Loan Party under any Loan Document, (v) any other Person to whom Obligations under this Agreement and other Loan Documents are owing, and (vi) the successors and assigns of each of the foregoing, and (b) collectively, all of the foregoing.

 

“Credit Party Expenses” means, without limitation, (a) all reasonable out-of-pocket expenses incurred by the Agents and their respective Affiliates, in connection with this Agreement and the other Loan Documents, including without limitation (i) the reasonable fees, charges and disbursements of (A) counsel for the Agents, (B) outside consultants for the Agents, (C) appraisers, (D) commercial finance examiners, and (E) all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Obligations, (ii) in connection with (A) the syndication of the credit facilities provided for herein, (B) the preparation, negotiation, administration, management, execution and delivery of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (C) the enforcement or protection of their rights in connection with this Agreement or the Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral or in connection with any proceeding under any Debtor Relief Laws, or (D) any workout, restructuring or negotiations in respect of any Obligations, (b) with respect to the L/C Issuer, and its Affiliates, all reasonable out-of-pocket expenses incurred in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, and (c) all reasonable out-of-pocket expenses incurred by the Credit Parties who are not the Agents, the L/C Issuer or any Affiliate of any of them, after the occurrence and during the continuance of an Event of Default.

 

“Customer Credit Liabilities” means at any time, the aggregate remaining value at such time of (a) outstanding Gift Cards, (b) outstanding Customer Deposits and (c) frequent shopper programs of the Borrowers.

 

“Customer Deposits” means all customer deposits, including, without limitation, all framing deposits.

 

“Customs Broker Agreement” means an agreement, in form and substance reasonably satisfactory to the Collateral Agent, among a Borrower, a customs broker, freight forward or other carrier, and the Collateral Agent, in which the customs broker, freight forward or other carrier acknowledges that it has control over and holds the documents evidencing ownership of the subject Inventory for the benefit of the Collateral Agent and agrees, upon notice from the Collateral Agent, to hold and dispose of the subject Inventory solely as directed by the Collateral Agent.

 

“DDA” means each checking, savings or other demand deposit account maintained by any of the Loan Parties.  All funds in each DDA shall be conclusively presumed to be Collateral and proceeds of Collateral and the Agents and the Lenders shall have no duty to inquire as to the source of the amounts on deposit in any DDA.

 

“DDA Notification” has the meaning provided therefor in Section 6.13(a)(i).

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

  

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“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

 

“Default Rate” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Margin, if any, applicable to Base Rate Loans, plus (iii) 2% per annum; provided, however, that with respect to a LIBO Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such LIBO Rate Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate for Standby Letters of Credit or Commercial Letters of Credit, as applicable, plus 2% per annum.

 

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Committed Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

 

“Deteriorating Lender” means any Defaulting Lender or any Lender as to which (a) the Administrative Agent or L/C Issuer believes in good faith that such Lender has defaulted in fulfilling its obligations under one or more other syndicated credit facilities, or (b) a Person that Controls such Lender has been deemed insolvent by the Administrative Agent or become the subject of any proceeding under any Debtor Relief Law.

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including, without limitation, any sale-leaseback transaction and any sale, transfer, license or other disposition of (whether in one transaction or in a series of transactions) of any property (including, without limitation, any Equity Interests) by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

 

“Disqualified Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety one (91) days after the date on which the Loans mature; provided, however, that (i) only the portion of such Equity Interests which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock and (ii) with respect to any Equity Interests issued to any employee or to any plan for the benefit of employees of the Parent, Lead Borrower or their Subsidiaries or by any such plan to such employees, such Equity Interest shall not constitute Disqualified Stock solely because it may be required to be repurchased by Parent, the Lead Borrower or one of their Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, resignation, death or disability and if any class of Equity Interest of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by delivery of an Equity Interest that is not Disqualified Stock, such Equity Interests shall not be deemed to be Disqualified Stock. Notwithstanding the preceding sentence, any Equity Interest that would constitute Disqualified Stock solely because the holders thereof have the right to require a Loan Party to repurchase such Equity Interest upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock.  The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Agreement will be the maximum amount that the Lead Borrower and its Subsidiaries may become obligated to pay upon maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock or portion thereof, plus accrued dividends.

 

  

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“Dollars” and “$” mean lawful money of the United States.

 

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of any political subdivision of the United States.

 

“Early Termination Fee” has the meaning set forth in Section 2.09(b).

 

“Eligible Assignee” means (a) a Credit Party or any of its Affiliates; (b) a bank, insurance company, or company engaged in the business of making commercial loans, which Person, together with its Affiliates, has a combined capital and surplus in excess of $250,000,000; (c) an Approved Fund; (d) any Person to whom a Credit Party assigns its rights and obligations under this Agreement as part of an assignment and transfer of such Credit Party’s rights in and to a material portion of such Credit Party’s portfolio of asset based credit facilities, and (e) any other Person (other than a natural person) approved by (i) the Administrative Agent and the L/C Issuer and the Swing Line Lender, and (ii) unless an Event of Default has occurred and is continuing, the Lead Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include a Loan Party or any of the Loan Parties’ Affiliates or Subsidiaries, and unless an Event of Default has occurred and is continuing, the Administrative Agent shall consult with the Lead Borrower prior to assigning its rights and obligations to any direct competitor or supplier of a Loan Party as an “Eligible Assignee” hereunder.

 

“Eligible Credit Card Receivables” means at the time of any determination thereof, each Credit Card Receivable that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Credit Card Receivable (i) has been earned by performance and represents the bona fide amounts due to a Borrower from a credit card payment processor and/or credit card issuer, and in each case originated in the ordinary course of business of such Borrower, and (ii) in each case is reasonably acceptable to the Administrative Agent in its discretion, and is not ineligible for inclusion in the calculation of the Borrowing Base pursuant to any of clauses (a) through (l) below.  Without limiting the foregoing, to qualify as an Eligible Credit Card Receivable, an Account shall indicate no Person other than a Borrower as payee or remittance party.  In determining the amount to be so included, the face amount of an Account shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that a Borrower may be obligated to rebate to a customer, a credit card payment processor, or credit card issuer pursuant to the terms of any agreement or understanding (written or oral)) and (ii) the aggregate amount of all cash received in respect of such Account but not yet applied by the Loan Parties to reduce the amount of such Credit Card Receivable.  Any Credit Card Receivables meeting the foregoing criteria shall be deemed Eligible Credit Card Receivables but only as long as such Credit Card Receivable is not included within any of the following categories, in which case such Credit Card Receivable shall not constitute an Eligible Credit Card Receivable:

 

  

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(a)           Credit Card Receivable which do not constitute an “Account” (as defined in the UCC);

 

(b)           Credit Card Receivables that have been outstanding for more than four (4) Business Days from the date of sale;

 

(c)           Credit Card Receivables with respect to which a Loan Party does not have good, valid and marketable title, free and clear of any Lien (other than Liens granted to the Collateral Agent);

 

(d)           Credit Card Receivables that are not subject to a first priority security interest in favor of the Collateral Agent (it being the intent that chargebacks in the ordinary course by the credit card processors shall not be deemed violative of this clause);

 

(e)           Credit Card Receivables which are disputed, are with recourse, or with respect to which a claim, counterclaim, offset or chargeback has been asserted (to the extent of such claim, counterclaim, offset or chargeback);

 

(f)           Credit Card Receivables as to which the credit card processor has the right under certain circumstances to require a Loan Party to repurchase the Accounts from such credit card processor;

 

(g)           Credit Card Receivables due from an issuer or payment processor of the applicable credit card which is the subject of any bankruptcy or insolvency proceedings;

 

(h)            Credit Card Receivables which are not a valid, legally enforceable obligation of the applicable issuer with respect thereto;

 

(i)           Credit Card Receivables which do not conform to all representations, warranties or other provisions in the Loan Documents relating to Credit Card Receivables;

 

(j)           Credit Card Receivables which are evidenced by “chattel paper” or an “instrument” of any kind unless such “chattel paper” or “instrument” is in the possession of the Collateral Agent, and to the extent necessary or appropriate, endorsed to the Collateral Agent; or

 

(k)           Credit Card Receivables which the Administrative Agent determines in its discretion to be uncertain of collection or to exceed any credit limit established by the Administrative Agent.

 

(l)           Credit Card Receivables which are payable in any currency other than Dollars.

 

“Eligible Inventory” means, as of the date of determination thereof, without duplication, items of Inventory of a Borrower that are finished goods, merchantable and readily saleable to the public in the ordinary course and deemed by the Administrative Agent in its discretion to be eligible for inclusion in the calculation of the Borrowing Base, in each case that, except as otherwise agreed by the Administrative Agent, complies with each of the representations and warranties respecting Inventory made by the Borrowers in the Loan Documents, and that is not excluded as ineligible by virtue of one or more of the criteria set forth below.  Except as otherwise agreed by the Administrative Agent, without duplication to any Inventory Reserves, the following items of Inventory shall not be included in Eligible Inventory:

 

(a)           Inventory that is not solely owned by a Borrower or a Borrower does not have good and valid title thereto;

 

(b)           Inventory that is leased by or is on consignment to a Borrower or which is consigned by a Borrower to a Person which is not a Loan Party;

 

(c)           Inventory that is not located in the United States of America (excluding territories or possessions of the United States) at a location that is owned or leased by a Borrower, except to the extent that the Borrowers have furnished the Administrative Agent with (i) 

 

 

  

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any UCC financing statements or other documents that the Administrative Agent may determine to be necessary to perfect its security interest in such Inventory at such location, and (ii) a Collateral Access Agreement executed by the Person owning any such location on terms reasonably acceptable to the Administrative Agent;

 

(d)           Except as otherwise incorporated in any applicable appraisal, as provided in form and substance reasonably satisfactory to the Administrative Agent, Inventory that is comprised of goods which (i) are damaged, defective, “seconds,” or otherwise unmerchantable, (ii) are to be returned to the vendor, (iii) are obsolete or slow moving, or are special order or custom items, work-in-process, raw materials, or that constitute spare parts, promotional, marketing, packaging and shipping materials or supplies used or consumed in a Borrower’s business, (iv) are seasonal in nature and which have been packed away for sale in the subsequent season, (v) not in compliance with all standards imposed by any Governmental Authority having regulatory authority over such Inventory, its use or sale, or (vi) are bill and hold goods;

 

(e)           Inventory that is not subject to a perfected first-priority security interest in favor of the Collateral Agent;

 

(f)           Inventory that consists of samples, labels, bags, packaging, and other similar non-merchandise categories;

 

(g)           Inventory that is not insured in compliance with the provisions of Section 5.10 hereof;

 

(h)           Inventory that has been sold but not yet delivered or as to which a Borrower has accepted a deposit; or

 

(j)           Inventory that is subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third party from which any Borrower or any of its Subsidiaries has received notice of a dispute in respect of any such agreement.

 

“Environmental Laws” means (a) any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems and (b) the common law relating to damage to Persons or property from Hazardous Materials.

 

“Environmental Liability” means any liability, obligation, damage, loss, claim, action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment, disposal or presence of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

“Equipment” has the meaning provided in the UCC.

 

 

  

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“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on the date of determination.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended and in effect.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Lead Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Lead Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Lead Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Lead Borrower or any ERISA Affiliate.

 

“Event of Default” has the meaning specified in Section 8.01.  An Event of Default shall be deemed to be continuing unless and until that Event of Default has been duly waived as provided in Section 10.03 hereof.

 

“Excess Availability” means, as of any date of determination thereof by the Administrative Agent, the result, if a positive number, of (i) the Borrowing Base at such time, minus (ii) the aggregate Outstanding Amount of all Credit Extensions to, or for the account of, the Borrowers.

 

“Exchange Act” means, the Securities Exchange Act of 1934, as amended.

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrowers hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which any Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Lead Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrowers with respect to such withholding tax pursuant to Section 3.01(a).

 

  

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“Executive Order” has the meaning set forth in Section 10.18.

 

“Existing Credit Agreement” means that certain Amended and Restated Loan and Security Agreement, dated as of December 21, 2006, between the Borrowers and Wells Fargo Retail Finance, LLC (as successor in interest to Wells Fargo Retail Finance II, LLC), as Lender, as amended from time to time.

 

“Existing Letters of Credit” means, collectively, each of the letters of credit issued under the Existing Credit Agreement and outstanding on the Closing Date, as listed on Schedule 2.03.

 

“Existing Loan Documents” means the “Loan Documents”, as defined in the Existing Credit Agreement.

 

“Extraordinary Receipt” means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including tax refunds, pension plan reversions, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustments.

 

“Facility Guaranty” means the Guaranty made by the Guarantors in favor of the Agents and the Lenders, in form and substance reasonably satisfactory to the Administrative Agent.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Wells Fargo Bank on such day on such transactions as determined by the Administrative Agent.

 

“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall generally end on the last day of each calendar month in accordance with the fiscal accounting calendar of the Loan Parties, except with respect to a Fiscal Month that is the last month of a Fiscal Quarter or Fiscal Year.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall generally be thirteen weeks and end on the last Saturday of each March, June, September and December of such Fiscal Year in accordance with the fiscal accounting calendar of the Loan Parties.

 

“Fiscal Year” means the fiscal year of the Lead Borrower and its Subsidiaries ending on the Saturday closest to each December 31st of any calendar year.

 

“Foreign Asset Control Regulations” has the meaning set forth in Section 10.18.

 

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Lead Borrower is resident for tax purposes.  For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

 

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

 

  

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“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

 

“Gift Cards” means all merchandise credits, gift certificates and gift cards of the Borrowers entitling the holder thereof to use all or a portion of the credit, certificate or gift card to pay all or a portion of the purchase price for any Inventory.

 

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or advance or supply funds for the purchase of) any security for the payment of such Indebtedness or obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien), or (c) as an account party in respect of any letter of credit or letter of credit guaranty issued to support such Indebtedness or obligation.  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.

 

“Guarantor” means, collectively, the Persons listed on Schedule 1.01(b) hereto, and each other Person who shall from time to time execute and deliver a Joinder Agreement as a Guarantor or such other document as the Administrative Agent deems appropriate in accordance with Section 6.12.

 

“Hazardous Materials” means (a) all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, 

 

  

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infectious or medical wastes and all other substances or wastes of any nature which (as to any of the foregoing) are defined as a hazardous material in or regulated pursuant to any Environmental Law and (b) oil in any physical state.

 

“Highbridge Note” means that certain Senior Subordinated Note dated September 15, 2006 in the face amount of $2,500,000 executed by iParty Corp. in favor of Highbridge International LLC.

 

“Honor Date” has the meaning specified in Section 2.03(c)(i).

 

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

 

(a)           all obligations of such Person for borrowed money (including any indebtedness which is nonrecourse to the credit of such Person, but which is secured by any Lien on any asset of such Person) and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

 

(b)           the maximum amount of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

 

(c)           all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than thirty (30) days after the date on which such trade account payable was due);

 

(d)           indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

 

(e)           all Attributable Indebtedness of such Person;

 

(f)           all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, or any warrant, right or option to acquire such Equity Interest, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

 

(g)           all Guarantees of such Person in respect of any of the foregoing or any other obligation of any third party.

 

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees” has the meaning specified in Section 10.04(b).

 

“Information” has the meaning specified in Section 10.07.

 

“Intellectual Property” means all present and future:  trade secrets, know-how and other proprietary information; trademarks, trademark applications, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights and copyright applications; (including copyrights for computer programs) and all tangible and intangible property embodying the copyrights, unpatented inventions (whether or not patentable); patents 

 

  

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and patent applications; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.

 

“Intellectual Property Security Agreement” means the Intellectual Property Security Agreement dated as of the Closing Date among the Loan Parties and the Collateral Agent, granting a Lien in the Intellectual Property and certain other assets of the Loan Parties, as amended and in effect from time to time.

 

“Interest Expense” shall mean, for any period, the sum, for the Loan Parties (determined on a Consolidated basis without duplication in accordance with GAAP), of the following all interest, fees, charges and related expenses payable during such period to any Person in connection with Indebtedness or the deferred purchase price of assets that is treated as interest in accordance with GAAP.

 

“Interest Payment Date” means (a) as to each Base Rate Loan (including a Swing Line Loan), the first calendar day of each month and the Maturity Date, and (b) as to each LIBO Rate Loan, the last day of each Interest Period applicable to such LIBO Rate Loan, and if such LIBO Rate Loan has an Interest Period of greater than ninety (90) days, on the last day of the third month of such Interest Period, and the Maturity Date.

 

“Interest Period” means, as to each LIBO Rate Loan, the period commencing on the date such LIBO Rate Loan is disbursed or converted to or continued as a LIBO Rate Loan and ending on the date one, two or three months thereafter, as selected by the Lead Borrower in its Committed Loan Notice; provided that:

 

(i)           any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

 

(ii)           any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;

 

(iii)           no Interest Period shall extend beyond the Maturity Date; and

 

(iv)           notwithstanding the provisions of clause (iii) no Interest Period shall have a duration of less than one (1) month, and if any Interest Period applicable to a LIBO Borrowing would be for a shorter period, such Interest Period shall not be available hereunder.

 

For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

 

“Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrowers’ and/or their Subsidiaries’ internal controls over financial and/or collateral reporting, in each case as described in the Securities Laws.

 

  

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“Inventory” has the meaning given that term in the UCC, and shall also include, without limitation, all: (a) goods which (i) are leased by a Person as lessor, (ii) are held by a Person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a Person under a contract of service, or (iv) consist of raw materials, work in process, or materials used or consumed in a business; (b) goods of said description in transit; (c) goods of said description which are returned, repossessed or rejected; and (d) packaging, advertising, and shipping materials related to any of the foregoing.

 

“Inventory Reserves” means such reserves as may be established from time to time by the Administrative Agent in the Administrative 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 market  value of the Eligible Inventory. Without limiting the generality of the foregoing, Inventory Reserves may, in the Administrative Agent’s discretion, include (but are not limited to) reserves based on:

 

(a)          obsolescence;

(b)          seasonality;

(c)          Shrink;

(d)          imbalance;

(e)          change in Inventory character;

(f)           change in Inventory composition;

(g)          change in Inventory mix;

(h)          out-of-date and/or expired Inventory; and

(i)           damaged, defective or returned to vendor Inventory.

 

“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or (c) any Acquisition, or (d) any other investment of money or capital in order to obtain a profitable return.  For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

 

“IRS” means the United States Internal Revenue Service.

 

“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).

 

“Issuer Documents” means with respect to any Letter of Credit, the Letter Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and any Borrower (or any Subsidiary thereof) or in favor of the L/C Issuer and relating to any such Letter of Credit.

 

“Joinder Agreement” means an agreement, in the form attached hereto as Exhibit I pursuant to which, among other things, a Person becomes a party to, and bound by the terms of, this Agreement and/or the other Loan Documents in the same capacity and to the same extent as either a Borrower or a Guarantor, as the Administrative Agent may determine.

 

“Landlord Lien State” means such state(s) in which a landlord’s claim for rent may have priority over the lien of the Collateral Agent in any of the Collateral.

 

“Laws” means each international, foreign, Federal, state and local statute, treaty, rule, guideline, regulation, ordinance, code and administrative or judicial precedent or authority, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and each applicable administrative order, directed duty, request, license, authorization and permit of, and agreement with, any Governmental Authority, in each case whether or not having the force of law.

 

  

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“L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage.

 

“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Committed Borrowing.

 

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

 

“L/C Issuer” means (a) Wells Fargo Bank in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit (including Existing Letters of Credit) hereunder (which successor may only be a Lender selected by the Administrative Agent in its discretion), and (b) any other Lender selected by the Administrative Agent in its discretion that is reasonably satisfactory to Lead Borrower.  The L/C Issuer may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the L/C Issuer, in which case the term “L/C Issuer” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

 

“L/C Obligations” means, as at any date of determination, the aggregate undrawn amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.  For purposes of computing the amounts available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06.  For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

 

“Lease” means any agreement, whether written or oral, no matter how styled or structured, pursuant to which a Loan Party is entitled to the use or occupancy of any real property for any period of time.

 

“Lender” has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the Swing Line Lender, and collectively means all of them.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Lead Borrower and the Administrative Agent.

 

“Letter of Credit” means each Standby Letter of Credit and each Commercial Letter of Credit issued in accordance herewith and shall include the Existing Letters of Credit. Without limiting the foregoing, all Existing Letters of Credit shall be deemed to have been issued hereunder and shall for all purposes be deemed to be “Letters of Credit” hereunder.

 

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

 

“Letter of Credit Expiration Date” means the day that is thirty (30) days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

 

“Letter of Credit Fee” has the meaning specified in Section 2.03(i).

 

“Letter of Credit Sublimit” means an amount equal to $2,000,000.  The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitments.  A permanent reduction of the Aggregate Commitments shall require a corresponding pro rata reduction in the Letter of Credit Sublimit to an amount equal to (or, at Lead Borrower’s option, less than) the Aggregate Commitments.

 

  

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“LIBO Borrowing” means a Borrowing comprised of LIBO Rate Loans.

 

“LIBO Rate” means for any Interest Period with respect to a LIBO Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.  If such rate is not available at such time for any reason, then the “LIBO Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBO Rate Loan being made, continued or converted by Wells Fargo Bank and with a term equivalent to such Interest Period would be offered to Wells Fargo Bank by major banks in the London interbank eurodollar market in which Wells Fargo Bank participates at their request at approximately 11:00 a.m. (London time) two (2) Business Days prior to the commencement of such Interest Period.

 

“LIBO Rate Loan” means a Committed Loan that bears interest at a rate based on the Adjusted LIBO Rate.

 

“Lien” means (a) any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale, Capital Lease Obligation or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing) and (b) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

“Liquidation” means the exercise by the Administrative Agent or Collateral Agent of those rights and remedies accorded to such Agents under the Loan Documents and applicable Law as a creditor of the Loan Parties with respect to the realization on the Collateral, including (after the occurrence and continuation of an Event of Default) the conduct by the Loan Parties acting with the consent of the Administrative Agent, of any public, private or “going-out-of-business”, “store closing” or other similar sale or any other disposition of the Collateral for the purpose of liquidating the Collateral.  Derivations of the word “Liquidation” (such as “Liquidate”) are used with like meaning in this Agreement.

 

“Loan” means an extension of credit by a Lender to any Borrower under Article II in the form of a Committed Loan or a Swing Line Loan.

 

“Loan Account” has the meaning assigned to such term in Section 2.11(a).

 

“Loan Cap” means, at any time of determination, the lesser of (a) the Aggregate Commitments at such time, or (b) the Borrowing Base at such time.

 

“Loan Documents” means this Agreement, each Note, each Issuer Document, all Borrowing Base Certificates, the Security Documents, the Ratification and Reaffirmation Agreement and any other instrument or agreement now or hereafter executed and delivered in connection herewith, or in connection with any transaction arising out of any Cash Management Services and Bank Products provided by the Administrative Agent or any of its Affiliates, each as amended and in effect from time to time.

 

“Loan Parties” means, collectively, the Borrowers and any Guarantors.

 

  

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“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of the Loan Parties and their Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; (c) a material impairment of the rights and remedies of, or benefit to, the Agent or the Lenders under any Loan Document or a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party; (d) a material adverse change in, or a material adverse effect upon, the value of the Collateral; or (e) a material impairment of the priority of the Collateral Agent’s Lien with respect to a material amount of the Collateral.  In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event in and of itself does not have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events would result in a Material Adverse Effect.

 

“Material Contract” means, with respect to any Person, each agreement to which such Person is a party involving aggregate consideration payable to or by such Person of $150,000 or more in any Fiscal Year or otherwise material to the business, condition (financial or otherwise), operations, performance, properties or prospects of such Person, other than purchase orders entered into in the ordinary course of business.

 

“Material Indebtedness” means Indebtedness (other than the Obligations) of the Loan Parties in an aggregate principal amount exceeding $50,000.

 

“Maturity Date” means July 2, 2012.

 

“Maximum Rate” has the meaning provided therefor in Section 10.09.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

“Minimum Availability Block” has the meaning provided therefor in Section 7.17.

 

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

 

“Net Income” shall mean with respect to any fiscal period, the net income of the Loan Parties determined in accordance with GAAP, consistently applied.

 

“Net Proceeds” means (a) with respect to any Disposition by any Loan Party or any of its Subsidiaries, or any Extraordinary Receipt received or paid to the account of any Loan Party or any of its Subsidiaries, the excess, if any, of (i) the sum of cash and cash equivalents received in connection with such transaction (including any cash or cash equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness that is secured by the applicable asset by a Lien permitted hereunder which is senior to the Collateral Agent’s Lien on such asset and that is required to be repaid (or to establish an escrow for the future repayment thereof) in connection with such transaction (other than Indebtedness under the Loan Documents), (B) the reasonable and customary out-of-pocket expenses incurred by such Loan Party or such Subsidiary in connection with such transaction (including, without limitation, appraisals, and brokerage, legal, title and recording or transfer tax expenses and commissions) paid by any Loan Party to third parties (other than Affiliates); and

 

(b)           with respect to the sale or issuance of any Equity Interest by any Loan Party or any of its Subsidiaries, or the incurrence or issuance of any Indebtedness by any Loan Party or any of its Subsidiaries, the excess of (i) the sum of the cash and cash equivalents received in connection with such transaction over (ii) the underwriting discounts and commissions, and other reasonable and customary out-of-pocket expenses, incurred by such Loan Party or such Subsidiary in connection therewith.

 

  

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“Net Retail Liquidation Value” means with respect to the Borrowers’ Eligible Inventory, the appraised orderly liquidation value, net of costs and expenses to be incurred in connection with any such liquidation, which value is expressed as a percentage of Cost of the Borrowers’ Eligible Inventory as set forth in the Borrowers’ inventory stock ledger, which value shall be determined from time to time by the most recent appraisal undertaken by an independent appraiser engaged by the Administrative Agent.

 

“Non-Consenting Lender” has the meaning provided therefor in Section 10.01.

 

“Non-Extension Notice Date” has the meaning specified in Section 2.03(b)(iii).

 

“Note” means each (i) Committed Loan Note, and (ii) Swing Line Loan Note, as each may be amended, supplemented or modified from time to time.

 

“NPL” means the National Priorities List under CERCLA.

 

“Obligations” means (a) all advances to, and debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees and expenses that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, and (b) any Other Liabilities.

 

“Operating Leases” shall mean any lease of property (whether real, personal or mixed) for a period of longer than one year by a Person under which such Person is lessee, other than a Capital Lease.

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity, and (d) in each case, all shareholder or other equity holder agreements, voting trusts and similar arrangements to which such Person is a party or which is applicable to its Equity Interests and all other arrangements relating to the Control or management of such Person.

 

“Other Liabilities” means any obligation on account of (a) any Cash Management Services furnished to any of the Loan Parties or any of their Subsidiaries and/or (b) any transaction with any Agent, any Lender or any of their respective Affiliates, which arises out of any Bank Products entered into with any Loan Party and any such Person, as each may be amended from time to time.

 

  

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“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

 

“Outstanding Amount” means (i) with respect to Committed Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Committed Loans and Swing Line Loans occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrowers of Unreimbursed Amounts.

 

“Overadvance” means a Credit Extension to the extent that, immediately after its having been made, Availability is less than zero.

 

“Parent” means iParty Corp., a Delaware corporation.

 

“Participant” has the meaning specified in Section 10.06(d).

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Borrower or any ERISA Affiliate or to which any Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

 

“Permitted Disposition” means any of the following:

 

(a)           Dispositions of Inventory in the ordinary course of business;

 

(b)           Dispositions of the Inventory of a Loan Party not in the ordinary course of business in connection with Store closings, at arm’s length, provided, that such Store closures and related Inventory Dispositions shall not exceed the number of the Loan Parties’ Stores closures and related Inventory Dispositions as provided in the Business Plan, provided, further, that all sales of Inventory in connection with Store closings shall be in accordance with liquidation agreements and with professional liquidators reasonably acceptable to the Agents; provided, further, that as long as any Default or Event of Default shall have occurred and be continuing, all Net Proceeds received in connection therewith are applied to the Obligations in accordance with Section 2.05 hereof;

 

(c)           non-exclusive licenses of Intellectual Property of a Loan Party or any of its Subsidiaries in the ordinary course of business;

 

(d)           licenses for the conduct of licensed departments within the Loan Parties’ Stores in the ordinary course of business; provided that, if requested by the Agents, the Agents shall have entered into an intercreditor agreement with the Person operating such licensed department on terms and conditions reasonably satisfactory to the Agents;

 

(e)           Dispositions of Equipment in the ordinary course of business that is substantially worn, damaged, obsolete or, in the judgment of a Loan Party, no longer useful or necessary in its business or that of any Subsidiary and is not replaced with similar property having at least equivalent value;

 

  

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(f)           sales, transfers and Dispositions among the Loan Parties or by any Subsidiary to a Loan Party; and

 

(g)           sales, transfers and Dispositions of or by any Subsidiary which is not a Loan Party to another Subsidiary that is not a Loan Party.

 

“Permitted Encumbrances” means:

 

(a)           Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 6.04;

 

(b)           carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by applicable Law, arising in the ordinary course of business and securing obligations that are not overdue by more than thirty (30) days or are being contested in compliance with Section 6.04;

 

(c)           pledges and deposits made (i) in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations, other than any Lien imposed by ERISA and (ii) in connection with a Permitted Disposition otherwise permitted hereunder, whether as an earnest money deposit or an escrow arrangement;

 

(d)           deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

 

(e)           Liens in respect of judgments that would not constitute an Event of Default hereunder;

 

(f)           easements, covenants, conditions, restrictions, building code laws, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of a Loan Party and such other minor title defects or survey matters that, in each case, do not materially interfere with the current use of the real property;

 

(g)           Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed, (ii) except as permitted pursuant to clause (a) of the definition of Permitted Indebtedness the amount secured or benefited thereby is not increased, (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is otherwise permitted hereunder);

 

(h)           Liens on fixed or capital assets acquired by any Loan Party which are permitted under clause (c) of the definition of Permitted Indebtedness so long as (i) such Liens and the Indebtedness secured thereby are incurred prior to or within ninety (90) days after such acquisition, (ii) the Indebtedness secured thereby does not exceed the cost of acquisition of such fixed or capital assets, (iii) such Liens shall not extend to any other property or assets of the Loan Parties, and (iv) such Liens and the Indebtedness secured thereby are less than $150,000;

 

(i)           Liens in favor the Collateral Agent;

 

(j)           Landlords’ and lessors’ Liens in respect of rent not in default; and

 

(k)           Liens arising solely by virtue of any statutory or common law provisions relating to banker’s liens, liens in favor of securities intermediaries, rights of setoff or similar rights and remedies as to deposit accounts or securities accounts or other funds maintained with depository institutions or securities intermediaries;

 

  

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provided, however,  that, except as provided in any one or more of clauses (a) through (k) above, the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

 

“Permitted Indebtedness” means each of the following as long as no Default or Event of Default has occurred and is continuing or would arise from the incurrence thereof:

 

(a)           Indebtedness outstanding on the date hereof and listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder, and the direct or contingent obligor with respect thereto is not changed as a result of or in connection with such refinancing, refunding, renewal or extension, (ii) the result of such extension, renewal or replacement shall not be an earlier maturity date or decreased weighted average life of such Indebtedness, and (iii) the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such refinancing, refunding, renewing or extending Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lenders than the terms of any agreement or instrument governing the Indebtedness being refinanced, refunded, renewed or extended and the interest rate applicable to any such refinancing, refunding, renewing or extending Indebtedness does not exceed the then applicable market interest rate;

 

(b)           Indebtedness of any Borrower to any other Borrower; provided that such Indebtedness shall (i) be evidenced by such documentation as the Administrative Agent may reasonably require, (ii) constitute “Collateral” under this Agreement and the Security Documents, (iii) be on terms (including subordination terms) reasonably acceptable to the Administrative Agent, and (iv) be otherwise permitted pursuant to Section 7.03;

 

(c)           purchase money Indebtedness of any Loan Party to finance the acquisition of any fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or result in an earlier maturity date or decreased weighted average life thereof provided that the terms relating to principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole, of any such refinancing, refunding, renewing or extending Indebtedness, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lenders than the terms of any agreement or instrument governing the Indebtedness being refinanced, refunded, renewed or extended and the interest rate applicable to any such refinancing, refunding, renewing or extending Indebtedness does not exceed the then applicable market interest rate, provided, however, that the aggregate principal amount of Indebtedness permitted by this clause (c) shall not exceed $150,000 at any time outstanding per Fiscal Year, and provided, further, that, if requested by the Collateral Agent, the Loan Parties shall cause the holders of any such Indebtedness to enter into a Collateral Access Agreement on terms reasonably satisfactory to the Collateral Agent;

 

  

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(d)           contingent liabilities under surety bonds or similar instruments incurred in the ordinary course of business in connection with the construction or improvement of Stores;

 

(e)           the Obligations;

 

(f)           Subordinated Indebtedness;

 

(g)           Guarantees of any Loan Party or other Subsidiary in respect of obligations of another Loan Party that are otherwise permitted to be incurred under this Agreement and the other Loan Documents; and

 

(h)           All Indebtedness referred to in clause (g) of the definition of Indebtedness, other than any such Indebtedness which constitutes Disqualified Stock.

 

“Permitted Investments” means each of the following as long as no Default or Event of Default exists or would arise from the making of such Investment:

 

(a)           Investments existing on the Closing Date, and set forth on Schedule 7.02, but not any increase in the amount thereof or any other modification of the terms thereof;

 

(b)           Guarantees constituting Permitted Indebtedness;

 

(c)           Capital contributions made by any Borrower to another Borrower; and

 

(d)           Purchase of fractional shares of the capital stock of iParty Corp. pursuant to the Reverse Stock Split.

 

provided, however, that notwithstanding the foregoing, after the occurrence and during the continuance of a Default or an Event of Default, no such Investments specified in clauses (a) through (c) shall be permitted unless (i) either (A) no Loans are then outstanding, or (B) the Investment is a temporary Investment pending expiration of an Interest Period for a LIBO Rate Loan, the proceeds of which Investment will be applied to the Obligations after the expiration of such Interest Period, and (ii) such Investments are pledged to the Collateral Agent as additional Collateral for the Obligations pursuant to such agreements as may be reasonably required by the Collateral Agent.

 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, limited partnership, Governmental Authority or other entity.

