-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RTa0NALwPj4bRwymf3UAWh4V8P1uyvwKhDoNWBvOmWWfbSvJy5b1lcPbDB4ihc4F kenrmgleWGG0pyYND2pung== 0000950144-99-000643.txt : 19990129 0000950144-99-000643.hdr.sgml : 19990129 ACCESSION NUMBER: 0000950144-99-000643 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990128 ITEM INFORMATION: FILED AS OF DATE: 19990128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SERVICE MERCHANDISE CO INC CENTRAL INDEX KEY: 0000089107 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISC GENERAL MERCHANDISE STORES [5399] IRS NUMBER: 620816060 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-09223 FILM NUMBER: 99515567 BUSINESS ADDRESS: STREET 1: 7100 SERVICE MERCHANDISE DR CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6156606000 MAIL ADDRESS: STREET 1: PO BOX 24600 CITY: NASHVILLE STATE: TN ZIP: 37202 8-K 1 SERVICE MERCHANDISE COMPANY INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: January 28, 1999 SERVICE MERCHANDISE COMPANY, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Tennessee 1-9223 62-0816060 -------------------------------------------- ---------------------- ------------------- (State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
7100 Service Merchandise Boulevard, Brentwood, TN 37027 - ------------------------------------------------------- --------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (615) 660-6000 Not Applicable - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 Item 5. Other Events - -------------------------------------------------------------------------------- See attached press release and other exhibits. 2 3 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SERVICE MERCHANDISE COMPANY, INC. Date: January 28, 1999 By: /s/ C. Steven Moore ---------------------------- C. Steven Moore Vice President 3 4 EXHIBIT INDEX
No. Exhibit - --------- ------------------------------------------------------------- 99.1 Press Release dated January 22, 1999. 99.2 Second Amended and Restated Credit Agreement, dated as of January 20, 1999, by and among Service Merchandise Company, Inc., Citicorp USA, Inc. as Administrative Agent, Bank Boston, N.A. as Documentation Agent and Collateral Monitoring Agent and other lenders. 99.3 Amended and Restated Master Collateral Agreement among Service Merchandise Company, Inc., the Subsidiaries of Service Merchandise Company, Inc. and Citicorp USA, Inc., as Administrative Agent, dated January 21, 1999.
EX-99.1 2 PRESS RELEASE 1 EXHIBIT 99.1 PRESS RELEASE The following is the text of a press release issued by Service Merchandise Company, Inc. on January 22, 1999. SERVICE MERCHANDISE COMPLETES $750 MILLION SECURED CREDIT FACILITY FROM CITIBANK Nashville, TN (Jan.22, 1999)--Service Merchandise Company, Inc. (NYSE: SME) today announced that it has obtained a 30-month, $750 million secured credit facility from Citibank and BankBoston Retail Finance. The asset-backed facility consists of a $150 million term loan and a $600 million revolving line, subject to a borrowing base limitation and other customary limitations and conditions contained in such facilities. The new financing facility will be used primarily to replace the Company's existing bank facility. The new facility is the first step in an out-of-court restructuring designed to stabilize the Company as a plan is developed to address the Company's financial and operational challenges. The credit agreement requires the Company to present an operating plan within the next 120 days. Service Merchandise is a national retailer of fine jewelry, gift and home products. The Brentwood, Tenn.-based Company employs approximately 25,000 associates and operates 347 stores in 34 states. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This press release includes certain forward-looking statements in reliance on the "safe harbor" provisions of The Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the factors identified below. Actual results may differ materially from those anticipated in any such forward-looking statements. The Company undertakes no obligation to update or revise any such forward-looking statements. The Company's liquidity, capital resources, and results of operations may be affected from time to time by a number of factors and risks, including, but not limited to, the ability of the Company to comply with the terms of its credit facility; the ability of the Company to access borrowings under its credit facility; the ability of the Company to obtain shipments and negotiate terms with vendors and service providers for current orders and past due payables; the ability of the Company to negotiate terms with landlords with respect to current and future lease obligations; the Company's use of substantial financial leverage and the potential impact of such leverage on the Company's ability to develop and execute operating strategies to 2 withstand significant economic downturns and to repay its indebtedness; the ability to develop, fund and execute a new strategic plan for the Company; the ability of the Company to attract and retain key executives and associates; competitive pressures from other retailers, including specialty retailers and discount stores, which may affect the nature and viability of the Company's business strategy; trends in the economy as a whole, which may affect consumer confidence and consumer demand for the types of goods sold by the Company; availability, costs and terms of financing, including the risk of rising interest rates; the ability to maintain gross profit margins; the seasonal nature of the Company's business and the ability of the Company to predict consumer demand as a whole, as well as demand for specific goods; the ability of the Company to attract and retain customers; costs associated with the shipping, handling and control of inventory and the Company's ability to optimize its supply chain; potential adverse publicity; availability and cost of management and labor employed; real estate occupancy and development costs, including the substantial fixed investment costs associated with opening, maintaining or closing a Company store; the ability to liquidate unwanted inventory at existing or closed stores; and the ability to effect conversions to new technological systems, including become Year 2000 compliant. EX-99.2 3 SECOND AMENDED AND RESTATED CHARTER AGREEMENT 1 EXHIBIT 99.2 - -------------------------------------------------------------------------------- U.S. $750,000,000 SECOND AMENDED AND RESTATED CREDIT AGREEMENT BY AND AMONG SERVICE MERCHANDISE COMPANY, INC. AS BORROWER THE LENDERS PARTY HERETO CITICORP USA, INC. AS ADMINISTRATIVE AGENT AND BANKBOSTON, N.A. AS DOCUMENTATION AGENT AND COLLATERAL MONITORING AGENT AND SALOMON SMITH BARNEY INC AS ARRANGER AND BOOK MANAGER DATED: JANUARY 20, 1999 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS 1.1 Defined Terms........................................................................ 2 1.2 Other Definitional Provisions........................................................ 37 SECTION 2. AMOUNTS AND TERMS OF TERM LOANS 2.1 Term Loans........................................................................... 37 2.2 Repayment of Term Loans; Amortization................................................ 37 SECTION 3. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS 3.1 Revolving Credit Commitments......................................................... 38 3.2 Procedure for Revolving Credit Borrowing............................................. 38 3.3 Commitment Fee....................................................................... 39 3.4 Termination or Reduction of Commitments.............................................. 39 3.5 Repayment of Revolving Loans......................................................... 39 3.6 L/C Commitment....................................................................... 39 3.7 Procedure for Issuance of Letters of Credit.......................................... 40 3.8 Letter of Credit Fees, Commissions and Other Charges................................. 41 3.9 L/C Participations................................................................... 41 3.10 Letter of Credit Reimbursement Obligations........................................... 42 3.11 Obligations Absolute................................................................. 43 3.12 Letter of Credit Payments............................................................ 43 3.13 Letter of Credit Applications........................................................ 43 3.14 Swing Line Commitment................................................................ 43 3.15 Procedure for Swing Line Borrowing................................................... 44 3.16 Refunding of Swing Line Loans; Participations in Swing Line Loans.................... 44 3.17 Annual Revolving Credit Clean-Down................................................... 46 3.18 Other Fees........................................................................... 46 SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT 4.1 Optional and Mandatory Prepayments................................................... 46 4.2 Conversion and Continuation Options.................................................. 48 4.3 Minimum Amounts and Maximum Number of Tranches....................................... 48 4.4 Interest Rates and Payment Dates..................................................... 48 4.5 Computation of Interest and Fees..................................................... 49 4.6 Inability to Determine Interest Rate................................................. 49 4.7 Pro Rata Treatment and Payments...................................................... 50 4.8 Illegality........................................................................... 51 4.9 Requirements of Law.................................................................. 51 4.10 Indemnification for Taxes............................................................ 52 4.11 Indemnity............................................................................ 54 4.12 Change of Lending Office............................................................. 54 4.13 Evidence of Debt..................................................................... 54