 

“Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by a Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

 

“Pledge Agreement” means that certain Stock Pledge Agreement, dated as of December 21, 2006, by and between iParty Corp. and the Collateral Agent (as successor in interest to Wells Fargo Retail Finance II, LLC), as amended and in effect from time to time.

 

“Prepayment Event” means:

 

(a)           any Disposition (including, without limitation, pursuant to any sale-leaseback transaction) of any property or asset of a Loan Party;

 

(b)           any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of a Loan Party, unless (i) the proceeds therefrom are required to be paid to the holder of a Lien on such property or asset having priority over the Lien of the Collateral Agent or (ii) prior to the occurrence of a Default or an Event of Default, the proceeds therefrom are utilized for purposes of replacing or repairing the assets in respect of which such proceeds, awards or payments were received within one hundred eighty (180) days of the occurrence of the damage to or loss of the assets being repaired or replaced;

 

  

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(c)           the issuance by a Loan Party of any Equity Interests, other than any such issuance of Equity Interests (i) to a Loan Party, or (ii) as a compensatory issuance to any employee, director, or consultant (including under any option plan or stock incentive plan);

 

(d)           the incurrence by a Loan Party of any Indebtedness for borrowed money other than Permitted Indebtedness; or

 

(e)           the receipt by any Loan Party of any Extraordinary Receipts.

 

“Public Lender” has the meaning specified in Section 6.02.

 

“Ratification and Reaffirmation Agreement” means the Ratification and Reaffirmation Agreement, dated as of the date even herewith, by the Borrowers and in favor of the Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Real Estate” means all Leases and all land, together with the buildings, structures, parking areas, and other improvements thereon, now or hereafter owned by any Loan Party, including all easements, rights-of-way, and similar rights relating thereto and all leases, tenancies, and occupancies thereof.

 

“Register” has the meaning specified in Section 10.06(c).

 

“Registered Public Accounting Firm” has the meaning specified by the Securities Laws and shall be independent of the Parent and its Subsidiaries as prescribed by the Securities Laws.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, advisors, attorneys and representatives of such Person and of such Person’s Affiliates.

 

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

 

“Reports” has the meaning provided in Section 9.11.

 

“Request for Credit Extension” means (a) with respect to a Committed Borrowing, conversion or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

 

“Required Lenders” means, as of any date of determination, (a) the Agent and (b) the Lenders holding more than 50% of the Aggregate Commitments or, if the Commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, the Lenders holding in the aggregate more than 50% of the Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

 

“Reserves” means all (if any) Inventory Reserves, Availability Reserves and Receivables Reserves.

 

“Responsible Officer” means the chief executive officer, president, chief financial officer of a Loan Party, any other Person who presents themselves to the Administrative Agent as, and in the Administrative Agent’s reasonable discretion is, a Responsible Officer of a Loan Party or any of the other individuals designated in writing to the Administrative Agent by an existing Responsible Officer of a Loan Party as an authorized signatory of any certificate or other 

 

  

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document to be delivered hereunder.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

 

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to such Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment.  Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such Person with any proceeds of a dissolution or liquidation of such Person.

 

“Reverse Stock Split” means that certain reverse stock split of the existing shares of iParty Corp.’s common stock pursuant to that certain amendment to iParty Corp.’s restated certificate of incorporation authorized by stockholders at the 2009 annual meeting of stockholders held on May 27, 2009, pursuant to such reverse stock split the existing shares of iParty Corp.’s common stock shall be combined into new shares of iParty Corp. common stock at an exchange ratio ranging between one-for-five and one-for-thirty.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB, each as amended and in effect.

 

“Security Agreement” means that certain Security Agreement, dated as of the date hereof, by and between the Collateral Agent and the Borrowers, as further amended and in effect.

 

“Security Documents” means the Security Agreement, the Pledge Agreement, the Trademark Security Agreement, the Blocked Account Agreements, the DDA Notifications, the Credit Card Notifications, and each other security agreement or other instrument or document executed and delivered to the Collateral Agent pursuant to this Agreement or any other Loan Document granting a Lien to secure any of the Obligations.

 

“Seller Note” means that certain Senior Subordinated Note dated August 7, 2006 in the face amount of $600,000 executed by iParty Retail Stores Corp. in favor of Party City Corporation.

 

“Settlement Date” has the meaning provided in Section 2.14(a).

 

“Shareholders’ Equity” means, as of any date of determination, consolidated shareholders’ equity of the Parent and its Subsidiaries as of that date determined in accordance with GAAP.

 

“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise unaccounted for.

 

  

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“Solvent” and “Solvency” means, with respect to any Person on a particular date, that on such date (a) at fair valuation, all of the properties and assets of such Person are greater than the sum of the debts, including contingent liabilities, of such Person, (b) the present fair saleable value of the properties and assets of such Person is not less than the amount that would be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts beyond such Person’s ability to pay as such debts mature, and (e) such Person is not engaged in a business or a transaction, and is not about to engage in a business or transaction, for which such Person’s properties and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in which such Person is engaged.  The amount of all guarantees at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, can reasonably be expected to become an actual or matured liability.

 

 “Standby Letter of Credit” means any Letter of Credit that is not a Commercial Letter of Credit and that (a) is used in lieu or in support of performance guaranties or performance, surety or similar bonds (excluding appeal bonds) arising in the ordinary course of business, (b) is used in lieu or in support of stay or appeal bonds, (c) supports the payment of insurance premiums for reasonably necessary casualty insurance carried by any of the Loan Parties, or (d) supports payment or performance for identified purchases or exchanges of products or services in the ordinary course of business.

 

“Stated Amount” means at any time the maximum amount for which a Letter of Credit may be honored.

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the FRB to which Wells Fargo Bank is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D.  LIBO Rate Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

“Store” means any retail store (which may include any real property, fixtures, Equipment, Inventory and other property related thereto) operated, or to be operated, by any Loan Party.

 

“Swing Line” means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04.

 

“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.

 

“Swing Line Lender” means Wells Fargo Retail Finance, LLC, its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

 

“Swing Line Loan” has the meaning specified in Section 2.04(a).

 

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B.

 

“Swing Line Loan Note” means the promissory note of the Borrowers substantially in the form of Exhibit C-2, payable to the order of the Swing Line Lender, evidencing the Swing Line Loans made by the Swing Line Lender.

 

  

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“Swing Line Sublimit” means an amount equal to the lesser of (a) $10,000,000, and (b) the Aggregate Commitments.  The Swing Line Sublimit is part of, and not in addition to, the Aggregate Commitments.

 

“Subordinated Indebtedness” means Indebtedness which is expressly subordinated in right of payment to the prior payment in full of the Obligations and which is in form and on terms approved in writing by the Administrative Agent, including, but not limited to the obligations of the Borrowers under the Seller Note, the Highbridge Note or the Trade Note.

 

“Subordination Agreement” means a subordination agreement, in form and substance acceptable to the Administrative Agent in its sole discretion, pursuant to which a creditor of any Loan Party acknowledges and agrees that the obligations of such Loan Party to such creditor are subordinate to the obligations of such Loan Party to the Obligations owed to the Lender hereunder or under any other Loan Document.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the Equity Interests having ordinary voting power for the election of directors or other governing body are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of a Loan Party.

 

“Supply Agreement” means that certain Supply Agreement, dated as of August 7, 2006, by and between Amscam, Inc and iParty Corp. pursuant to which iParty Corp. has agreed to purchase party goods from Amscan, Inc. and will receive certain favorable pricing terms and rebates (or any amendment, restatement, or replacement thereof (by one or more agreements or on customary trade terms with one or more supplier acceptable at all times to the Administrative Agent) entered into by the Borrowers with the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld or delayed).

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Temporary Halloween Stores” means stores operated by the Borrowers on a seasonal or temporary basis to sell Halloween costumes and other related items.

 

“Termination Date” means the earliest to occur of (i) the Maturity Date, (ii) the date on which the maturity of the Obligations is accelerated (or deemed accelerated) and the Commitments are irrevocably terminated (or deemed terminated) in accordance with Article VIII.

 

“Total Funded Debt” shall mean all Indebtedness of the Loan Parties on a Consolidated basis.

 

“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

 

“Trademark Security Agreement” means that certain Trademark and Trademark Applications Security Agreement, dated as of December 21, 2006, by and among iParty Corp. and the Collateral Agent (as successor in interest to Wells Fargo Retail Finance II, LLC), granting a Lien in trademarks, trademark applications, service marks, registered service marks and service mark applications together with any goodwill connected with and symbolized by any such trademarks, trademark applications, service marks, registered service marks, and service mark applications and certain other assets of iParty Corp. in connection therewith, as amended and in effect from time to time.

 

  

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“Trade Note” means that certain Senior Subordinated Note dated October 24, 2006 in the face amount of $1,819,373.11 executed by iParty Retail Stores Corp. in favor of Amscan, Inc.

 

“Trading with the Enemy Act” has the meaning set forth in Section 10.18.

 

“Type” means, with respect to a Committed Loan, its character as a Base Rate Loan or a LIBO Rate Loan.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in The Commonwealth of Massachusetts; provided, however, that if a term is defined in Article 9 of the Uniform Commercial Code differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than Massachusetts, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.

 

“UCP” means the Uniform Customs and Practice guidelines as in effect from time to time which govern the issuance of documentary and standby letters of credit.

 

“UFCA ” has the meaning specified in Section 10.21(d).

 

“UFTA” has the meaning specified in Section 10.21(d).

 

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

 

“United States” and “U.S.” mean the United States of America.

 

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

 

“Unused Line Fee” has the meaning provided in Section 2.09(a).

 

“Wells Fargo Bank” means Wells Fargo Bank, N.A., a national banking association.

 

1.02           Other Interpretive Provisions.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

 

(a)          The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

 

  

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(b)          In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

 

(c)          Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

 

1.03           Accounting Terms

 

(a)          Generally.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

 

(b)          Changes in GAAP.  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Lead Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Lead Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders in their reasonable discretion); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Lead Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

1.04           Rounding.  Any financial ratios required to be maintained by the Borrowers pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

 

1.05           Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

 

1.06           Letter of Credit Amounts.  Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to be the Stated Amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Documents related thereto, provides for one or more automatic increases in the Stated Amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum Stated Amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum Stated Amount is in effect at such time.

 

 

  

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1.07           Currency Equivalents Generally.  Any amount specified in this Agreement (other than in Articles II, IX and X) or any of the other Loan Documents to be in Dollars shall also include the equivalent of such amount in any currency other than Dollars, such equivalent amount thereof in the applicable currency to be determined by the Administrative Agent at such time on the basis of the Spot Rate (as defined below) for the purchase of such currency with Dollars.  For purposes of this Section 1.07, the “Spot Rate” for a currency means the rate determined by the Administrative Agent to be the rate quoted by the Person acting in such capacity as the spot rate for the purchase by such Person of such currency with another currency through its principal foreign exchange trading office at approximately 11:00 a.m. on the date two (2) Business Days prior to the date of such determination; provided that the Administrative Agent may obtain such spot rate from another financial institution designated by the Administrative Agent if the Person acting in such capacity does not have as of the date of determination a spot buying rate for any such currency.

 

ARTICLE II

 

THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01           Committed Loans; Reserves.  (a)  Subject to the terms and conditions set forth herein, each Lender severally agrees to make loans (each such loan, a “Committed Loan”) to the Borrowers from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the lesser of (x) the amount of such Lender’s Commitment, or (y) such Lender’s Applicable Percentage of the Borrowing Base; subject in each case to the following limitations:

 

(i)           after giving effect to any Committed Borrowing, the Total Outstandings shall not exceed the Loan Cap;

 

(ii)          after giving effect to any Committed Borrowing, the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Commitment;

 

(iii)         the Outstanding Amount of all L/C Obligations shall not at any time exceed the Letter of Credit Sublimit; and

 

(iv)         after giving effect to all Credit Extensions, no Overadvance shall exist.

 

Within the limits of each Lender’s Commitment, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.01, prepay under Section 2.05, and reborrow under this Section 2.01.  Committed Loans may be Base Rate Loans or LIBO Rate Loans, as further provided herein.

 

(b)           The Lead Borrower may request, no later than one (1) year prior to the Maturity Date, that the Aggregate Commitment (initially, $12,500,000) be increased (and that each Lender’s Revolving Credit Commitment be increased ratably) at any time on, or subsequent to, the date hereof (the “Commitment Increase Date”), by up to $2,500,000, in multiples of $500,000 (each, a “Commitment Increase”), to a maximum Aggregate Commitment of $15,000,000, subject to the terms and conditions in this clause (b).  The Commitment Increase shall become effective upon the Commitment Increase Date so long as (i) (A) the representations and warranties contained in Article V hereof and in each other Loan Document, certificate or other writing delivered to the Administrative Agent, the Lenders or the L/C Issuer pursuant hereto or thereto on or prior to the Commitment Increase Date that are subject to materiality or Material Adverse Effect qualifications shall be true and correct in all respects and the representations and warranties contained in Article V hereof and in each other Loan Document, certificate or other writing delivered to the Administrative Agent, the Lenders or the L/C Issuer pursuant hereto or thereto that are not subject to materiality or Material Adverse Effect qualifications shall be true and correct in all material respects, in each case, as of the Commitment Increase Date 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 Commitment Increase Date or would result from the Commitment Increase under this Agreement or the other Loan Documents and (C) no default or other violation would result from the Commitment Increase under any Material Contract or any financing agreement or other documents with respect to indebtedness for borrowed money of any Borrower, and (ii) the Administrative Agent shall have received, no more than ten (10) Business Days and no less than three (3) Business Days prior to the Commitment Increase Date, the following: (A) a certificate of an Responsible Officer of the Lead Borrower, certifying as to clauses (A), (B) and (C) of subsection (i) above, and (B) any and all agreements, instruments and other documents reasonably requested by the Administrative Agent in connection with the Commitment Increase, each in form and substance reasonably satisfactory to the Administrative Agent; (iii) the Commitment Increase has been approved by the Administrative Agent, at the sole discretion of the Required Lenders and (iv) on or prior to the Commitment Increase Date, the Borrowers shall have paid the Administrative Agent, for the ratable benefit of the Lenders, a fee equal to one half of one percent (0.50%) of the amount of such Commitment Increase.  The Agent shall be authorized to charge the Loan Account with such fee on or at any time after the Commitment Increase Date.

 

 

  

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(c)           The following are the Reserves which may be established as of the Closing Date:

 

(i)           100% of Customer Credit Liabilities (an Availability Reserve);

 

(ii)          100% of Shrink (an Inventory Reserve);

 

(iii)         100% of damaged, defective or otherwise unsaleable Inventory (an Inventory Reserve);

 

(iv)         100% of charitable donations (an Availability Reserve); and

 

(v)          100% of Florida sales tax (an Availability Reserve).

 

(d)           The Administrative Agent shall have the right, at any time and from time to time on or after the Closing Date in its discretion to establish new, or modify or eliminate any existing, eligibility criteria or Reserves.

 

2.02           Borrowings, Conversions and Continuations of Committed Loans.

 

(a)           Committed Loans (other than Swing Line Loans) shall be either Base Rate Loans or LIBO Loans as the Lead Borrower may request subject to and in accordance with this Section 2.02.  All Swing Line Loans shall be only Base Rate Loans.  Subject to the other provisions of this Section 2.02, Committed Borrowings of more than one Type may be incurred at the same time.

 

 

  

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(b)           Each Committed Borrowing, each conversion of Committed Loans from one Type to the other, and each continuation of LIBO Rate Loans shall be made upon the Lead Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone.  Each such notice must be received by the Administrative Agent not later than (i) 11:00 a.m. three (3) Business Days prior to the requested date of any Borrowing of, conversion to or continuation of LIBO Rate Loans or of any conversion of LIBO Rate Loans to Base Rate Loans, and (ii) 11:30 a.m. the requested date of any Borrowing of Base Rate Loans.  Each telephonic notice by the Lead Borrower pursuant to this Section 2.02(b) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Lead Borrower.  Each Borrowing of, conversion to or continuation of LIBO Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.  Except as provided in Section 2.03(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $100,000 or a whole multiple of $50,000 in excess thereof.  Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Lead Borrower is requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of LIBO Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto.  If the Lead Borrower fails to specify a Type of Committed Loan in a Committed Loan Notice or if the Lead Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans.  Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable LIBO Rate Loans.  If the Lead Borrower requests a Borrowing of, conversion to, or continuation of LIBO Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.  Notwithstanding anything to the contrary herein, a Swing Line Loan may not be converted to a LIBO Rate Loan.

 

(c)     Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the Lead Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in Section 2.02(b).  In the case of a Committed Borrowing, each Lender shall make the amount of its Committed Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall use reasonable efforts to make all funds so received available to the Borrowers in like funds by no later than 4:00 p.m. on the day of receipt by the Administrative Agent either by (i) crediting the account of the Lead Borrower on the books of the Administrative Agent with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Lead Borrower; provided, however, that if, on the date the Committed Loan Notice with respect to such Borrowing is given by the Lead Borrower, there are L/C Borrowings outstanding, then the proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and second, shall be made available to the Borrowers as provided above.

  

  

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(d)     The Administrative Agent, without the request of the Lead Borrower, may advance any interest, fee, expenses, service charge, Credit Party Expenses, or other payment to which any Credit Party is entitled from the Loan Parties pursuant hereto or any other Loan Document, as and when due and payable, and may charge the same to the Loan Account notwithstanding that an Overadvance may result thereby.  The Administrative Agent shall advise the Lead Borrower of any such advance or charge promptly after the making thereof.  Such action on the part of the Administrative Agent shall not constitute a waiver of the Administrative Agent’s rights and the Borrowers’ obligations under Section 2.05.  Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.02(d) shall bear interest at the interest rate then and thereafter applicable to Base Rate Loans.

 

(e)     Except as otherwise provided herein, a LIBO Rate Loan may be continued or converted only on the last day of an Interest Period for such LIBO Rate Loan.  Upon the occurrence and during the continuation of a Default, the Administrative Agent may, and at the direction of the Required Lenders shall, prohibit Loans from being requested as, converted to, or continued as, LIBO Rate Loans.

 

(f)     The Administrative Agent shall promptly notify the Lead Borrower and the Lenders of the interest rate applicable to any Interest Period for LIBO Rate Loans upon determination of such interest rate.  At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Lead Borrower and the Lenders of any change in Wells Fargo Bank’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

 

(g)     After giving effect to all Committed Borrowings, all conversions of Committed Loans from one Type to the other, and all continuations of Committed Loans as the same Type, there shall not be more than three (3) Interest Periods in effect with respect to Committed Loans.

 

(h)     The Administrative Agent, the Lenders, the Swing Line Lender and the L/C Issuer shall have no obligation to make any Loan, or to endeavor to cause the issuance of or provide any Letter of Credit, if an Overadvance would result.  The Administrative Agent shall have no liability for, and no Loan Party or Credit Party shall have the right to, or shall, bring any claim of any kind whatsoever against the Administrative Agent with respect to “inadvertent Overadvances” (i.e. where an Overadvance results from changed circumstances beyond the control of the Administrative Agent (such as a reduction in the collateral value)) regardless of the amount of any such Overadvance(s).

 

2.03       Letters of Credit.

 

(a)             The Letter of Credit Commitment.

 

(i)           Subject to the terms and conditions set forth herein, (A) the Administrative Agent, in reliance upon the agreements of the Lenders set forth in this Section 2.03, shall endeavor to cause the L/C Issuer from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrowers, and to amend or extend Letters of Credit previously issued by the L/C Issuer, in accordance with Section 2.03(b) below; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Borrowers and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total Outstandings shall not exceed the Loan Cap, (y) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit.  Each request by the Lead Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrowers that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, the Borrowers’ ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrowers may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.  Any L/C Issuer (other than Wells Fargo Bank or any of its Affiliates) shall notify the Administrative Agent in writing on each Business Day of all Letters of Credit issued on the prior Business Day by such L/C Issuer.  All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof.

 

  

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(ii)           No Letter of Credit shall be issued if:

 

(A)           subject to Section 2.03(b)(iii), the expiry date of such requested Standby Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Lenders have approved such expiry date; or

 

(B)           subject to Section 2.03(b)(iii), the expiry date of such requested Commercial Letter of Credit would occur more than forty five (45) days after the date of issuance or last extension, unless the Required Lenders have approved such expiry date; or

 

(C)           the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless either such Letter of Credit is Cash Collateralized on or prior to the Letter of Credit Expiration Date or all the Lenders have approved such expiry date.

 

(iii)           No Letter of Credit shall be issued, without the prior consent of the Administrative Agent, if:

 

(A)           any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;

 

(B)           the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer applicable to letters of credit generally;

 

(C)           except as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of Credit is in an initial Stated Amount less than $10,000, in the case of a Commercial Letter of Credit, or $20,000, in the case of a Standby Letter of Credit;

 

(D)           such Letter of Credit is to be denominated in a currency other than Dollars;

 

(E)   such Letter of Credit contains any provisions for automatic reinstatement of the Stated Amount after any drawing thereunder; or

 

  

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(F)           a default of any Lender’s obligations to fund under Section 2.03(c) exists or any Lender is at such time a Defaulting Lender or Deteriorating Lender hereunder, unless the Administrative Agent or the L/C Issuer has entered into satisfactory arrangements with the Borrowers or such Lender to eliminate the L/C Issuer’s risk with respect to such Lender.

 

(iv)           The Borrowers shall not permit any Letter of Credit to be amended if (A) the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof or (B) if the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

 

(v)           The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.

 

(b)     Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.

 

(i)           Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Lead Borrower delivered to the Administrative Agent in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Lead Borrower.  Any Letter of Credit Application or other document delivered hereunder that is signed by a Responsible Person shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action, and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Borrowers.  Such Letter of Credit Application must be received by the Administrative Agent not later than 11:00 a.m. at least two (2) Business Days (or such other date and time as the Administrative Agent may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  Promptly after receipt of any Letter of Credit Application, the Administrative Agent will provide the L/C Issuer (other than Wells Fargo Bank or any of its Affiliates) with a copy of such Letter of Credit Application.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Administrative Agent: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the Administrative Agent may reasonably require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Administrative Agent (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the Administrative Agent may require.  Additionally, the Lead Borrower shall furnish to the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the Administrative Agent may require.

 

  

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(ii)           Unless the L/C Issuer has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the applicable Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer's usual and customary business practices.  Immediately upon the issuance or amendment of each Letter of Credit, each Lender shall be deemed to (without any further action), and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer, without recourse or warranty, a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Letter of Credit.  Upon any change in the Commitments under this Agreement, it is hereby agreed that with respect to all L/C Obligations, there shall be an automatic adjustment to the participations hereby created to reflect the new Applicable Percentages of the assigning and assignee Lenders.

 

(iii)          If the Lead Borrower so requests in any applicable Letter of Credit Application, the Administrative Agent may, in its sole and absolute discretion, endeavor to cause the L/C Issuer to issue a Standby Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Standby Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Standby Letter of Credit is issued.  Unless otherwise directed by the Administrative Agent or the L/C Issuer, the Lead Borrower shall not be required to make a specific request to the Administrative Agent or the L/C Issuer for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Standby Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the Administrative Agent shall instruct the L/C Issuer not to permit any such extension if (A) the Administrative Agent has determined that it would not be permitted, or would have no obligation, at such time to endeavor to cause or have the L/C Issuer issue such Standby Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), or (B) the L/C Issuer has received notice (which may be by telephone or in writing) on or before the day that is no less than five (5) Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the Lead Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.

 

(iv)           Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Lead Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

 

  

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(c)     Drawings and Reimbursements; Funding of Participations.

 

(i)           Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the Administrative Agent shall notify the Lead Borrower thereof; provided, however, that any failure to give or delay in giving such notice shall not relieve the Borrowers of their obligation to reimburse the L/C Issuer and the Lenders with respect to any such payment.  Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrowers shall reimburse the L/C Issuer through the Administrative Agent on the same day in an amount equal to the amount of such drawing. If the Borrowers fail to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Applicable Percentage thereof.  In such event, the Borrowers shall be deemed to have requested a Committed Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice).  Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone or electronic means.

 

(ii)           Each Lender shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent’s Office in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrowers in such amount.  The Administrative Agent shall remit the funds so received to the L/C Issuer.

 

(iii)           With respect to any Unreimbursed Amount that is not fully refinanced by a Committed Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrowers shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate.  In such event, each Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.

 

(iv)           Until each Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Applicable Percentage of such amount shall be solely for the account of the L/C Issuer.

 

(v)           Each Lender’s obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, any Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Committed Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Lead Borrower of a Committed Loan Notice).  No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrowers to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.

 

  

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(vi)           If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing.  If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Committed Loan included in the relevant Committed Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be.  A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.

 

(d)     Repayment of Participations.

 

(i)           At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrowers or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Applicable Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in the same funds as those received by the Administrative Agent.

 

(ii)           If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

 

(e)     Obligations Absolute.  The obligation of the Borrowers to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

 

(i)           any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

 

(ii)           the existence of any claim, counterclaim, setoff, defense or other right that the Borrowers or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

  

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(iii)           any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

 

(iv)           any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Laws;

 

(v)           any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrowers or any of their Subsidiaries; or

 

(vi)           the fact that any Event of Default shall have occurred and be continuing.

 

The Lead Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Lead Borrower’s instructions or other irregularity, the Lead Borrower will immediately notify the Administrative Agent and the L/C Issuer.  The Borrowers shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

 

(f)     Role of L/C Issuer.  Each Lender and the Borrowers agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; (iii) any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit or any error in interpretation of technical terms; or (iv) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document.  The Borrowers hereby assume all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrowers’ pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrowers may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrowers, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrowers which the Borrowers prove were caused by the L/C Issuer's willful misconduct or gross negligence or the L/C Issuer's willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit.  In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary (or the L/C Issuer may refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit), and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

 

  

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(g)     Cash Collateral.  Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrowers shall, in each case, immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations.  Sections 2.05  and 8.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder.  For purposes of this Section 2.03, Section 2.05 and Section 8.02(c) “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances in an amount equal to 105% of the Outstanding Amount of all L/C Obligations, pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby Consented to by the Lenders).  Derivatives of such term have corresponding meanings.  The Borrowers hereby grant to the Collateral Agent a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing.  Cash Collateral shall be maintained in the Cash Collateral Account.  If at any time the Administrative Agent determines that any funds held as Cash Collateral are subject to any right or claim of any Person other than the Administrative Agent or that the total amount of such funds is less than the aggregate Outstanding Amount of all L/C Obligations, the Borrowers will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate Outstanding Amount over (y) the total amount of funds, if any, then held as Cash Collateral that the Administrative Agent determines to be free and clear of any such right and claim.  Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Laws, to reimburse the L/C Issuer and, to the extent not so applied, shall thereafter be applied to satisfy other Obligations.

 

(h)    Applicability of ISP and UCP.  Unless otherwise expressly agreed by the L/C Issuer and the Lead Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP or UCP shall apply to each Standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each Commercial Letter of Credit.

 

  

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(i)     Letter of Credit Fees.  The Borrowers shall pay to the Administrative Agent, for the account of each Lender in accordance with its Applicable Percentage, a Letter of Credit fee (the “Letter of Credit Fee”) for each Letter of Credit equal to the Applicable Rate times the daily Stated Amount under each such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit. For purposes of computing the daily Stated Amount available to be drawn under any Letter of Credit, the Stated Amount of the Letter of Credit shall be determined in accordance with Section 1.06.   Letter of Credit Fees shall be (i) due and payable on the first calendar day of each month, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand, and (ii) computed on a monthly basis in arrears.  If there is any change in the Applicable Rate during any month, the daily amount available to be drawn under of each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such month that such Applicable Rate was in effect.  Notwithstanding anything to the contrary contained herein, while any Event of Default has occurred and is continuing, the Administrative Agent may, and upon the request of the Required Lenders shall, notify the Lead Borrower that all Letter of Credit Fees shall accrue at the Default Rate and thereafter such Letter of Credit Fees shall accrue at the Default Rate to the fullest extent permitted by applicable Laws.

 

(j)     [Reserved].

 

(k)     Consignment of Bill of Lading.  The Borrowers shall, upon the request of the Administrative Agent, consign to the L/C Issuer any bill of lading for Inventory which is supported by a Commercial Letter of Credit issued by the L/C Issuer.

 

(l)     Conflict with Issuer Documents.  In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

 

2.04      Swing Line Loans.

 

(a)     The Swing Line.  Subject to the terms and conditions set forth herein, the Swing Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.04, to make loans (each such loan, a “Swing Line Loan”) to the Borrowers from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Applicable Percentage of the Outstanding Amount of Committed Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed the lesser of (A) the Aggregate Commitments, or (B) the Borrowing Base, and (ii) the aggregate Outstanding Amount of the Committed Loans of any Lender at such time, plus such Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations at such time, plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line Loans at such time shall not exceed such Lender’s Commitment, and provided, further, that the Borrowers shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan.  Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall bear interest only at a rate based on the Base Rate.  Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swing Line Loan.

 

  

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(b)     Borrowing Procedures.  Each Swing Line Borrowing shall be made upon the Lead Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000, and (ii) the requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Lead Borrower.  Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof.  Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent at the request of the Required Lenders prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender may, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrowers at its office by crediting the account of the Lead Borrower on the books of the Swing Line Lender in immediately available funds.

 

(c)     Refinancing of Swing Line Loans.

 

(i)           The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrowers (which hereby irrevocably authorize the Swing Line Lender to so request on their behalf), that each Lender make a Base Rate Loan in an amount equal to such Lender's Applicable Percentage of the amount of Swing Line Loans then outstanding.  Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02.  The Swing Line Lender shall furnish the Lead Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent.  Each Lender shall make an amount equal to its Applicable Percentage of the amount specified in such Committed Loan Notice available to the Administrative Agent in immediately available funds for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrowers in such amount.  The Administrative Agent shall remit the funds so received to the Swing Line Lender.

 

(ii)           If for any reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Lenders fund its risk participation in the relevant Swing Line Loan and each Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.

 

  

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(iii)           If any Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing.  If such Lender pays such amount (with interest and fees as aforesaid), the principal amount so paid shall constitute such Lender’s Committed Loan included in the relevant Committed Borrowing or funded participation in the relevant Swing Line Loan, as the case may be.   A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

 

(iv)           Each Lender’s obligation to make Committed Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrowers or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Committed Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02.  No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrowers to repay Swing Line Loans, together with interest as provided herein.

 

(d)     Repayment of Participations.

 

(i)           At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Applicable Percentage of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s risk participation was funded) in the same funds as those received by the Swing Line Lender.

 

(ii)           If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Lender shall pay to the Swing Line Lender its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate.  The Administrative Agent will make such demand upon the request of the Swing Line Lender.  The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

 

(e)           Interest for Account of Swing Line Lender.  The Swing Line Lender shall be responsible for invoicing the Borrowers for interest on the Swing Line Loans.  Until each Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Lender’s Applicable Percentage of any Swing Line Loan, interest in respect of such Applicable Percentage shall be solely for the account of the Swing Line Lender.

 

  

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(f)     Payments Directly to Swing Line Lender.  The Borrowers shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

 

2.05      Prepayments.

 

(a)     The Borrowers may, upon irrevocable notice from the Lead Borrower to the Administrative Agent, at any time or from time to time voluntarily prepay Committed Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 11:00 a.m. (A) three (3) Business Days prior to any date of prepayment of LIBO Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of LIBO Rate Loans shall be in a principal amount of $100,000 or a whole multiple of $50,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $50,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Committed Loans to be prepaid and, if LIBO Rate Loans, the Interest Period(s) of such Committed Loans.  The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Lead Borrower, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a LIBO Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.  Each such prepayment shall be applied to the Committed Loans of the Lenders in accordance with their respective Applicable Percentages.

 

(b)     The Borrowers may, upon irrevocable notice from the Lead Borrower to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the date of the prepayment, and (ii) any such prepayment shall be in a minimum principal amount of $100,000.  Each such notice shall specify the date and amount of such prepayment.  If such notice is given by the Lead Borrower, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

 

(c)     If for any reason the Total Outstandings at any time exceed the Loan Cap, as then in effect, the Borrowers shall immediately prepay Committed Loans and L/C Borrowings and/or Cash Collateralize the L/C Obligations (other than L/C Borrowings) in an aggregate amount equal to such excess; provided, however, that the Borrowers shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(c) unless after the prepayment in full of the Loans the Total Outstandings exceed the Loan Cap.

 

 

  

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         (d)     Notwithstanding the provisions of Section 2.05(a) or 2.05(b), so long as the cash management procedures set forth in Section 6.13 are in effect, any proceeds deposited to the Concentration Account in accordance with the provisions of Section 6.13, including, without limitation, any Net Proceeds received by a Loan Party upon the occurrence of a Prepayment Event and upon the direction of the Lead Borrower shall, (i) if deposited in the Concentration Account not later than 2:00 p.m. in immediately available funds, be utilized to prepay the Loans on the date such funds were deposited into the Concentration Account, or (ii) if deposited in the Concentration Account after 2:00 p.m. in immediately available funds, be utilized to prepay the Loans on the next Business Day following the date such funds were deposited into the in the Concentration Account, in either case in the order of priority set forth in Section 2.05(e).  The application of all such proceeds to the Loans shall not reduce the Commitments.  If all Obligations then due pursuant to Section 2.05(e) are paid in full, then any proceeds deposited to the Concentration Account shall be remitted without any deduction other than customary fees to the operating account of the Borrowers designated by the Lead Borrower on (i) if received in the Concentration Account not later than 2:00 p.m. in immediately available funds, the date such funds were deposited into the in the Concentration Account, or (ii) if received in the Concentration Account after 2:00 p.m. in immediately available funds, the next Business Day following the date such funds were deposited into the in the Concentration Account.

 

(e)     Prepayments made pursuant to this Section 2.05, first, shall be applied ratably to the L/C Borrowings and the Swing Line Loans, second, shall be applied ratably to the outstanding Committed Loans that are Base Rate Loans, third, shall be applied ratably to the outstanding Committed Loans that are LIBO Rate Loans, fourth, shall be used to Cash Collateralize the remaining L/C Obligations in accordance with Section 2.03(g) (after and during the continuation of an Event of Default); and, fifth, the amount remaining, if any, may be retained by and shall be released to the Borrowers for use in the ordinary course of their  business; provided however, that so long as no Event of Default has occurred and is continuing,  in the event of any payments pursuant to Section 2.05(d), at the Lead Borrower’s election, in lieu of prepaying, any then outstanding LIBO Rate Loans such funds may be retained by the Agent in an interest bearing account for the benefit of the Borrowers in an amount sufficient to Cash Collateralize any such LIBO Rate Loans until same may be paid without any prepayment or other charges.  Upon the drawing of any Letter of Credit that has been Cash Collateralized, the funds held as Cash Collateral shall be applied (without any further action by or notice to or from the Borrowers or any other Loan Party) to reimburse the L/C Issuer or the Lenders, as applicable.