- i - 3 SECTION 5. REPRESENTATIONS AND WARRANTIES 5.1 Financial Condition.................................................................. 55 5.2 No Change............................................................................ 56 5.3 Existence; Compliance with Law....................................................... 56 5.4 Power; Authorization; Enforceable Obligations........................................ 56 5.5 No Legal Bar......................................................................... 57 5.6 No Material Litigation............................................................... 57 5.7 No Default........................................................................... 57 5.8 No Burdensome Restrictions........................................................... 57 5.9 Taxes................................................................................ 57 5.10 Federal Regulations.................................................................. 58 5.11 ERISA................................................................................ 58 5.12 Investment Company Act; Other Regulations............................................ 58 5.13 Subsidiaries......................................................................... 58 5.14 Environmental Matters................................................................ 58 5.15 The Security Documents............................................................... 59 5.16 Ownership of Property; Liens......................................................... 60 5.17 Intellectual Property................................................................ 61 5.18 Pledged Stock........................................................................ 61 5.19 Real Estate Matters.................................................................. 61 5.20 [Reserved]........................................................................... 61 5.21 Purpose of Loans; Use of Proceeds.................................................... 61 5.22 Accuracy of Information.............................................................. 61 5.23 Depositary Accounts.................................................................. 62 5.24 Senior Indebtedness.................................................................. 62 5.25 Y2K Compliance....................................................................... 62 5.26 Subordinated Debentures and Senior Note Indenture.................................... 63 SECTION 6. CONDITIONS 6.1 Conditions to Effectiveness.......................................................... 63 6.2 Conditions to Each Extension of Credit............................................... 66 SECTION 7. AFFIRMATIVE COVENANTS 7.1 Financial Statements................................................................. 67 7.2 Certificates; Other Information...................................................... 68 7.3 Payment of Obligations............................................................... 69 7.4 Maintenance of Existence; Compliance with Contractual Obligations and Requirements of Law.................................................................. 69 7.5 Maintenance of Property; Insurance................................................... 69 7.6 Inspection of Property; Books and Records; Discussions............................... 69 7.7 Notices.............................................................................. 69 7.8 Environmental Laws................................................................... 70 7.9 Further Assurances................................................................... 70 7.10 Mortgages; Etc....................................................................... 71 7.11 Additional Collateral................................................................ 71 7.12 Management Restructuring Consultant.................................................. 72 7.13 Business Plans and Projections....................................................... 72 7.14 Depositary Account and Payments System............................................... 73
- ii - 4 7.15 Ongoing Y2K Reports.................................................................. 73 7.16 Securing of Waivers.................................................................. 73 SECTION 8. NEGATIVE COVENANTS 8.1 Financial Condition Covenants........................................................ 73 8.2 Limitation on Guarantee Obligations.................................................. 74 8.3 Limitation on Liens.................................................................. 75 8.4 Limitation on Fundamental Changes.................................................... 78 8.5 Limitation on Sale of Assets......................................................... 78 8.6 Limitation on Dividends.............................................................. 79 8.7 Limitation on Indebtedness........................................................... 80 8.8 Limitation on Investments, Loans and Advances........................................ 80 8.9 Limitation on Optional Payments and Modifications of Debt Instruments................ 81 8.10 Limitation on Transactions with Affiliates........................................... 82 8.11 Limitation on Sales and Leasebacks................................................... 82 8.12 Fiscal Years and Quarters............................................................ 82 8.13 Limitation on Conduct of Business.................................................... 82 8.14 No Other Designated Senior Debt...................................................... 82 8.15 Limitation on Issuances of Capital Stock............................................. 82 8.16 Foreign Holding Companies, Inactive Subsidiaries and Special Purpose Subsidiaries......................................................................... 82 SECTION 9. EVENTS OF DEFAULT.......................................................................... 83 SECTION 10. ADMINISTRATIVE AGENT AND THE COLLATERAL MONITORING AGENT 10.1 Appointment.......................................................................... 86 10.2 Delegation of Duties................................................................. 86 10.3 Exculpatory Provisions............................................................... 86 10.4 Reliance by Agents................................................................... 86 10.5 Notice of Default.................................................................... 87 10.6 Non-Reliance on Agents and Other Lenders............................................. 87 10.7 Indemnification...................................................................... 87 10.8 Agent in Its Individual Capacity..................................................... 88 10.9 Successor Administrative Agent....................................................... 88 SECTION 11. MISCELLANEOUS 11.1 Amendments and Waivers............................................................... 88 11.2 Notices.............................................................................. 90 11.3 No Waiver; Cumulative Remedies....................................................... 91 11.4 Survival of Representations and Warranties........................................... 91 11.5 Payment of Expenses and Taxes; Indemnity............................................. 91 11.6 Successors and Assigns; Participations and Assignments............................... 92 11.7 Replacement of Lenders under Certain Circumstances................................... 94 11.8 Adjustments; Set-off................................................................. 95 11.9 Counterparts......................................................................... 95 11.10 Severability......................................................................... 96 11.11 Integration.......................................................................... 96
- iii - 5 11.12 Termination................................................................. 96 11.13 GOVERNING LAW............................................................... 96 11.14 Submission To Jurisdiction; Waivers......................................... 96 11.15 Acknowledgements............................................................ 97 11.16 WAIVERS OF JURY TRIAL....................................................... 97 11.17 Confidentiality............................................................. 97 11.18 Section Headings............................................................ 98 11.19 Judgment Currency........................................................... 98 11.20 Special Provisions.......................................................... 98 11.21 Amendments to Original Mortgages............................................ 98 11.22 Review of Business Plan..................................................... 98 11.23 Negotiation of Revised Covenants............................................ 99 11.24 Releases.................................................................... 99 11.25 Documents Evidence the Same Indebtedness.................................... 99
- iv - 6 SCHEDULES Schedule 1.1(a) Commitments Schedule 1.1(b) Real Estate Eligibility Conditions Schedule 4.1(e) Florida Eligible Mortgaged Real Property Schedule 5.1 Charges and Changes Schedule 5.2 Changes Schedule 5.4 Consents Schedule 5.6 Litigation Schedule 5.7 Defaults Schedule 5.8 Restrictions Schedule 5.13 Subsidiaries Schedule 5.14 Environmental Matters Schedule 5.15 Uniform Commercial Code Filings Schedule 5.17 Intellectual Property Matters Schedule 5.19 Material Real Property Schedule 5.23 Depositary Accounts Schedule 5.25 Y2K Compliance Schedule 6.1(i) Local Counsel Jurisdictions Schedule 6.1(l) Lien Search Jurisdictions Schedule 7.3 Payments on Obligations Schedule 7.4 Compliance with Obligations Schedule 7.10(b) Excluded Properties Schedule 7.10(c) Post Closing Real Estate Requirements Schedule 8.2(b) Existing Guarantee Obligations Schedule 8.3(f) Existing Liens Schedule 8.7(f) Existing Indebtedness Schedule 8.8 Investments Schedule 8.10 Transactions with Affiliates Schedule 11.2 Addresses EXHIBITS Exhibit A Form of Assignment and Acceptance Exhibit B Form of Subsidiaries Guarantee Exhibit C Form of Master Collateral Agreement Exhibit D Form of Revolving Credit Note Exhibit E Form of Term Loan Note Exhibit F Form of Swing Line Note Exhibit G Form of Borrower Closing Certificate Exhibit H-1 Form of Opinion of Counsel Exhibit H-2 Form of Opinion of Local Counsel Exhibit I Form of Borrowing Base Certificate Exhibit J Available GOB Inventory Worksheet - v - 7 SECOND AMENDED AND RESTATED CREDIT AGREEMENT SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 20, 1999, by and among SERVICE MERCHANDISE COMPANY, INC., a Tennessee corporation (the "Borrower"), the financial institutions and other entities from time to time party to this Agreement (collectively, the "Lenders" and each individually, a "Lender"), CITICORP USA, INC., a Delaware corporation ("Citicorp"), as collateral and administrative agent for the Lenders (in such capacity, the "Administrative Agent"), and BANKBOSTON, N.A., a national banking association ("BankBoston"), as documentation agent and collateral monitoring agent for the Lenders (in such capacities, the "Collateral Monitoring Agent") (as amended, modified, supplemented, extended, renewed, or refinanced from time to time, this "Agreement"). W I T N E S S E T H: WHEREAS, the Borrower, the financial institutions party thereto (the "Existing Lenders"), The Chase Manhattan Bank, a New York banking corporation, as administrative agent and collateral agent for the Existing Lenders (the "Existing Administrative Agent"), and Citicorp, as documentation agent thereunder, are parties to that certain Amended and Restated Credit Agreement, dated as of September 10, 1997 (as heretofore amended, the "Existing Credit Agreement"); and WHEREAS, effective immediately prior to the Effective Date referred to below, (i) the Existing Lenders assigned all of their Loans and Commitments under the Existing Credit Agreement to Citicorp and BankBoston, which on the Effective Date are assigning a portion thereof to the Lenders and (ii) the Existing Administrative Agent resigned as collateral and administrative agent for the Existing Lenders and assigned to the Administrative Agent all of its rights and obligations in its capacity as administrative and collateral agent under the Existing Credit Agreement and the Loan Documents; and WHEREAS, the Borrower and the Lenders desire to amend certain terms of the Existing Credit Agreement, among other things, to provide for a reduction in the principal amount of outstanding Term Loans, to reduce the aggregate Revolving Credit Commitments from $700,000,000 to $600,000,000, to change the final maturity of the Term Loans and the Revolving Loans and to make certain changes to the covenants and certain other provisions contained therein; and WHEREAS, the Borrower, the Lenders and the Administrative Agent have agreed to amend and restate the Existing Credit Agreement to provide for such amendments on the terms set forth in this Agreement, which Agreement shall become effective upon the satisfaction of certain conditions precedent set forth herein; and WHEREAS, it is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities existing under the Existing Credit Agreement or evidence payment of all or any of such obligations and liabilities, that this Agreement amend and restate in its entirety the Existing Credit Agreement, and that from and after the Effective Date the Existing Credit Agreement be of no further force or effect except as to evidence the incurrence of the "Credit Agreement Obligations" thereunder and the representations and warranties made thereunder; NOW, THEREFORE, in consideration of the mutual covenants contained herein and subject to the satisfaction of the conditions set forth herein, the Borrower, the Lenders and the Administrative Agent hereby agree as follows: 8 SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "ABR": means a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall be equal at any time to the then highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; (b) the sum (adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i) 1/2 of one percent per annum, plus (ii) the rate per annum obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for Citibank in respect of liabilities consisting of or including (among other liabilities) three-month U.S. dollar nonpersonal time deposits in the United States, plus (iii) the average during such three-week period of the maximum annual assessment rates payable to the Federal Deposit Insurance Corporation (or any successor) by banks which are members of the Bank Insurance Fund for insuring U.S. dollar deposits in the United States; and (c) the sum (adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i) 1/2 of one percent per annum plus (ii) the Federal Funds Rate. "ABR Loans": Term Loans or Revolving Loans the rate of interest applicable to which is based upon the ABR. "Account Debtor": any Person that is liable to make payments with respect to an Account. "Accounts": all "accounts" (as such term is defined in the UCC) now owned or hereafter acquired by the Borrower or any Subsidiary Guarantor and all Instruments and Chattel Paper now owned or hereafter acquired by the Borrower or such Subsidiary Guarantor which evidence a right to payment for goods sold or leased or for services rendered, whether or not such right has been earned by performance. "Accounts Receivable Calculation Date": at any time, the last day of the most recent fiscal month. 2 9 "Acquisition": as to any Person, the acquisition by such Person of (a) Capital Stock of any other Person that is not a Subsidiary of such Person if, after giving effect to the acquisition of such Capital Stock, such other Person would be a Subsidiary of such Person, (b) all or substantially all of the assets of any other Person or (c) assets constituting one or more business units of any other Person. "Administrative Agent": as defined in the preamble to this Agreement, and any successor Administrative Agent appointed pursuant to subsection 10.9. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 5% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. For the purposes of this Agreement, the Borrower and its Restricted Subsidiaries shall not be deemed to be Affiliates of each other and Jay Alix & Associates or its successor, solely in its capacity as a management restructuring consultant, or any successor management restructuring consultant solely by reason of such capacity, shall not be deemed to be an Affiliate of the Borrower or its Subsidiaries. "Agents": collectively, the Administrative Agent and the Collateral Monitoring Agent. "Aggregate Outstanding Extensions of Credit": at any time, an amount equal to the sum of (a) the Aggregate Revolving Credit Outstandings at such time and (b) the aggregate outstanding principal amount of Term Loans of all the Term Lenders at such time. "Aggregate Revolving Credit Outstandings": at any time, an amount equal to the Revolving Credit Extensions of Credit of all the Lenders at such time. "Agreement": as defined in the preamble to this Agreement. "Agreement Currency": as defined in subsection 11.19. "Applicable Commitment Fee Rate": 0.50% per annum, which will accrue, commencing on the Effective Date, as a percentage of the daily average unused portion of the Revolving Credit Commitments payable monthly in arrears and on the Revolving Credit Termination Date. "Applicant": with respect to any Letter of Credit, the Borrower or any Subsidiary Guarantor. "Application": an application or request, in such form as an Issuing Bank may specify from time to time, requesting such Issuing Bank to open a Letter of Credit. "Arranger and Book Manager": Salomon Smith Barney Inc. "Asset Sale": means any sale or other disposition, or series of sales or other dispositions (including, without limitation, by merger or consolidation, and whether by operation of law or otherwise), made on or after the Effective Date by the Borrower and/or any of the Restricted Subsidiaries to any Person of any asset or assets which individually yields or in the aggregate for a series of related transactions yield proceeds or have a fair market value in excess of $150,000; provided, that any sale or other disposition permitted pursuant to 3 10 clauses (a) through (e) and clauses (h) through (k) of subsection 8.5 shall not constitute an Asset Sale for purposes of this Agreement. "Asset Sale Proceeds" means with respect to any Asset Sale, cash payments received by the Borrower or any Restricted Subsidiary (including, without limitation, any cash payments received by way of deferred payment of principal (but not interest) pursuant to a note or receivable or otherwise and any cash realized from any disposition of non-cash proceeds received by the seller, but only as and when received) from any Asset Sale (after repayment of any Indebtedness other than the Loans due by reason of such Asset Sale), in each case net of the amount of (i) brokers' and advisors' fees and commissions payable in connection with such Asset Sale, (ii) all foreign, federal, state and local taxes estimated in good faith by the Borrower to be payable as a direct consequence of such Asset Sale, including, without limitation, in connection with the payment of a dividend or the making of a distribution by a Restricted Subsidiary of such payments to the Borrower or any other Restricted Subsidiary (including, without limitation, taxes withheld in connection with the repatriation of such proceeds), net of any tax benefits derived in respect of such dividend or distribution, (iii) the fees and expenses attributable to such Asset Sale, to the extent not included in clause (i) above, and (iv) any amount required to be paid to any Person (other than the Borrower or any Restricted Subsidiary) owning a beneficial interest in the property or assets subject to such Asset Sale. For purposes of this definition, (x) an Asset Sale shall be deemed to include, without limitation, any award of compensation for any asset or property or group thereof taken by condemnation or eminent domain and insurance proceeds for the loss of or damage to any asset or property if such award or proceeds equals or exceeds $2,000,000 (per occurrence), and (y) in the case of insurance proceeds for damage to any Operating Asset, such proceeds shall not be deemed Asset Sale Proceeds so long as no Event of Default shall have occurred and be continuing and if such Operating Assets are repaired within 120 days of the receipt of such proceeds or a binding agreement to repair the same is entered into within such 120-day period and such repairs are completed within one year of the date of the receipt of such proceeds. "Assignee": as defined in subsection 11.6(c). "Available Accounts Receivable Amount": as of any Accounts Receivable Calculation Date, an amount equal to up to 75% of the Eligible Trade Accounts Receivable Amount as of such Accounts Receivable Calculation Date. "Available Cash Equivalents": as of any Calculation Date, an amount equal to 100% of Cash Equivalents which have then been pledged to the Administrative Agent pursuant to the Pledge Agreement. "Available GOB Inventory Amount": as of any Calculation Date, an amount equal to the GOB Inventory Amount minus the GOB Discount Amount for the period reported on at such Calculation Date, as calculated on the Available GOB Inventory Worksheet attached hereto as Exhibit J. "Available Inventory Amount": as of any Calculation Date, an amount equal to (a) 70% (subject to upward adjustment to 72.5% in the Agents' discretion) of the Eligible Adjusted Inventory Amount (excluding the Eligible Adjusted Inventory Amount in respect of Inventory at the OSS Subsidiary) as of such Calculation Date, plus (b) 50% of the Eligible Adjusted Inventory Amount for Inventory at the OSS Subsidiary as of such Calculation Date, minus (c) the Customer Credit Liability Amount as of the most recent Reserve Calculation Date, minus (d) the Landlord Lien Reserve Amount as of the most recent Reserve Calculation 4 11 Date; provided that, during the peak seasonal inventory period of September 1st through December 10th only, the Agents may, in their sole discretion exercised commercially reasonably, increase the allowable percentage rate as to clause (a) of this definition to 75%. "Available L/C Amount": as of any Calculation Date, an amount equal to up to 60% of the sum of (a) the aggregate undrawn face amount of Trade