 

2.06      Termination or Reduction of Commitments.

 

(a)           The Borrowers may, upon irrevocable notice from the Lead Borrower to the Administrative Agent, terminate the Aggregate Commitments, the Letter of Credit Sublimit or from time to time permanently reduce the Aggregate Commitments, or the Letter of Credit Sublimit; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m. three Business Days prior to the date of any such termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $500,000 or any whole multiple of $100,000 in excess thereof, (iii) the Borrowers shall not terminate or reduce (A) the Aggregate Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstanding would exceed the Aggregate Commitments,  and (B) the Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed the Letter of Credit Sublimit.

 

(b)           If, after giving effect to any reduction of the Aggregate Commitments, the Letter of Credit Sublimit exceeds the amount of the Aggregate Commitments, such Letter of Credit Sublimit shall be automatically reduced by the amount of such excess.

 

(c)           The Administrative Agent will promptly notify the Lenders of any termination or reduction of the Letter of Credit Sublimit or the Aggregate Commitments under this Section 2.06.  Upon any reduction of the Aggregate Commitments, the Commitment of each Lender shall be reduced by such Lender’s Applicable Percentage of such reduction amount.  All fees (including, without limitation, Commitment Fees, Early Termination Fees, and Letter of Credit Fees) and interest in respect of the Aggregate Commitments accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination.

 

  

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2.07      Repayment of Loans. The Borrowers shall repay to the Lenders on the Termination Date the aggregate principal amount of Committed Loans outstanding on such date.

 

2.08      Interest.

 

(a)     Subject to the provisions of Section 2.08(a)(i) below, (i) each LIBO Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Adjusted LIBO Rate for such Interest Period plus the Applicable Margin; and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin.

 

(i)           If any Event of Default has occurred and is continuing, then all outstanding Obligations shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate and thereafter, until termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

 

(ii)           Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

 

(b)     Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Laws.

 

2.09      Fees.  In addition to certain fees described in subsections (i) and (j) of Section 2.03:

 

(a)     Unused Line Fee.  The Borrowers shall pay to the Administrative Agent, for the account of each Lender, in accordance with its Applicable Percentage, an unused line fee (the “Unused Line Fee”) equal to one half of one percent (0.50%) times the average daily amount by which the Aggregate Commitments exceed the sum of (i) the Outstanding Amount of Loans and (ii) the Outstanding Amount of L/C Obligations.  The Unused Line Fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable monthly in arrears on the first calendar day of each month, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period.  The Unused Line Fee shall be calculated monthly in arrears, and if there is any change in the Applicable Margin during any month, the average daily amount shall be computed and multiplied by the Applicable Margin separately for each period during such month that such Applicable Margin was in effect.

 

(b)     Early Termination Fee.  In the event that (i) the Termination Date occurs, for any reason, or (ii) the Lead Borrower elects to permanently reduce in full or in part the Commitments pursuant to Section 2.06 hereof, then in each case the Borrowers shall pay to the Administrative Agent, for the ratable benefit of the Lenders, a fee (the “Early Termination Fee”) in respect of amounts which are or become payable by reason thereof equal to (x) one and one-half percent (1.50%) if such event shall occur on or before July 1, 2010, (y) one percent (1.00%) if such event shall occur after July 1, 2010, but on or before July 1, 2011 or (z) one half of one percent (0.50%) if such event shall occur after July 1, 2011, as the case may be, of the Aggregate Commitments then in effect.  Notwithstanding anything to the contrary contained herein, no Early Termination Fee shall be due if the Commitments are irrevocably terminated and the Obligations repaid in full in cash at any time as a result of the loan arrangement evidenced by this Agreement and the other Loan Documents being refinanced in its entirety by an Affiliate (under clause (i) of the definition thereof) of the Administrative Agent.  All parties to this Agreement agree and acknowledge that the Lenders will have suffered damages on account of the early termination of this Agreement and that, in view of the difficulty in ascertaining the amount of such damages, the Early Termination Fee constitutes reasonable compensation and liquidated damages to compensate the Lenders on account thereof.

 

  

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(c)     Collateral Monitoring Fee.  On the Closing Date, and on the first day of each month thereafter during the term hereof, the Borrowers shall pay to the Collateral Agent a collateral monitoring fee (the “Collateral Monitoring Fee”) in the amount of $2,000.  Such Collateral Monitoring Fee shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

(d)     Closing Fee.  On the Closing Date, the Borrowers shall pay to the Administrative Agent a closing fee (the “Closing Fee”) in the amount of $125,000.  Such Closing Fee shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

(e)     Other Fees.  The Borrowers shall pay to the Administrative Agent, for its own account, fees in such amounts and at such times as mutually agreed upon by the parties in writing.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

2.10      Computation of Interest and Fees.  All computations of interest and fees shall be made on the basis of a 360-day year and actual days elapsed.  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12, bear interest for one day.  Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

2.11      Evidence of Debt.

 

(a)     The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by the Administrative Agent (the “Loan Account”) in the ordinary course of business.  In addition, each Lender may record in such Lender’s internal records, an appropriate notation evidencing the date and amount of each Loan from such Lender, each payment and prepayment of principal of any such Loan, and each payment of interest, fees and other amounts due in connection with the Obligations due to such Lender.  The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrowers and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.  Upon the request of any Lender made through the Administrative Agent, the Borrowers shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records.  Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.  Upon receipt of an affidavit of a Lender as to the loss, theft, destruction or mutilation of such Lender’s Note and upon cancellation of such Note, the Borrowers will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor.

 

  

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(b)     In addition to the accounts and records referred to in Section 2.11(a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

 

2.12      Payments Generally; Administrative Agent’s Clawback.

 

(a)     General.  All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrowers hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein.  The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.  From and after the Closing Date, the Administrative Agent shall be entitled to charge the Borrowers for one (1) Business Day of ‘clearance’ at the rate then applicable under Section 2.08 to any Borrowings on all payments of Borrowers and their Subsidiaries.  This across-the-board one (1) Business Day clearance charge on all payments of Borrowers and their Subsidiaries 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 charge being the equivalent of charging interest on such payments through the completion of a period ending one (1) Business Day after the receipt thereof.  The parties acknowledge and agree that the economic benefit of the foregoing provisions of this Section 2.12 shall be for the exclusive benefit of the Administrative Agent.

 

 

  

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(b)           (i)     Funding by Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of LIBO Rate Loans (or in the case of any Borrowing of Base Rate Loans, prior to 12:00 noon on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrowers a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Committed Borrowing available to the Administrative Agent, then the applicable Lender and the Borrowers severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrowers to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrowers, the interest rate applicable to Base Rate Loans.  If the Borrowers and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrowers the amount of such interest paid by the Borrowers for such period.  If such Lender pays its share of the applicable Committed Borrowing to the Administrative Agent, then the principal amount so paid shall constitute such Lender’s Committed Loan included in such Committed Borrowing.  Any payment by the Borrowers shall be without prejudice to any claim the Borrowers may have against a Lender that shall have failed to make such payment to the Administrative Agent.

 

(ii)           Payments by Borrowers; Presumptions by Administrative Agent.  Unless the Administrative Agent shall have received notice from the Lead Borrower prior to the time at which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer hereunder that the Borrowers will not make such payment, the Administrative Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the L/C Issuer, as the case may be, the amount due.  In such event, if the Borrowers have not in fact made such payment, then each of the Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

A notice of the Administrative Agent to any Lender or the Lead Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

 

(c)     Failure to Satisfy Conditions Precedent.  If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrowers by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof (subject to the provisions of the last paragraph of Section 4.02 hereof), the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

 

(d)     Obligations of Lenders Several.  The obligations of the Lenders hereunder to make Committed Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 10.04(c) are several and not joint.  The failure of any Lender to make any Committed Loan, to fund any such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan, to purchase its participation or to make its payment under Section 10.04(c).

 

  

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(e)     Funding Source.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

 

2.13       Sharing of Payments by Lenders.  If any Credit Party shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of, interest on, or other amounts with respect to, any of the Obligations resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Obligations greater than its pro rata share thereof as provided herein (including as in contravention of the priorities of payment set forth in Section 8.03), then the Credit Party receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Obligations of the other Credit Parties, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Credit Parties ratably and in the priorities set forth in Section 8.03, provided that:

 

(i)           if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

 

(ii)           the provisions of this Section shall not be construed to apply to (x) any payment made by the Loan Parties pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than to the Borrowers or any Subsidiary thereof (as to which the provisions of this Section shall apply).

 

Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.

 

2.14        Settlement Amongst Lenders.

 

(a)          The amount of each Lender’s Applicable Percentage of outstanding Loans (including outstanding Swing Line Loans) shall be computed weekly (or more frequently in the Administrative Agent’s discretion) and shall be adjusted upward or downward based on all Loans (including Swing Line Loans) and repayments of Loans (including Swing Line Loans) received by the Administrative Agent as of 3:00 p.m. on the first Business Day (such date, the “Settlement Date”) following the end of the period specified by the Administrative Agent.

 

 

  

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(b)          The Administrative Agent shall deliver to each of the Lenders promptly after a Settlement Date a summary statement of the amount of outstanding Committed Loans for the period and the amount of repayments received for the period.  As reflected on the summary statement, (i) the Administrative Agent shall transfer to each Lender its Applicable Percentage of repayments, and (ii) each Lender shall transfer to the Administrative Agent (as provided below) or the Administrative Agent shall transfer to each Lender, such amounts as are necessary to insure that, after giving effect to all such transfers, the amount of Committed Loans made by each Lender shall be equal to such Lender’s Applicable Percentage of all Committed Loans outstanding as of such Settlement Date.  If the summary statement requires transfers to be made to the Administrative Agent by the Lenders and is received prior to 1:00 p.m. on a Business Day, such transfers shall be made in immediately available funds no later than 3:00 p.m. that day; and, if received after 1:00 p.m., then no later than 3:00 p.m. on the next Business Day. The obligation of each Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Administrative Agent.  If and to the extent any Lender shall not have so made its transfer to the Administrative Agent, such Lender agrees to pay to the Administrative Agent, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent, equal to the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation plus any administrative, processing, or similar fees customarily charged by the Administrative Agent in connection with the foregoing.

 

 

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY;

APPOINTMENT OF LEAD BORROWER

 

3.01      Taxes.

 

(a)     Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrowers hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrowers shall be required by applicable Laws to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or L/C Issuer, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrowers shall make such deductions and (iii) the Borrowers shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Laws.

 

(b)     Payment of Other Taxes by the Borrowers.  Without limiting the provisions of subsection (a) above, the Borrowers shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Laws.

 

(c)     Indemnification by the Loan Parties.  The Loan Parties shall indemnify the Administrative Agent, each Lender and the L/C Issuer, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and any penalties, interest, fees, and reasonable costs and expenses, arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Lead Borrower by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive absent manifest error.

 

(d)     Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority, the Lead Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

  

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(e)     Status of Lenders.  Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which any Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Lead Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Lead Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if requested by the Lead Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Lead Borrower or the Administrative Agent as will enable the Lead Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

 

Without limiting the generality of the foregoing, in the event that any Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to the Lead Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Lead Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

 

(i)           duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,

 

(ii)          duly completed copies of Internal Revenue Service Form W-8ECI,

 

(iii)         in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrowers within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of  Internal Revenue Service Form W-8BEN, or

 

(iv)         any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Lead Borrower to determine the withholding or deduction required to be made.

 

 

  

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(f)     Treatment of Certain Refunds.  If the Administrative Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section, it shall pay to the Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrowers, upon the request of the Administrative Agent, such Lender or the L/C Issuer, agree to repay the amount paid over to the Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the L/C Issuer in the event the Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to require the Administrative Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrowers or any other Person.

 

3.02      Illegality.  If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund LIBO Rate Loans, or to determine or charge interest rates based upon the LIBO Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Lead Borrower through the Administrative Agent, any obligation of such Lender to make or continue LIBO Rate Loans or to convert Base Rate Loans to LIBO Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Lead Borrower that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all LIBO Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such LIBO Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBO Rate Loans.  Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or converted.

 

3.03       Inability to Determine Rates.  If the Required Lenders determine that for any reason in connection with any request for a LIBO Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank market for the applicable amount and Interest Period of such LIBO Rate Loan, (b) adequate and reasonable means do not exist for determining the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan , or (c) the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Lead Borrower and each Lender.  Thereafter, the obligation of the Lenders to make or maintain LIBO Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice.  Upon receipt of such notice, the Lead Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of LIBO Rate Loans or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.

 

3.04       Increased Costs; Reserves on LIBO Rate Loans.

 

(a)     Increased Costs Generally.  If any Change in Law shall:

 

(i)           impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the LIBO Rate) or the L/C Issuer;

 

  

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(ii)           subject any Lender or the L/C Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any LIBO Rate Loan made by it, or change the basis of taxation of payments to such Lender or the L/C Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the L/C Issuer); or

 

(iii)           impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or LIBO Rate Loans made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any LIBO Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Borrowers will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

 

(b)     Capital Requirements.  If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company for any such reduction suffered.

 

(c)     Certificates for Reimbursement.  A certificate of a Lender or the L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Lead Borrower shall be conclusive absent manifest error.  The Borrowers shall pay such Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

(d)     Delay in Requests.  Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the Borrowers shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Lead Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

  

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(e)     Reserves on LIBO Rate Loans.  The Borrowers shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each LIBO Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Lead Borrower shall have received at least ten (10) days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender.  If a Lender fails to give notice ten (10) days prior to the relevant Interest Payment Date, such additional interest shall be due and payable ten (10) days from receipt of such notice.

 

3.05      Compensation for Losses.  Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrowers shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a)          any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

(b)          any failure by the Borrowers (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Lead Borrower; or

 

(c)          any assignment of a LIBO Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Lead Borrower pursuant to Section 10.13;

 

including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.  The Borrowers shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

 

For purposes of calculating amounts payable by the Borrowers to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each LIBO Rate Loan made by it at the LIBO Rate for such Loan by a matching deposit or other borrowing in the London interbank market for a comparable amount and for a comparable period, whether or not such LIBO Rate Loan was in fact so funded.

 

3.06      Mitigation Obligations; Replacement of Lenders.

 

(a)            Designation of a Different Lending Office.  If any Lender requests compensation under Section 3.04, or the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender.  The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

  

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(b)     Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrowers may replace such Lender in accordance with Section 10.13.

 

3.07      Survival.  All of the Borrowers’ obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

 

3.08      Designation of Lead Borrower as Borrowers’ Agent.

 

(a)     Each Borrower hereby irrevocably designates and appoints the Lead  Borrower as such Borrower’s agent to obtain Credit Extensions, the proceeds of which shall be available to each Borrower for such uses as are permitted under this Agreement.  As the disclosed principal for its agent, each Borrower shall be obligated to each Credit Party on account of Credit Extensions so made as if made directly by the applicable Credit Party to such Borrower, notwithstanding the manner by which such Credit Extensions are recorded on the books and records of the Lead Borrower and of any other Borrower.  In addition, each Loan Party other than the Borrowers hereby irrevocably designates and appoints the Lead  Borrower as such Loan Party’s agent to represent such Loan Party in all respects under this Agreement and the other Loan Documents.

 

(b)     Each Borrower recognizes that credit available to it hereunder is in excess of and on better terms than it otherwise could obtain on and for its own account and that one of the reasons therefor is its joining in the credit facility contemplated herein with all other Borrowers.  Consequently, each Borrower hereby assumes and agrees to discharge all Obligations of each of the other Borrowers.

 

(c)     The Lead  Borrower shall act as a conduit for each Borrower (including itself, as a “Borrower”) on whose behalf the Lead Borrower has requested a Credit Extension.  Neither the Administrative Agent nor any other Credit Party shall have any obligation to see to the application of such proceeds therefrom.

 

ARTICLE IV

 

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01      Conditions of Initial Credit Extension.  The obligation of the L/C Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction (or waiver in accordance with Section 10.01) of the following conditions precedent:

 

(a)          The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent:

 

(i)           executed counterparts of this Agreement sufficient in number for distribution to the Administrative Agent, each Lender and the Lead Borrower;

 

(ii)           (A) a Committed Loan Note executed by the Borrowers in favor of each Lender requesting a Committed Loan Note, and (B) a Swing Line Loan Note executed by the Borrowers in favor of Wells Fargo Retail Finance, LLC;

 

  

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(iii)           such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing (A) the authority of each Loan Party to enter into this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party and (B) the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party;

 

(iv)           copies of each Loan Party’s Organization Documents and such other documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, and in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect;

 

(v)           a favorable opinion of Posternak Blankstein & Lund LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, as to such matters concerning the Loan Parties and the Loan Documents as the Administrative Agent may reasonably request;

 

(vi)           a certificate signed by a Responsible Officer of the Lead Borrower certifying (A) that the conditions specified in Sections 4.01 and 4.02 have been satisfied, (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect, (C) either that (1) no consents, licenses or approvals are required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, or (2) that all such consents, licenses and approvals have been obtained and are in full force and effect, and (D) to the Solvency of the Loan Parties on a Consolidated basis as of the Closing Date after giving effect to the transactions contemplated hereby;

 

(vii)           a duly completed Compliance Certificate as of the last day of the Fiscal Month of the Parent and its Subsidiaries most recently ended prior to the Closing Date, signed by a Responsible Officer of the Lead Borrower;

 

(viii)           evidence that all insurance required to be maintained pursuant to the Loan Documents and all endorsements in favor of the Agents required under the Loan Documents have been obtained and are in effect;

 

(ix)           certain Security Documents and certificates evidencing any stock being pledge thereunder, together with undated stock powers executed in blank, each duly executed by the applicable Loan Parties;

 

(x)           all other Loan Documents, each duly executed by the applicable Loan Parties;

 

(xi)           (A) appraisals (based on net liquidation value) by a third party appraiser acceptable to the Collateral Agent of all Inventory of the Borrowers, the results of which are satisfactory to the Collateral Agent and (B) a written report regarding the results of a commercial finance examination of the Loan Parties, which shall be satisfactory to the Collateral Agent;

 

 

  

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(xii)           results of searches or other evidence reasonably satisfactory to the Collateral Agent (in each case dated as of a date reasonably satisfactory to the Collateral Agent) indicating the absence of Liens on the assets of the Loan Parties, except for Permitted Encumbrances and Liens for which termination statements and releases, satisfactions and discharges of any mortgages, and releases  or subordination agreements satisfactory to the Collateral Agent are being tendered concurrently with such extension of credit or other arrangements satisfactory to the Collateral Agent for the delivery of such termination statements and releases, satisfactions and discharges have been made;

 

(xiii)           (A)           all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create or perfect the first priority Liens intended to be created under the Loan Documents and all such documents and instruments shall have been so filed, registered or recorded to the satisfaction of the Collateral Agent, (B) the DDA Notifications, Credit Card Notifications, and Blocked Account Agreements required pursuant to Section 6.13 hereof, and (C) control agreements with respect to the Loan Parties’ securities and investment accounts;

 

(xiv)           Collateral Access Agreement, as required by the Collateral Agent;

 

(xv)           Freight forwarder agreements, as required by, and in form and substance satisfactory to, the Collateral Agent; and

 

(xvi)           such other assurances, certificates, documents, consents or opinions as the Agents reasonably may require.

 

(b)          The Administrative Agent shall have received a Borrowing Base Certificate dated the Closing Date for the then most recently ended fiscal week, and executed by a Responsible Officer of the Lead Borrower.

 

(c)          The Administrative Agent shall be reasonably satisfied that any financial statements delivered to it fairly present the business and financial condition of the Loan Parties and that there has been no Material Adverse Effect since the date of the most recent financial information delivered to the Administrative Agent.

 

(d)          The Administrative Agent shall have received and be satisfied with (i) a detailed Business Plan and forecast for the period commencing on the Closing Date and ending with the end of such Fiscal Year, which shall include an Availability model, Consolidated income statement, balance sheet, and statement of cash flow, by month, each prepared in conformity with GAAP and consistent with the Loan Parties’ then current practices and (b) such other information (financial or otherwise) reasonably requested by the Administrative Agent.

 

(e)          There shall not be pending any litigation or other proceeding, the result of which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

(f)          There shall not have occurred any default of any Material Contract or adverse change in the business, assets, operations, trade support, condition (financial or otherwise) or prospects of any Loan Party, which would reasonably be expected to have a Material Adverse Effect.

 

 

  

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(g)          The consummation of the transactions contemplated hereby shall not violate any applicable Law or any Organization Document.

 

(h)          All fees and expenses required to be paid to the Agents pursuant to Sections 2.03, 2.09 and 10.04 and on or before the Closing Date shall have been paid in full, and all fees required to be paid to the Lenders on or before the Closing Date shall have been paid in full.

 

(i)          The Borrowers shall have paid all fees, charges and disbursements of counsel to the Administrative Agent, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrowers and the Administrative Agent).

 

(j)          No material changes in governmental regulations or policies affecting any Loan Party or any Credit Party shall have occurred prior to the Closing Date.

 

(k)          There shall not have occurred any disruption or material adverse change in the United States financial or capital markets in general that has had, in the reasonable opinion of the Administrative Agent, a material adverse effect on the market for loan syndications or adversely affecting the syndication of the Loans.

 

(l)          Each Lender shall have received final credit approval to enter into the Agreement and the other Loan Documents (to which it is a party) and for its applicable Commitment, and to perform its obligations thereunder.

 

(m)          The Agents shall have completed, and be satisfied with, its corporate and legal due-diligence of each Loan Party (including, but not limited to solvency), its examination of the Collateral, the Stores and distribution centers of the Loan Parties, and the capital structure of the Loan Parties.

 

Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have Consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be Consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

 

4.02      Conditions to all Credit Extensions.  The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type, or a continuation of LIBO Rate Loans) is subject to the following conditions precedent:

 

(a)          The representations and warranties of each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in material respects (except to the extent such representation or warranty is already qualified by materiality or subject to a “Material Adverse Effect” qualifier) on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (c), respectively, of Section 6.01.

 

 

  

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(b)          No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.

 

(c)          The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

 

(d)          The Administrative Agent shall have received an updated Borrowing Base Certificate reflecting the outstanding Credit Extensions after giving effect to such request (it being agreed that except for Borrowing Base Certificates furnished pursuant to Section 6.01(c), the values for eligible assets will not be required to be updated).

 

(e)          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, any Agent, any Lender or any of their Affiliate.

 

(f)           The aggregate amount of all requested Loans and/or Letters of Credit shall not exceed Availability at such time.

 

(g)          No event or circumstance which could reasonably be expected to result in a Material Adverse Effect shall have occurred.

 

(h)          No Loan Party has entered into any transaction, or made any payment, of the type specified in Section 7.06, within three (3) Fiscal Months of the date of the proposed Credit Extension, provided, however, this condition shall not apply in connection with the issuance of any Letter of Credit, any L/C Borrowing, or any other Loan for which 100% of the proceeds shall be used to repay any outstanding fees, cost or expense (including, without limitation, the Unused Line Fees, Early Termination Fees, and Letter of Credit Fees), owed to any Credit Party under, or in connection with, this Agreement or any other Loan Document.

 

Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type or a continuation of LIBO Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty by the Borrowers that the conditions specified in this Section 4.02 have been satisfied on and as of the date of the applicable Credit Extension.  The conditions set forth in this Section 4.02 are for the sole benefit of the Credit Parties but until the Required Lenders otherwise direct the Administrative Agent to cease making Committed Loans, the Lenders will fund their Applicable Percentage of all Committed Loans and L/C Advances and participate in all Swing Line Loans and Letters of Credit whenever made or issued, which are requested by the Lead Borrower and which, notwithstanding the failure of the Loan Parties  to comply with the provisions of this Article IV, are agreed to by the Administrative Agent, provided, however, the making of any such Loans or the issuance of any Letters of Credit shall not be deemed a modification or waiver by any Credit Party of the provisions of this Article IV on any future occasion or a waiver of any rights or the Credit Parties as a result of any such failure to comply.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make Loans and to issue Letters of Credit hereunder, each Loan Party represents and warrants to the Administrative Agent and the other Credit Parties that:

 

 

  

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5.01      Existence, Qualification and Power.  Each Loan Party and each Subsidiary thereof (a) is a corporation, limited liability company, partnership or limited partnership, duly organized or formed, validly existing and, where applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, permits, authorizations, consents and approvals to (i) own or lease its assets and carry on its business as currently conducted, and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, where applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect.  Schedule 5.01 annexed hereto sets forth, as of the Closing Date, each Loan Party’s name as it appears in official filings in its state of incorporation or organization and the name under which each Loan Party currently conducts its business (if different), its state of incorporation or organization, organization type, organization number, if any, issued by its state of incorporation or organization, its federal employer identification number, and the address of its chief executive office and principal place of business.

 

5.02      Authorization; No Contravention.  The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party, has been duly authorized by all necessary corporate or other organizational action, and does not and will not (a) contravene the terms of any of such Person's Organization Documents; (b) conflict with or result in any breach, termination, or contravention of, or constitute a default under, or require any payment to be made under (i) any Material Contract or any Material Indebtedness to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; except, in each case referred to in this clause (b), to the extent that any such conflict, breach, termination, contravention or default would not reasonably be expected to have a Material Adverse Effect or (iii) any governmental licenses, permits, authorizations, consents and approvals; (c) result in or require the creation of any Lien upon any asset of any Loan Party (other than Liens in favor of the Collateral Agent under the Security Documents); or (d) violate any Law.

 

5.03      Governmental Authorization; Other Consents.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, except for (a) the perfection or maintenance of the Liens created under the Security Documents (including the first priority nature thereof), (b) such as have been obtained or made and are in full force and effect, or (c) filings with the SEC in connection with the entry into a material agreement.

 

5.04      Binding Effect.  This Agreement has been, and each other Loan Document, when delivered, will have been, duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

 

  

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5.05      Financial Statements; No Material Adverse Effect.

 

(a)           The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of the Parent and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all Material Indebtedness and other liabilities, direct or contingent, of the Parent and its Subsidiaries on a Consolidated basis as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

 

(b)           The unaudited Consolidated balance sheet of the Parent and its Subsidiaries dated March 28, 2009, and the related Consolidated and consolidating statements of income or operations, Shareholders’ Equity and cash flows for the Fiscal Quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present in all material respects the financial condition of the Parent and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.  Schedule 5.05 sets forth all Material Indebtedness and other liabilities, direct or contingent, of the Loan Parties and their Subsidiaries as of the date of such financial statements, including liabilities for taxes, material commitments and Material Indebtedness.

 

(c)           Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or would reasonably be expected to have a Material Adverse Effect.

 

(d)           No Internal Control Event exists or has occurred that has resulted in or would reasonably be expected to result in a misstatement in any material respect, in any financial information delivered or to be delivered to the Administrative Agent or the Lenders, of (i) covenant compliance calculations provided hereunder or (ii) the assets, liabilities, financial condition or results of operations of the Parent and its Subsidiaries on a Consolidated basis.

 

(e)           The Consolidated forecasted balance sheet and statements of income and cash flows of the Parent and its Subsidiaries delivered pursuant to Section 6.01(e) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Loan Parties’ best estimate of its future financial performance.

 

5.06      Litigation.  There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any of its Subsidiaries or against any of its properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) except as specifically disclosed on Schedule 5.06, either individually or in the aggregate, if determined adversely, would reasonably be expected to have a Material Adverse Effect, and there has been no adverse change in the status, or financial effect on any Loan Party or Subsidiary thereof, of the matters described on Schedule 5.06.

 

5.07      No Default.  No Loan Party or any Subsidiary is in default under or with respect to any Material Indebtedness.  No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

 

  

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5.08      Ownership of Property; Liens.

 

(a)           Each of the Loan Parties and each Subsidiary thereof has good record and marketable title in fee simple to or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, in each case free and clear of all Liens, other than Permitted Encumbrances, except for such defects in title and leasehold interest as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Each of the Loan Parties and each Subsidiary has good and marketable title to, valid leasehold interests in, or valid licenses to use all personal property (including Intellectual Property) and assets material to the ordinary conduct of its business as currently conducted, free and clear of all Liens, other than Permitted Encumbrances.

 

(b)           The Loan Parties own no Real Estate.  Schedule 5.08(b) sets forth the address (including street address, county and state) of all Leases and Capital Leases of the Loan Parties, together with a list of the lessor and its contact information with respect to each such Lease as of the Closing Date.  Each of such Leases is in full force and effect and the Loan Parties are not in default of the terms thereof.

 

(c)           Schedule 7.01 sets forth a complete and accurate list of all Liens on the property or assets of each Loan Party and each of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto.  The property of each Loan Party and each of its Subsidiaries is subject to no Liens, other than Liens set forth on Schedule 7.01, and Permitted Encumbrances.

 

(d)           Schedule 7.02 sets forth a complete and accurate list of all Investments held by any Loan Party or any Subsidiary of a Loan Party on the date hereof, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof.

 

(e)           Schedule 7.03 sets forth a complete and accurate list of all Indebtedness of each Loan Party and any Subsidiary of each Loan Party as of the Closing Date, showing as of the Closing Date the amount, obligor or issuer and maturity thereof.

 

5.09      Environmental Compliance.

 

(a)          Except as specifically disclosed in Schedule 5.09, no Loan Party or any Subsidiary thereof (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)          Except as otherwise set forth in Schedule 5.09, none of the properties currently or formerly owned or operated by any Loan Party or any Subsidiary thereof is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; there are no and never have been any underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any Subsidiary thereof or, to the best of the knowledge of the Loan Parties, on any property formerly owned or operated by any Loan Party or Subsidiary thereof; except as individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect, there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or Subsidiary thereof; and except as individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect, Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any Subsidiary thereof.

 

 

  

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(c)          Except as otherwise set forth in Schedule 5.09, no Loan Party or any Subsidiary thereof is undertaking, and no Loan Party or any Subsidiary thereof has completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any Subsidiary thereof have been disposed of in a manner not reasonably expected to result in material liability to any Loan Party or any Subsidiary thereof.

 

5.10      Insurance.  The properties of the Loan Parties and their Subsidiaries are insured with financially sound and reputable insurance companies which are not Affiliates of the Loan Parties, in such amounts, with such deductibles and covering such risks (including, without limitation, workmen’s compensation, public liability, business interruption and property damage insurance) as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Loan Parties or the applicable Subsidiary operates.  Schedule 5.10 sets forth a description of all insurance maintained by or on behalf of the Loan Parties as of the Closing Date. Each insurance policy listed on Schedule 5.10 is in full force and effect and all premiums in respect thereof that are due and payable have been paid.

 

5.11      Taxes.  The Loan Parties and their Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings being diligently conducted, for which adequate reserves have been provided in accordance with GAAP, as to which Taxes no Lien has been filed and which contest effectively suspends the collection of the contested obligation and the enforcement of any Lien securing such obligation.  There is no proposed tax assessment against any Loan Party or any Subsidiary that would, if made, have a Material Adverse Effect.  No Loan Party or any Subsidiary thereof is a party to any tax sharing agreement.

 

5.12      ERISA Compliance.

 

(a)           Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws.  Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Lead Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification.  The Loan Parties and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.  No Lien imposed under the Code or ERISA exists or is likely to arise on account of any Plan.

 

 

  

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(b)           There are no pending or, to the best knowledge of the Lead Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that would reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or would reasonably be expected to result in a Material Adverse Effect.

 

(c)           (i)           Except as would not reasonably be expected to have a Material Adverse Effect, (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13      Subsidiaries; Equity Interests.  The Loan Parties have no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, which Schedule sets forth the legal name, jurisdiction of incorporation or formation and authorized Equity Interests of each such Subsidiary, listed by class, and setting forth the number and percentage of the outstanding Equity Interests of each such class owned directly or indirectly by the applicable Loan Party.  All of the outstanding Equity Interests of such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party (or a Subsidiary of a Loan Party) in the amounts specified on Part (a) of Schedule 5.13, free and clear of all Liens except for those created under the Security Documents.  Except as specifically disclosed in Schedule 5.13, no Loan Party 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 Loan Party’s Subsidiaries’ Equity Interests or any security convertible into or exchangeable for any such Equity Interests.  The Loan Parties have no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13.  Part (c) of Schedule 5.13 is a complete and accurate description of the authorized Equity Interests of each Loan Party, by class, and a description of the number of shares of each such class that are issued and outstanding.  Except as set forth on Part (c) of Schedule 5.13, all of the outstanding Equity Interests in the Loan Parties have been validly issued, and are fully paid and non-assessable and, other than with respect to the Parent, are owned in the amounts specified on Part (c) of Schedule 5.13, free and clear of all Liens except for those created under the Security Documents.  Except as set forth in Schedule 5.13, there are no subscriptions, options, warrants, or calls relating to any shares of any Loan Party’s Equity Interests, including any right of conversion or exchange under any outstanding security or other instrument.  The copies of the Organization Documents of each Loan Party and each amendment thereto provided pursuant to Section 4.01 are true and correct copies of each such document, each of which is valid and in full force and effect.

 

5.14      Margin Regulations; Investment Company Act; Public Utility Holding Company Act.

 

(a)            No Loan Party is engaged or will be engaged, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.  None of the proceeds of the Credit Extensions shall be used directly or indirectly for the purpose of purchasing or carrying any margin stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any margin stock or for any other purpose that might cause any of the Credit Extensions to be considered a “purpose credit” within the meaning of Regulations T, U, or X issued by the FRB.

 

 

  

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(b)            None of the Loan Parties, any Person Controlling any Loan Party, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.  None of the Loan Parties, any Person Controlling any Loan Party, or any Subsidiary is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company”, as each term is defined and used in the Public Utility Holding Company Act of 2005

 

5.15      Disclosure.  Each Loan Party has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected financial information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

 

5.16      Compliance with Laws.  Each of the Loan Parties and each Subsidiary is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

5.17      Intellectual Property; Licenses, Etc. Each Loan Party owns, or holds licenses in, all Intellectual Property, trade names, patent rights and other authorizations that are necessary to the conduct of its business as currently conducted and as proposed to be conducted, and attached hereto as Schedule 5.17 is a true, correct, and complete listing of all material patents, patent applications, trademarks, trademark applications, copyrights, and copyright registrations as to which a Loan Party is the owner or is an exclusive licensee.  There is no action, proceeding, claim or complaint pending or, threatened in writing to be brought against any Loan Party which might jeopardize any of such Person’s interest in any of the foregoing licenses, patents, copyrights, trademarks, trade names, designs or applications, except those which, either individually or in the aggregate, would reasonably be expected not to have a Material Adverse Effect, and no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any Loan Party or any Subsidiary infringes upon any rights held by any other Person.

 

 

  

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5.18      Labor Matters.

 

There are no strikes, lockouts, slowdowns or other material labor disputes against any Loan Party or any Subsidiary thereof pending or, to the knowledge of any Loan Party, threatened. The hours worked by and payments made to employees of the Loan Parties comply with the Fair Labor Standards Act and any other applicable federal, state, local or foreign Law dealing with such matters, except where the failure to comply would not reasonably be expected to have a Material Adverse Effect. No Loan Party or any of its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining Act or similar state Law.  All payments due from any Loan Party and its Subsidiaries, or for which any claim may be made against any Loan Party, on account of wages and employee health and welfare insurance and other benefits, have been paid or properly accrued in accordance with GAAP as a liability on the books of such Loan Party, except as would not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 5.18 no Loan Party or any Subsidiary is a party to or bound by any collective bargaining agreement, management agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement. There are no representation proceedings pending or, to any Loan Party’s knowledge, threatened to be filed with the National Labor Relations Board, and no labor organization or group of employees of any Loan Party or any Subsidiary has made a pending demand for recognition. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair employment practices charges or any other claims or complaints against any Loan Party or any Subsidiary pending or, to the knowledge of any Loan Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any employee of any Loan Party or any of its Subsidiaries. The consummation of the transactions contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Loan Party or any of its Subsidiaries is bound.  Each Loan Party and its Subsidiaries are in material compliance with all requirements pursuant to employment standards, labor relations, health and safety, workers compensation, immigration laws and other applicable employment legislation, except where the failure to be in compliance would not reasonably be expected to have a Material Adverse Effect.  To the knowledge of the Loan Parties, no officer or director of any Loan Party who is party to an employment agreement with such Loan Party is in violation of any term of any employment contract or proprietary information agreement with such Loan Party which would reasonably be expected to have a Material Adverse Effect; and to the knowledge of the Loan Parties, the execution of the employment agreements and the continued employment by the Loan Parties of the such persons, will not result in any such violation, which would reasonably be expected to have a Material Adverse Effect.

 

5.19      Security Documents.

 

(a)            The Pledge Agreement creates in favor of the Collateral Agent, for the benefit of the Secured Parties referred to therein, a legal, valid, continuing and enforceable security interest in the Collateral (as defined in the Pledge Agreement), the enforceability of which is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law, and the Pledged Securities (as defined in the Pledge Agreement) have been delivered to the Collateral Agent (together with stock powers or other appropriate instruments of transfer executed in blank form).  The Collateral Agent has a fully perfected first priority Lien on, and security interest in, to and under all right, title and interest of each pledgor thereunder in such Collateral, and such security interest is in each case prior and superior in right and interest to any other Person.

 

 

  

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(b)            The Security Agreement creates in favor of the Collateral Agent, for the benefit of the Secured Parties referred to therein, a legal, valid, continuing and enforceable security interest in the Collateral (as defined in the Security Agreement), the enforceability of which is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.  The financing statements, releases and other filings are in appropriate form and have been or will be filed in the office of the Secretary of State of Delaware.  The Collateral Agent has a perfected Lien on, and security interest in, to and under all right, title and interest of the grantors thereunder in all Collateral that may be perfected by filing, recording or registering a financing statement or analogous document (including without limitation the proceeds of such Collateral subject to the limitations relating to such proceeds in the UCC) or by obtaining control, under the UCC (in effect on the date this representation is made) in each case prior and superior in right to any other Person, subject only to Permitted Encumbrances.

 

(c)            When the Intellectual Property Security Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office and when financing statements, releases and other filings referenced in 5.19(c) in appropriate form are filed with such offices, the Intellectual Property Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the applicable Loan Parties in the Intellectual Property (as defined in the Intellectual Property Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, in each case prior and superior in right to any other Person, subject only to Permitted Encumbrances (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks, trademark applications and copyrights acquired by the Loan Parties after the date hereof).

 

5.20      Solvency.

 

After giving effect to the transactions contemplated by this Agreement, and before and after giving effect to each Credit Extension, the Loan Parties, on a Consolidated basis, are Solvent. No transfer of property has been or will be made by any Loan Party and no obligation has been or will be incurred by any Loan Party 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 any Loan Party.

 

5.21      Deposit Accounts; Credit Card Arrangements.

 

(a)            Annexed hereto as Schedule 5.21(a) is a list of all DDAs maintained by the Loan Parties as of the Closing Date, which Schedule includes, with respect to each DDA (i) the name and address of the depository; (ii) the account number(s) maintained with such depository; (iii) a contact person at such depository, and (iv) the identification of each Blocked Account Bank.

 

 

  

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(b)            Annexed hereto as Schedule 5.21(b) is a list describing all arrangements as of the Closing Date to which any Loan Party is a party with respect to the processing and/or payment to such Loan Party of the proceeds of any credit card charges and debit card charges for sales made by such Loan Party.

 

5.22      Brokers.  No broker or finder brought about the obtaining, making or closing of the Loans or transactions contemplated by the Loan Documents, and no Loan  Party or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.  Each Loan Party hereby jointly and severally indemnifies each Credit Party against, and agrees that such Person will hold each such Credit Party harmless from, any claim, demand or liability, including reasonable attorneys’ fees, for any broker’s, finder’s or placement fee or commission incurred by such indemnifying party or the Lead Borrower or its Affiliates or a representative of such Person.

 

5.23      Customer and Trade Relations.  Except for matters which, either individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, there exists no actual or, to the knowledge of any Loan Party, threatened, termination or cancellation of, or any material adverse modification or change in the business relationship of any Loan Party with any supplier material to its operations.

 

5.24      Material Contracts.  Schedule 5.24 sets forth all Material Contracts to which any Loan Party is a party or is bound as of the Closing Date.  The Loan Parties have delivered true, correct and complete copies of such Material Contracts to the Administrative Agent on or before the date hereof.  The Loan Parties are in compliance with the obligations specified in Section 6.19 in respect of their Material Contracts and have not received any notice of the intention of any other party thereto to terminate any Material Contract.

 

5.25      Casualty.  Neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

5.26      Anti-Terrorism Laws.

 

(a)            General.  To the knowledge of the Loan Parties, after reasonable inquiry, none of the Loan Parties nor any direct or indirect investor in any Loan Party (other than the Lenders or any direct or indirect investors in the Lenders), is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

(b)            Executive Order No. 13224.  To the knowledge of the Loan Parties, after reasonable inquiry, none of the Loan Parties nor any direct or indirect investor in any Loan Party (other than the Lenders or any direct or indirect investors in the Lenders), or their respective agents acting or benefiting in any capacity in connection with the transactions hereunder, is any of the following (each a “Blocked Person”):

 

(i)             a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

 

(ii)            a Person owned or controlled  by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

 

 

  

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(iii)           a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

(iv)           a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224;

 

(v)            a Person or entity that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list; or

 

(vi)           a Person or entity who is affiliated or associated with a person or entity listed above.

 

(c)            To the best knowledge of the Loan Parties, after reasonable inquiry, none of the Loan Parties nor, to the knowledge of the Loan Parties, any of its or their agents acting in any capacity in connection with the transactions hereunder (A) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (B) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224.

 

ARTICLE VI

 

AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Loan Parties shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Subsidiary to:

 

6.01      Financial Statements.  Deliver to the Administrative Agent, in form and detail reasonably satisfactory to the Administrative Agent:

 

       (a)          as soon as available, but in any event within ninety (90) days after the end of each Fiscal Year of the Borrowers (commencing with the Fiscal Year ended on or about December 27, 2008), a Consolidated  balance sheet of the Borrowers and their Subsidiaries as at the end of such Fiscal Year, and the related Consolidated statement of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, such Consolidated statements to be audited and accompanied by (i) a report and unqualified opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit, (ii) if requested or required by the Securities Exchange Commission, an opinion of such Registered Public Accounting Firm independently assessing the Loan Parties’ internal controls over financial reporting in accordance with Item 308 of SEC Regulation S-K, PCAOB Auditing Standard No. 5, and Section 404 of Sarbanes-Oxley expressing a conclusion that contains no statement that there is a material weakness in such internal controls, except for such material weaknesses as to which the Required Lenders do not object, and (iii) interim draft (subject to year end audit and similar adjustments) annual financial statements (inclusive of subsequent periods, until year end statements are delivered) within forty five (45) days of each Fiscal Year end;

 

 

  

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       (b)          as soon as available, but in any event within thirty (30) days after the end of each of the Fiscal Months of each fiscal year of the Parent (commencing with the Fiscal Month ended on or about June 30, 2009), a Consolidated balance sheet of the Parent and its Subsidiaries as at the end of such Fiscal Month, and the related Consolidated statement of income or operations, Shareholders’ Equity and cash flows for such Fiscal Month, and for the portion of the Parent’s Fiscal Year then ended, setting forth in each case in comparative form the figures for (A) such period set forth in the projections delivered pursuant to Section 6.01(d) hereof, (B) the corresponding Fiscal Month of the previous Fiscal Year and (C) the corresponding portion of the previous fiscal year, all in reasonable detail, such Consolidated statements to be certified by a Responsible Officer of the Lead Borrower as fairly presenting in all material respects the financial condition, results of operations, Shareholders’ Equity and cash flows of the Parent and its Subsidiaries as of the end of such Fiscal Month in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

 

       (c)          daily, a Borrowing Base Certificate; such Certificate may be sent to the Administrative Agent by facsimile transmission, provided that the original thereof is forwarded to the Administrative Agent on the date of such transmission at its request.  No adjustments to the Borrowing Base Certificate may be made without support documentation and such other documentation as may be reasonably requested by the Administrative Agent or the Lenders from time to time;

 

       (d)          if requested by the Administrative Agent, weekly, no later than Wednesday for the immediately preceding fiscal week, cash flow reports in form and content reasonably satisfactory to the Administrative Agent;

 

       (e)          as soon as available, but in any event at least (i) thirty (30) days before the end of each Fiscal Year of the Parent, a Business Plan in draft form (including projected new Store openings) prepared by management of the Lead Borrower, and (ii) fifteen (15) days before the end of each Fiscal Year of the Parent, a Business Plan (including projected new Store openings) prepared by management of the Lead Borrower, each in form satisfactory to the Administrative Agent, of Consolidated balance sheets and statements of income or operations and cash flows of the Parent and its Subsidiaries on a monthly basis for the immediately following Fiscal Year (including the fiscal year in which the Maturity Date occurs), and as soon as available, but in any event no more than thirty (30) days after any significant revisions to or reforecastings of such Business Plan with respect to such Fiscal Year.

 

6.02      Certificates; Other Information.  Deliver to the Administrative Agent, in form and detail reasonably satisfactory to the Administrative Agent and the Required Lenders:

 

(a)           [reserved];

 

        (b)          concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the Fiscal Month ended on or around June 30, 2009), (i) a duly completed Compliance Certificate signed by a Responsible Officer of the Lead Borrower, which shall include (A) a certification as to the amount, if any, of rent under any Leases, and any obligations and liabilities with respect to Taxes, that have not been timely paid, (B) a certification as to the receipt of notice, if any, as to any obligations or liabilities with respect to utilities and/or insurance premiums that have not been timely paid, and (C) a certification as to the acquisition, if any, of any additional Intellectual Property acquired since the date of the last similar certification, and (ii) in the case of annual financial statements, a copy of management’s discussion and analysis with respect to such financial statements.  In the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Lead Borrower shall also provide a statement of reconciliation conforming such financial statements to GAAP;

 

 

  

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        (c)          upon the request of the Administrative Agent or its auditors, appraisers, accountants, consultants or other representatives, copies of each Loan Party’s most recent federal income tax returns, and any amendments thereto;

 

        (d)          promptly following the submission to the board of directors or the audit committee thereof, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of any Loan Party by its Registered Public Accounting Firm in connection with the accounts or books of the Loan Parties or any Subsidiary, or any audit of any of them, including, without limitation, specifying any Internal Control Event;

 

        (e)          promptly after the same are available, copies of each annual report, proxy or financial statement or other documents, report or communication sent to the stockholders of the Loan Parties, and copies of all annual, regular, periodic and special reports and registration statements which any Loan Party may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934 or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

 

        (f)          the financial and collateral reports described on Schedule 6.02 hereto, at the times set forth in such Schedule;

 

        (g)          promptly after the furnishing thereof, copies of any notice, statement, report or other communication furnished to any holder of debt securities of any Loan Party or any Subsidiary thereof pursuant to the terms of any indenture, loan or credit or similar agreement, in each case not otherwise required to be furnished to the Lenders pursuant to Section 6.01 or any other clause of this Section 6.02;

 

        (h)          as soon as available, but in any event within thirty (30) days after the end of each Fiscal Year of any Loan Party (or upon the request of the Administrative Agent or its auditors, appraisers, accountants, consultants or other representatives), (i) a certificate executed by an authorized officer of the Lead Borrower certifying the existence and adequacy of the property and casualty insurance program carried by the Loan Parties and their Subsidiaries, and (ii) a written summary of said program identifying the name of each insurer, the number of each policy and expiration date of each policy, the amounts and types of each coverage, and a list of exclusions and deductibles for each policy, and containing such additional information as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably specify

 

        (i)          promptly, and in any event within five (5) Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from any Governmental Authority (including, without limitation, the SEC (or comparable agency in any applicable non-U.S. jurisdiction)) concerning any proceeding with, or investigation or possible investigation or other inquiry by such Governmental Authority regarding financial or other operational results of any Loan Party or any Subsidiary thereof or any other matter which, if adversely determined, could reasonably expected to have a Material Adverse Effect; and

 

 

  

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        (j)          at their discretion, from time to time hereafter, with updated Business Plans; provided in all events, the Borrowers, not later than thirty (30) days prior to the end of each of each Borrowers’ Fiscal Year, shall furnish the Administrative Agent with an updated and extended Business Plan which shall go out at least through the end of the then next Fiscal Year; provided further, in each event, such updated and extended Business Plans shall be prepared pursuant to a methodology and shall include such assumptions as are satisfactory to the Administrative Agent and routinely throughout the year, the Administrative Agent, following the receipt of any of such revised forecast which reflects material adverse business performance, may, but shall not be under any obligation to, revise the financial performance covenants included in Sections 7.17 and 7.18;

 

        (k)          promptly, such additional information regarding the business affairs, financial condition or operations of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request, including, without limitation, the income level for each individual Store.

 

Financial statements and other documents required to be delivered pursuant to Sections 6.01 and Section 6.02 shall be delivered in accordance with Section 10.02(a).  The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Loan Parties with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

 

The Loan Parties hereby acknowledge that the Administrative Agent will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Loan Parties hereunder.

 

6.03           Notices.  Promptly notify the Administrative Agent:

 

(a)          of the occurrence of any Default or Event of Default;

 

(b)          of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, any default under, or termination of, a Material Contract or with respect to Material Indebtedness of any Loan Party or any Subsidiary thereof; (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary thereof and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or any administrative or arbitration proceeding affecting any Loan Party or any Subsidiary thereof, including pursuant to any applicable Environmental Laws;

 

(c)          of any undischarged or unpaid judgments or decrees;

 

(d)          of the occurrence of any ERISA Event;

 

(e)          of any material change in accounting policies or financial reporting practices by any Loan Party or any Subsidiary thereof;

 

(f)          of any change in any Loan Party’s chief executive officer, chief financial officer, or chairman of the board of directors;

 

(g)          of the discharge by any Loan Party of its present Registered Public Accounting Firm or any withdrawal or resignation by such Registered Public Accounting Firm;

 

 

  

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(h)          of any collective bargaining agreement or other labor contract to which a Loan Party becomes a party, or the application for the certification of a collective bargaining agent, or any strike, lockout, slowdown or other material labor dispute against any Loan Party or any Subsidiary pending or, to the knowledge of any Loan Party, threatened;

 

(i)          of the filing of any Lien for unpaid Taxes against any Loan Party;

 

(j)          of any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any interest in a material portion of the Collateral under power of eminent domain or by condemnation or similar proceeding or if any material portion of the Collateral is damaged or destroyed;

 

(k)          of any new Store openings and closings of any Store;

 

(l)          of any failure by any Loan Party to pay rent at (i) any one or more of such Loan Party’s locations or (ii) any of such Loan Party’s locations if such failure continues for more than three (3) days following the day on which such rent first came due;

 

(m)          of the formation or acquisition of any Subsidiary;

 

(n)          within five (5) days of the completion of any physical count of the Borrowers’ Inventory (together with a copy of the certified or such other results as may then be available thereof);

 

(o)           of the failure by Borrowers to pay trade liabilities or other expense liabilities in accordance with their past business practices;

 

(p)          within five (5) days of the Borrowers becoming aware of any litigation which, if determined adversely to the Borrowers, might have a Material Adverse Effect on the financial condition of the Borrowers;

 

(q)          within five (5) days of the reduction by any of the Borrowers’ material vendors in the amount of trade credit or terms provided by such vendor to the Borrowers on the Closing Date;

 

(r)          of the engagement or employment by the Borrowers of any bankruptcy, restructuring or “turn-around” professionals;

 

(s)          if any goods are at any time in the possession of a bailee;

 

(t)          if the Borrowers are at any time a beneficiary under a letter of credit now or hereafter issued in favor of the Borrowers; and

 

(u)          if Borrowers shall at any time hold or acquire a commercial tort claim (together with brief details thereof).

 

Each notice pursuant to this Section 6.03 shall be accompanied by a statement of a Responsible Officer of the Lead Borrower setting forth details of the occurrence referred to therein and stating what action the Lead Borrower has taken and proposes to take with respect thereto.  Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

 

 

  

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6.04      Payment of Obligations.  Pay and discharge in full as the same shall become due and payable (subject to any applicable grace period, and ordinary and customary trade terms), all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, (b) all lawful claims (including, without limitation, claims for labor, materials, supplies and claims of landlords, warehousemen, customs brokers, and carriers) which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, except, in each case, where (i) the validity or amount thereof (other than payroll taxes or taxes that are the subject of a United States federal tax lien) is being contested in good faith by appropriate proceedings diligently conducted, (ii) such Loan Party has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (iii) such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, and (iv) no Lien has been filed with respect thereto (other than any Lien being contested in good faith with respect to labor, materials or supplies associated with any Real Estate of the Loan Parties), and (v) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.  The Lead Borrower will, upon request, furnish the Collateral Agent with proof satisfactory to the Collateral Agent indicating that the Loan Parties and their Subsidiaries have made the payments described in clause (a) above.  Each Loan Party shall, and shall cause each of its Subsidiaries to, pay in full as the same shall become due and payable (subject to any applicable grace period, and ordinary and customary trade terms) all accounts payable incident to the operations of such Person not referred to in this Section 6.04, above.  Nothing contained herein shall be deemed to limit the rights of the Agents with respect to determining Reserves pursuant to this Agreement.

 

6.05      Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization or formation except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its Intellectual Property, except to the extent such Intellectual Property is no longer used or useful in the conduct of the business of the Loan Parties.

 

6.06      Maintenance of Properties.

 

(a)            Keep its properties (including, but not limited to the Collateral) in such repair, working order and condition, and shall from time to time make such repairs, replacements, additions and improvements thereto, as are reasonably necessary for the efficient operation of its business and shall comply at all times in all material respects with all material franchises, licenses and leases to which it is party so as to prevent any loss or forfeiture thereof or thereunder, except where (i) compliance is at the time being contested in good faith by appropriate proceedings and (ii) failure to comply with the provisions being contested has not resulted, and which, in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

(b)            Take all reasonable actions to possess and maintain all Intellectual Property material to the conduct of their respective businesses and own all right, title and interest in and to, or have a valid license for, all such Intellectual Property.  No Loan Party nor any of its Subsidiaries shall take any action, or fail to take any action, that could reasonably be expected to (i) result in the invalidity, abandonment, misuse, lapse, or unenforceability of Intellectual Property which is material to the conduct of the business of the Loan Parties or (ii) knowingly infringe upon or misappropriate any rights of other Persons.  Except (i) upon not less than twenty-one (21) days prior written notice given to the Administrative Agent, and (ii) in compliance with all other provisions of this Agreement, the Borrowers will not undertake or commit to undertake any action such that the results of that action, if undertaken prior to the date of this Agreement, would have been reflected on Schedule 5.17.

 

 

  

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(c)            Do all things reasonably necessary in order to comply with all Environmental Laws at any Real Property or otherwise in connection with their operations noncompliance with which would reasonably be expected to cause a Material Adverse Effect, and obtain all permits and other governmental authorizations for their operations under applicable Environmental Laws other than such permits and other authorizations the failure of which to obtain would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

6.07      Maintenance of Insurance.

 

(a)            Maintain with financially sound and reputable insurance companies reasonably acceptable to the Administrative Agent and not Affiliates of the Loan Parties, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business and operating in the same or similar locations or as is required by applicable Law, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons and as are reasonably acceptable to the Administrative Agent.

 

(b)            Fire and extended coverage policies maintained with respect to any Collateral shall be endorsed or otherwise amended to include (i) a non-contributing mortgage clause (regarding improvements to real property) and lenders’ loss payable clause (regarding personal property), in form and substance reasonably satisfactory to the Collateral Agent, which endorsements or amendments shall provide that the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Collateral Agent, (ii) a provision to the effect that none of the Loan Parties, Credit Parties or any other Person shall be a co-insurer and (iii) such other provisions as the Collateral Agent may reasonably require from time to time to protect the interests of the Credit Parties. Commercial general liability policies shall be endorsed to name the Collateral Agent as an additional insured. Business interruption policies shall name the Collateral Agent as a loss payee and shall be endorsed or amended to include (i) a provision that, from and after the Closing Date, the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Collateral Agent, (ii) a provision to the effect that none of the Loan Parties, the Administrative Agent, the Collateral Agent or any other party shall be a co-insurer and (iii) such other provisions as the Collateral Agent may reasonably require from time to time to protect the interests of the Credit Parties. Each such policy referred to in this Section 6.07(b) shall also provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium except upon not less than twenty (20) days’ prior written notice thereof by the insurer to the Collateral Agent (giving the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason except upon not less than twenty (20) days’ prior written notice thereof by the insurer to the Collateral Agent. The Lead Borrower shall deliver to the Collateral Agent, prior to the cancellation, modification or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Collateral Agent, including an insurance binder) together with evidence satisfactory to the Collateral Agent of payment of the premium therefor.

 

(c)            None of the Credit Parties, or their agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 6.07.  Each Loan Party shall look solely to its insurance companies or any other parties other than the Credit Parties for the recovery of such loss or damage and such insurance companies shall have no rights of subrogation against any Credit Party or its agents or employees.  If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then the Loan Parties hereby agree, to the extent permitted by law, to waive their right of recovery, if any, against the Credit Parties and their agents and employees.  The designation of any form, type or amount of insurance coverage by the any Credit Party under this Section 6.07 shall in no event be deemed a representation, warranty or advice by such Credit Party that such insurance is adequate for the purposes of the business of the Loan Parties or the protection of their properties.

 

 

  

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(d)            The Lead Borrower shall deliver to the Collateral Agent, notice of each claim in excess of $50,000 made by the Borrowers under any policy of insurance which covers the Collateral and will permit the Administrative Agent following the occurrence and during the continuance of any Default or Event of Default, at the Administrative Agent’s option in each instance (but not its obligation), to the exclusion of the Borrowers, to conduct the adjustment of each such claim.  The Borrowers hereby appoint the Collateral Agent as the Borrowers’ attorney in fact to obtain, adjust, settle and cancel any insurance described in this section and to endorse in favor of the Credit Parties any and all drafts and other instruments with respect to such insurance.  This appointment, being coupled with an interest, is irrevocable until this Agreement is terminated by a written instrument executed by a duly authorized Officer of each Credit Party.  The Credit Parties shall not be liable on account of any exercise pursuant to said power except for any exercise in gross negligence or willful misconduct.  The Credit Parties may apply any proceeds of such insurance against the Obligations, otherwise such proceeds shall be applied in the same manner as specified in Section 2.05(e).

 

(e)            Maintain for themselves and their Subsidiaries, a Directors and Officers insurance policy, and a “Blanket Crime” policy including employee dishonesty, forgery or alteration, theft, disappearance and destruction, robbery and safe burglary, property, and computer fraud coverage with responsible companies in such amounts as are customarily carried by business entities engaged in similar businesses similarly situated, and will upon request by the Administrative Agent furnish the Administrative Agent certificates evidencing renewal of each such policy.

 

(f)            Permit any representatives that are designated by the Collateral Agent to inspect the insurance policies maintained by or on behalf of the Loan Parties and to inspect books and records related thereto and any properties covered thereby.  The Loan Parties shall pay the reasonable fees and expenses of any representatives retained by the Collateral Agent to conduct any such inspection.

 

6.08      Compliance with Laws.  Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been set aside and maintained by the Loan Parties in accordance with GAAP; (b) such contest effectively suspends enforcement of the contested Laws, and (c) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

 

6.09      Books and Records; Accountants.

 

(a)           Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Loan Parties or such Subsidiary, as the case may be; and (ii) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Loan Parties or such Subsidiary, as the case may be.

 

 

  

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(b)          At all times retain a Registered Public Accounting Firm which is reasonably satisfactory to the Administrative Agent and shall instruct such Registered Public Accounting Firm to cooperate with, and be available to, the Administrative Agent or its representatives to discuss the Loan Parties’ financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such Registered Public Accounting Firm, as may be raised by the Administrative Agent.  The Lead Borrower hereby irrevocably authorizes and directs all auditors, accountants, or other third parties to deliver to the Administrative Agent, at the Borrowers’ expense, copies of the Borrowers’ financial statements, papers related thereto, and other accounting records of any nature in their possession, and to disclose to the Administrative Agent any information they may have regarding the Collateral or the financial condition of the Borrowers.

 

6.10      Inspection Rights.

 

(a)           Permit representatives and independent contractors of the Administrative Agent to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and Registered Public Accounting Firm, all at the expense of the Loan Parties as often as may be reasonably desired, upon reasonable advance notice to the Lead Borrower and in a manner which does not unreasonably interfere with the use and conduct of the Borrowers’ business; provided, however, that when an Event of Default has occurred and is continuing the Administrative Agent (or any of its representatives or independent contractors) may do any of the foregoing at the expense of the Loan Parties at any time and without advance notice.

 

(b)           Upon the request of the Administrative Agent after reasonable prior notice, permit the Administrative Agent or professionals (including investment bankers, consultants, accountants, lawyers and appraisers) retained by the Administrative Agent to conduct appraisals, commercial finance examinations and other evaluations, including, without limitation, of (i) the Lead Borrower’s practices in the computation of the Borrowing Base and (ii) the assets included in the Borrowing Base and related financial information such as, but not limited to, sales, gross margins, payables, accruals and reserves.  Subject to the following sentences, the Loan Parties shall pay the fees and expenses of the Administrative Agent or such professionals with respect to such evaluations and appraisals.  Without limiting the foregoing, the Loan Parties acknowledge that the Administrative Agent may, in its discretion, undertake inventory appraisals or commercial finance examinations at the Loan Parties’ expense, as provided in Sections 6.15(c) and (d).  Notwithstanding anything to the contrary contained herein or in Section 6.15(c) or (d), the Administrative Agent may cause additional inventory appraisals and commercial finance examinations to be undertaken (x) as it in its discretion deems necessary or appropriate, at its own expense, or (y) at the expense of the Loan Parties upon the occurrence and during the continuance of an Event of Default, and (z) at any time required by applicable Law.

 

6.11      Use of Proceeds.  Use the proceeds of the Credit Extensions shall be used solely in accordance with the Business Plan, including, (a) to finance the working capital needs of the Borrowers, including the purchase of Inventory, in the ordinary course of business, (b) to finance Letters of Credit needs of the Borrowers in the ordinary course of business, (c) to finance Capital Expenditures of the Borrowers, and (d) for general corporate purposes of the Loan Parties, in each case to the extent expressly permitted under applicable Law and the Loan Documents.

 

 

  

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6.12      Additional Loan Parties.  Notify the Administrative Agent at least ten (10) Business Days prior to the time that any Person becomes a Subsidiary, and promptly on the date of formation, cause any such Person (a) which is not a CFC, to (i) become a Loan Party by executing and delivering to the Administrative Agent a Joinder Agreement or such other document as the Administrative Agent shall deem appropriate for such purpose, (ii) grant a Lien to the Collateral Agent on such Person’s assets to secure the Obligations, and (iii) deliver to the Administrative Agent documents of the types referred to in clauses (iii) and (iv) of Section 4.01(a) and, if requested by the Administrative Agent, favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (a)), and (b) if any Equity Interests or Indebtedness of such Person are owned by or on behalf of any Loan Party, to pledge such Equity Interests and promissory notes evidencing such Indebtedness (except that, if such Subsidiary is a CFC, the Equity Interests of such Subsidiary to be pledged may be limited to 65% of the outstanding voting Equity Interests of such Subsidiary and 100% of the non-voting Equity Interests of such Subsidiary and such time period may be extended based on local law or practice), in each case in form, content and scope reasonably satisfactory to the Administrative Agent.  In no event shall compliance with this Section 6.12 waive or be deemed a waiver or Consent to any transaction giving rise to the need to comply with this Section 6.12 if such transaction was not otherwise expressly permitted by this Agreement or constitute or be deemed to constitute, with respect to any Subsidiary, an approval of such Person as a Borrower or permit the inclusion of any acquired assets in the computation of the Borrowing Base.

 

6.13      Cash Management.

 

(a)            On or prior to the Closing Date:

 

(i)           deliver to the Administrative Agent copies of notifications (each, a “DDA Notification”) substantially in the form attached hereto as Exhibit H which have been executed on behalf of such Loan Party and delivered to each depository institution listed on Schedule 5.21(a);

 

(ii)           deliver to the Administrative Agent copies of notifications (each, a “Credit Card Notification”), substantially in the form attached hereto as Exhibit G which have been executed on behalf of such Loan Party and delivered to such Loan Party’s credit card clearinghouses and processors listed on Schedule 5.21(b); and

 

(iii)           enter into a Blocked Account Agreement satisfactory in form and substance to the Agents with each Blocked Account Bank (collectively, the “Blocked Accounts”).

 

(b)            (i) Each Credit Card Notification and DDA Notification shall require the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to a Blocked Account of all payments due from credit card processors, and (ii) the Borrowers shall cause each depository institution listed on Schedule 5.21(a) to cause the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to a Blocked Account of all amounts on deposit in each DDA in excess of the minimum balance permitted in accordance with Section 6.13(c).

 

(c)            Each Blocked Account Agreement shall require the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to the concentration account maintained by the Collateral Agent at Wells Fargo Bank (the “Concentration Account”), of all cash receipts and collections, including, without limitation, the following:

 

 

  

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(i)           all available cash receipts from the sale of Inventory and other assets;

 

(ii)          all proceeds of collections of Accounts;

 

(iii)         all Net Proceeds, and all other cash payments received by a Loan Party from any Person or from any source or on account of any sale or other transaction or event, including, without limitation, any Prepayment Event;

 

(iv)         the then contents of each DDA (net of any minimum balance, not to exceed $1,500.00, as may be required to be kept in the subject DDA by the depository institution at which such DDA is maintained);

 

(v)          the then entire ledger balance of each Blocked Account (net of any minimum balance, not to exceed $1,500.00, as may be required to be kept in the subject Blocked Account by the Blocked Account Bank); and

 

(vi)         the proceeds of all credit card charges.

 

(d)            The Loan Parties shall provide the Collateral Agent (i) with written notice of any Restricted Payment, in each case as otherwise permitted pursuant to Section 7.06 of this Agreement, no less than five (5) days prior to the receipt thereof and (ii) with written confirmation (which shall include a fed reference number, if applicable) on the date of the receipt of any such Restricted Payment.

 

(e)            The Concentration Account shall at all times be under the sole dominion and control of the Collateral Agent.  The Loan Parties hereby acknowledge and agree that (i) without limiting the provisions of Section 2.05(d), the Loan Parties have no right of withdrawal from the Concentration Account, (ii) the funds on deposit in the Concentration Account shall at all times be collateral security for all of the Obligations and (iii) the funds on deposit in the Concentration Account shall be applied as provided in this Agreement.  In the event that, notwithstanding the provisions of this Section 6.13, any Loan Party receives or otherwise has dominion and control of any such proceeds or collections, such proceeds and collections shall be held in trust by such Loan Party for the Collateral Agent, shall not be commingled with any of such Loan Party’s other funds or deposited in any account of such Loan Party and shall, not later than the Business Day after receipt thereof, be deposited into the Concentration Account or dealt with in such other fashion as such Loan Party may be instructed by the Collateral Agent.

 

(f)            Upon the request of the Administrative Agent, the Loan Parties shall cause bank statements and/or other reports to be delivered to the Administrative Agent not less often than monthly, accurately setting forth all amounts deposited in each Blocked Account to ensure the proper transfer of funds as set forth above.

 

6.14      Information Regarding the Collateral.

 

(a)            Furnish to the Administrative Agent at least thirty (30) days prior written notice of any change in: (i) any Loan Party’s name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties; (ii) the location of any Loan Party’s chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility); (iii) any Loan Party’s organizational structure or jurisdiction of incorporation or formation; or (iv) any Loan Party’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its state of organization. The Loan Parties agree not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the UCC or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral for its own benefit and the benefit of the other Credit Parties.