Letters of Credit (including Trade Letters of Credit which have been collateralized by Standby Letters of Credit issued by an Issuing Bank) issued to finance the purchase of Inventory (excluding any Inventory included in the calculation of Eligible Inventory Amount) and (b) the aggregate Inventory Value of Inventory financed with Trade Letters of Credit which have been fully drawn and the Reimbursement Obligations in respect of which have been fully paid so long as, in the case of clause (a) and (b), (i) such Inventory shall be in transit to properties owned or leased by the Borrower or the Subsidiary Guarantors in the United States, (ii) such Inventory is not included in the calculation of Eligible Inventory Amount and, upon arrival in the United States, will be included in the determination of the Eligible Inventory Amount (but not included in the determination of the Ineligible Inventory Amount) and (iii) the Administrative Agent or its agent or bailee shall be named as the consignee of the applicable bill of lading or other document of title. "Available Revolving Credit Commitment": as to any Lender, at any time, an amount equal to the excess, if any, of (a) such Lender's Revolving Credit Commitment at such time over (b) such Lender's Revolving Credit Extensions of Credit at such time. "Available Mortgaged Real Property Amount": an amount equal to the lesser of (i) 54.5% of the excess of (A) the aggregate Mortgage Value of all parcels of Eligible Mortgaged Real Property as of the most recent Calculation Date over (B) the sum of (I) the aggregate Real Property Amortization Amounts for all parcels of Eligible Mortgaged Real Property at such time, (II) the Environmental Reserve Amount at such time and (III) the aggregate Mechanics' Lien Reserve Amounts for all parcels of Eligible Mortgaged Real Property at such time and (ii) $82,000,000. "BankBoston": as defined in the preamble to this Agreement. "benefitted Lenders": as defined in subsection 11.8(a). "Blocked Account Agreement": any "Blocked Account Agreement" (i) entered into among the Borrower or any Subsidiary Guarantor, a Depositary Bank and the Existing Administrative Agent, substantially in the form of Exhibit E to the Existing Collateral Agreement, or (ii) entered into among the Borrower or any Subsidiary Guarantor, a Depositary Bank and the Administrative Agent pursuant to subsection 3.1 of the Master Collateral Agreement, as the same may be amended, modified, supplemented, extended or renewed from time to time. "Board of Governors": the Board of Governors of the Federal Reserve System and any Governmental Authority which succeeds to the powers and functions thereof. "Borrower": as defined in the preamble to this Agreement. "Borrowing Base": at any time, (i) an amount, calculated based upon the Borrowing Base Certificate delivered pursuant to subsection 6.2(e) and thereafter the most recent Borrowing Base Certificate delivered pursuant to this Agreement, equal to the sum of (a) the Available Inventory Amount as of the most recent Calculation Date, plus (b) the Available 5 12 Accounts Receivable Amount as of the most recent Accounts Receivable Calculation Date, plus (c) the Available L/C Amount as of the most recent Calculation Date, plus (d) the Available Mortgaged Real Property Amount as of the most recent Calculation Date, plus (e) In-Transit Cash calculated as of the Wednesday immediately preceding the most recent Calculation Date, minus (f) the Cumulative Asset Sale Reserve, and minus (g) the Interim Reserve Amount, plus (ii) on each Borrowing Date, the Available Cash Equivalents Amount as of such Borrowing Date. The Borrowing Base established based upon a particular Borrowing Base Certificate shall remain in effect until the delivery of a subsequent Borrowing Base Certificate. The Agents shall have the right, in connection with any periodic audit or appraisal of the Inventory performed by or on behalf of the Agents, any reports provided to the Agents by the Borrower, or as a result of changing market conditions, in their sole discretion exercised commercially reasonably and in accordance with customary business practices for comparable asset based transactions of $100,000,000 or more and upon at least 10 days prior written notice to the Borrower, to require that additional reserves of the types described below be included in the determination of the Available Inventory Amount: (a) additional reserves relating to new categories of inventory (e.g. produce) unrelated to the current or disclosed future business of the Borrower and the Subsidiary Guarantors; (b) additional reserves to reflect substantial changes in the overall composition or mix of the Inventory which have the effect of materially reducing the Net Recoverable Value of the Inventory taken as a whole; (c) additional reserves relating to changes in the marketability of Inventory (including, for example, as a result of a recession) which have the effect of materially reducing the Net Recoverable Value of the Inventory taken as a whole; (d) additional reserves relating to a material negative variance between the Borrower's or a Subsidiary Guarantor's cost and the market price of a major product category (e.g., a decline in the price of gold), and (e) additional GOB Inventory reserves. In the event the Borrower is unable to deliver or perform the Post Closing Real Estate Requirements as to any parcel of Eligible Mortgaged Real Property, on the 31st day after the notice from the Administrative Agent of the failure to deliver or perform any such Post Closing Real Estate Requirement (or such later date as agreed by the Administrative Agent), such parcel of Eligible Mortgaged Real Property shall no longer qualify as Eligible Mortgaged Real Property and shall not thereafter be included as such in the Borrowing Base calculation. "Borrowing Base Certificate": as defined in subsection 7.2(c). "Borrowing Date": any Business Day specified in a notice pursuant to subsection 3.2 or 3.15 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in subsection 5.14(b). "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close, provided, that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market. "Business Plan": a business plan of the Borrower and its Subsidiaries through the period ending December 31, 2001, which shall contain forecasted expenditures, revenues, net income and cash flow during such period, and the Borrower's business strategy, including store openings and closings, store consolidations, capital expenditures, expense reductions, and similar strategic plans relating to the conduct of the business of the Borrower and its Subsidiaries. 6 13 "Calculation Date": at any time, the last day of any period covered by the most recent Borrowing Base Certificate. "Capital Expenditures": for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities during such period) by the Borrower or any Restricted Subsidiary during such period that, in conformity with GAAP, are required to be included in "capital expenditures", "additions to property, plant, equipment or intangibles" or similar fixed asset accounts reflected in the consolidated balance sheet of the Borrower and the Restricted Subsidiaries which are consolidated Subsidiaries of the Borrower (including equipment which is purchased simultaneously with the trade-in of existing equipment owned by the Borrower or any Restricted Subsidiary to the extent of the gross amount of such purchase price less the book value of the equipment being traded-in at such time), but excluding expenditures made in connection with the replacement or restoration of assets to the extent reimbursed or financed from insurance proceeds paid on account of the loss of or the damage to the assets being replaced or restored, or from awards of compensation arising from the taking by condemnation or eminent domain of such assets being replaced and deducting cash amounts (including free rent) received by the Borrower and the Restricted Subsidiaries from other Persons during such period in reimbursement of Capital Expenditures made by the Borrower and the Restricted Subsidiaries. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Cash Dominion Trigger Event": means the occurrence of the Effective Date. "Cash Equivalents": means (a) direct obligations of, or obligations guaranteed by, the United States of America or any agency thereof, (b) commercial paper issued in the United States of America and rated at least A-1 or P-1 by at least one nationally recognized rating organization, (c) certificates of deposit issued by or eurodollar deposits made with any Lender, any affiliate of any Lender, or any bank or trust company which has (or the parent of which has) capital, surplus and undivided profits aggregating at least $100,000,000 (or the equivalent amount in another currency), (d) loan participations in respect of loans made in the United States by any bank or trust company referred to in clause (c) above to borrowers which have short-term ratings of at least A-1 or P-1 by at least one nationally recognized rating organization, (e) drafts accepted by any bank or trust company referred to in clause (c) above or any other negotiable instrument guaranteed or endorsed with full recourse by any such bank or trust company, (f) repurchase agreements with respect to any of the foregoing types of securities described in clause (a), (b) and (d) above, (g) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (f) above, (h) obligations the return with respect to which is excluded from gross income under Section 103 of the Tax Code, with a maturity of not more than six months or with the right of the holder to put such obligations for purchase at par upon not more than seven days' notice and which are rated at least A-l or P-1 by at least one nationally recognized rating organization, (i) (A) tax free money market funds that invest solely in the securities described in clause (h) above or (B) money market preferred municipal bond funds which have a term of not more than seven days and which are rated at least AAA or the equivalent thereof by Standard & Poor's Ratings Group or at least Aaa or the equivalent thereof by Moody's Investors Services, Inc., and (j) any other securities reasonably acceptable to the Administrative Agent which are rated at least A-1 or P-1 by at least one nationally recognized rating organization, or which are of an equivalent credit quality in the reasonable judgment of 7 14 the Administrative Agent, provided that (i) all such obligations, commercial paper, certificates of deposit, eurodollar deposits, loan participations, drafts, investments, instruments, securities and repurchase agreements are denominated in Dollars, (ii) each such obligation, commercial paper, certificate of deposit, draft, investment, security and instrument (including those subject to repurchase agreements) is evidenced by an instrument or a security (each as defined in the UCC) of which (and of any confirmations