 

 

  

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(b)            Should any of the information on any of the Schedules hereto become inaccurate or misleading in any material respect as a result of changes after the Closing Date, the Lead Borrower shall advise the Administrative Agent in writing of such revisions or updates as may be necessary or appropriate to update or correct the same.  From time to time as may be reasonably requested by the Administrative Agent, and not less than one time per Fiscal Year, the Lead Borrower shall supplement each Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter arising after the Closing Date that, if existing or occurring on the Closing Date, would have been required to be set forth or described in such Schedule or as an exception to such representation or that is necessary to correct any information in such Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Schedule, such Schedule shall be appropriately marked to show the changes made therein).  Notwithstanding the foregoing, no supplement or revision to any Schedule or representation shall be deemed the Credit Parties’ consent to the matters reflected in such updated Schedules or revised representations nor permit the Loan Parties to undertake any actions otherwise prohibited hereunder or fail to undertake any action required hereunder from the restrictions and requirements in existence prior to the delivery of such updated Schedules or such revision of a representation; nor shall any such supplement or revision to any Schedule or representation be deemed the Credit Parties’ waiver of any Default resulting from the matters disclosed therein.

 

6.15      Physical Inventories.

 

(a)            Cause not less than one (1) physical inventory of the Stores and the distribution centers, each to be undertaken, at the expense of the Loan Parties, in each twelve (12) month period and periodic cycle counts, in each case consistent with past practices, conducted by such inventory takers as are satisfactory to the Collateral Agent and following such methodology as is consistent with the methodology used in the immediately preceding inventory or as otherwise may be satisfactory to the Collateral Agent. The Collateral Agent, at the expense of the Loan Parties, may participate in and/or observe each scheduled physical count of Inventory which is undertaken on behalf of any Loan Party.   The Lead Borrower, within fifteen (15) days following the completion of each such inventory, shall provide the Collateral Agent with a reconciliation of the results of such inventory (as well as of any other physical inventory or cycle counts undertaken by a Loan Party) and shall post such results to the Loan Parties’ stock ledgers and general ledgers, as applicable.

 

(b)            The Collateral Agent, in its discretion, if any Default or Event of Default shall have occurred and be continuing, may cause additional such inventories to be taken as the Collateral Agent determines (each, at the expense of the Loan Parties).

 

(c)            Upon the Administrative Agent’s request from time to time, the Borrowers shall permit the Administrative Agent to obtain appraisals (in all events, at the Borrowers’ expense) conducted by such appraisers up to three (3) times per Fiscal Year.  In its discretion, the Lender may obtain additional appraisals at the Borrowers’ expense, as provided in Section 6.10 (b).

 

(d)            The Administrative Agent contemplates conducting commercial finance audits (in each event, at the Borrowers’ expense) of the Borrowers’ books and records up to three (3) times per Fiscal Year.  In its discretion the Lender may undertake additional audits at the Borrowers’ expense,  as provided in Section 6.10 (b).

 

 

  

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(e)            In the event that the Borrowers do not undertake “mystery shopping” (so-called) and share the results of the same with the Administrative Agent, the Administrative Agent from time to time (in all events, at the Borrowers’ expense) may undertake “mystery shopping” (so-called) visits to all or any of the Borrowers’ business premises. The Administrative Agent shall provide the Borrowers with a copy of any non-company confidential results of such mystery shopping upon Borrowers’ written request.

 

6.16      Environmental Laws.

 

(a)            Except as would not reasonably be expected to have a Material Adverse Effect, (a) conduct its operations and keep and maintain its Real Estate in material compliance with all Environmental Laws; (b) obtain and renew all environmental permits appropriate or necessary for its operations and properties; and (c) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws pertaining to the presence, generation, treatment, storage, use, disposal, transportation or release of any Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, provided, however, that neither a Loan Party nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and adequate reserves have been set aside and are being maintained by the Loan Parties with respect to such circumstances in accordance with GAAP or handled by its lessors.

 

6.17      Further Assurances.

 

(a)            Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements and other documents), that may be required under any applicable Law, or which any Agent may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties. The Loan Parties also agree to provide to the Agents, from time to time upon request, evidence satisfactory to the Agents as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

 

(b)            If any material assets are acquired by any Loan Party after the Closing Date (other than assets constituting Collateral under the Security Documents that become subject to the Lien of the Security Documents upon acquisition thereof), notify the Agents thereof, and the Loan Parties will cause such assets to be subjected to a Lien securing the Obligations and will take such actions as shall be necessary or shall be reasonably requested by any Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section 6.17, all at the expense of the Loan Parties. In no event shall compliance with this Section 6.17(b) waive or be deemed a waiver or consent to any transaction giving rise to the need to comply with this Section 6.17(b) if such transaction was not otherwise expressly permitted by this Agreement or constitute or be deemed to constitute consent to the inclusion of any acquired assets in the computation of the Borrowing Base.

 

(c)            Use, and cause each of the Subsidiaries to use, their commercially reasonable efforts to obtain lease terms in any lease entered into by any Loan Party after the date hereof not expressly prohibiting the recording in the relevant real estate filing office of an appropriate memorandum of lease and the encumbrancing of the leasehold interest of such Loan Party in the property that is the subject of such lease.

 

 

  

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(d)            Upon the request of the Collateral Agent, cause each of its customs brokers, freight forwarders and other carriers to deliver an agreement (including, without limitation, a Customs Broker Agreement) to the Collateral Agent covering such matters and in such form as the Collateral Agent may reasonably require.

 

(e)            Upon the request of the Collateral Agent, use commercially reasonable efforts to cause any of its landlords to deliver a Collateral Access Agreement to the Collateral Agent in such form as the Collateral Agent may reasonably require.

 

6.18      Compliance with Terms of Leaseholds.

 

Except as otherwise expressly permitted hereunder (including, without limitation, in connection with Store closings permitted pursuant to clause (b) of the definition of Permitted Dispositions), make all payments and otherwise perform all obligations in respect of all Leases of real property to which any Loan Party or any of its Subsidiaries is a party, keep such Leases in full force and effect and not allow such Leases to lapse or be terminated or any rights to renew such Leases to be forfeited or cancelled, notify the Administrative Agent of any default by any party with respect to such Leases and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so, except, in any case, where the failure to do so, either individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect.  In the event that the Borrowers become delinquent in their rent payments, the Administrative Agent may establish additional Reserves against the Borrowing Base for the amount of any landlord liens arising from such delinquency.

 

6.19      Material Contracts.  Subject to Section 7.20, perform and observe all of the terms and provisions of each Material Contract to be performed or observed by any Loan Party or any of its Subsidiaries, take all such action required on the part of any Loan Party or any of its Subsidiaries to maintain each such Material Contract in full force and effect, enforce each such Material Contract in accordance with its terms, take all such action to such end as may be from time to time requested by the Administrative Agent and, upon request of the Administrative Agent, make to each other party to each such Material Contract such demands and requests for information and reports or for action as any Loan Party or any of its Subsidiaries is entitled to make under such Material Contract, and cause each of its Subsidiaries to do so, except, in any case, where the failure to do so, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.  In addition, the Supply Agreement is shall at all times remain, in full force and effect.

 

6.20      ERISA.

 

(a)            Comply in all material respects with the applicable provisions of ERISA or any other applicable federal, state, provincial, local or foreign law dealing with such matters, except where the failure to comply would reasonably be expected to result in a claim or liability against any Loan Party or its Affiliates of $150,000 or less.

 

(b)            Pay and discharge promptly any liability imposed upon it pursuant to the provisions of Title IV of ERISA; provided, however, that neither any Loan Party nor any ERISA Affiliate or any other Subsidiary of the Loan Parties shall be required to pay any such liability if (i) the amount, applicability or validity thereof shall be diligently contested in good faith by appropriate proceedings, and (ii) such Person shall have set aside on its books reserves, in the opinion of the independent certified public accountants of such Person, adequate with respect thereto.

 

 

  

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(c)            Deliver to the Collateral Agent, promptly, and in any event within twenty (20) days, after (i) the occurrence of any Reportable Event in respect of a Plan, a copy of the materials that are filed with the PBGC, (ii) any Loan Party or any  ERISA Affiliate or an administrator of any Plan files with participants, beneficiaries or the PBGC a notice of intent to terminate any such Plan, a copy of any such notice, (iii) the receipt of notice by any Loan Party or any ERISA Affiliate or an administrator of any Plan from the PBGC of the PBGC’s intention to terminate any Plan or to appoint a trustee to administer any such Plan, a copy of such notice, (iv) the request by any Lender of copies of each annual report that is filed on Treasury Form 5500 with respect to any Plan, together with certified financial statements (if any) for the Plan and any actuarial statements on Schedule B to such Form 5500, (v) any Loan Party or any ERISA Affiliate knows or has reason to know of any event or condition which would reasonably be expected to constitute grounds under the provisions of Section 4042 of ERISA for the termination of (or the appointment of a trustee to administer) any Plan, an explanation of such event or condition, (vi) the receipt by any Loan Party or any ERISA Affiliate of an assessment of withdrawal liability under Section 4201 of ERISA from a Multiemployer Plan, a copy of such assessment, (vii) any Loan Party or any ERISA Affiliate knows or has reason to know of any event or condition which would reasonably be expected to cause any one of them to incur a liability under Section 4062, 4063, 4064 or 4069 of ERISA or Section 412(n) or 4971 of the Code, an explanation of such event or condition, or (viii) any Loan Party or any ERISA Affiliate knows or has reason to know that an application is to be, or has been, made to the Secretary of the Treasury for a waiver of the minimum funding standard under the provisions of Section 412 of the Code, a copy of such application, and in each case described in clauses (i) through (iii) and (v) through (vii) together with a statement signed by an officer setting forth details as to such Reportable Event, notice, event or condition and the action which such Loan Party and any ERISA Affiliate proposes to take with respect thereto.».

 

ARTICLE VII

 

NEGATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, no Loan Party shall, nor shall it permit any Subsidiary to, directly or indirectly:

 

7.01      Liens.  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired or sign or file or suffer to exist under the UCC or any similar Law or statute of any jurisdiction a financing statement that names any Loan Party or any Subsidiary thereof as debtor; sign or suffer to exist any security agreement authorizing any Person thereunder to file such financing statement; sell any of its property or assets subject to an understanding or agreement (contingent or otherwise) to repurchase such property or assets with recourse to it or any of its Subsidiaries; or assign or otherwise transfer any accounts or other rights to receive income, other than, as to all of the above, Permitted Encumbrances.

 

7.02      Investments.  Have outstanding, make, acquire or hold any Investment (or become contractually committed to do so), directly or indirectly, or incur any liabilities (including contingent obligations) for or in connection with any Investment, except Permitted Investments.

 

 

  

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7.03      Indebtedness; Disqualified Stock.

 

Create, incur, assume, guarantee, suffer to exist or otherwise become or remain liable with respect to, any Indebtedness (except Permitted Indebtedness) or issue Disqualified Stock.

 

7.04      Fundamental Changes.  Merge, dissolve, liquidate, wind up, consolidate with or into another Person, reorganize, enter into a plan of reorganization, recapitalization or reclassify its Equity Interests (or agree to do any of the foregoing), except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect to any action described below or would result therefrom:

 

    (a)          any Subsidiary may merge with any other Subsidiary or its direct Parent, provided that a Loan Party shall be the continuing or surviving Person and if a Borrower is party to such merger, such Borrower shall be the continuing or surviving Person;

 

    (b)          any CFC that is not a Loan Party may merge into any CFC that is not a Loan Party; and

 

    (c)          effect the Reverse Stock Split.

 

7.05      Dispositions.  Make any Disposition or enter into any agreement to make any Disposition, except Permitted Dispositions.

 

7.06      Restricted Payments.  Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, or issue or sell any Equity Interests or accept any capital contribution, except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect to any action described below or would result therefrom each Subsidiary of a Loan Party may make Restricted Payments to any Borrower except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect to any action described below or would result therefrom: (a) each (i) Loan Party may make Restricted Payments to any other Loan Party, and (ii) Subsidiary of a Loan Party may make Restricted Payments to any other Loan Party; (b) the Loan Parties and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person; (c) the Parent may declare and make dividend payments or other Distributions in preferred Equity Interests (other than Disqualified Stock) in connection with an exercise of the “poison pill” contained in its Organizational Documents and (d) in connection with any stock split transaction consummated by the Parent, the Parent may make cash payments for the retirement of any fractional Equity Interests resulting therefrom; provided, however that such cash payments shall not exceed $25,000 in the aggregate following the Closing Date.

 

7.07      Prepayments of Indebtedness.  Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner any Indebtedness, or make any payment in violation of any subordination terms of any Subordinated Indebtedness, except (a) as long as no Event of Default then exists or would result therefrom, regularly scheduled or mandatory repayments, repurchases, redemptions or defeasances of Permitted Indebtedness (but excluding on account of any Subordinated Indebtedness) or (b) voluntary prepayments, repurchases, redemptions or defeasances of Permitted Indebtedness (but excluding on account of any Subordinated Indebtedness) and (c) refinancings and refundings of such Indebtedness in compliance with Section 7.03.

 

7.08      Change in Nature of Business.

 

Engage in any line of business different from the business conducted by the Loan Parties and their Subsidiaries on the date hereof or any business substantially related or incidental thereto.

 

 

  

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7.09      Transactions with Affiliates.  Enter into, renew, extend or be a party to any transaction of any kind with any Affiliate of any Loan Party, whether or not in the ordinary course of business, other than on fair and reasonable terms that are fully disclosed to the Administrative Agent, and that are no less favorable to the Loan Parties or such Subsidiary than would be obtainable by the Loan Parties or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing shall not apply to (i) Restricted Payments permitted pursuant to Section 7.06, and (ii) the payment of director and officer compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements, in each case under this clause (ii), made in the ordinary course of business, (iii) reimbursements for executive personnel and any other such shared personnel as provided in the Business Plan, and (iv) any transaction between or among the Loan Parties.

 

7.10      Burdensome Agreements.  Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments or other distributions to any Loan Party or to otherwise transfer property to or invest in a Loan Party, (ii) of any Subsidiary to Guarantee the Obligations, (iii) of any Subsidiary to make or repay loans to a Loan Party, or (iv) of the Loan Parties or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person in favor of the Collateral Agent; provided, however, that this clause (iv) shall not prohibit (I) any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under clauses (c) and (d) of the definition of Permitted Indebtedness solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (II) the existence of or entry into of licenses, leases or other contracts entered into in the ordinary course of business containing customary restrictions on the assignment of such license, lease or contract, or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person.

 

7.11      Use of Proceeds.  Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose.

 

7.12      Amendment of Material Documents.

 

Amend, modify or waive any of a Loan Party’s rights under (a) its Organization Documents, except with respect to the Reverse Stock Split or (b) any Material Contract or Material Indebtedness (other than on account of any refinancing thereof otherwise permitted hereunder), in each case to the extent that such amendment, modification or waiver would be reasonably likely to have a Material Adverse Effect.

 

7.13      Corporate Name; Fiscal Year.

 

    (a)          Change the Fiscal Year of any Loan Party, or the accounting policies or reporting practices of the Loan Parties, except as required by GAAP.

 

    (b)          (i) Change its name as it appears in official filings in the state of its incorporation or other organization (ii) change its chief executive office, principal place of business, corporate offices or warehouses or locations at which Collateral is held or stored, or the location of its records concerning the Collateral, (iii) change the type of entity that it is, (iv) change its organization identification number, if any, issued by its state of incorporation or other organization, or (e) change its state of incorporation or organization, in each case without at least thirty (30) days prior written notice to the Collateral Agent and after the Collateral Agent’s written acknowledgment, which acknowledgment shall not be unreasonably withheld or delayed, that any reasonable action requested by the Collateral Agent in connection therewith, including to continue the perfection of any Liens in favor of the Collateral Agent, in any Collateral, has been completed or taken, and provided that any such new location shall be in the continental United States.

 

 

  

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7.14      Deposit Accounts; Blocked Accounts; Credit Card Processors.

 

    (a)           Open new DDAs or Blocked Accounts unless the Loan Parties shall have delivered to the Collateral Agent appropriate DDA Notifications or Blocked Account Agreements consistent with the provisions of Section 6.13 and otherwise satisfactory to the Collateral Agent.

 

    (b)           Enter into new agreements with credit card processors other than the ones expressly contemplated herein or in Section 6.13 hereof unless the Loan Parties shall have delivered to the Collateral Agent appropriate Credit Card Notifications consistent with the provisions of Section 6.13 and otherwise satisfactory to the Collateral Agent.

 

7.15      Consignments.  Consign any Inventory or sell any Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale (it being understood that customer return and exchange policies relating to the sale of Inventory in the ordinary course of business shall not be prohibited by this Section 7.15).

 

7.16      [Reserved]

 

7.17      Minimum Availability.  Permit Excess Availability at any time to be less than an amount equal to 7.5% of the then applicable Loan Cap (the “Minimum Availability Block”).

 

7.18      Capital Expenditures.  Make Capital Expenditures in excess of (a) the amount set forth on Schedule 7.18  for the Fiscal Year ending on or about December 31, 2009; (b) 110% of the amount set forth for Capital Expenditures in the Business Plan for the Fiscal Year ending on or about December 31, 2010; (c) 110% of the amount set forth for Capital Expenditures in the Business Plan for the Fiscal Year ending on or about December 31, 2011; and (d) 110% of the amount set forth for Capital Expenditures in the Business Plan, pro-rated through the Maturity Date, for the Fiscal Year ending on or about December 31, 2012.

 

7.19      Locations.

 

(a)           Except (i) to accomplish sales of Inventory in the ordinary course of business or (ii) the sale of obsolete equipment or fixtures (replaced by equipment or fixtures of equal or greater value) or (iii) to utilize such of the Collateral as is removed from such locations in the ordinary course of business (such as motor vehicles), remove any Collateral from the chief executive office, the Stores listed on Schedule 5.08(b), any Temporary Halloween Stores and temporary off site storage.

 

(b)           Commit to, or open any location at which the Borrowers maintain, offers for sale, or stores any of the Collateral, except those set forth in, or contemplated by, the Business Plan, or any Temporary Halloween Stores.

 

7.20      Subordinated Debt Payments.  Make payments of principal or interest on the Highbridge Note except as permitted by the Subordinated Provisions relating thereto; provided that notwithstanding such Subordinated Provisions, no payment of principal at the scheduled maturity date of the Highbridge Note shall be made unless (x) such payments are made entirely, on a dollar for dollar basis, with proceeds from (1) new Subordinated Indebtedness on terms and conditions acceptable to the Administrative Agent and subordinated on terms acceptable to the Administrative Agent, (2) the issuance by the Parent of additional shares of common stock or (3) the issuance by Parent of other Equity Interests (including Disqualified Stock) so long as such Equity Interests are on terms and conditions acceptable to the Administrative Agent, and if requested and applicable, subordinated on terms acceptable to Administrative Agent or (y) beginning sixty (60) days prior to the date of such payment and ending on the date of such payment (but prior to giving effect thereto), the Loan Parties (1) shall have an average daily Excess Availability greater than or equal to $4,500,000, and (2) shall not at any time have Excess Availability less than $4,500,000 for any three (3) consecutive Business Days during such period and at all times beginning on the date of such payment (after giving effect thereto) and ending sixty (60) days following the date of such payment the Loan Parties shall have Excess Availability greater than or equal to $3,000,000 (and at least five (5) Business Days prior to such date, Borrower shall provide the Administrative Agent with a written certification that provides for projected Excess Availability during the following sixty (60) days); provided further, that in either subclause (x) or (y) of this Section 7.20, no Event of Default shall have occurred and be continuing or could be caused by such respective payment.

 

 

  

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ARTICLE VIII

 

EVENTS OF DEFAULT AND REMEDIES

 

8.01      Events of Default.  Any of the following shall constitute an Event of Default:

 

    (a)          Non-Payment.  The Borrowers or any other Loan Party fails to pay when and as required to be paid herein:

 

(i)           any amount of principal of or any interest on any Loan; or

 

(ii)           any L/C Obligation, deposit any funds as Cash Collateral in respect of L/C Obligations, any interest on any L/C Obligation, any fee due hereunder, or any other amount payable hereunder or under any other Loan Document; or

 

    (b)          Specific Covenants.  (i) Any Loan Party fails to perform or observe any term, covenant or agreement contained in any of Sections 5.01, 6.01, 6.02(b), 6.02(f), 6.02(i), 6.03, 6.04, 6.05, 6.06, 6.07, 6.10, 6.11, 6.12, 6.13, or 6.14(a) or Article VII of this Agreement; or (ii) any of the Loan Parties fails to perform or observe any term, covenant or agreement contained in Sections 4.04, 4.10 and 5.01 of the Security Agreement to which it is a party; or

 

    (c)          Other Defaults.  Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for ten (10) consecutive calendar days after the occurrence thereof; or

 

    (d)          Material Impairment.  Any material impairment of the value or priority of the Credit Parties’ security interests in the Collateral; or

 

    (e)          Material Adverse Effect.   The occurrence of any event or series of events individually or in the aggregate which, causes a Material Adverse Effect; or

 

    (f)          Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith (including, without limitation, any Borrowing Base Certificate) shall be incorrect or misleading in any material respect when made or deemed made; or

 

 

  

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    (g)          Cross-Default.  Any Loan Party or any Subsidiary thereof (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any (x) Material Indebtedness, or (y) other Indebtedness, to the extent that such failure would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (other than Indebtedness hereunder), including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement, or (B) fails to observe or perform any other agreement or condition relating to any such Material Indebtedness (other than Indebtedness hereunder) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Material Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or

 

    (h)          Default Under Other Agreements.  The occurrence of any breach or default under any agreement between the Credit Parties and Loan Party or instrument or paper given to the Credit Parties by such Loan Party, whether such agreement, instrument, or paper now exists or hereafter arises, continuing beyond any applicable cure or grace period thereunder, (notwithstanding that the Credit Parties may not have exercised its rights upon default under any such other agreement, instrument or paper).

 

    (i)          Insolvency Proceedings, Etc.   Any Loan Party or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Laws, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or a proceeding shall be commenced or a petition filed, without the application or consent of such Person, seeking or requesting the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed and the appointment continues undischarged, undismissed or unstayed for forty-five (45) calendar days (provided, however, that, during the pendency of such period, the Credit Parties shall be relieved of their obligation to extend credit hereunder) or an order or decree approving or ordering any of the foregoing shall be entered; or any proceeding under any Debtor Relief Laws relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for forty-five (45) calendar days (provided, however, that, during the pendency of such period, the Credit Parties shall be relieved of their obligation to extend credit hereunder), or an order for relief is entered in any such proceeding; or

 

    (j)          Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Subsidiary thereof becomes unable or admits in writing its inability or fails generally to pay its debts as they become due in the ordinary course of business, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and not dismissed or bonded over within thirty (30) days; or

 

 

  

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    (k)          Judgments; Restraint of Business.  There is entered against any Loan Party or any Subsidiary thereof (i) one or more judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding $250,000 (to the extent not covered by independent third-party insurance as to which the insurer is rated at least “A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage), or (ii) any one or more non-monetary judgments that have, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of ten (10) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect; or

 

    (l)          Liens.  (i) A notice of Lien, levy, or assessment is filed of record with respect to any of any Borrower’s properties or assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, or 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 of any Borrower’s properties or assets and the same is not paid on the payment date thereof; or (ii) any Lien (other than a Permitted Encumbrance) is placed on any of the Collateral by any Person and such lien continues unreleased for a period of thirty (30) consecutive days; or

 

    (m)          ERISA.  (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or would reasonably be expected to result in liability of any Loan Party under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $250,000 or which would reasonably likely result in a Material Adverse Effect, or (ii) a Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $50,000 or which would reasonably likely result in a Material Adverse Effect; or

 

    (n)          Invalidity of Loan Documents.  (i)  Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document or seeks to avoid, limit or otherwise adversely affect any Lien purported to be created under any Security Document; or (ii) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party or any other Person not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Security Document; or

 

    (o)          Change of Control.  There occurs any Change of Control; or

 

    (p)          Cessation of Business.  Except as otherwise expressly permitted hereunder, any Loan Party shall take any action to suspend the operation of its business in the ordinary course, liquidate all or a material portion of its assets or Store locations, or employ an agent or other third party to conduct a program of closings, liquidations or “Going-Out-Of-Business” sales of any material portion of its business; or

 

    (q)          Loss of Collateral.  There occurs any (i) uninsured loss, theft, damage or destruction of or to any material portion of the Collateral, or (i) sale (other than sales in the ordinary course of business or otherwise permitted hereunder) of any material portion of the Collateral; or

 

    (r)          Breach of Contractual Obligation.  Any Loan Party or any Subsidiary thereof fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Contract or fails to observe or perform any other material agreement or condition relating to any such Material Contract or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause the counterparty to such Material Contract to terminate such Material Contract in accordance with its terms; or

 

    (s)          Indictment.  The indictment or institution of any legal process or proceeding against, any Loan Party, under any federal, state, municipal, and other civil or criminal statute, rule, regulation, order, or other requirement having the force of law where the relief, penalties, or remedies sought or available include the forfeiture of any property of such Loan Party and/or the imposition of any stay or other order, the effect of which could be to restrain in any material way the conduct by such Loan Party of its business in the ordinary course; or

 

    (t)          Guaranty.  The termination or attempted termination of any Facility Guaranty; or

 

    (u)          Subordination; Subordinated Indebtedness.  (i)  The subordination provisions of the documents evidencing or governing any Subordinated Indebtedness (the “Subordinated Provisions”) shall, in whole or in part, terminate, cease to be effective or cease to be legally valid, binding and enforceable against any holder of the applicable Subordinated Indebtedness; (ii) any Borrower or any other Loan Party shall, directly or indirectly, (A) make any payment on account of any Subordinated Indebtedness that has been contractually subordinated in right of payment to the payment of the Obligations, except to the extent that such payment is permitted by each of the (x) terms of the Subordinated Provisions applicable to such Subordinated Indebtedness and (y) as applicable, Section 7.20, or (B) disavow or contest in any manner (x) the effectiveness, validity or enforceability of any of the Subordination Provisions, (y) that the Subordination Provisions exist for the benefit of the Credit Parties, or (z) that all payments of principal of or premium and interest on the applicable Subordinated Indebtedness, or realized from the liquidation of any property of any Loan Party, shall be subject to any of the Subordination Provisions; (iii) the occurrence and continuance of any default or event of default in respect of any of the Seller Note, the Term Note, the Highbridge Note or any additional Subordinated Indebtedness; or (iv) the occurrence of any breach of any Subordination Agreement.

 

8.02      Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Administrative Agent may, or, at the request of the Required Lenders shall, take any or all of the following actions:

 

    (a)          declare the Commitments of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such Commitments and obligation shall be terminated;

 

    (b)          declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Loan Parties;

 

 

  

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    (c)          require that the Loan Parties Cash Collateralize the L/C Obligations; and

 

    (d)          whether or not the maturity of the Obligations shall have been accelerated pursuant hereto, proceed to protect, enforce and exercise all rights and remedies of the Credit Parties under this Agreement, any of the other Loan Documents or applicable Law, including, but not limited to, by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Credit Parties;

 

provided, however, that upon the entry of an order for relief with respect to any Loan Party or any Subsidiary thereof under the Bankruptcy Code, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Loan Parties to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

 

No remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of Law.

 

8.03      Application of Funds.  After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

 

First, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and the Collateral Agent and amounts payable under Article III) due and payable to the Administrative Agent and the Collateral Agent, each in its capacity as such;

 

Second, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Lenders and the L/C Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;

 

Third, to the extent that Swing Line Loans have not been refinanced by a Committed Loan, payment to the Swing Line Lender of that portion of the Obligations constituting accrued and unpaid interest on the Swing Line Loans;

 

Fourth, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Committed Loans, L/C Borrowings and other Obligations, and fees (including Letter of Credit Fees but excluding any Early Termination Fees), ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Fourth payable to them;

 

 

  

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Fifth, to the extent that Swing Line Loans have not been refinanced by a Committed Loan, to payment to the Swing Line Lender of that portion of the Obligations constituting unpaid principal of the Swing Line Loans;

 

Sixth, to payment of that portion of the Obligations constituting unpaid principal of the Committed Loans and L/C Borrowings, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Sixth held by them;

 

Seventh, to the Administrative Agent for the account of the L/C Issuer, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit in proportion to the respective amounts described in this clause Seventh held by them;

 

Eighth, to payment of all other Obligations (including without limitation the cash collateralization of unliquidated indemnification obligations as provided in Section 10.04, but excluding any Other Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Eighth held by them;

 

Ninth, to payment of that portion of the Obligations arising from Cash Management Services to the extent secured under the Security Documents, ratably among the Credit Parties in proportion to the respective amounts described in this clause Ninth held by them;

 

Tenth, to payment of all other Obligations arising from Bank Products to the extent secured under the Security Documents, ratably among the Credit Parties in proportion to the respective amounts described in this clause Tenth held by them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Loan Parties or as otherwise required by Law.

 

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Seventh above shall be applied to satisfy drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

 

ARTICLE IX

 

ADMINISTRATIVE AGENT

 

9.01      Appointment and Authority.

 

    (a)          Each of the Lenders and the L/C Issuer hereby irrevocably appoints Wells Fargo Retail Finance, LLC to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  Except as provided in Section 9.06, the provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and no Loan Party or any Subsidiary thereof shall have rights as a third party beneficiary of any of such provisions.

 

 

  

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    (b)          Each of the Lenders (in its capacities as a Lender), Swing Line Lender and the L/C Issuer hereby irrevocably appoints Wells Fargo Retail Finance, LLC as Collateral Agent and authorizes the Collateral Agent to act as the agent of such Lender and the L/C Issuer for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto.  In this connection, the Collateral Agent, as “collateral agent” and any co-agents, sub-agents and attorneys-in-fact appointed by the Collateral Agent pursuant to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Collateral Agent), shall be entitled to the benefits of all provisions of this Article IX and Article X (including Section 10.04(c)), as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents, as if set forth in full herein with respect thereto.

 

9.02      Rights as a Lender.  The Persons serving as the Agents hereunder shall have the same rights and powers in their capacity as a Lender as any other Lender and may exercise the same as though they were not the Administrative Agent or the Collateral Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent or the Collateral Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Loan Parties or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent or the Collateral Agent hereunder and without any duty to account therefor to the Lenders.

 

9.03      Exculpatory Provisions.  The Agents shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents.  Without limiting the generality of the foregoing, the Agents:

 

    (a)          shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

 

    (b)          shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent or the Collateral Agent, as applicable, is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that no Agent shall be required to take any action that, in its respective opinion or the opinion of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable Law; and

 

    (c)          shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Loan Parties or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent, the Collateral Agent or any of its Affiliates in any capacity.

 

No Agent shall be liable for any action taken or not taken by it (i) with the Consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as such Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a final and non-appealable judgment of a court of competent jurisdiction.

 

The Agents shall not be deemed to have knowledge of any Default unless and until notice describing such Default is given to such Agent by the Loan Parties, a Lender or the L/C Issuer.  In the event that the Agents obtains such actual knowledge or receives such a notice, the Agents shall give prompt notice thereof to each of the other Credit Parties.  Upon the occurrence and during the continuance of an Event of Default, the Agents shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders.  Unless and until the Agents shall have received such direction, the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any such Default or Event of Default as it shall deem advisable in the best interest of the Credit Parties.  In no event shall the Agents be required to comply with any such directions to the extent that any Agent believes that its compliance with such directions would be unlawful.

 

 

  

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The Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or the creation, perfection or priority of any Lien purported to be created by the Security Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agents.

 

9.04      Reliance by Agents.

 

Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including, but not limited to, any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received written notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit.  Each Agent may consult with legal counsel (who may be counsel for any Loan Party), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

9.05      Delegation of Duties.  Each Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by such Agent.  Each Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Agents and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as such Agent.

 

 

  

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9.06      Resignation of Agents.  Either Agent may at any time give written notice of its resignation to the Lenders, the L/C Issuer and the Lead Borrower.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Lead Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent or Collateral Agent, as applicable, meeting the qualifications set forth above; provided that if the Administrative Agent or the Collateral Agent shall notify the Lead Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by the Collateral Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring Collateral Agent shall continue to hold such collateral security until such time as a successor Collateral Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section.  Upon the acceptance of a successor’s appointment as Administrative Agent or Collateral Agent, as applicable, hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section).  The fees payable by the Borrowers to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Lead Borrower and such successor.  After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Administrative Agent or Collateral Agent hereunder.

 

Any resignation by Wells Fargo Retail Finance, LLC as Administrative Agent pursuant to this Section shall also constitute the resignation of Wells Fargo Retail Finance LLC, as Swing Line Lender and Wells Fargo Bank as L/C Issuer.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, (b) the retiring L/C Issuer shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer or Swing Line Lender shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to the retiring L/C Issuer to effectively assume the obligations of the retiring L/C Issuer with respect to such Letters of Credit.

 

9.07      Non-Reliance on Administrative Agent and Other Lenders.  Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Agents or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Agents or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.  Except as provided in Section 9.12, the Agents shall not have any duty or responsibility to provide any Credit Party with any other credit or other information concerning the affairs, financial condition or business of any Loan Party that may come into the possession of the Agents.

 

 

  

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9.08      Administrative Agent May File Proofs of Claim.  In case of the pendency of any proceeding under any Debtor Relief Laws or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Loan Parties) shall be entitled and empowered, by intervention in such proceeding or otherwise

 

    (a)          to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer, the Administrative Agent and the other Credit Parties (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer, the Administrative Agent, such Credit Parties and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer the Administrative Agent and such Credit Parties under Sections 2.03(i), 2.03(j), 2.09 and 10.04) allowed in such judicial proceeding; and

 

    (b)          to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 10.04.

 

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or the L/C Issuer or to authorize the Administrative Agent to vote in respect of the claim of any Lender or the L/C Issuer in any such proceeding.

 

9.09      Collateral and Guaranty Matters.  The Credit Parties irrevocably authorize the Agents, at their option and in their discretion,

 

    (a)          to release any Lien on any property granted to or held by the Collateral Agent under any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than contingent indemnification obligations for which no claim has been asserted) and the expiration or termination of all Letters of Credit (or upon the Cash Collateralization of all Letters of Credit in the manner set forth in Section 2.03(g)), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, or (iii) if approved, authorized or ratified in writing by the Required Lenders in accordance with Section 10.01;

 

 

  

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    (b)          to subordinate any Lien on any property granted to or held by the Collateral Agent under any Loan Document to the holder of any Lien on such property that is permitted by the definition of Permitted Encumbrances; and

 

    (c)          to release any Guarantor from its obligations under the Facility Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

 

Upon request by any Agent at any time, the Required Lenders will confirm in writing such Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Facility Guaranty pursuant to this Section 9.09.  In each case as specified in this Section 9.09, the Agents will, at the Loan Parties’ expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Security Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Facility Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.09.

 

9.10      Notice of Transfer.

 

The Agents may deem and treat a Lender party to this Agreement as the owner of such Lender’s portion of the Obligations for all purposes, unless and until, and except to the extent, an Assignment and Acceptance shall have become effective as set forth in Section 10.06.

 

9.11      Reports and Financial Statements.

 

By signing this Agreement, each Lender:

 

    (a)          agrees to furnish the Administrative Agent on the first day of each month with a summary of all Other Liabilities due or to become due to such Lender. In connection with any distributions to be made hereunder, the Administrative Agent shall be entitled to assume that no amounts are due to any Lender on account of Other Liabilities unless the Administrative Agent has received written notice thereof from such Lender;

 

    (b)          is deemed to have requested that the Administrative Agent furnish such Lender, promptly after they become available, copies of all financial statements required to be delivered by the Lead Borrower hereunder and all commercial finance examinations and appraisals of the Collateral received by the Agents (collectively, the “Reports”);

 

    (c)          expressly agrees and acknowledges that the Administrative Agent makes no representation or warranty as to the accuracy of the Reports, and shall not be liable for any information contained in any Report;

 

    (d)          expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Agents or any other party performing any audit or examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties' books and records, as well as on representations of the Loan Parties' personnel;

 

    (e)          agrees to keep all Reports confidential in accordance with the provisions of Section 10.07 hereof; and

 

 

  

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    (f)          without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold the Agents 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 Credit Extensions that the indemnifying Lender has made or may make to the Borrowers, or the indemnifying Lender's participation in, or the indemnifying Lender's purchase of, a Loan or Loans; and (ii) to pay and protect, and indemnify, defend, and hold the Agents and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including attorney costs) incurred by the Agents 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.

 

9.12      Agency for Perfection.

 

Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Liens for the benefit of the Agents and the Lenders, in assets which, in accordance with Article 9 of the UCC or any other applicable Law of the United States can be perfected only by possession.  Should any Lender (other than the Agents) obtain possession of any such Collateral, such Lender shall notify the Agents thereof, and, promptly upon the Collateral Agent's request therefor shall deliver such Collateral to the Collateral Agent or otherwise deal with such Collateral in accordance with the Collateral Agent's instructions.

 

9.13      Indemnification of Agents.  The Lenders agree to indemnify the Agents (to the extent not reimbursed by the Loan Parties and without limiting the obligations of Loan Parties hereunder), ratably according to their Applicable Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by any Agent in connection therewith; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

9.14      Relation among Lenders.  The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agents) authorized to act for, any other Lender.

 

9.15      Defaulting Lender.

 

    (a)          If for any reason any Lender shall fail or refuse to abide by its obligations under this Agreement, including without limitation its obligation to make available to Administrative Agent its Applicable Percentage of any Loans, expenses or setoff or purchase its Applicable Percentage of a participation interest in the Swing Line Loans or L/C Borrowings and such failure is not cured within two (2) days of receipt from the Administrative Agent of written notice thereof, then, in addition to the rights and remedies that may be available to the other Credit Parties, the Loan Parties or any other party at law or in equity, and not at limitation thereof, (i) such Defaulting Lender’s right to participate in the administration of, or decision-making rights related to, the Obligations, this Agreement or the other Loan Documents shall be suspended during the pendency of such failure or refusal, and (ii) a Defaulting Lender shall be deemed to have assigned any and all payments due to it from the Loan Parties, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining non-Defaulting Lenders for application to, and reduction of, their proportionate shares of all outstanding Obligations until, as a result of application of such assigned payments the Lenders’ respective Applicable Percentages of all outstanding Obligations shall have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency.  The Defaulting Lender’s decision-making and participation rights and rights to payments as set forth in clauses (i) and (ii) hereinabove shall be restored only upon the payment by the Defaulting Lender of its Applicable Percentage of any Obligations, any participation obligation, or expenses as to which it is delinquent, together with interest thereon at the Default Rate from the date when originally due until the date upon which any such amounts are actually paid.

 

 

  

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    (b)          The non-Defaulting Lenders shall also have the right, but not the obligation, in their respective, sole and absolute discretion, to cause the termination and assignment, without any further action by the Defaulting Lender for no cash consideration (pro rata, based on the respective Commitments of those Lenders electing to exercise such right), of the Defaulting Lender’s Commitment to fund future Loans.  Upon any such purchase of the Applicable Percentage of any Defaulting Lender, the Defaulting Lender’s share in future Credit Extensions and its rights under the Loan Documents with respect thereto shall terminate on the date of purchase, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest, including, if so requested, an Assignment and Acceptance.

 

    (c)          Each Defaulting Lender shall indemnify the Administrative Agent and each non-Defaulting Lender from and against any and all loss, damage or expenses, including but not limited to reasonable attorneys’ fees and funds advanced by the Administrative Agent or by any non-Defaulting Lender, on account of a Defaulting Lender’s failure to timely fund its Applicable Percentage of a Loan or to otherwise perform its obligations under the Loan Documents.

 

ARTICLE X

 

MISCELLANEOUS

 

10.01     Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no Consent to any departure by any Loan Party therefrom, shall be effective unless in writing signed by the Administrative Agent, with the Consent of the Required Lenders, and the Lead Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each 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 amendment, waiver or consent shall:

 

    (a)          extend or, increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written Consent of such Lender;

 

    (b)          postpone any date fixed by this Agreement or any other Loan Document for (i) any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any of the other Loan Documents without the written Consent of each Lender entitled to such payment, or (ii) any scheduled or mandatory reduction of the Aggregate Commitments hereunder or under any other Loan Document without the written Consent of each Lender;

 

    (c)          reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document, without the written Consent of each Lender entitled to such amount; provided, however, that only the Consent of the Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive any obligation of the Borrowers to pay interest or Letter of Credit Fees at the Default Rate or (ii) to amend any financial covenant hereunder (or any defined term used therein);

 

 

  

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    (d)          change Section 2.13 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written Consent of each Lender;

 

    (e)          change any provision of this Section or the definition of “Required Lenders”, or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written Consent of each Lender;

 

    (f)          except as expressly permitted hereunder or under any other Loan Document, release, or limit the liability of, any Loan Party without the written Consent of each Lender;

 

    (g)          except for Permitted Dispositions, release all or substantially all of the Collateral from the Liens of the Security Documents without the written Consent of each Lender;

 

    (h)          increase the Aggregate Commitments without the written Consent of each Lender;

 

    (i)          change the definition of the term “Borrowing Base” or any component definition thereof if as a result thereof the amounts available to be borrowed by the Borrowers would be increased without the written Consent of each Lender; provided that the foregoing shall not limit the discretion of the Administrative Agent to change, establish or eliminate any Reserves; and

 

    (j)          except as expressly permitted herein or in any other Loan Document, subordinate the Obligations hereunder or the Liens granted hereunder or under the other Loan Documents, to any other Indebtedness or Lien, as the case may be without the written Consent of each Lender;

 

and, provided further, that (i) no amendment, waiver or Consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or Consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or Consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (iv) no amendment, waiver or Consent shall, unless in writing and signed by the Collateral Agent in addition to the Lenders required above, affect the rights or duties of the Collateral Agent under this Agreement or any other Loan Document.  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or Consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender.

 

 

  

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If any Lender does not Consent (a “Non-Consenting Lender”) to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the Consent of each Lender and that has been approved by the Required Lenders, the Lead Borrower may replace such Non-Consenting Lender in accordance with Section 10.13; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Lead Borrower to be made pursuant to this paragraph).

 

10.02     Notices, Financial Statements and Other Documents; Effectiveness; Electronic Communications.

 

    (a)          Notices, Financial Statements and Other Documents Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices, financial statements and other documents and communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

 

       (i)           if to the Loan Parties, the Agents or the L/C Issuer or the Swing Line Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

 

       (ii)           if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.

 

Notices, financial statements and other documents sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices, financial statements and other documents sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient).  Notices, financial statements and other documents delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

 

    (b)          Electronic Communications.  Notices, financial statements and other documents  and communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.  The Administrative Agent or the Lead Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

 

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

 

 

  

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(c)          Change of Address, Etc.  Each of the Loan Parties, the Agents and the L/C Issuer and the Swing Line Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.  Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Lead Borrower, the Agents and the L/C Issuer and the Swing Line Lender.  In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

 

(d)          Reliance by Agents, L/C Issuer and Lenders.  The Agents, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of the Loan Parties even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Loan Parties shall indemnify the Agents, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Loan Parties.  All telephonic notices to and other telephonic communications with the Agents may be recorded by the Agents, and each of the parties hereto hereby consents to such recording.

 

10.03     No Waiver; Cumulative Remedies.  No failure by any Credit Party to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges provided herein and in the other Loan Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.  Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Credit Party may have had notice or knowledge of such Default at the time.

 

10.04     Expenses; Indemnity; Damage Waiver.

 

    (a)          Costs and Expenses.  The Borrowers shall pay on demand all Credit Party Expenses.

 

 

  

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    (b)          Indemnification by the Loan Parties.  The Loan Parties shall indemnify the Agents (and any sub-agent thereof), each other Credit Party, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless (on an after tax basis) from, any and all losses, claims, causes of action, damages, liabilities, settlement payments, costs, and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Agents (and any sub-agents thereof) and their Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Loan Party or any of its Subsidiaries, or any Environmental Liability related in any way to any Loan Party or any of its Subsidiaries, (iv) any claims of, or amounts paid by any Credit Party to, a Blocked Account Bank or other Person which has entered into a control agreement with any Credit Party hereunder, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Borrower or any other Loan Party or any of the Loan Parties’ directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.

 

    (c)          Reimbursement by Lenders.  Without limiting their obligations under Section 9.13 hereof, to the extent that the Loan Parties for any reason fail to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it, each Lender severally agrees to pay to the Agents (or any such sub-agent), the L/C Issuer or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agents (or any such sub-agent) or the L/C Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for the Agents (or any such sub-agent) or L/C Issuer in connection with such capacity.  The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d).

 

    (d)          Waiver of Consequential Damages, Etc.  To the fullest extent permitted by applicable Law, the Loan Parties shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

 

  

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    (e)          Payments.  All amounts due under this Section shall be payable on demand therefor.

 

    (f)          Survival.  The agreements in this Section shall survive the resignation of any Agent and the L/C Issuer, the assignment of any Commitment or Loan by any Lender, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

 

10.05     Payments Set Aside.  To the extent that any payment by or on behalf of the Loan Parties is made to any Credit Party, or any Credit Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Credit Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Laws or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Agents upon demand its Applicable Percentage (without duplication) of any amount so recovered from or repaid by the Agents, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

 

10.06     Successors and Assigns.

 

(a)          Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder or under any other Loan Document without the prior written Consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of Section 10.06(b), (ii) by way of participation in accordance with the provisions of Section 10.06(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 10.06(f) (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Credit Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)          Assignments by Lenders.  Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment(s) and the Loans (including for purposes of this Section 10.06(b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that any such assignment shall be subject to the following conditions:

 

(i)           Minimum Amounts.

 

 

  

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(A)           in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, no minimum amount need be assigned; and

 

(B)           in any case not described in subsection (b)(i)(A)of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if the “Effective Date” is specified in the Assignment and Assumption, as of the “Effective Date”, shall not be less than $500,000 unless each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Lead Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;

 

(ii)          Proportionate Amounts.  Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, except that this clause (ii) shall not apply to the Swing Line Lender’s rights and obligations in respect of Swing Line Loans;

 

(iii)         Required Consents.  No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

 

             (A)           the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of any Commitment if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender;

 

             (B)           the consent of the L/C Issuer (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding); and

 

             (C)           the consent of the Swing Line Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of the assignment of any Commitment.

 

(iv)         Assignment and Assumption.  The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

 

 

  

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Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment.  Upon request, the Borrowers (at their expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.06(d).

 

(c)          Register.  The Administrative Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, absent manifest error, and the Loan Parties, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Lead Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

 

(d)          Participations.  Any Lender may at any time, without the consent of, or notice to, the Loan Parties or the Administrative Agent, sell participations to any Person (other than a natural person or the Loan Parties or any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Loan Parties, the Agents, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement.  Any Participant shall agree in writing to comply with all confidentiality obligations set forth in Section 10.07 as if such Participant was a Lender hereunder.

 

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any  provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant.  Subject to subsection (e) of this Section, the Loan Parties agree that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.06(b).  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender.

 

 

  

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(e)          Limitations upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Lead Borrower's prior written consent.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Lead Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Loan Parties, to comply with Section 3.01(e) as though it were a Lender.

 

(f)          Certain Pledges.  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(g)          Electronic Execution of Assignments.  The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act or any other similar state laws based on the Uniform Electronic Transactions Act.

 

(h)          Resignation as L/C Issuer or Swing Line Lender after Assignment.  Notwithstanding anything to the contrary contained herein, if at any time Wells Fargo Retail Finance, LLC assigns all of its Commitment and Loans pursuant to subsection (b) above, (i) Wells Fargo Bank may upon thirty (30) days’ notice to the Lead Borrower and the Lenders, resign as L/C Issuer and/or (ii) Wells Fargo Retail Finance, LLC  upon 30 days’ notice to the Lead Borrower, resign as Swing Line Lender.  In the event of any such resignation as L/C Issuer or Swing Line Lender, the Lead Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender  hereunder; provided, however, that no failure by the Lead Borrower to appoint any such successor shall affect the resignation of Wells Fargo Bank as L/C Issuer or Wells Fargo Retail Finance, LLC as Swing Line Lender, as the case may be.  If Wells Fargo Bank resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). If Wells Fargo Retail Finance, LLC resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).  Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Wells Fargo Bank to effectively assume the obligations of Wells Fargo Bank with respect to such Letters of Credit.

 

 

  

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10.07      Treatment of Certain Information; Confidentiality.  Each of the parties hereto agree to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, funding sources, attorneys, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential on the same terms as provided herein), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) by each of the Credit Parties subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) by each of the Credit Parties with the consent of the Lead Borrower, (h) by the Loan Parties with the prior written consent of the Administrative Agent (except in the case of disclosure to any bank, finance company or other lender) or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to any Credit Party or any of their respective Affiliates on a non-confidential basis from a source other than the Loan Parties; provided, however, that in the case of any disclosure pursuant to clause (c) above, the applicable party which is required to disclose confidential Information agrees to give the other party, to the extent practicable and not otherwise prohibited by any such Law, regulation, subpoena, order or decree of a court or similar legal process, prior notice of such disclosure (provided, however, no disclosing party shall incur any liability to any other party or other Person for failing to provide such other party or Person with any such prior notice); provided, further, however, that the disclosing party shall disclose only that portion of the confidential Information as is required to be disclosed, in its sole judgment, pursuant to any such Law, regulation, subpoena, order or decree of a court or similar legal process.  Any such required disclosure shall not, in and of itself, change the status of the disclosed information as Information under the terms of this Agreement.

 

For purposes of this Section, “Information” means (i) with respect to the Credit Parties, all information received from the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any Subsidiary thereof or their respective businesses, other than any such information that is available to any Credit Party on a non-confidential basis prior to disclosure by the Loan Parties or any Subsidiary thereof and (ii) with respect to the Loan Parties, all information received from the Credit Parties or an Subsidiary thereof relating to the Credit Parties or any Subsidiary thereof or their respective businesses, other than any such information that is available to any Loan Party on a non-confidential basis prior to disclosure by the Credit Parties or any Subsidiary thereof.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

Each of the parties hereof acknowledge that (a) the Information may include material non-public information concerning the Loan Parties or a Subsidiary, or the Credit Parties or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.

 

 

  

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10.08      Right of Setoff.  If an Event of Default shall have occurred and be continuing or if any Lender shall have been served with a trustee process or similar attachment relating to property of a Loan Party, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Administrative Agent or the Required Lenders, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrowers or any other Loan Party against any and all of the Obligations now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer, regardless of the adequacy of the Collateral, and irrespective of whether or not such Lender or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrowers or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have.  Each Lender and the L/C Issuer (through the Administrative Agent) agrees to notify the Lead Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

10.09      Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrowers.  In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

10.10      Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

 

  

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10.11      Survival.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Credit Parties, regardless of any investigation made by any Credit Party or on their behalf and notwithstanding that any Credit Party may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.  Further, the provisions of Sections 3.01, 3.04, 3.05 and 10.04 and Article IX shall survive and remain in full force and effect regardless of the repayment of the Obligations, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.  In connection with the termination of this Agreement and the release and termination of the security interests in the Collateral, the Agents may require such indemnities and collateral security as they shall reasonably deem necessary or appropriate to protect the Credit Parties against (x) loss on account of credits previously applied to the Obligations that may subsequently be reversed or revoked, and (y) any obligations that may thereafter arise with respect to the Other Liabilities.

 

10.12      Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

10.13      Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

 

    (a)        the Borrowers shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b);

 

    (b)       such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts);

 

    (c)       in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and

 

 

  

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    (d)       such assignment does not conflict with applicable Laws.

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.

 

10.14     Governing Law; Jurisdiction; Etc.

 

(a)          GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.

 

(b)          SUBMISSION TO JURISDICTION.  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPERIOR COURT OF NORFOLK COUNTY, MASSACHUSETTS AND OF THE UNITED STATES FEDERAL COURTS LOCATED IN THE DISTRICT OF MASSACHUSETTS, BOSTON, MASSACHUSETTS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE LOAN PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)          WAIVER OF VENUE.  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION.  EACH OF THE LOAN PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)          SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

 

  

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(e)          ACTIONS COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES THAT ANY ACTION COMMENCED BY ANY LOAN PARTY ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT OF THE COMMONWEALTH OF MASSACHUSETTS SITTING IN THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AS THE ADMINISTRATIVE AGENT MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

 

10.15     Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.16     No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby, the Loan Parties each acknowledge and agree that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each of the Loan Parties is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Loan Parties or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Credit Parties has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Loan Parties with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any of the Credit Parties has advised or is currently advising any Loan Party or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Credit Parties and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and none of the Credit Parties has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Credit Parties have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate.  Each of the Loan Parties hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against each of the Credit Parties with respect to any breach or alleged breach of agency or fiduciary duty.

 

 

  

115

  

 

10.17     USA PATRIOT Act Notice.  Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (as amended, the “Act”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the Act.  Each Loan Party is in compliance, in all material respects, with the Patriot Act.  No part of the proceeds of the Loans will be used by the Loan Parties, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

10.18     Foreign Asset Control Regulations.  Neither of the advance of the Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the "Trading With the Enemy Act") or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the "Foreign Assets Control Regulations") or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the "Executive Order") and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)).  Furthermore, none of the Borrowers or their Affiliates (a) is or will become a "blocked person" as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such "blocked person" or in any manner violative of any such order.

 

10.19     Time of the Essence.  Time is of the essence of the Loan Documents.

 

10.20     Press Releases.

 

(a)           Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of Administrative Agent or its Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to Administrative Agent and without the prior written consent of Administrative Agent unless (and only to the extent that) such Credit Party or Affiliate is required to do so under applicable Law and then, in any event, such Credit Party or Affiliate will consult with Administrative Agent before issuing such press release or other public disclosure.

 

 

  

116

  

 

(b)           Each Loan Party consents to the publication by Administrative Agent or any Lender of advertising material relating to the financing transactions contemplated by this Agreement using any Loan Party’s name, product photographs, logo or trademark.  Administrative Agent or such Lender shall provide a draft reasonably in advance of any advertising material to the Lead Borrower for review and comment prior to the publication thereof.  Administrative Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

 

10.21     Additional Waivers.

 

(a)          The Obligations are the joint and several obligation of each Loan Party. To the fullest extent permitted by applicable Law, the obligations of each Loan Party shall not be affected by (i) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement or any other Loan Document, or (iii) the failure to perfect any security interest in, or the release of, any of the Collateral or other security held by or on behalf of the Collateral Agent or any other Credit Party.

 

(b)          The obligations of each Loan Party  shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations after the termination of the Commitments), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Loan Party hereunder shall not be discharged or impaired or otherwise affected by the failure of any Agent or any other Credit Party to assert any claim or demand or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any Loan Party as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations after the termination of the Commitments).

 

(c)          To the fullest extent permitted by applicable Law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations and the termination of the Commitments. The Collateral Agent and the other Credit Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or non-judicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all the Obligations have been indefeasibly paid in full in cash and the Commitments have been terminated.  Each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to applicable Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party, as the case may be, or any security.

 

 

  

117

  

 

(d)          Each Borrower is obligated to repay the Obligations as joint and several obligors under this Agreement.  Upon payment by any Loan Party of any Obligations, all rights of such Loan Party against any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations and the termination of the Commitments. In addition, any indebtedness of any Loan Party now or hereafter held by any other Loan Party is hereby subordinated in right of payment to the prior indefeasible payment in full of the Obligations and no Loan Party will demand, sue for or otherwise attempt to collect any such indebtedness.  If any amount shall erroneously be paid to any Loan Party on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents.  Subject to the foregoing, to the extent that any Borrower shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Revolving Loans made to another Borrower hereunder or other Obligations incurred directly and primarily by any other Borrower (an "Accommodation Payment"), then the Borrower making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Borrowers in an amount, for each of such other Borrowers, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Borrower's Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Borrowers.  As of any date of determination, the "Allocable Amount" of each Borrower shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Borrower hereunder without (a) rendering such Borrower "insolvent" within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), (b) leaving such Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Borrower unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.

 

 

  

118

  

 

10.22     Amendment and Restatement.

 

Effective as of the date hereof, each Borrower hereby agrees to become a borrower, debtor and obligor under, and to bind itself to, the Existing Loan Documents to which the Borrowers are bound generally (in each case, as modified and restated hereby), and, in such capacity, to assume and bind itself to all Obligations of the Borrowers thereunder (as modified and restated hereby).  The terms, conditions, agreements, covenants, representations and warranties set forth in and relating to the Existing Credit Agreement are hereby amended, restated, replaced and superseded in their entirety (except as provided in the preamble to this Agreement) by the terms, conditions, agreements, covenants, representations and warranties set forth in this Agreement.  This Agreement does not extinguish the obligations, including, without limitation, obligations for the payment of money, outstanding under the Existing Credit Agreement or discharge or release the obligations or the liens or priority of any mortgage, pledge, security agreement or any other security therefor, which shall continue, as modified and restated hereby, without interruption and in full force and effect.  Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Existing Credit Agreement or instruments securing the same, which shall remain in full force and effect, except in each case as amended, restated, replaced and superseded hereby or by instruments executed in connection herewith.  Nothing expressed or implied in this Agreement shall be construed as a release or other discharge of any Borrower or guarantor from any of their obligations or liabilities under the Existing Loan Documents or any of the security agreements, pledge agreements, mortgages, guaranties or other loan documents executed in connection therewith, except in each case as amended, restated, replaced and superseded hereby or by instruments executed in connection herewith.  Each Borrower hereby confirms and agrees that (i) the Existing Credit Agreement and each Existing Loan Document to which it is a party is, and shall continue to be, in full force and effect and is hereby amended, restated, replaced and superseded hereby or by instruments executed in connection herewith, except that on and after the date hereof all references in any such Existing Loan Document to “the Agreement”, “thereto”, “thereof” “thereunder” or words of like import referring to the Existing Credit Agreement shall mean the Existing Credit Agreement as amended, restated, replaced and superseded by this Agreement; and (ii) to the extent that any such Existing Loan Document purports to assign or pledge to the Lender a security interest in or lien on, any collateral as security for the Liability (as defined in the Existing Credit Agreement) of any Borrower from time to time existing in respect of the Existing Credit Agreement, such pledge, assignment or grant of the security interest or lien is hereby ratified and confirmed in all respects in favor of the Administrative Agent, which shall remain in full force and effect, as amended, restated, replaced and superseded hereby or by instruments executed in connection herewith.

 

10.23     No Strict Construction.

 

The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

10.24     Attachments.

 

The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.

 

[Remainder of page intentionally left blank]

 

 

  

119

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

Borrowers:

 

iPARTY RETAIL STORES CORP.

as Lead Borrower and a Borrower

 

By: /s/ SAL PERISANO                                                                

Name: Sal Perisano

Title: Chief Executive Officer

 

iPARTY CORP.

as a Borrower

 

By: /s/ SAL PERISANO                                                                 

Name: Sal Perisano

Title: Chairman and Chief Executive Officer

 

  

S-1

  

 

 

Agents:

 

WELLS FARGO RETAIL FINANCE, LLC,

as Administrative Agent and Collateral Agent

 

By:  /s/ MICHELE AYOU                                                               

Name:   Michele Ayou

Title:     Vice President

 

 

  

S-2

  

 

Lenders:

 

WELLS FARGO RETAIL FINANCE, LLC,

as Lender and Swing Line Lender

 

By:  /s/ MICHELE AYOU                                                               

Name:   Michele Ayou

Title:     Vice President

 

 

 

S-3

 

 

  

  

  

 

Final Version

 

DISCLOSURE SCHEDULE

TO

SECOND AMENDMED AND RESTATED CREDIT AGREEMENT

These are the schedules (collectively, the “Disclosure Schedule”) referred to, incorporated by reference in and made a part of the Second Amended and Restated Credit Agreement dated as of July 1, 2009 (the “Credit Agreement”), among iParty Retail Stores Corp., as Lead Borrower, iParty Corp., as a Borrower and Wells Fargo Retail Finance, LLC, as administrative agent, collateral agent and swing line lender and the other Lenders party thereto.  Capitalized terms used without definition herein shall have the respective meanings ascribed to them in the Credit Agreement.

The Credit Agreement contemplates that the Borrowers will make certain disclosures regarding the Borrowers’ properties, assets, business and affairs.  The purpose of this Disclosure Schedule and its attachments (which constitute an integral part hereof) is to provide such disclosure as contemplated by the Credit Agreement.  Except as otherwise set forth herein, this Disclosure Schedule gives effect to the anticipated use of proceeds of borrowings under the Credit Agreement.

This Disclosure Schedule incorporates by reference any relevant disclosures set forth in the Credit Agreement.  The inclusion of any specific item in the Disclosure Schedule is not intended to imply that the item so included, or other items, are or are not material, and no party shall use the fact of the inclusion of any such item in any dispute or controversy between the parties as to whether any obligation, item or matter not included in the Disclosure Schedule is or is not material for purposes of the Credit Agreement.

 

 

  

  

  

 

Final Version

 

	
Schedule 1.01(a)

	
Borrowers

	  
	
1. iParty Corp., a Delaware corporation

	  

 

 

 

  

  

  

 

Final Version

	
Schedule 1.01(b)

	
Guarantors

	  
	 
	
None

	  

 

 

  

  

  

 

Final Version

 

	
Schedule 2.01

	 
	
Commitments and Applicable Percentages

	  	  	  

 

	 	 	 
	
Lender

	
Commitment

	
Applicable Percentage

	 	 	 
	 	 	 
	
Wells Fargo Retail Finance, LLC

	
$12,500,000.00

	
100.000000%

	 	 	 
	 	 	 
	
Total

	
$12,500,000.00

	
100.000000%

	 	 	 

 

 

 

  

  

  

 

Final Version

 

	
Schedule 2.03

	
Existing Letters of Credit

	  
	
None

 

 

  

  

  

 

Final Version

 

 

 

	  

	
 

Schedule 5.01

 

Loan Parties Organizational Information

	  	  	  	  	  	  
	
Name

	
State of

Incorporation

	
Entity Type

	
Organization

 Number

	
Federal ID

Number

	
Address of CEO and

Principal Place of

Business

	  	  	  	  	  	  
	
iParty Corp.

	
Delaware

	
Corporation

	
2907060

	
76-0547750

	
270 Bridge Street,

Suite 301, Dedham

MA, 02026

	  	  	  	  	  	  
	
iParty Retail

Stores Corp.

	
Delaware

	
Corporation

	
3269616

	
04-3526277

	
270 Bridge Street,

Suite 301, Dedham

MA, 02026

	  	  	  	  	  	  

  

  

  

 

iPARTY CORP.

CAPITALIZATION TABLE

May 30, 2009

 

 

	Authorized Common Shares 	150,000,000
	Stock Option Plan Shares 	11,000,000
	Authorized Preferred Shares 	10,000,000

 

 

	 	 	5/30/09	 	 	Current month activity	 	 	5/2/09
	 	 	Issued	 	 	Fully Diluted	 	 	Price Per Share	 	 	Shares	 	 	 Fully Diluted	 	 	Issued	 	 	Fully Diluted	 	 	Price Per Share
	Issued Common Shares 	 	 22,731,667	 	 	 22,731,667	 	 	 	 	 	 -	 	 	 -	 	 	 22,731,667	 	 	22,731,667	 	 	 
	Issued Preferred Shares - Series A (Convertible 1 to 1) 	 	 -	 	 	 	 	$	 -	 	 	 -	 	 	 -	 	 	-	 	 	 	 	$	 -
	Issued Preferred Shares - Series B (Convertible 1 to 13.396) 	 	464,173	 	 	 6,218,052	 	$	1.49	 	 	-	 	 	-	 	 	 464,173	 	 	 6,218,062	 	$	 1.49
	Issued Preferred Shares - Series C (Convertible 1 to 13.852) 	 	 100,000	 	 	 1,385,200	 	$	 1.47	 	 	-	 	 	-	 	 	100,000 	 	 	 1,365,200	 	$	 1.47
	Issued Preferred Shares - Series D (Convertible 1 to 14.609) 	 	 250,000	 	 	 3,852,520	 	$	 1.37	 	 	 -	 	 	 -	 	 	 250,000	 	 	 3,852,250	 	$	 1.39
	Issued Preferred Shares - Series E (Convertible 1 to 10.358) 	 	 296,658	 	 	 3,073,163	 	$	 0.36	 	 	 -	 	 	 -	 	 	 296,658	 	 	 3,073,183	 	$	 0.36
	Issued Preferred Shares - Series F (convertible 1 to 10.387) 	 	 114,286	 	 	 1,184,803	 	$	 0.42	 	 	-	 	 	-	 	 	114,286	 	 	1,184,803	 	$	 0.42
	Total Common and Preferred 	 	23,956,792	 	 	 35,225,144	 	 	 	 	 	 -	 	 	 -	 	 	 23,958,792	 	 	 38,225,144	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issued Stock Options Outstanding 	 	 10,326,845	 	 	 10,326,845	 	$	 0.50	 	 	1,085,000	 	 	 1,085,000	 	 	 9,241,845	 	 	 9,241,845	 	$	 0.54
	Convertible Debt Warrants 	 	 381,889	 	 	 381,889	 	 $	3.27	 	 	 (146,341	)	 	 (146,341	)	 	 528,210	 	 	 528,210	 	 $	 3.79
	Warrants - Amato 	 	90,000	 	 	90,000 	 	$	 1.50	 	 	-	 	 	 -	 	 	 90,000	 	 	 90,000	 	$	 1.50
	Warrants - Booke	 	 10,000	 	 	10,000	 	$	 1.50	 	 	 -	 	 	 -	 	 	 10,000	 	 	 10,000	 	$	 1.50
	Highbridge Warrants	 	 2,0833,334	 	 	 2,083,334	 	$	 0.48	 	 	 -	 	 	 -	 	 	 2,083,334	 	 	 2,083,334	 	$	 0.48
	Issued Shares (Fully Diluted)	 	38,845,840	 	 	 51,117,192	 	 	 	 	 	 938,559	 	 	 938,559	 	 	 38,910,181	 	 	 50,178,533	 	 	 

  

  

  

  

 

Final Version

 

 

 

	
Schedule 5.05

	 
	
Material Indebtedness and Other Liabilities*

	
 

*The asterisk denotes that confidential portions of this schedule have been omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the Securities and Exchange Commission.

 

 

  

  

  

Final Version

 

	
Schedule 5.06

	
Litigation

	  
	
None

 

 

  

  

  

 

Final Version

 

 

 

	  

	
Schedule 5.08(b)

	
Leases*

 

 

*The asterisk denotes that confidential portions of this schedule have been omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the Securities and Exchange Commission.

 

 

  

  

  

 

Final Version

 

 

 

	
Schedule 5.09

	 
	
Environmental Matters

	 
	  
	
(a) None

	 
	  
	
(b) None

	 
	  
	
(c) None

 

 

  

  

  

 

Final Version

 

 

 

Schedule 5.10

 

Insurance*

 

*The asterisk denotes that confidential portions of this schedule have been omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the Securities and Exchange Commission.

 

 

 

 

  

  

  

Final Version

 

 

 

 

 

Schedule 5.13

 

Subsidiaries; Equity Interests

 

 

(a) iParty Retail Stores Corp., a Delaware corporation, is authorized to issue common stock, par value  $ 0.01, of which 10,000 shares have been issued to iParty Corp., a Delaware corporation. The shares have been pledged under the Existing Credit Agreement and the transfer of such shares is subject to applicable federal and state laws.

 

 

(b) See Schedule 5.13, Part (a) above

 

 

(c)

 

 

iParty Corp

 

 

For a description of iParty Corp.’s Equity Interests, see its most recently filed Annual Report on Form 10-K for the period ended December 27, 2008 as filed with the Securities and Exchange Commission. The information contained therein with respect to the capitalization is as of December 27, 2008.  See attached Capitalization Table as of May 30, 2009.

 

 

On October 31, 2002, iParty Corp. issued a press release to announce that it had concluded it had incorrectly applied the anti-dilution provisions of its Series B, C and D convertible preferred stock (the “Affected Preferred Stock”) in conjunction with dilutive financings in August and September 2000.  iParty Corp.’s press release was filed as an exhibit to a Current Report on Form 8-K filed by iParty Corp. on that same day with the SEC.

 

 

As more fully explained in the press release and 8-K, the Company had determined that it inadvertently issued additional shares of Affected Preferred Stock, instead of adjusting the Affected Preferred Stock’s conversion ratios.  iParty Corp. had also miscalculated the number of common shares issuable upon conversion of the Affected Preferred Stock. iParty Corp. had also determined that it mistakenly issued additional warrant certificates, instead of adjusting the Affected Warrants’ conversion ratios.  The warrant calculations had also mistakenly omitted the dilutive effect of a warrant issued by iParty Corp. in December 1999.