related thereto) the Administrative Agent or its agents promptly take possession unless such items are Permitted Book-Entry Securities or, at the Borrower's or the relevant Subsidiary Guarantor's option, an Excepted Cash Equivalent or, in the case of eurodollar deposits or loan participations, are held in the name of the Administrative Agent or any agent therefor, and in the case of loan participations, are evidenced by facsimile or other written confirmation, (iii) each such obligation, certificate of deposit, draft, investment, security and instrument (including those subject to repurchase agreements) matures within six months after it is acquired by the Borrower or any Subsidiary Guarantor and (iv) each item of such commercial paper (including those subject to repurchase agreements) matures within three months after it is acquired by the Borrower or any Subsidiary Guarantor. "Cash Proceeds": all Proceeds of Collateral consisting of cash, checks, credit card proceeds, money orders or commercial paper of any kind whatsoever. "Chattel Paper": with respect to the Borrower or any Subsidiary Guarantor, all "chattel paper" (as such term is defined in the UCC) now owned or hereafter acquired by such Borrower or Subsidiary Guarantor. "CIBC": as defined in subsection 6.1(w). "Citicorp": as defined in the preamble to this Agreement. "Collateral": collectively, the Pledged Stock, all other Pledged Securities, the Mortgaged Property, the Mortgage Assignments, all Security, all Proceeds of the foregoing and all other property in which the Administrative Agent is granted a Lien from time to time hereunder or under any Security Document, subject to the limitations set forth in subsection 2.9 of the Master Collateral Agreement. "Collateral Account": the account maintained by the Administrative Agent at Citibank, N.A. in New York, New York entitled the "Citicorp USA, Inc., as Administrative Agent: Service Merchandise Company, Inc. -- Collateral Account". "Collateral Monitoring Agent": as defined in the preamble to this Agreement. "Commitment": with respect to any Lender, such Lender's Revolving Credit Commitment, and collectively, as to all the Lenders, the "Commitments". "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Tax Code. "Confidential Information": as defined in subsection 11.17. 8 15 "Consolidated": when used in connection with any defined term, and not otherwise defined, means such term as it applies to any Person and its Subsidiaries on a consolidated basis, after eliminating all intercompany items. "Continuing Directors": as defined in Section 9(j). "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its material property is bound. "Credit Agreement Obligations": the collective reference to the unpaid principal of and interest on the Loans and the Reimbursement Obligations and all other obligations and liabilities of the Borrower to the Administrative Agent or the Lenders (including interest accruing at the then applicable rate provided for herein after the maturity of the Loans or Reimbursement Obligations and interest accruing at the then applicable rate provided for herein after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any Letters of Credit, the other Loan Documents or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Agents or to the Lenders that are required to be paid by the Borrower pursuant to the terms of this Agreement or any other Loan Document). "Credit Card Issuer": any bank or other Person which issues credit cards and extends credit to cardholders in connection with a Credit Card Program. "Credit Card Program": a private credit card program and/or co-branded Visa, Mastercard or other credit card program created and operated or maintained by the Credit Card Subsidiaries pursuant to (a) the Private Label Credit Card Agreement, dated as of January 28, 1997, among World Financial Network National Bank, the Borrower and Service Credit Corp. (formerly known as Service Merchandise Co. No. 80, Inc.), (b) any other similar agreement or arrangement with terms and conditions reasonably satisfactory to the Administrative Agent. "Credit Card Subsidiaries": any direct or indirect Subsidiary of the Borrower, and any wholly-owned Subsidiaries of such Subsidiary, existing from time to time that are created in connection with a Credit Card Program, as long as (i) such Subsidiaries engage in no business or transactions other than (x) the issuance (or providing for the issuance) of credit cards, the extension of credit to cardholders pursuant thereto, and other transactions arising from or related thereto (including the sale or transfer of Accounts or credit card receivables pursuant to asset backed financing transactions) and (y) the entering into and performance of agreements with a Credit Card Issuer that facilitate the Credit Card Issuer's doing business in connection with a Credit Card Program and (ii) the liabilities of the Credit Card Subsidiaries are without recourse to the Borrower and its Restricted Subsidiaries (other than the Credit Card Subsidiaries), provided that the Borrower and its Restricted Subsidiaries may enter into customary commitments and/or underwriting agreements on behalf of the Credit Card Subsidiaries for the purpose of customary securities law or regulatory indemnifications. 9 16 "Cumulative Asset Sale Reserve": as of any date, the reserve against the Borrowing Base established in connection with Asset Sales permitted hereunder. "Current Assets": cash, accounts receivable, inventory and all other assets (other than Fixed Assets) used in the operation of the business of the Borrower and its Subsidiaries. "Custody and Control Agreement": any "Custody and Control Agreement" (i) entered into among the Borrower or any Subsidiary Guarantor, an Intermediary (as therein defined) and the Existing Administrative Agent, pursuant to Section 9(e) of the Existing Pledge Agreement, or (ii) entered into among the Borrower or any Subsidiary Guarantor, an Intermediary (as therein defined) and the Administrative Agent, pursuant to Section 9(e) of the Pledge Agreement, as the same may be amended, modified, supplemented, extended or renewed from time to time. "Customer Credit Liability Amount": as of any Reserve Calculation Date, an amount equal to 50% of the aggregate amount of gift certificates, merchandise credits and special order deposits then outstanding entitling the holders thereof to use all or a portion thereof to pay all or a portion of the purchase price for any Inventory as of such day which are not being held for escheatment or which have not been escheated as of such day. "Customs Broker Inventory": any Inventory which has arrived in the United States and is located at a customs broker's warehouse facility, so long as such Inventory (a) is fully paid and subject only to a Lien in favor of the Administrative Agent (other than Permitted Inventory Liens), (b) is in the possession of such customs broker, and (c) such Inventory is reported in a Borrowing Base Certificate separately from other Inventory included in the calculation of the Available Inventory Amount. "Customs Broker Waiver": a waiver in form and substance satisfactory to the Administrative Agent in respect of Inventory of the Borrower or any Subsidiary Guarantor which is temporarily located at a customs broker's warehouse facility. "Debt Issuance Proceeds": means in respect of the issuance of any debt securities or other incurrence of Indebtedness by the Borrower or any Restricted Subsidiary (other than Indebtedness permitted by subsection 8.7), the gross cash proceeds received from such issuance or incurrence, minus all taxes, discounts, commissions and other fees and expenses incurred in connection therewith, including, without limitation, the reasonable fees and disbursements of counsel. "Default": any of the events specified in Section 9 which, with the giving of notice, the lapse of time, or both, or the satisfaction of any other condition specified in Section 9, would become an Event of Default. "Depositary Bank": each bank or financial institution at which the Borrower or any Subsidiary Guarantor maintains any depositary account into which Cash Proceeds are deposited, including each bank or financial institution listed on Schedule 5.23. "Derivative Agreements": any foreign exchange contracts, interest rate and currency swap agreements, floors, caps, collars, swaptions and similar derivative contracts, in each case, between the Borrower or any Subsidiary Guarantor, on the one hand, and any Lender or any Affiliate of any Lender, on the other hand. 10 17 "Designated Material Real Property": collectively, at any time, (a) all parcels of Material Real Property which are then subject to a first priority Lien granted pursuant to a Mortgage, (b) the Excluded Properties, (c) all parcels of Material Real Property deemed to be parcels of Designated Material Real Property pursuant to subsection 8.3(k) or 8.3(q) and (d) the parcels of real property identified on Schedule 5.19 under the heading "Other Material Real Property." "Dollars" and "$": dollars in lawful currency of the United States of America. "Dollar Equivalent": at any date of determination thereof with respect to the face amount of any Letter of Credit issued in any currency other than Dollars or any Reimbursement Obligations in respect of any such Letter of Credit, an amount in dollars equivalent to such face amount calculated at the rate of exchange quoted by the Administrative Agent on such date of determination (at the hour on such date of determination at which it customarily makes such determination) to prime banks in the interbank market where its foreign currency exchange operations in respect of the currency in which such Letter of Credit is issued are then being conducted for the spot purchase of such currency with Dollars. "Domestic Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction (including territories) within the United States of America, excluding the Inactive Subsidiaries, Securitization Entities, Excluded Subsidiaries, Special Purpose Subsidiaries and Foreign Holding Companies. "EBITDA": with respect to any period, Consolidated Net Income of the Borrower and its Consolidated Subsidiaries for such period plus (a) in each case to the extent deducted in determining such Consolidated Net Income for such period, the sum of the following (without duplication): (i) Consolidated Interest Expense of the Borrower and its Consolidated Subsidiaries, (ii) consolidated income tax expense of the Borrower and its Consolidated Subsidiaries, (iii) consolidated depreciation and amortization expense of the Borrower and its Consolidated Subsidiaries, including, without limitation, depreciation and amortization included in selling, general and administrative expenses of the Borrower and its Consolidated Subsidiaries, (iv) any non-cash expenses, non-cash losses or other non-cash charges resulting from the write-down in the valuation of any assets, (v) any non-recurring charge or restructuring charge which, in accordance with GAAP is excluded from operating income, and (vi) losses, expenses and other charges, including related severance payments in respect of going-out-of-business sales to the extent such cash losses, expenses and other charges do not exceed the cash proceeds received from such sales, minus (b) to the extent added in determining such Consolidated Net Income for such period, any non-cash gains resulting from the write-up in the valuation of any assets, plus or minus (c) the amount of cash received or expended in such period in respect of any amount which, under clause (v) above, was taken into account in determining EBITDA for such or any prior period. "Effective Date": the date on which the conditions set forth in subsection 6.1 are satisfied. "Eligible Adjusted Inventory Amount": as of any Calculation Date, (a) the Eligible Inventory Amount, plus (b) the Available GOB Inventory Amount, minus (c) the Shrink Reserve in respect of such Eligible Inventory Amount, in each case as of such Calculation Date. "Eligible Assignee": as defined in subsection 11.6(c). 