 

 

  

  

  

Final Version

 

 

 

 

 

As a result of these errors, beginning in September 2000, iParty Corp. believed and treated holders of Affected Preferred Stock as if they were entitled to approximately 2.3 million more common shares upon conversion of their Affected Preferred Stock than they were in fact entitled to.  Of this overstated amount, 590,327 common shares were issued upon conversions of shares of Affected Preferred Stock and sold in the public market (the “Overissued Shares”) beginning in October 2000.  On October 31, 2002, iParty Corp.’s Board of Directors ratified the issuance of the Overissued Shares.

 

Based upon consultation with Delaware counsel, iParty Corp. has been advised that the Overissued Shares likely constitute void shares and may not constitute validly issued, fully paid and nonassessable as a matter of Delaware law, notwithstanding the subsequent ratification of the issuance of such shares by iParty Corp.’s Board of Directors.  IParty Corp. has consistently treated the ratified Overissued Shares as validly issued, fully paid and nonassessable shares for all purposes since the press release and Form 8-K filing on October 31, 2002 but cannot warrant or represent this as a legal matter for the reasons outlined herein.

 

 

iParty Retail Stores Corp

 

 

See Schedule 5.13, Part (a) above.

 

 

  

  

  

Final Version

 

 

 

	
Schedule 5.17

	 
	
Intellectual Property Matters

	  
	
Registered Service Marks

	  
	 
	
Description

	
Registration Number

	
Registration Date

	  	  	  
	 	 	 
	
iParty

	
2756735

	
August 26, 2003

	  	  	  
	 	 	 
	
iParty

	
2541025

	
February 19, 2002

 

 

  

  

  

Final Version

 

	
Schedule 5.18

	 
	
Labor Matters

	  
	 
	
iParty Corp

	  
	 
	
1.  For a description of iParty Corp.’s compensation arrangements, see its most recent Annual Report on Form 10-K for the period ended December 27, 2008 as filed with the Commission on March 23, 2009 and its most recent Definitive Proxy Statement as filed with the Commission on April 24, 2009.

	  
	 
	
2.  iParty Corp. is a party to the following employment agreements:

	 
	
(a)  Employment Agreement between iParty Corp. and Sal Perisano, dated March 22, 2007 as amended by that certain First Amendment dated December 30, 2008 to Employment Agreement by and between iParty Corp. and Sal Perisano.

	 
	
(b)  Employment Agreement between iParty Corp. and Dorice Dionne, dated March 22, 2007 as amended by that certain First Amendment dated December 30, 2008 to Employment Agreement by and between iParty Corp. and Dorice Dionne.

	 
	
(c)  Letter Agreement between iParty Corp. and David E. Robertson, dated March 22, 2007 as amended by that certain First Amendment dated December 30, 2008 to Letter Agreement dated March 22, 2007 by and between iParty Corp. and David E. Robertson.

	  
	 
	
3.  Under iParty Corp.’s Amended and Restated 1998 Incentive and Nonqualified Stock Option Plan and its 2009 Stock Incentive Plan, iParty Corp. is authorized to grant equity awards to its directors, officers, employees, consultants and advisors to purchase in the aggregate up to 11,000,000 shares of its common stock.  As of May 30, 2009, iParty Corp. had issued options outstanding for the purchase of  10,326,845 shares of common stock to such individuals including its directors and senior management.

	  
	 
	
iParty Retail Stores Corp.

	  
	 
	
None.

 

 

  

  

  

 

Final Version

 

 

 

	
Schedule 5.21(a)

 

Deposit Accounts*

 

 

*The asterisk denotes that confidential portions of this schedule have been omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the Securities and Exchange Commission.

 

 

  

  

  

 

Final Version

 

 

	
Schedule 5.21(b)

	 
	
Credit Card Arrangements

	  
	  
	 
	
First Data Services, LLC

1 Western Maryland Parkway

Hagerstown, Maryland  21740

	  
	 
	
American Express Travel Related Services Company, Inc.PO Box 53773

Phoenix, AZ 85072

Attn: SE Maintenance Unit

 

	
Discover Financial Services, Inc.

Senior Vice President, Network Operations

Discover Network

2500 Lake Cook Road

Riverwoods, IL 60015-3800

 

	
 

 

 

 

  

  

  

 

Final Version

 

 

Schedule 5.24

 

	
Material Contracts

	 
	 
	
1. See Schedule 5.05, Items 1, 2 and 3.

 

 

	
2.  See Schedule 5.08(b), Real Estate Leases for listing of real estate leases.

 

 

	
3.  See Schedule 5.18, Item 2.

 

 

	
4.  Asset Purchase Agreement with Party City Corporation dated August 7, 2006.

 

 

	
5.  With respect to Highbridge International LLC and iParty:

(a)Securities Purchase Agreement dated September 15, 2006.

(b)Amendment Agreement dated January 9, 2007.

(c)Warrant to Purchase Common Stock issued September 15, 2006, as amended January 9, 2007.

 

	
6.  Asset Purchase Agreement by and among Party City of Warwick, Inc. and Party City of Lincoln, LLC, as sellers, and iParty Corp. and iParty Retail Stores Corp., as Buyers, dated August 15, 2007.

 

 

	
7.  Supply Agreement with Amscan Corp. dated August 7, 2006.

 

 

	
8.  Agreement with respect to Voice and Date Communications Services with Paetec Corp.

 

 

	
9.  Agreement(s) with MetLife, Inc. regarding Met Life - Employee Life, AD&D and Dental Insurance.

 

 

 

  

  

  

Final Version

 

Schedule 6.02

 

Financial and Collateral Reporting

 

References is hereby made to a certain Second Amended and Restated Credit Agreement, dated as of July 1, 2009 (as amended, modified, supplemented or restated and in effect from time to time, the "Credit Agreement"), by and among (i) iParty Retail Stores Corp., a Delaware corporation (in such capacity, the "Lead Borrower"), as agent for the Borrowers from time to time party thereto (collectively, with the Lead Borrower, the `Borrowers"), (ii) the Borrowers, (iii) the Lenders from time to time party thereto, and (iv) Wells Fargo Retail Finance, LLC, as Administrative Agent and Collateral Agent. All capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement.

 

The Loan Parties hereby agree to provide to the Administrative Agent, on the applicable day specified below, the following documents (each in such form and detail as the Administrative Agent from time to time may specify):

 

a.            Daily (by 12:00 a.m. EST) (or, if such day is not a Business Day, on the next succeeding Business Day):

 

(i)            the flash sales report for the prior day.

 

b.            Weekly (by Wednesday after the immediately preceding week) (or, if such day is not a Business Day, on the next succeeding Business Day):

 

(i)   the Borrowing Base Certificate delivered in accordance with Section 6.01(c) of the Agreement on such day and its supporting source documents; and

 

(ii)            Inventory summary by Store location and department.

 

c.            Within fifteen (15) days of the end of each Fiscal Month, for the immediately preceding Fiscal Month:

 

(i)    purchases and account payable analysis report (together with account payable aging) for each Loan Party, in the Administrative Agent's format; and

 

(ii)   Inventory certificate inclusive of sales to stock percents for each Loan Party, in the Administrative Agent's format; and

 

(iii)   statement of Store activity, in the Administrative Agent's format; and

 

(iv)   packaway reporting.

 

d.            Within thirty (30) days of the end of each Fiscal Month (except for the end of the Fiscal Year), for the immediately preceding Fiscal Month:

 

(i)   reconciliation of the stock ledger to the general ledger for each Loan Party and the calculation of Availability; and

 

(ii)   Financial Statements (inclusive of Income Statement, Balance Sheet and Cash Flow); and

 

 

  

  

  

 

	
  

	
(iii)

	
Responsible Officer's Certificate regarding rent, tax and insurance compliance certificate, in the Administrative Agent's format; and

 

	
  

	
(iv)

	
account payable aging report by invoice date; and

 

	
  

	
(v)

	
such other information as the Administrative Agent may from time to time reasonably request.

 

e.            Within forty five (45) day or ninety (90) days (as indicated below) of the end of each Fiscal Year, for the immediately preceding Fiscal Year:

 

	
  

	
(i)

	
an interim draft of the annual financial statements (forty five (45) days), inclusive of subsequent periods until the year end statements are finalized; and

 

	
  

	
(ii)

	
audited annual financial statements (ninety (90) days),

 

For purposes of (i) Section (a) above, the first "Business Day" in respect of which the items required by such Section shall be provided, shall be July 1, 2009, (ii) Section (b) above, the first "Wednesday after the immediately preceding week" in respect of which the items required by such Section shall be provided, shall be July 1, 2009, (iii) Sections (c) and (d) above, the first "preceding Fiscal Month" in respect of which the items required by each Section shall be provided, shall be the Fiscal Month ending August 1, 2009 and (iv) Section (e) above, the first "Fiscal Year" shall be the Fiscal Year ending December 26, 2009.

 

 

  

  

  

Final Version

	
Schedule 7.01

 

	
Existing Encumbrances

1.  See Schedule 5.08(b), Capital Leases.

2.  See UCC Search Summary, attached hereto and incorporated herein.

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	
iParty Corp.

270 Bridge Street

Suite 301

Dedham, MA 02026

	
Wells Fargo Retail

Finance, LLC

One Boston Place

18th Floor

Boston, MA 02108

	Delaware	
5/20/2002

	
21258932

	
Active Thru

5/20/2012

Continued

	

A continuing security interest in all Debtor's

assets, including, without limitation accounts,

chattel paper, documents, general intangibles.

instruments, deposit accounts, letter of credit

rights, supporting obligations, commercial torts,

investment property, inventory, equipment and

other goods.

1/6/2004 - Amendment changing the address of

iParty Corp. from 1457 VFW Parkway, West

Roxbury, MA 02132 to 270 Bridge Street, Suite

301, Dedham, MA 02026;

7/12/2006 - Assignment of Wells Fargo Retail

Finance, LLC to Wells Fargo Retail Finance II, LLC;

11/28/2006 - Continuation;

10/31/2008 - Amendment adding Wells Fargo

Retail Finance, LLC as an additional secured

Party;

11/3/2008 - Amendment deleting Wells Fargo

Retail Finance II, LLC as Secured Party.

	
iParty Corp.

270 Bridge Street

Suite 301

Dedham, MA 02026

	
Wells Fargo Retail

Finance, LLC

One Boston Place

18th Floor

Boston, MA 02108

	Delaware	
1/6/2004

	40029779	
Active Thru

1/6/2014

Continued

	
A continuing security interest in all Debtor's

assets, including, without limitation accounts,

chattel paper, documents, general intangibles,

instruments, deposit accounts, letter of credit

rights, supporting obligations, commercial torts,

investment property, inventory, equipment and

other goods;

7/23/2008 - Continuation;

10/31/2008 - Amendment adding Wells Fargo

Retail Finance, LLC as an additional secured

Party;

11/3/2008 - Amendment deleting Wells Fargo

Retail Finance II, LLC as Secured Party.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	
7/20/2004

	
42030239

	
Active

Through

7/20/2009

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B70571; #B70747; B70769;, B70772, B70775;

B70780; B70803, B70815; B70831, B70832;

B70844; B70857; B70866; B70868; B70929;

IBM EquipmentType 4610, 4810, 6636, 9994,

6331, 8198, 3Com High End Disk Symbol

Technologies Scanner, includes all additions,

attachments, accessories, accessions and upgrades

thereto and any substitutions, replacements or

exchanges for any such item of equipment or

software and any and all proceeds of any of the

foregoing, including, without limitation, payments

under insurance or any indemnity or warranty

relating to loss or damage ofsuch equipment and

software.

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	
7/23/2004

	
42073841

	
Active

Through

7/23/2009

Original

	
Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B70977; IBM Equipment Type 4610, 4810,

6636,8198,9994; 3Com High End Disk, includes

all additions, attachments, accessories, accessions

and upgrades thereto and any substitutions,

replacements or exchanges for any such item of

equipment or software and any and all proceeds of

any of the foregoing, including, without

limitation, payments under insurance or any

indemnity or warranty relating to loss or damage

of such equiprnent and software.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	7/30/2004	42146290	
Active

Through

7/30/2009

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B70424; #B70730; B70732; B70750, B70752;

B70839; IBM Equipment Type 4610, 4810, 6636,

9994, includes all additions, attachments,

accessories, accessions and upgrades thereto and

any substitutions, replacements or exchanges for

any such item of equipment or software and any

and all proceeds of any of the foregoing,

including, without limitation, payments under

insurance or any indemnity or warranty relating to

loss or damage of such equipment and software.

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	8/2/2004	42163121	
Active

Through

8/2/2009

Original

	
Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B70778; #B70854; IBM Equipment Type 4610

4810,6636,9994, includes all additions,

attachments, accessories, accessions and upgrades

thereto and any substitutions, replacements or

exchanges for any such item of equipment or

software and any and all proceeds of any of the

foregoing, including, without limitation, payments

under insurance or any indemnity or warranty

relating to loss or damage of such equipment and

software.

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	8/3/2004	42175505	
Active

Through

8/3/2009

Original

	
Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B70827; #B70851; Equipment Type 4610, 4810,

6636, 9994, includes all additions, attachments,

accessories, accessions and upgrades thereto and

any substitutions, replacements or exchanges for

any such item of equipment or software and any

and all proceeds of any of the foregoing,

including, without limitation, payments under

insurance or any indemnity or warranty relating to

loss or damage of such equipment and software.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	8/30/2004	42440644	
Active

Through

8/30/2009

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B80801; #B80825; B80899; B81029, B81041;

B81091; B81096; B81108; B81133; B81263;

B81275; B81289; B81291; IBM Equipment Type

4610, 4810, 6331, 6636, 8198, 9994, 3Com High

End Disk Hewlett Packard Printer, 3Com High

End Disk Symbol Technologies Scanner and

Symbol Technologies Miscellaneous Equipment,

includes all additions, attachments, accessories,

accessions and upgrades thereto and any

substitutions, replacements or exchanges for any

such item of equipment or software and any and

all proceeds of any of the foregoing, including,

without limitation, payments under insurance or

any inderrmity or warranty relating to loss or

damage of such equipment and software.

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	8/31/2004	42453290	
Active

Through

8/31/2009

Original

	
Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B81323; #B81335; B81340; B81349, B81355;

B81359; B81379; B81381; B81385; B81402;

B81415; B814244 B83130; IBM Equipment Type

4610, 4810, 6331, 6636, 8198, 9994, 3Com High

End Disk, includes all additions, attachments,

accessories, accessions and upgrades thereto and

any substitutions, replacements or exchanges for

any such item of equipment or software and any

and all proceeds of any of the foregoing,

including, without limitation, payments under

insurance or any indemnity or warranty relating to

loss or damage of such equipment and software.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	9/1/2004	42464149	
Active

Through

9/1/2009

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B80636; #B80754; B81295; B81302, B81322;

B81380; B81391; B81395; B81410; B81589;

B83163; IBM Equipment Type 4610,4810,6636,

9994, 6631; 8198, 8670, 3Com High End Disk

Symbol Technologies Scanner and Symbol

Technologies Miscellaneous Equipment, includes

all additions, attachments, accessories, accessions

and upgrades thereto and any substitutions,

replacements or exchanges for any such item of

equipment or software and any and an proceeds of

any of the foregoing, including, without

limitation, payments under insurance or any

indemnity or warranty relating to loss or damage

of such equipment and software.

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	9/2/2004	42479014	
Active

Through

9/2/2009

Original

	
Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B81095; #B81496; B81589; B81643, IBM

Equipment Type 4610, 4810, 6331, 6636, 8198,

9994, 3Com High End Disk Symbol Technologies

Miscellaneous Equipment, includes all additions,

attachments, accessories, accessions and upgrades

thereto and any substitutions, replacements or

exchanges for any such item of equipment or

software and any and all proceeds of any of the

foregoing, including, without limitation, payments

under insurance or any indemnity or warranty

relating to loss or damage of such equipment and

software.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	9/20/2004	42635813	
Active

Through

9/20/2009

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B70877; IBM Equipment Type 2130, 8670,

9994, IGCQ, includes all additions, attachments,

accessories, accessions and upgrades thereto and

any substitutions, replacements or exchanges for

any such item of equipment or software and any

and all proceeds of any ofthe foregoing,

including, without limitation, payments under

insurance or any indemnity or warranty relating to

loss or damage of such equipment and software.

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	9/21/2004	42650721	
Active

Through

9/21/2009

Original

	
Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B70904; #B79116, B79123; IBM Equipment

Type4610, 4810, 6331, 6636, 8198, 9994, 3Com

High End Disk, includes all additions,

attachments, accessories, accessions and upgrades

thereto and any substitutions, replacements or

exchanges for any such item of equipment or

software and any and all proceeds of any of the

foregoing, including) without limitation, payments

under insurance or any indemnity or warranty

relating to loss or damage of such equipment and

software.

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	9/23/2004	42669150	
Active

Through

9/23/2009

Original

	
Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B79118; IBM Equipment Type 4610, 4810

6331, 6636, 8198, 3Com High End Disk, includes

all additions, attachments, accessories, accessions

and upgrades thereto and any substitutions,

replacements or exchanges for any such item of

equipment or software and any and all proceeds of

any of the foregoing, including, without

limitation, payments under insurance or any

indemnity or warranty relating to loss or damage

of such equipment and software.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	
iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	9/23/2004	42678912	
Active

Through

9/23/2009

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B79117, IBM Equipment Type 4610, 4810,

6331, 6636, 8198, includes all additions,

attachments, accessories, accessions and upgrades

thereto and any substitutions, replacements or

exchanges for any such item of equipment or

software and any and all proceeds of any of the

foregoing, including, without limitation, payments

under insurance or any indemnity or warranty

relating to loss or damage of such equipment and

software.

	 iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	10/1/2004	42756783	
Active

Through

10/1/2009

Original

	
Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B79120; #B 79121, #B79122; B79122, B79124,

B90423; IBM Equipment Type 2130, 8670, 6631,

6636, 3Com High End Disk 2130 8670 9994

IGCQ, includes all additions, attachments,

accessories, accessions and upgrades thereto and

any substitutions, replacements or exchanges for

any such item of equipment or software and any

and all proceeds of any of the foregoing,

including, without limitation, payments under

insurance or any indemnity or warranty relating to

loss or damage of such equipment and software.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	
Delaware

	10/29/2004	43059450	
Active

Through

10/29/2009

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B95361; #B96212, B96594; IBM Equipment

Type 4610, 4810, 6331, 6636, 8198, 9994, 3Com

High End Disk IGCQ 3Com High End Disk

Symbol Technologies Miscellaneous Equipment,

Hewlett Packard Printer, Symbol Technologies,

Misc Equipment, 3Com High End Disk Symbol

Technologies Scanner, includes all additions,

attachments, accessories, accessions and upgrades

thereto and any substitutions, replacements or

exchanges for any such item of equipment or

software and any and all proceeds of any of the

foregoing, including, without limitation, payments

under insurance or any indemnity or warranty

relating to loss or damage of such equipment and

software.

	iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	Delaware	12/17/2004	43567536	
Active

Through

12/17/2009

Original

	
Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#B99815; IBM Equipment Type 4610, 4810,

6636, 9994, 3Com High End Disk Symbol

Technologies Scanner IGCQ, IGCQ Symbol

Technologies Scanner 6331, 8198 3Com High

End Disk Symbol Technologies Scanner Symbol

Technologies Mise Equip, 3Com High End Disk

Hewlett Packard Printer, IGCQ Symbol

Technologies Scanner, includes all additions,

attachments, accessories, accessions and upgrades

thereto and any substitutions, replacements or

exchanges for any such item of equipment or

software and any and all proceeds of any of the

foregoing, including, without limitation, payments

under insurance or any indemnity or warranty

relating to loss or damage of such equipment and

software.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	Delaware	1/3/2005	50002221	
Active

Through

1/3/2010

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#C07697; #C09201, #C09216; #C09262,

#C09263; IBM Equipment Type 4610, 4810,

6331, 6636, 8198 3Com High End Disk 9994,

includes all additions, attachments, accessories,

accessions and upgrades thereto and any

substitutions, replacements or exchanges for any

such item of equipment or software and any and

all proceeds of any of the foregoing, including,

without limitation, payments under insurance or

any indemnity or warranty relating to loss or

damage of such equipment and software.

	iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	Delaware	1/11/2005	50115759	
Active

Through

1/11/2010

Original

	
Computer Equipment/Software as more fu1ly

described in IBM Credit LLC Supplements

#CI0804; IBM Equipment Type 4610, 4810,

6331,6636,8198 3Com High End Disk, includes

all additions, attachments, accessories, accessions

and upgrades thereto and any substitutions,

replacements or exchanges for any such item of

equipment or software and any and all proceeds of

any of the foregoing, including, without

limitation, payments under insurance or any

indemnity or warranty relating to loss or damage

of such equipment and software.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	Delaware	1/21/2005	50243999	
Active

Through

1/21/2010

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#C13062; IBM EquipmentType 4610, 4810,

6331, 6636, 8198 3Com High End Disk, includes

all additions, attachments, accessories, accessions

and upgrades thereto and any substitutions,

replacements or exchanges for any such item of

equipment or software and any and all proceeds of

any of the foregoing, including, without

limitation, payments under insurance or any

indemnity or warranty relating to loss or damage

of such equipment and software.

	iParty Corp.

1457 VFW Parkway

Boston, MA 02132

	
IBM Credit LLC

1 North Castle Drive

Armonk, NY 10504-257

	Delaware	3/1/2005	50654864	
Active

Through

3/1/2010

Original

	

Computer Equipment/Software as more fully

described in IBM Credit LLC Supplements

#C20936; #C20955, IBM Equipment Type 4610,

4810, 6636, 8198 3Com High End Disk 6331,

includes all additions, attachments, accessories,

accessions and upgrades thereto and any

substitutions, replacements or exchanges for any

such item of equipment or software and any and

all proceeds of any of the foregoing, including,

without limitation, payments under insurance or

any indemnity or warranty relating to loss or

damage ofsuch equiprnent and software.

	iParty Corp.	N/A	Massachusetts	N/A	N/A	
N/A

	CLEAR SEARCH RESULTS
	iParty Corp.	N/A	
Norfolk

County, MA

Dedham City,

MA

	N/A	N/A	
N/A

	CLEAR SEARCH RESULTS

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	
iParty Retail Stores Corp.

270 Bridge Street

Suite 301

Dedham, MA 02026

	
Wells Fargo Retail

Finance, LLC

One Boston Place

18th Floor

Boston, MA 02108

	Delaware	8/6/2001	10782859	
Active

Through

8/6/2011

Continued

	

In Lieu filing by Secured Party to continue the

effectiveness of previously filed financing

statements in CT, FL, ME, MA, NH, NY, RI,

Boston City Clerk, MA, Nashua City Clerk, NH

and New York County, NY, all of which are more

fully described and identified on the attached

Schedule B a copy of which attached and made a

part of the initial filing. Collateral: a continuing

security interest in an Debtor's accounts, general

intangibles, instruments, investment property,

inventory, machinery, equipment, fixtures, and

other goods including but not limited to those

items set forth on Schedule A, a copy of which is

attached and made a part of the initial filing.

5/22/2003 - Assignment of Wells Fargo Retail

Finance, LLC to Wells Fargo Retail Finance II,

LLC;

1/9/2004 - Amendment changing the address of

iPartyRetail Stores Corp. from 1457 VFW

Parkway, West Roxbury, MA 02132 to 270

Bridge Street, Suite 301, Dedham, MA 02026;

3/8/2006 - Continnation;

10/31/2008 - Amendment adding Wells Fargo

Retail Finance, LLC as an additional secured

Party;

11/3/2008 - Amendment deleting Wells Fargo

Retail Finance II, LLC as Secured Party.

 

  

  

  

iParty Corp. System Companies

Search Results Summary as of June 16, 2009

 

	LESSEE/DEBTOR(S)	
SECURED AND/OR OTHER

PARTY (IES)

	JURISDCTN	
FILE

DATE

	FILE NO.	
FILING

STATUS

	
COLLATERAL DESCRIPTION,

RECOMMENDATIONS AND/OR

COMMENTS

	
iParty Retail Stores Corp.

270 Bridge Street

Suite 301

Dedham, MA 02026

	
Wells Fargo Retail

Finance, LLC

One Boston Place

18th Floor

Boston, MA 02108

	Delaware	1/6/2004	40029753	
Active Thru

1/6/2014

Continued

	

A continuing security interest in all Debtor's

assets, including, without limitation accounts,

chattel paper, documents, general intangibles,

instruments, deposit accounts, letter of credit

rights, supporting obligations, commercial torts,

investment property, inventory, equipment and

other goods;

7/23/2008 - Continuation;

10/31/2008 - Amendment adding Wells Fargo

Retail Finance, LLC as an additional secured

Party;

11/3/2008 - Amendment deleting Wells Fargo

Retail Finance II, LLC as Secured Party.

	
iParty Retail Stores Corp.

270 Bridge Street

Suite 301

Dedham, MA 02026

	
CIT Communications

Finance Corporation

1 CIT Drive

Livingston, NJ 07039

	Delaware	2/11/2005	50475029	
Terminated

5/17/2005

	
Equipment now or hereafter acquired, which is

sold to Debtor by Secured Party pursuant to Lease

No X885822, including but limited to, CiSCO

3745 Rooter/Access Rooters, and all attachments,

accessions, additions, substitutions, products,

replacements and rentals and right to use license

for any software related to any of the foregoing,

and includes all proceeds.

	
iParty Retail Stores Corp.

270 Bridge Street

Suite 301

Dedham, MA 02026

	
IOS Capital

1738 Bass Road

Macon, GA 31210-1043

	Delaware	3/15/2005	50888272	
Active Thru

3/15/2010

Original

	
Lease Transaction pursuant to Product Schedule

No./Agreement JH4688 Master Lease Agreement.

	
iParty Retail Stores Corp.

270 Bridge Street

Suite 301

Dedham, MA 02026

	
IOS Capital

1738 Bass Road

Macon, GA 31210-1043 

	Delaware	8/4/2005	52405893	
Active Thru

8/4/2010

Original

	
Lease Transaction pursuant to Product Schedule

No./Agreement JH4688A Master Lease Agreement.

	
iParty Retail Stores Corp.

	N/A	Massachusetts	N/A	N/A	N/A	CLEAR SEARCH RESULTS
	
iParty Retail Stores Corp.

	N/A	
Norfolk

County, MA

Dedham City,

MA

	N/A	N/A	N/A	CLEAR SEARCH RESULTS

 

 

  

  

  

 

 

 

 

 

Final Version

 

	
Schedule 7.02

 

	
Permitted Investments

	
 

 

 

 

1.  iParty Corp. owns 100% of the outstanding Equity Interests of iParty Retail Stores Corp.

	 
	  

  

  

  

Final Version

 

	
Schedule 7.03

 

	
Permitted Indebtedness

	  
	  	
None.

	  

  

  

  

Final Version

	
Schedule 7.18

 

	
Capital Expenditures

	  
	
1.  $924,615

 

  

  

  

 

Final Version

 

 

Schedule 10.02

 

Administrative Agent's Office, Certain Addresses for Notices

 

 

1.   Administrative Agent's Office:

 

Wells Fargo Retail Finance, LLC, as Administrative Agent

One Boston Place, 19th Floor

Boston, Massachusetts 02108

Attention: Michele Ayou

 

2.            Certain Addresses for Notices:

 

a.             If to the Lead Borrower and any other Loan Party:

 

iParty Retail Stores Corp.

270 Bridge Street, Ste. 301

Dedham, MA 02026

Attention: Sal Perisano, CEO and David E. Robertson, CFO Telephone: (781) 329-3952

Facsimile: (781) 326-7143

E-mail: drobertson@iparty.com; sperisano@iparty.cocm

 

With a copy to:

 

Posternak Blankstein & Lund LLP The Prudential Tower

800 Boylston Street

Boston, MA 02199

Attention: Donald I-I. Siegel, P.C. Telephone: (617) 973-6147

Facsimile: (617) 722-4954

E-mail: dsiegel@pbl.com

 

b.             If to the Administrative Agent, Collateral Agent and the L/C Issuer:

 

Wells Fargo Retail Finance, LLC, as Administrative Agent

One Boston Place, 19th Floor 

Boston, Massachusetts 02108

Attention: Michele Ayou

Telephone: (617) 854-7246

Facsimile: (866) 303-3930

E-mail: Michele.L.Ayou@wellsfargo.com

 

with a copy to:

 

Proskauer Rose LLP

One International Place

Boston, Massachusetts 02110

Attention: Peter Antoszyk, Esq.

Telephone: (617) 526-9749

Facsimile: (617) E-mail: pantoszyk@proskauer.com

 

 

  

  

  

 

 

EXHIBIT A

 

FORM OF COMMITTED LOAN NOTICE

 

Date:  ___________, _____

 

To:           Wells Fargo Retail Finance, LLC, as Administrative Agent

under the Credit Agreement referred to below

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

Ladies and Gentlemen:

 

Reference is made to that certain Second Amended and Restated Credit Agreement, dated as of July 1, 2009 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among iParty Retail Stores Corp., a Delaware corporation (the “Lead Borrower”) and iParty Corp., a Delaware corporation (“iParty”, and together with the Lead Borrower, each individually a “Borrower”, and collectively the “Borrowers”), Wells Fargo Retail Finance, LLC, as Administrative Agent, Collateral Agent and Swing Line Lender and the other Lenders party thereto.  The Borrowers hereby certify that the conditions set forth in Section 4.02 of the Credit Agreement for the making of such Loan have been met.

 

The undersigned hereby requests (select one):

 

 ̈  A Borrowing of Committed Loans

 

 ̈  A conversion of Loans from one Type to the other

 

 ̈  A continuation of LIBO Rate Loans

 

           1.           On  ___________________________________  (a Business Day).

 

           2.           In the amount of $________________________.1

 

           3.           Comprised of [Type of Loan requested].

 

           4.           For LIBO Rate Loans:   with an Interest Period of [1] [2] [3] month[s].

 

 

[Remainder of Page Intentionally Left Blank; Signature Page to Follow]

 

 

1 Each Borrowing, conversion or continuation of Loans must be in a minimum amount of $100,000 or a whole multiple of $50,000 in excess thereof.

  

  

  

 

iPARTY RETAIL STORES CORP.,

as the Lead Borrower

By:                                                          

Name:                                                     

Title:                                          

 

 

  

  

  

 

EXHIBIT B

 

FORM OF SWING LINE LOAN NOTICE

 

Date:  ___________, _____

 

To:          Wells Fargo Retail Finance, LLC, as Administrative Agent

under the Credit Agreement referred to below

One Boston Place, 19th Floor

Boston, Massachusetts 02108

 

Ladies and Gentlemen:

 

Reference is made to that certain Second Amended and Restated Credit Agreement, dated as of July 1, 2009 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among iParty Retail Stores Corp., a Delaware corporation (the “Lead Borrower”) and iParty Corp., a Delaware corporation (“iParty”, and together with the Lead Borrower, each individually a “Borrower”, and collectively the “Borrowers”), Wells Fargo Retail Finance, LLC, as Administrative Agent, Collateral Agent and Swing Line Lender and the other Lenders party thereto.  The Borrowers hereby certify that the conditions set forth in Section 4.02 of the Credit Agreement for the making of such Loan have been met.

 

The undersigned hereby requests a Swing Line Loan:

 

1.           On _________________________________ (a Business Day).

 

2.           In the amount of $                                                               .2

 

 

 

 

[Remainder of Page Intentionally Left Blank; Signature Page to Follow]

 

 

 

2 Each Borrowing, conversion or continuation of Loans must be in a minimum amount of $100,000.

 

  

  

  

 

iPARTY RETAIL STORES CORP.,

as the Lead Borrower

By:                                                          

Name:                                                     

Title:                                          

 

 

  

  

  

 

EXHIBIT C-1

 

SECOND AMENDED AND RESTATED MASTER NOTE (REVOLVING)

 

 

	Up to $15,000,000	 Boston, Massachusetts 

July 1, 2009

 

For value received, the undersigned, iParty Retail Stores Corp., a Delaware corporation and iParty Corp., a Delaware corporation (collectively, the “Borrowers”), hereby promise to pay on July 2, 2012, to the order of Wells Fargo Retail Finance, LLC, a Delaware limited liability company (the “Lender”), at its main office in Boston, Massachusetts, or at any other place designated at any time by the holder hereof, in lawful money of the United States of America and in immediately available funds, the principal sum of Fifteen Million ($15,000,000.00) Dollars or, if less, the aggregate unpaid principal amount of all advances made by the Lender to the Borrowers hereunder, together with interest on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note is fully paid at the rate from time to time in effect under the Second Amended and Restated Credit Agreement of even date herewith (as amended, modified, supplemented or restated from time to time, the “Credit Agreement”) among the Borrowers, Wells Fargo Retail Finance, LLC, as Administrative Agent, Collateral Agent and Swing Line Lender and the other Lenders party thereto. The principal hereof and interest accruing thereon shall be due and payable as provided in the Credit Agreement. This Note may be prepaid only in accordance with the Credit Agreement.

 

This Note is issued pursuant, and is subject, to the Security Agreement (as defined in the Credit Agreement), which provides, among other things, for acceleration hereof. This Note is the Second Amended and Restated Master Note referred to in the Credit Agreement.

 

This Note is secured, among other things, pursuant to the Credit Agreement and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements.

 

The Borrowers hereby agree to pay all costs of collection, including attorneys’ fees and legal expenses in the event this Note is not paid when due, whether or not legal proceedings are commenced.

 

This Note amends and restates, supersedes and replaces an Amended and Restated Master Note (Revolving) dated December 21, 2006 in the original principal amount of $15,000,000 executed by the Borrower in favor of the Lender.

 

Presentment or other demand for payment, notice of dishonor and protest are expressly waived.

 

This Note shall be deemed to be under seal.

 

 

 

[Remainder of Page Intentionally Left Blank; Signature Page to Follow]

 

 

 

 

  

  

  

 

iPARTY RETAIL STORES CORP.

By:                                                                       

Name:

Title:

iPARTY CORP.