11 18 "Eligible Inventory Amount": as of any Calculation Date, (a) the Inventory Value as of such Calculation Date of all Inventory of the Borrower and the Subsidiary Guarantors that consists of finished goods, loose diamonds or colored stones, plus (b) Customs Broker Inventory, plus (c) Landed Inventory, minus (d) the sum of (i) the Ineligible Inventory Amount as of such Calculation Date and (ii) the GOB Inventory Amount as of such Calculation Date. "Eligible Mortgaged Real Property": at any time, any parcel of Material Real Property of the Borrower or any Subsidiary Guarantor as to which each of the following conditions has been satisfied at such time: (a) (i) Such parcel of Material Real Property (A) is comprised of a developed retail store, distribution center, shopping center or office building with respect to which a certificate of occupancy or temporary certificate of occupancy or the local equivalent thereof (or any other similar proof of completion) shall have been issued by the relevant Governmental Authority or the Administrative Agent shall have received other evidence reasonably satisfactory to it of the completion of such retail store, distribution center, shopping center or office building or (B) is undeveloped and has a book value (excluding soft costs) of at least $1,000,000, (ii) a Lien on such parcel of Material Real Property shall have been granted by the Borrower or such Subsidiary Guarantor, as the case may be, in favor of the Administrative Agent pursuant to a Mortgage or a Mortgage Assignment, (iii) each Mortgage and Mortgage Assignment shall be in full force and effect in favor of the Administrative Agent at such time, (iv) each Mortgage and Mortgage Assignment shall have been recorded in the appropriate jurisdiction or jurisdictions to perfect and assign to the Administrative Agent the Lien granted pursuant to such Mortgage, provided, that such Mortgage need not have been so recorded if an effective title insurance policy (naming the Administrative Agent as the insured thereunder) shall have been issued that otherwise complies with the requirements of clause (c) (i) or (ii) of this definition and that provides "gap" coverage insuring against any exceptions that may arise prior to the actual recording of such Mortgage, and (v) all applicable mortgage recording taxes shall have been paid, and provided, further, that in respect of the requirements of clause (a)(iv) of this definition, the Mortgage Assignments shall be deemed to have been recorded and filed of record in the appropriate jurisdictions as of the date they are executed and delivered by the Existing Administrative Agent to the Administrative Agent until such time, if any, as the recording or filing of any such Mortgage Assignment is rejected by such jurisdiction, at which time the related parcel of Material Real Property shall not be considered Eligible Mortgaged Real Property until such time as the Mortgage Assignment is accepted for recordation and actually filed of record. (b) the Administrative Agent and, in the case of clause (i), the title insurance company issuing the policy referred to in clause (c) of this definition shall have received (i) maps or plats of an as-built survey of the sites of the Material Real Property covered by such Mortgage certified to the Administrative Agent and such title insurance company in a manner reasonably satisfactory to them, dated a date reasonably satisfactory to the Administrative Agent and such title insurance company, by an independent professional licensed land surveyor reasonably satisfactory to the Administrative Agent and such title insurance company, which maps or plats and the surveys on which they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (A) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines (where setback information is readily obtainable); (B) the lines of streets abutting such sites and the width thereof; (C) all access and other easements appurtenant to such sites or 12 19 necessary to use such sites; (D) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting such sites, whether recorded, apparent from a physical inspection of such sites or otherwise known to the surveyor; (E) any encroachments on any adjoining property by the building structures and improvements on such sites; and (F) if such sites are described as being on a filed map, a legend or other information relating the survey to said map or (ii) in the case of any such parcel of Material Real Property listed on Part I of Schedule 5.19, a copy of either (A) an as-built survey of such parcel of Material Real Property if such parcel of Material Real Property was developed as of the Effective Date or a boundary survey of such parcel of Material Real Property if such parcel of Material Real Property was undeveloped as of the Effective Date, in each case prepared within five years prior to the Effective Date or (B) a copy of a survey delivered pursuant to the Existing Credit Agreement in connection with any Mortgage on such parcel of Material Real Property delivered pursuant to the Existing Credit Agreement; (c) the Administrative Agent shall have received in respect of such parcel of Material Real Property (i) a mortgagee's title policy (or policies) or marked-up unconditional binder (or binders) for such insurance dated a date reasonably satisfactory to the Administrative Agent, and such policy shall (A) be in an amount not less than the Mortgage Value (as of the date such parcel of Material Real Property becomes a parcel of Eligible Mortgaged Real Property) of such parcel of Material Real Property, (B) be issued at ordinary rates, (C) insure that the Mortgage insured thereby creates a valid first Lien on such parcel of Material Real Property free and clear of all defects and encumbrances, except such as may be approved by the Administrative Agent and Permitted Mortgage Liens, (D) name the Administrative Agent for the benefit of the Lenders as the insured thereunder, (E) be in the form of ALTA Loan Policy - 1992 (or such local equivalent thereof as is reasonably satisfactory to the Administrative Agent), (F) contain a comprehensive lender's endorsement and (G) be issued by Chicago Title Insurance Company, First American Title Insurance Company, Lawyers Title Insurance Corporation or any other title company reasonably satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers) or (ii) in the case of any such parcel of Material Real Property subject to a Mortgage pursuant to the Existing Credit Agreement as of the Effective Date, an endorsement endorsing the previously issued mortgagee's title policy issued by Lawyers Title Insurance Corporation in connection with the Existing Credit Agreement to the Administrative Agent, and a date down endorsement to such title policy, both on the same terms and conditions as such title policy was initially issued. The Administrative Agent shall have received (x) evidence satisfactory to it that all premiums in respect of each such policy or endorsement, as the case may be, have been paid and (y) a copy of all documents referred to, or listed as exceptions to title, in such title policy (or policies); (d) the Administrative Agent shall have received an Existing Appraisal with respect to such parcel of Material Real Property; (e) with respect to any such parcel of Material Real Property upon which a Mortgage is granted pursuant to subsection 7.10(a) or which is designated as a "Phase I Property" on Schedule 5.19, a Phase I environmental report with respect to such parcel of Material Real Property, dated a date not more than one year prior to the date such parcel became Eligible Mortgaged Real Property under the Existing Credit Agreement, or not more than one year prior to the date such parcel becomes Eligible Mortgaged Real Property under this Agreement, showing no material condition of environmental concern shall have been delivered to the Administrative Agent and in form reasonably satisfactory to the Administrative Agent; 13 20 (f) if such parcel of Material Real Property is subject to a ground lease in favor of the Borrower or any Subsidiary Guarantor as lessee, no consent shall be required under such ground lease to mortgage or foreclose upon such parcel of Material Real Property (or such consent shall have been obtained); and (g) such parcel of Material Real Property shall be in compliance, or, as applicable, the Loan Party which is the owner or lessee thereof, shall be in compliance, with all of the terms, covenants, conditions, representations and warranties set forth in Schedule 1.1(b), provided that, (i) if any such term, covenant, condition, representation or warranty shall reference any provision of this Agreement, such reference shall be read without giving effect to any qualification or limitation contained therein regarding a Material Adverse Effect, and (ii) if such parcel of Material Real Property or, as applicable, the Loan Party which is the owner or lessee thereof ceases to be in compliance with any of the terms, covenants, conditions, representations or warranties set forth in Schedule 1.1(b), such parcel of Material Real Property shall cease (effective as of the delivery of the next succeeding Borrowing Base Certificate) to be Eligible Mortgaged Real Property during the continuation of such non-compliance if such non-compliance could reasonably be expected to have a material adverse effect on the value of such parcel of Material Real Property, but such non-compliance shall not constitute, in and of itself, a Default or Event of Default. If a parcel of Material Real Property of the type described in clause (a)(i)(B) of this definition becomes a parcel of Eligible Mortgaged Real Property and is thereafter subsequently developed such that such parcel of Eligible Mortgaged Real Property satisfies the requirements of clause (a)(i)(A) of this definition, the Borrower may, at its option, deliver a notice to the Administrative Agent to the effect that the Borrower wishes to cause such parcel of Material Real Property to satisfy the requirements of this definition as if (x) such parcel of Material Real Property became a parcel of Material Real Property as of the date of such notice, (y) such parcel of Material Real Property was not then a parcel of Eligible Mortgaged Real Property and (z) if applicable, such parcel of Material Real Property was not subject to a Mortgage as of the Effective Date. Upon delivery of any such notice, the Administrative Agent shall commission a new appraisal with respect to such parcel of Material Real Property. Upon satisfaction of the conditions set forth in this definition following such date with respect to such parcel of Material Real Property (other than the condition set forth in clause (e) above, such parcel of Material Real Property shall, without duplication, be deemed to become a parcel of Eligible Mortgaged Real Property as of the date such conditions are satisfied and the Mortgage Value of such parcel of Eligible Mortgaged Real Property shall be included in the Borrowing Base effective as of the delivery of the Borrowing Base Certificate in respect of the fiscal month in which such conditions are satisfied. "Eligible Trade Accounts Percentage": as of any Accounts Receivable Calculation Date, up to 85%, provided that, in connection with each periodic audit or appraisal of the Accounts of the Borrower and the Subsidiary Guarantors performed by or on behalf of the Administrative Agent, the Administrative Agent shall have the right in its sole discretion exercised commercially reasonably and in accordance with customary business practices, upon at least 10 days prior written notice to the Borrower, to change the "Eligible Trade Accounts Percentage" to the percentage estimated to be the percentage of the aggregate amount of the Accounts as of such Accounts Receivable Calculation Date which satisfy each of the following criteria: (a) such Account has been adjusted to reflect the return or rejection of, or any loss of or damage to any of the Inventory giving rise to such Account and is not subject to bona fide set-offs, counterclaims, defenses, or disputes asserted with respect to such Account (it being 14 21 understood that such Account shall not include material financing charges, or late or other fees); (b) the Account Debtor with respect to such Account is not insolvent or the subject of any bankruptcy case or insolvency proceeding of any kind, unless such Account is due from such Account Debtor as an administrative claim under the Bankruptcy Code and the Administrative Agent, in the exercise of its reasonable business judgment, deems the Account Debtor to be creditworthy; (c) the Account Debtor in respect of such an Account has a place of business within the United States of America (excluding Puerto Rico, the Virgin Islands and any other territory of the United States); (d) the Account Debtor in respect of such Account is not the United States of America or any state, territory, subdivision, department, or agency thereof, unless all applicable requirements of the Assignment of Claims Act of 1940 have been satisfied; (e) such Account does not arise out of transactions with an employee, officer, director, Subsidiary, or Affiliate of the Borrower or any Subsidiary Guarantor; (f) no amount payable in respect of such Account has remained unpaid for a period exceeding sixty days after the due date stated on the invoice therefor (excluding the amount of any net credit balances relating to Accounts with invoice dates more than 60 days from the due date); (g) such Account is owed by an Account Debtor which does not then have balances on its Accounts which are more than 60 days past due which exceed 50% of the total balance of all such Accounts owed by such Account Debtor; (h) such Account has not been and is not required to be charged off or written off as uncollectible in accordance with the customary business practice of the Borrower and the Subsidiary Guarantors; (i) such Account does not arise out of any claim in tort, is not evidenced by chattel paper, a promissory note, a negotiable instrument, or any other instrument of any kind or, if such Account is evidenced by chattel paper, a promissory note, a negotiable instrument or any other instrument, such chattel paper, promissory note, negotiable instrument or other instrument has been delivered to the Administrative Agent and is subject to a first priority security interest in favor of the Administrative Agent; (j) the amount of the face value of such Account listed on any schedule of Accounts and shown on all invoices and statements delivered to the Agent with respect to such Account is not subject to any asserted bona fide retainages or holdbacks of any type, is actually and absolutely owing, and is not contingent on any condition, in each case, other than in respect of repurchase or return agreements that (i) arise in the ordinary course of the Borrower's business and (ii) are consistent with the Borrower or such Subsidiary Guarantor's historical business practice; (k) such Account does not arise out of a cash on delivery sale; and (l) such Account does not arise out of the sale of samples. 15 22 In addition, to the extent that any Accounts or credit card receivables that arise in connection with a Credit Card Program are included in Eligible Trade Accounts Receivable at the option of the Borrower, the Eligible Trade Accounts Percentage shall include such reserves and the Available Accounts Receivable Amount shall reflect eligibility criteria as the Administrative Agent shall require in its sole discretion with respect to such Accounts and credit card receivables as a separate class of Accounts based upon the results of any periodic audit or appraisal of the Accounts of the Borrower and the Subsidiary Guarantors performed by or on behalf of the Administrative Agent, provided that no such Accounts or credit card receivables shall be included in "Eligible Trade Accounts Receivable" until a satisfactory audit or appraisal of such Accounts and credit card receivables has been performed by or on behalf of the Administrative Agent. It is understood that, to the extent that information is not available to determine the amount of Accounts which satisfy the criteria described above, the Administrative Agent shall estimate the amount of such Accounts which satisfy such criteria in determining the Eligible Trade Accounts Percentage. The Borrower shall, at the request of the Administrative Agent in connection with any periodic audit or appraisal of the Accounts of the Borrower and the Subsidiary Guarantors related to the Credit Card Program, deliver a calculation in reasonable detail of all Accounts which satisfy the criteria described above to the extent such information is reasonably available to the Borrower and the Subsidiary Guarantors. "Eligible Trade Accounts Receivable Amount": as of any Accounts Receivable Calculation Date, an amount equal to the Eligible Trade Accounts Percentage of the aggregate amount of all Accounts of the Borrower and the Subsidiary Guarantors as of such Accounts Receivable Calculation Date that satisfy all of the following criteria as of such Accounts Receivable Calculation Date: (a) such Account is owned solely by the Borrower or a Subsidiary Guarantor and is evidenced by an invoice and has arisen from the sale of goods which have been shipped or delivered to an Account Debtor on an absolute sale basis, have not been shipped or delivered on a consignment, approval, or sale-return basis, and are not subject to any repurchase or return agreement or arrangement, other than those repurchase or return agreements or arrangements that (i) arise in the ordinary course of the Borrower's business and (ii) are consistent with the Borrower or such Subsidiary Guarantor's historical business practices; and (b) such Account is subject to a Lien in favor of the Administrative Agent and is not subject to Liens other than Permitted Account Liens. "Environmental Laws": any and all foreign, federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating or imposing liability or standards of conduct concerning protection of human health or the environment, as are now or may at any time hereafter be in effect. "Environmental Reserve Amount": at any time, an amount equal to the product of (a) $75,000 and (b) the number of parcels of Eligible Mortgaged Real Property which are included in the Borrowing Base at such time. "Equipment": all equipment, machinery, chattels, tools, dies, jigs, molds, parts, machine tools, furniture, furnishings, fixtures and supplies, of every nature, now owned or hereafter acquired by the Borrower or any Subsidiary Guarantor, wherever located, additions, accessories and improvements thereto and substitutions therefor and all parts and equipment 16 23 which may be attached to or which are necessary for the operation and use of such personal property or fixtures, whether or not the same shall be deemed to be affixed to real property and in any event all "equipment" (as such term is defined in the UCC), but excluding Inventory. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors or other Governmental Authority having jurisdiction with respect thereto) prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board of Governors) maintained by a member bank of the Federal Reserve System. "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate for deposits in Dollars for the period commencing on the first day of such Interest Period and ending on the last day of such Interest Period which appears on Telerate Page 3750 as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. If at least two rates appear on such Telerate Page for such Interest Period, the "Eurodollar Base Rate" shall be the arithmetic mean of such rates. If the "Eurodollar Base Rate" cannot be determined in accordance with the immediately preceding sentences with respect to any Interest Period, the "Eurodollar Base Rate" with respect to each day during such Interest Period shall be the rate per annum equal to the average (rounded upward to the nearest 1/100th of 1%) of the respective rates notified to the Administrative Agent by each of the Lenders as the rate at which such Lender is offered Dollar deposits at or about 10:00 A.M. New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period. "Eurodollar Loans": Term Loans and Revolving Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Event of Default": any of the events specified in Section 9, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excepted Cash Equivalents": Cash Equivalents up to an aggregate amount outstanding at any one time equal to the amount set forth in subsection 8.8(b) and not required to be pledged to the Administrative Agent by reason of subsection 8.8(b). 