By:                                                                       

Name:

Title:

 

[Signature Page to Second Amended and Restated Master Note (Revolving)]

 

 

  

  

  

 

EXHIBIT C-2

 

SWING LINE LOAN NOTE

 

 

	$[__________]	 Boston, Massachusetts 

July 1, 2009

 

  

For value received, the undersigned, iParty Retail Stores Corp., a Delaware corporation and iParty Corp., a Delaware corporation (collectively, the “Borrowers”), hereby promise to pay on July 2, 2012, to the order of Wells Fargo Retail Finance, LLC, a Delaware limited liability company (the “Lender”), at its main office in Boston, Massachusetts, or at any other place designated at any time by the holder hereof, in lawful money of the United States of America and in immediately available funds, the principal sum of [___________] ($[__________]) Dollars or, if less, the aggregate unpaid principal amount of all advances made by the Lender to the Borrowers hereunder, together with interest on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note is fully paid at the rate from time to time in effect under the Second Amended and Restated Credit Agreement of even date herewith (as amended, modified, supplemented or restated from time to time, the “Credit Agreement”) among the Borrowers, Wells Fargo Retail Finance, LLC, as Administrative Agent, Collateral Agent and Swing Line Lender and the other Lenders party thereto. The principal hereof and interest accruing thereon shall be due and payable as provided in the Credit Agreement. This Note may be prepaid only in accordance with the Credit Agreement.

 

This Note is issued pursuant, and is subject, to the Security Agreement (as defined in the Credit Agreement), which provides, among other things, for acceleration hereof. This Note is the Swing Line Loan Note referred to in the Credit Agreement.

 

This Note is secured, among other things, pursuant to the Credit Agreement and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements.

 

The Borrowers hereby agree to pay all costs of collection, including attorneys’ fees and legal expenses in the event this Note is not paid when due, whether or not legal proceedings are commenced.

 

Presentment or other demand for payment, notice of dishonor and protest are expressly waived.

 

This Note shall be deemed to be under seal.

 

 

[Remainder of Page Intentionally Left Blank; Signature Page to Follow]

 

 

  

  

  

 

iPARTY RETAIL STORES CORP.

By:                                                                       

Name:

Title:

iPARTY CORP.

By:                                                                       

Name:

Title:

 

[Signature Page to Swing Line Loan Note]

 

 

  

  

  

 

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 

Date of Certificate: ______________

To:          Wells Fargo Retail Finance, LLC, as Agent

	
  

	
Ladies and Gentlemen:

 

Reference is made to that certain Second Amended and Restated Credit Agreement, dated as of July 1, 2009 (as amended, modified, supplemented or restated and in effect from time to time, the “Credit Agreement”) by and among, (i) iParty Retail Stores Corp., a Delaware corporation (in such capacity, the “Lead Borrower”), as agent for the Borrowers from time to time party thereto (collectively, with the Lead Borrower, the “Borrowers”), (ii) the Borrowers, (iii) the Lenders from time to time party thereto, and (iv) Wells Fargo Retail Finance, LLC, (“WFRF”), as Administrative Agent and Collateral Agent for the Lenders (in such capacities, together with any successors and assigns, each an “Agent” and collectively, the “Agents”).  Capitalized terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

 

The undersigned, in [his/her] capacity as a duly authorized and acting Responsible Officer of the Lead Borrower, hereby certifies on behalf of the Parent and its Subsidiaries as of the date hereof the following:

 

	
1.

	
No Event of Default or Default. The undersigned has reviewed the provisions of the Credit Agreement and the other Loan Documents and has made or caused to be made under [his/her] supervision a review of the condition and operations of the Parent and its Subsidiaries during the period covered by the financial statements delivered contemporaneously herewith with a view to determining whether the Parent and its Subsidiaries were in compliance with all of the provisions of the Credit Agreement and such Loan Documents at the times such compliance is required thereby.  Such review has not disclosed, and the undersigned has no knowledge of, the existence during such period of an Event of Default or Default, except as set forth in Appendix I annexed hereto.  If an Event of Default or Default exists, Appendix I describes in reasonable detail the nature and period of existence thereof and the action which the Parent and its Subsidiaries propose to take or have taken with respect thereto.

	
 

	
2.

	
Financial Calculations.  Attached hereto as Appendix II are reasonably detailed calculations demonstrating compliance with the financial covenants specified in Sections 7.17 and 7.18 of the Credit Agreement.

 

 

  

-1-

  

 

	
3.

	
Rent, Taxes and Insurance.

 

	
  

	
(a)

	
Except as set forth on Appendix III, (i) all rent owing under any Leases, and all obligations and liabilities in respect of Taxes, are current and being paid as agreed and (ii) no Loan Party has received notice that any obligations or liabilities in respect of utilities and/or insurance premiums have not been timely paid.

 

	
  

	
(b)

	
Appendix III describes the details of all past due payments (if any) and the steps (if any) being taken or contemplated by the Loan Parties to be taken on account thereof.  Copies of any related default, cure or late notices concerning any obligations have been enclosed herewith.

 

	
4.

	
Intellectual Property.  Except as set forth on Appendix IV, no Loan Party has acquired any additional Intellectual Property since the date of the last similar certification.

 

	
5.

	
Financial Statements.

 

[Use following paragraph (a) for Fiscal Year-end financial statements]

 

	
  

	
(a)

	
Attached hereto as Appendix V are the Consolidated balance sheets, Consolidated statement of income or operations, Consolidated Shareholders’ Equity and Consolidated statement of cash flows of the Borrowers and their Subsidiaries as at the end of the Fiscal Year ending ________, setting forth in each case in comparative form the corresponding figures for the immediately preceding Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, and audited and accompanied by (i) a report and an opinion of a Registered Public Accounting Firm of nationally recognized standing reasonably acceptable to the Administrative Agent, and (ii) if required by the SEC, an opinion of such Registered Public Accounting Firm independently assessing the Loan Parties’ internal controls over financial reporting in accordance with Item 308 of SEC Regulation S-K, PCAOB Auditing Standard No. 5, and Section 404 of Sarbanes-Oxley.

 

[Use following paragraph (b) for Fiscal Month-end financial statements]

 

	
  

	
(b)

	
Attached hereto as Appendix V are the internally prepared Consolidated balance sheet, Consolidated statement of income or operations, Consolidated statement of Shareholders’ Equity, and Consolidated cash flow of the Parent and its Subsidiaries as at the end of the Fiscal Month ending ________, and for the portion of the Parent’s Fiscal Year then ended, setting forth in each case in comparative form the figures for (A) such period set forth in the projections delivered pursuant to Section 6.01(d) of the Credit Agreement, (B) the corresponding Fiscal Month of the previous Fiscal Year and (C) the corresponding portion of the previous fiscal year, in each case, all in reasonable detail.

 

 

  

-2-

  

 

 

	
6.

	
No Material Accounting Changes, Etc.

 

	
  

	
(a)

	
The financial statements furnished to the Agents for the [Fiscal Year/Fiscal Month] ending ___________ fairly present, in all material respects, the Consolidated financial position of the Borrowers and their Subsidiaries as of the end of such [Fiscal Year/Fiscal Month] and the Consolidated results of operations and Consolidated cash flow of the Borrowers and their Subsidiaries for such [Fiscal Year/Fiscal Month], in accordance with GAAP applied in a manner consistent with that of the most recent audited financial statements of the Borrowers and their Subsidiaries furnished to the Agents, subject only to, with respect to the quarterly and monthly financial statements, normal year-end audit adjustments and the absence of footnotes.

 

	
  

	
(b)

	
Except as set forth in Appendix VI, there has been no change in GAAP used in the preparation of the financial statements furnished to the Agents for the [Fiscal Year/Fiscal Month] ending ___________.  If any such change has occurred, a statement of reconciliation conforming such financial statements to GAAP is attached hereto in Appendix VI.

 

[signature page follows]

 

 

  

-3-

  

 

IN WITNESS WHEREOF, the undersigned duly authorized and acting Responsible Officer of the Lead Borrower, on behalf of the Parent and its Subsidiaries, has duly executed this Compliance Certificate as of the date above first written.

 

LEAD BORROWER:

iPARTY RETAIL STORES CORP.

By:___________________________

Name: ________________________

Title: _________________________

 

 

 

  

-4-

  

APPENDIX I

Event of Default or Default

 

Except as set forth below, no Event of Default or Default exists.  [If an Event of Default or Default exists, set forth below in reasonable detail is a description of the nature and period of existence thereof and the action which the Parent and its Subsidiaries propose to take or have taken with respect thereto.]

 

 

 

  

-5-

  

APPENDIX II

 

Compliance with Financial Covenants

 

[reasonably detailed calculations in accordance with

the terms of the Credit Agreement attached]

 

 

  

-6-

  

 

APPENDIX III

 

Leases, Taxes and Insurance

 

Except as set forth below, (i) all rent owing under any Leases, and all obligations and liabilities in respect of Taxes, are current and being paid as agreed and (ii) no Loan Party has received notice that any obligations or liabilities in respect of utilities and/or insurance premiums have not been timely paid.  [If any obligations and liabilities of the Loan Parties in respect of rent, utilities, Taxes and/or insurance premiums are not current, the following describes the details of all past due payments (if any) and the steps (if any) being taken or contemplated by the Loan Parties to be taken on account thereof.]

 

 

  

-7-

  

 

APPENDIX IV

 

Intellectual Property

 

Except as set forth below, no Loan Party has acquired any additional Intellectual Property since the date of the last similar certification.

 

 

  

-8-

  

 

APPENDIX V

 

Financial Statements

 

[attached]

 

 

  

-9-

  

 

APPENDIX VI

Change in GAAP

Except as set forth below, there has been no change in GAAP used in the preparation of the financial statements furnished to the Agents for the [Fiscal Year/Fiscal Month] ending ___________.  If any such change has occurred, a statement of reconciliation conforming such financial statements to GAAP is attached hereto.

 

 

 

 

  

-10-

  

 

Exhibit E

Borrowing Base Certificate

(Credit Availability Calculation)*

*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the Securities and Exchange Commission.

 

 

  

  

  

 

EXHIBIT F

 

Form of Assignment and Assumption

 

 

ASSIGNMENT AND ASSUMPTION

 

Reference is made to the Second Amended and Restated Credit Agreement, dated as of July 1, 2009 (as amended, modified, supplemented or restated and in effect from time to time, the “Credit Agreement”), by and among (i) iPARTY RETAIL STORES CORP., a Delaware corporation (in such capacity, the “Lead Borrower”), as agent for the Borrowers from time to time party thereto (individually, a “Borrower” and, collectively with the Lead Borrower, the “Borrowers”), (ii) the Borrowers, (iii) the Guarantors from time to time party thereto (individually, a “Guarantor” and, collectively, the “Guarantors”), (iv) the Lenders from time to time party thereto (individually, a “Lender” and, collectively, the “Lenders”), and (v) WELLS FARGO RETAIL FINANCE, LLC, as Administrative Agent and Collateral Agent.  Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement.

 

______________________________ (the “Assignor”) and ___________________ (the “Assignee”) agree as follows:

 

	
1.

	
The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor’s rights and obligations as a Lender under the Credit Agreement as of the date hereof (including, without limitation, such interest in each of the Assignor’s outstanding Commitments, if any, and the Loans (and related Obligations) owing to it) specified in Section 1 of Schedule I hereto.  After giving effect to such sale and assignment, the Assignor’s and the Assignee’s Commitments and the amount of the Loans owing to the Assignor and the Assignee and the amount of Letters of Credit participated in by the Assignor and the Assignee will be as set forth in Section 2 of Schedule I hereto.

 

	
2.

	
The Assignor: (a) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Liens and that it is legally authorized to enter into this Assignment and Assumption; (b) makes no representation or warranty and assumes no responsibility with respect to (i) any statements, warranties or representations made in, or in connection with, the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant thereto, or (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant thereto; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of their respective obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant thereto; and (d) confirms, in the case of an Assignee who is not a Lender, an Affiliate of a Lender, or an Approved Fund, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the Assignor subject to this Assignment and Assumption, is not less than $500,000.00, or, if less, the entire remaining amount of the Assignor’s Commitment and the Loans at any time owing to it, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Lead Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).

 

 

  

1

  

 

 

	
3.

	
The Assignee: (a) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 6.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption; (b) agrees that it will, independently and without reliance upon any Agent, the Assignor 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 the Credit Agreement; (c) appoints and authorizes the Agents to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agents by the terms thereof, together with such powers as are reasonably incidental thereto; (d) agrees that it will perform in accordance with their terms all of the obligations which, by the terms of the Credit Agreement, are required to be performed by it as a Lender; (e) specifies as its lending office (and address for notices) the office set forth beneath its name on the signature pages hereof; (f) agrees that, if the Assignee is a Foreign Lender entitled to an exemption from, or reduction of, withholding tax under the law of the jurisdiction in which any Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, the Assignee shall deliver to the Lead Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) whichever of the following is applicable: (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party, (ii) duly completed copies of Internal Revenue Service Form W-8ECI, (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (A) a certificate to the effect that such Foreign Lender is not (1) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (2) a “10 percent shareholder” of the Borrowers within the meaning of section 881(c)(3)(B) of the Code, or (3) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (B) duly completed copies of Internal Revenue Service Form W-8BEN, or (iv) any other form prescribed by applicable Law as a basis for claiming exemption from, or a reduction in, United States Federal withholding tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit the Lead Borrower to determine the withholding or deduction required to be made; and (g) represents and warrants that it is an Eligible Assignee.

 

 

  

2

  

 

	
4.

	
Following the execution of this Assignment and Assumption by the Assignor and the Assignee, it will be delivered, together with a processing and recordation fee in the amount, if any, required as set forth in Section 10.06 to the Credit Agreement, to the Administrative Agent for acceptance and recording by the Administrative Agent.  The effective date of this Assignment and Assumption shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on Schedule I hereto (the “Effective Date”).

 

	
5.

	
Upon such acceptance and recording by the Administrative Agent and, to the extent required by Section 10.06(b)(iii) of the Credit Agreement, consent by the Administrative Agent, the Lead Borrower and/or the L/C Issuer, as applicable (such consent not to be unreasonably withheld or delayed), from and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent of the interest assigned by this Assignment and Assumption, shall have the rights and obligations of a Lender under the Credit Agreement, and (b) the Assignor shall, to the extent of the interest assigned by this Assignment and Assumption, be released from its obligations under the Credit Agreement.

 

	
6.

	
Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee.  The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Effective Date directly between themselves.

 

	
7.

	
This Assignment and Assumption shall be governed by, and be construed in accordance with, the laws of the Commonwealth of Massachusetts.

 

[SIGNATURE PAGE FOLLOWS]

 

 

  

3

  

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption to be executed by their respective officers thereunto duly authorized, as of the date first above written.

[ASSIGNOR]

By:_________________________________

Name:

Title:

[ASSIGNEE]

By:_________________________________

Name:

Title:

Lending Office (and address for notices):

[Address]

Accepted this _____ day

of ___________, _____:

WELLS FARGO RETAIL FINANCE, LLC

as Administrative Agent

By:_________________________________

Name:

Title:

 

 

  

4

  

 

Acknowledged and, to the extent required by Section 10.06(b)(i)(B) or Section 10.06(b)(iii) of the Credit Agreement, consented to, this _____ day of _____________, _______:

ADMINISTRATIVE AGENT:

WELLS FARGO RETAIL FINANCE, LLC

By:_________________________________

Name:

Title:

 

 

  

5

  

 

Acknowledged and, to the extent required by Section 10.06(b)(i)(B) or Section 10.06(b)(iii) of the Credit Agreement, consented to, this _____ day of _____________, _______:

LEAD BORROWER:

iPARTY RETAIL STORES, CORP.

By: ___________________________

Name:

Title:

  

6

  

Acknowledged and, to the extent required by Section 10.06(b)(iii) of the Credit Agreement, consented to, this _____ day of _____________, _______:

L/C ISSUER:

WELLS FARGO BANK, N.A.

By: ____________________________

Name:

Title:

 

 

 

  

7

  

 

Schedule I

 

to

Assignment and Assumption

 

	
Section 1.

	
Percentage/Amount of Commitments/Loans/Letters of Credit Assigned by

	
    Assignor to Assignee.

	  
	  	  
	
    Applicable Percentage assigned by Assignor:

	
______%

	  	  
	
    Commitment assigned by Assignor:

	
$_______________

	
 

	  
	

    Aggregate Outstanding Principal Amount of Loans assigned by Assignor:

	
$_______________

	  	  
	
    Aggregate Participations assigned by Assignor in L/C Obligations:

	
$_______________

	  	  

	
Section 2.

	
Percentage/Amount of Commitments/Loans/Letters of Credit Held by Assignor and Assignee after giving effect to Assignment and Assumption.

	
 

	  
	
    Assignor’s Applicable Percentage

	
______%

	  	  
	
    Assignee’s Applicable Percentage:

	
______%

	  	  
	
    Assignor’s Commitment:

	
$_______________

	  	  
	
    Assignee’s Commitment:

	
$_______________

	
 

	  
	

    Aggregate Outstanding Principal Amount of Loans Owing to Assignor:

	
$_______________

	
 

	  
	

    Aggregate Outstanding Principal Amount of Loans Owing to Assignee:

	
$_______________

	  	  
	
    Aggregate Participations by Assignor in L/C Obligations:

	
$_______________

	  	  
	
    Aggregate Participations by Assignee in L/C Obligations:

	
$_______________

	  	  
	
Section 3.

	  
	  	  
	
    Effective Date:

	
_______________, _____

  

8

  

 

 

Exhibit G

[FORM OF NOTICE TO CREDIT CARD PROCESSOR TO BE RETYPED ON

LETTERHEAD OF BORROWER]

                                                          ________ __, 200__

_____________________

_____________________

_____________________

Attention:_____________

 

Re:           ____________________(the “Company”)

 

Gentlemen:

 

___________________________ (“Processor”) has entered into arrangements pursuant to which Processor acts as credit card processing service provider to the Company in connection with sales by the Company to its customers using credit cards and debit cards as set forth in the ____________________________ by and between Processor and the Company (the “Card Processing Agreement”).

 

Please be advised that the Company has entered or is about to enter into financing arrangements with Wells Fargo Retail Finance, LLC (together with its successors and assigns, the “Lender”) pursuant to which Lender may from time to time make loans and advances and provide other financial accommodations to the Company, secured by, among other things, all of the Company’s right, title and interest in and to all present and future accounts, contract rights, general intangibles, documents, instruments, chattel paper, inventory, deposit and other bank accounts and proceeds of the foregoing, including all amounts at any time payable by Processor to the Company pursuant to the Card Processing Agreement or otherwise.

 

Notwithstanding anything to the contrary contained in the Card Processing Agreement or any prior instructions to Processor, unless and until Processor receives written instructions from Lender to the contrary, effective as of the date Processor is notified by the Company or Lender that the financing arrangements of the Company with Lender have closed, all amounts payable by Processor to the Company pursuant to the Card Processing Agreement or otherwise shall be sent, on a daily basis, by Federal funds wire transfer from the Settlement Account (as defined below) only to the following account (the “Concentration Account”):

 

 

  

  

  

 

___________________

ABA Number:_________

Account Number:  __________

Account Name:  ______________

Ref:  _______________

In the event Processor at any time receives any other instructions from Lender with respect to the disposition of amounts payable by or through Processor to the Company pursuant to the Card Processing Agreement or otherwise, Processor is hereby irrevocably authorized and directed to follow such instructions, without inquiry as to Lender’s right or authority to give such instructions.  Processor agrees it will follow all such instructions that Lender may from time to time hereafter give and Processor will not honor any instructions with respect to the payment of such amounts, other than those approved in writing by Lender.  The Company agrees to hold harmless Processor for any action taken by Processor in accordance with the terms of this letter and the Card Processing Agreement.

 

Processor and the Company hereby confirm and agree for the benefit of Lender as follows: (i) after all debits and settlements are made by Processor solely with respect to the Company’s credit card and debit card sales, all amounts received by Processor in connection with the credit card or debit card sales transactions handled by Processor on behalf of the Company shall only be deposited in account no.  at  (the “Settlement Account”), (ii) all amounts held in the Settlement Account are the property of the Company, subject to the security interest of Lender, (iii) Processor does not have any interest in, and will not assert any claims to, any funds at any time held or received in the Settlement Account or the Concentration Account, (iv) as of the date hereof, pursuant to the Card Processing Agreement, Processor provides credit card processing services to the Company with respect to the credit cards and/or debit cards issued by or through __________, _____ and __________, (v) the records of Processor do not reflect, and it has not received, notice of any assignment of, or pledge and security interest in, the Settlement Account or any amounts at any time held in it or any amounts payable by Processor to the Company, other than the security interest of Lender referred to in this letter, (vi) Processor is not aware of any material event of default under the Card Processing Agreement and such agreement is in full force and effect, and (vii) at the same time that Processor sends any notice of default, termination or non-renewal of its arrangements with the Company, or any notice of the intention of Processor to cease or suspend payment to the Settlement Account, Processor shall send a copy of such written notice to Wells Fargo Retail Finance, LLC, One Boston Place, Boston, Massachusetts 02108 Attention: Account Manager. Lender is relying upon this letter agreement in providing financing to the Company and this letter agreement will be binding upon Processor and its successors and assigns and inure to the benefit of Lender and its successors and assigns.  This letter agreement cannot be changed, modified or terminated, except by written agreement signed by Lender.

 

REMAINDER OF PAGE INTENTIONALLY BLANK

 

 

 

  

  

  

 

 

Very truly yours,

________________________

“Borrower”

By:           ______________________________

Name:

Title:

Acknowledged:

_________________________________

“Credit Card Processor”

By:         ______________________________

Name:

Title:

Wells Fargo Retail Finance, LLC

By:         ______________________________

Name:

Title:

 

 

  

  

  

 EXHIBIT H

 

FORM OF DDA NOTIFICATION

 

PREPARE ON BORROWER LETTERHEAD - ONE FOR EACH DEPOSITORY

 

To: [Name and Address of Bank]

 

Re:            iParty Retail Stores Corp.

The Account Numbers referenced on Exhibit A annexed hereto

 

Dear Sir/Madam:

 

This letter relates to the Account Numbers referenced on Exhibit A annexed hereto and any other depository account(s) (collectively the “Account”) which iParty, Corp., a Delaware corporation with an address at ________________________(the “Borrower”), now or hereafter maintains with you. The term “Account” shall also mean any certificates of deposit, investments, or other evidence of indebtedness heretofore or hereafter issued by you to or for the account of the Borrower.

 

Under various agreements between, among others, the Borrower and Wells Fargo Retail Finance I, LLC, a Delaware limited liability company with an office at One Boston Place, 19th Floor, Boston, Massachusetts 02108, as collateral agent (in such capacity, herein the “Collateral Agent”) for its own benefit and the benefit of a syndicate of revolving lenders and certain other credit parties (the “Credit Parties”), the Borrower has granted to the Collateral Agent (for its own benefit and the benefit of the Credit Parties) security interests in and to, among other things, the Borrower's accounts, accounts receivable, inventory, and proceeds therefrom, including, without limitation, the proceeds now or hereafter deposited in the Account or evidenced thereby. Consequently, the present and all future contents of the Account constitute the Collateral Agent's collateral.

 

Until you receive written notification from the Collateral Agent that the interest of the Collateral Agent and the other Credit Parties in the Accounts has been terminated, all funds from time to time on deposit in each of the Accounts, net of such minimum balance, not to exceed $2,500.00, as may be required by you to be maintained in each of the Accounts, shall be transferred not less frequently than weekly (or, upon notice to you from the Collateral Agent that a Cash Dominion Event has occurred, on each business day) only as follows:

 

  

1

  

 

(a)            By ACH, Depository Transfer Check, or Electronic Depository Transfer to:

[Bank} .

ABA #

Account No.

Re: iParty, Retail Stores Corp.

or

 

(b)            As you may be otherwise instructed from time to time in writing by an officer of the Collateral Agent.

 

Upon request of the Collateral Agent, a copy of each statement issued with respect to the Account should be provided to the Collateral Agent at the following addresses (which address may be changed upon seven (7) days’ written notice given to you by the Collateral Agent):

 

Wells Fargo Retail Finance, LLC

One Boston Place, 19th Floor

Boston, Massachusetts 02108

Attention: Michele Ayou 

Re: iParty Retail Stores Corp.

 

You shall be fully protected in acting on any order or direction by the Collateral Agent respecting the Accounts without making any inquiry whatsoever as to the Collateral Agent’s right or authority to give such order or direction or as to the application of any payment made pursuant thereto. Nothing contained herein is intended to, nor shall it be deemed to, modify the rights and obligations of the Borrower and the Collateral Agent under the terms of the loan arrangement and the loan documents executed in connection therewith between, among others, the Borrower and the Collateral Agent.

 

This letter may be amended only by notice in writing signed by the Borrower and an officer of the Collateral Agent and may be terminated solely by written notice signed by an officer of the Collateral Agent.

 

 

[signature page follows]

 

  

2

  

 

Very truly yours,

 

iParty Retail Stores, Corp.., as Borrower

 

By:___________________________

Name:_________________________                                                      

Title:__________________________                                                       

 

 

cc:           Wells Fargo Retail Finance, LLC

 

Signature Page to DDA Notification

 

  

  

  

 

Exhibit A

 

 

Accounts

 

 

[see attached]

 

 

Signature Page to DDA Notification

 

  

  

  

 

EXHIBIT I

 

Form of Joinder Agreement

 

 

JOINDER AGREEMENT

 

 

This JOINDER AGREEMENT (this “Joinder”) is made as of [_________________], by and among:

 

[_________________________], a [_________________________] (the “New [Borrower/Guarantor]”), with its principal executive offices at [________________________]; and

 

WELLS FARGO RETAIL FINANCE, LLC, as Administrative Agent and Collateral Agent;

 

in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

W I T N E S S E T H :

A.           Reference is made to a certain Second Amended and Restated Credit Agreement, dated as of July 1, 2009 (as amended, modified, supplemented or restated and in effect from time to time, the “Credit Agreement”), by and among (i) iPARTY RETAIL STORES CORP., a Delaware corporation (in such capacity, the “Lead Borrower”), as agent for the Borrowers from time to time party thereto, (ii) the Borrowers (individually, an “Existing Borrower” and, collectively with the Lead Borrower, the “Existing Borrowers”), (iii) the Guarantors from time to time party thereto (the “Existing Guarantors”), (iv) the Lenders from time to time party thereto (individually, a “Lender” and, collectively, the “Lenders”), and (v) Wells Fargo Retail Finance, LLC, as Administrative Agent and Collateral Agent.  All capitalized terms used herein, and not otherwise defined herein, shall have the meanings assigned to such terms in the Credit Agreement.

 

B.           The New [Borrower/Guarantor] desires to become a party to, and be bound by the terms of, the Credit Agreement and the other Loan Documents in the same capacity and to the same extent as the Existing [Borrowers/Guarantors] thereunder.

 

C.           Pursuant to the terms of the Credit Agreement, in order for the New [Borrower/Guarantor] to become party to the Credit Agreement and the other Loan Documents as provided herein, the New [Borrower/Guarantor] and the Existing Borrowers and Existing Guarantors are required to execute this Joinder.

 

  

1

  

 

NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

	
1.

	
Joinder and Assumption of Obligations.  Effective as of the date of this Joinder, the New [Borrower/Guarantor] hereby acknowledges that the New [Borrower/Guarantor] has received and reviewed a copy of the Credit Agreement and the other Loan Documents, and hereby:

 

	
  

	
(a)

	
joins in the execution of, and becomes a party to, the Credit Agreement and the other Loan Documents as a [Borrower/Guarantor] thereunder, as indicated with its signature below;

 

	
  

	
(b)

	
covenants and agrees to be bound by all covenants, agreements, liabilities and acknowl­edgments of a [Borrower/Guarantor] under the Credit Agreement and the other Loan Documents as of the date hereof (other than covenants, agreements, liabilities and acknowledgments that relate solely to an earlier date), in each case, with the same force and effect as if such New [Borrower/Guarantor] was a signatory to the Credit Agreement and the other Loan Documents and was expressly named as a [Borrower/Guarantor] therein;

 

	
  

	
(c)

	
after giving effect to the information on any supplement schedules attached hereto pursuant to Section 2 below, makes all representations, warranties, and other statements of a [Borrower/Guarantor] under the Credit Agreement and the other Loan Documents, as of the date hereof (other than representations, warranties and other statements that relate solely to an earlier date), in each case, with the same force and effect as if such New [Borrower/Guarantor] was a signatory to the Credit Agreement and the other Loan Documents and was expressly named as a [Borrower/Guarantor] therein;

 

	
  

	
(d)

	
assumes and agrees to perform all applicable duties and Obligations of the Existing [Borrowers/Guarantors] under the Credit Agreement and the other Loan Documents.

 

	
2.

	
Supplemental Schedules.  To the extent that any changes in any representations, warranties, and covenants require any amendments to the schedules to the Credit Agreement or any of the other Loan Documents, such schedules are hereby updated, as evidenced by any supplemental schedules (if any) annexed to this Joinder.

 

  

2

  

 

	
3.

	
Ratification of Loan Documents.  Except as specifically amended by this Joinder and the other documents executed and delivered in connection herewith, all of the terms and conditions of the Credit Agreement and of the other Loan Documents shall remain in full force and effect as in effect prior to the date hereof, without releasing any Loan Party thereunder or Collateral therefor.

 

	
4.

	
Conditions Precedent to Effectiveness.  This Joinder shall not be effective until each of the following conditions precedent have been fulfilled to the reasonable satisfaction of the Administrative Agent:

 

	
  

	
(a)

	
This Joinder shall have been duly executed and delivered by the respective parties hereto, and shall be in full force and effect.

 

	
  

	
(b)

	
All action on the part of the New [Borrower/Guarantor] and the other Loan Parties necessary for the valid execution, delivery and performance by the New [Borrower/Guarantor] and the other Loan Parties of this Joinder and all other documentation, instruments, and agreements to be executed in connection herewith shall have been duly and effectively taken and evidence thereof reasonably satisfactory to the Administrative Agent shall have been provided to the Administrative Agent.

 

	
  

	
(c)

	
The New [Borrower/Guarantor] (and each other Loan Party, to the extent requested by the Administrative Agent) shall each have delivered the following to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent:

 

	
  

	
(i)

	
Certificate of Legal Existence and Good Standing, if applicable, issued by the Secretary of the State of its incorporation or organization.

 

	
  

	
(ii)

	
A certificate of an authorized officer of the due adoption, continued effectiveness, and setting forth the text, of each corporate resolution adopted in connection with the assumption of obligations under the Credit Agreement and the other Loan Documents, and attesting to the true signatures of each Person authorized as a signatory to any of the Loan Documents, together with true and accurate copies of all Organization Documents.

 

	
  

	
(iii)

	
Execution and delivery by the New [Borrower/Guarantor] of the following Loan Documents:

 

	
  

	
a)

	
[Joinders to the Notes, as applicable];

 

  

3

  

 

	
  

	
b)

	
[Joinder to the Security Documents, as applicable];

 

	
  

	
c)

	
[Joinder to the Facility Guaranty, as applicable];

 

	
  

	
d)

	
[Blocked Account Agreement with _______________]; and

 

	
  

	
e)

	
Such other documents and agreements as the Administrative Agent or the Collateral Agent may reasonably require.

 

	
  

	
(d)

	
Upon the request of the Administrative Agent in its sole discretion, the Administrative Agent shall have received a written legal opinion of the New [Borrower’s/Guarantor’s] counsel, addressed to the Administrative Agent, the Collateral Agent and the other Credit Parties, covering such matters relating to the New [Borrower/Guarantor], the Loan Documents and/or the transactions contemplated thereby as the Administrative Agent may reasonably request.

 

	
  

	
(e)

	
The Collateral Agent shall have received all documents and instruments, including UCC financing statements and Blocked Account Agreements, required by Law or reasonably requested by the Administrative Agent or the Collateral Agent to create or perfect the Lien intended to be created under the Security Documents and all such documents and instruments shall have been so filed, registered or recorded to the satisfaction of the Administrative Agent.

 

	
  

	
(f)

	
All reasonable fees and Credit Party Expenses incurred by the Agents and the other Credit Parties in connection with the preparation and negotiation of this Joinder and related documents (including the reasonable fees and expenses of counsel to the Agents) shall have been paid in full by the New [Borrower/Guarantor].

 

	
  

	
(g)

	
The Loan Parties shall have executed and delivered to the Agents such additional documents, instruments, and agreements as the Administrative Agent or the Collateral Agent may reasonably request.

 

	
5.

	
Miscellaneous.

 

	
  

	
(a)

	
This Joinder may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of this Joinder by telecopy shall be as effective as delivery of a manually executed counterpart of this Joinder.

 

  

4

  

 

	
  

	
(b)

	
This Joinder expresses the entire understanding of the parties with respect to the transactions contemplated hereby.  No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

 

	
  

	
(c)

	
Any determination that any provision of this Joinder or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Joinder.

 

	
  

	
(d)

	
To the extent not paid by the New [Borrower/Guarantor] pursuant to Section 4(f) above, the Existing Borrowers and Existing Guarantors shall, within ten (10) Business Days after demand therefor, pay all reasonable fees and other Credit Party Expenses of the Agents and the other Credit Parties, including, without limitation, all reasonable attorneys’ fees, in connection with the preparation, negotiation, execution and delivery of this Joinder and the other documents, instruments and agreements required pursuant to Section 4 of this Joinder.

 

	
  

	
(e)

	
The New [Borrower/Guarantor] warrants and represents that the New [Borrower/Guarantor] is not relying on any representations or warranties of the Administrative Agent, the Collateral Agent or the other Credit Parties or their counsel in entering into this Joinder.

 

	
  

	
(f)

	
THIS JOINDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.

 

[SIGNATURE PAGES FOLLOW]

 

  

5

  

 

IN WITNESS WHEREOF, each of the undersigned has caused this Joinder to be duly executed and delivered by its proper and duly authorized officer as of the date set forth below.

 

New [Borrower/Guarantor]:

[__________________________]

By: ____________________________

Name:

Title:

Administrative Agent:

WELLS FARGO RETAIL FINANCE, LLC

 

By: ______________________________

Name:

Title:

 

Collateral Agent:

 

WELLS FARGO RETAIL FINANCE, LLC

By: _______________________________

Name:

Title:

 

  

6

  

 

Acknowledged and Agreed:

Existing Borrowers:

iPARTY RETAIL STORES CORP.

By:___________________________

Name:

Title:

iPARTY CORP.

By:________________________________

Name:

Title:

 

  

7

  

Exhibit J

Business Plan*

*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the Securities and Exchange Commission.

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