17 24 "Excluded Properties": as defined in subsection 7.10(b). "Excluded Subsidiaries": SMC-SPE-1, Inc., SMC-SPE-2, Inc., SerPlus Assurance Co., Ltd., and Service Credit Corp. "Existing Administrative Agent": as defined in the first recital to this Agreement. "Existing Collateral Agreement": the Master Collateral Agreement dated as of September 10, 1997, among the Borrower, certain of the Borrower's Subsidiaries, and the Existing Administrative Agreement, as heretofore amended. "Existing Pledge Agreement": the Amended and Restated Securities Pledge Agreement dated as of September 10, 1997, among the Borrower, each of the Pledgors party thereto, and the Existing Administrative Agreement, as heretofore amended. "Existing Appraisal": with respect to any parcel of Material Real Property, a final complete appraisal of the value of such parcel of Material Real Property, commissioned in connection with the Existing Credit Agreement (and delivered to the Administrative Agent) or this Agreement and valued on an "alternative use" basis which in the reasonable judgment of the Administrative Agent satisfies all applicable requirements of FIRREA and the Uniform Standards of Professional Appraisal Practice. "Existing Credit Agreement": as defined in the first recital to this Agreement. "Existing Lenders": as defined in the first recital to this Agreement. "Existing Loan Documents": as defined in subsection 11.25. "Extension of Credit": with respect to any Lender, (a) the making of a Loan by such Lender and (b) the issuance or extension of a Letter of Credit in which such Lender has a participating interest. "FANB": as defined in subsection 6.1(x). "Federal Funds Rate": means for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of such lessee. "FIRREA": the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended. "First Union Permitted Mortgage Financing": all Indebtedness, if any, and other obligations of the Borrower and its Subsidiaries, now existing or hereafter arising, under or in 18 25 connection with (a) that certain Loan Agreement dated as of October 4, 1996 by and between SMC-SPE-l, Inc., as borrower, and First Union National Bank of North Carolina, as lender, and the guaranties, mortgage and security and other agreements, instruments and other documents from time to time executed and delivered in connection therewith and (b) that certain Loan Agreement dated as of October 4, 1996 by and between SMC-SPE-2, Inc., as borrower, and First Union National Bank of North Carolina, as lender, and the guaranties, mortgage and security and other agreements, instruments and other documents from time to time executed and delivered in connection therewith, in each case, subject to compliance with the terms hereof, as the same may now or hereafter be amended, restated, modified, increased, extended, refinanced, replaced or refunded. "Fiscal Year": each fiscal year of the Borrower. Fiscal Years are referred to herein by reference to the calendar year in which a majority of the days comprising such Fiscal Year fall. "Fixed Assets": plant, machinery, equipment, furniture and fixtures, leasehold improvements and other tangible property used in the operation of the business of the Borrower and its Subsidiaries, and including (except in respect of the OSS Disposition) the Proceeds of the sale of all or substantially all of the Capital Stock of a Subsidiary Guarantor (except to the extent of the allocated value of any Current Assets included in the Proceeds of such sale of Capital Stock). "Floor Planning Facility": as to the Borrower or any Restricted Subsidiary, any manufacturer- or vendor-sponsored Inventory financing program (whether directly from the manufacturer or vendor or through a third party financing source) extending loans or trade terms to the Borrower or such Restricted Subsidiary and secured solely by such manufacturer's or vendor's named brand or identified Inventory, subject to the prior approval of the Administrative Agent in its reasonable discretion and execution and delivery of an intercreditor agreement reasonably acceptable to the Administrative Agent. "Foreign Holding Company": any Subsidiary organized under the laws of any jurisdiction (including territories) within the United States of America whose sole assets (exclusive of assets with an aggregate book value not exceeding $5,000,000 and assets consisting of advances or loans to the Borrower or any of its Subsidiaries) consist of the Capital Stock of one or more Foreign Subsidiaries or other Foreign Holding Companies. "Foreign L/C Commitment Sublimit": at any time, the lesser of (a) $10,000,000 and (b) the Revolving Credit Commitments then in effect. "Foreign Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction outside the United States of America, excluding Inactive Subsidiaries, but including in any event Foreign Holding Companies. "GAAP": generally accepted accounting principles in the United States of America in effect from time to time, provided that, solely for purposes of determining compliance with subsection 8.1, "GAAP" shall mean generally accepted accounting principles in the United States of America in effect as of the Effective Date. "GOB Deal Shrink": an amount equal to (i) the difference between (A) the Inventory Value of the GOB Inventory and (B) the value of the GOB Inventory as determined by a physical inventory count taken immediately prior to the commencement of a going-out-of-business or similar sale at the GOB Stores, or (ii) in the absence of a physical count of the 19 26 GOB Inventory, 3% of the Inventory Value of the GOB Inventory on the date of commencement of the going-out-of-business or similar sales. "GOB Discount Amount": an amount equal to (i) the weighted average discount offered to customers during the applicable period of the going-out-of-business or similar sale, expressed as a percentage, multiplied by (ii) the GOB Inventory Amount. "GOB Inventory": all Inventory located at GOB Stores as of the Calculation Date after the date of commencement of a going-out-of-business or similar sale at such GOB Stores. "GOB Inventory Amount": as of any Calculation Date, the Inventory Value of the GOB Inventory as of such Calculation Date, minus (a) the Shrink Reserve in respect of such GOB Inventory, minus (b) the GOB Deal Shrink, minus (c) GOB Inventory remaining on the 91st day after the commencement of the going-out-of-business or similar sales. "GOB Stores": the Borrower's and the Subsidiary Guarantors' stores which are in the process of being liquidated and closed. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), without duplication, any obligation, contingent or otherwise, of the guaranteeing person (a) under a guarantee, reimbursement, indemnity or similar obligation guaranteeing or in effect guaranteeing any Indebtedness of any other Person, in any manner, whether directly or indirectly, (b) to reimburse any other Person for drawings under undrawn letters of credit issued by such other Person for the account of the guaranteeing person, or (c) under a guarantee, reimbursement, indemnity or similar obligation to the extent the obligations of the guaranteeing person in respect thereof should be reflected as a liability in a consolidated balance sheet of the guaranteeing person (or should be reflected in the notes thereto) in accordance with GAAP, provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (i) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (ii) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by such guaranteeing person in good faith. "IE System": the Borrower's electronic inventory evaluation system which tracks Inventory on a store-by-store basis. "In-Transit Cash": as of the date of determination, the aggregate amount of (i) cash and cash equivalents of the Borrower and the Subsidiary Guarantors which is deposited into deposit accounts covered by Blocked Account Agreements, plus (ii) the net amount receivable by the Borrower and the Subsidiary Guarantors in respect of Visa, Mastercard or other branded credit card receivables (after deduction of discounts and fees payable to the processors of such credit card receivables) to the extent such amounts are credited to deposit accounts 20 27 covered by Blocked Account Agreements or other arrangements acceptable to the Agents in their sole discretion exercised commercially reasonably, in each case prior to the transfer of such amounts to the Collateral Account. "Inactive Subsidiary": any Subsidiary of the Borrower which (and only for so long as such Subsidiary) (a) does not own assets with an aggregate book value in excess of $5,000,000 and (b) is not then engaged in any business. "Indebtedness": of any Person at any date (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than trade liabilities and accounts payable incurred in the ordinary course of business and payable in accordance with the Borrower's and its Restricted Subsidiaries' customary practices and extensions thereof), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations (to the extent capitalized for accounting purposes) of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (e) all obligations of the types described in the other clauses of this definition secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof and (f) all obligations of such Person in respect of interest rate and currency hedging agreements. For purposes of this Agreement, (x) the amount of any Indebtedness referred to in clause (f) of the preceding sentence shall be the net amounts (including by offset of amounts payable thereunder), including any net termination payments, required to be paid to a counterparty rather than any notional amount with regard to which payments may be calculated and (y) any obligations described in clauses (a) through (e) above denominated in a currency other than Dollars shall be determined after giving effect to related currency swap and hedging agreements. It is understood and agreed that "Indebtedness" of a Person (i) shall include advances or loans to such Person under Floor Planning Facilities and (ii) shall not include (A) obligations of such Person in respect of letters of credit to the extent such obligations are not reflected as liabilities on the consolidated balance sheet of such Person (excluding the notes to such balance sheet) in accordance with GAAP or (B) obligations of such Person in respect of consignments of Inventory to such Person. "Indemnified Liabilities": as defined in subsection 11.5. "Indenture": as defined in subsection 6.1(x). "Ineligible Inventory Amount": as of any Calculation Date, the Inventory Value of all Inventory of the Borrower and the Subsidiary Guarantors that falls in any one or more of the following categories as of such Calculation Date: (a) Inventory that (i) is not owned solely by the Borrower or any such Subsidiary Guarantor or (ii) is leased by or on consignment or sale-or-return to the Borrower or any such Subsidiary Guarantor; (b) Inventory that is not located at (or in transit between) property that is owned or leased by the Borrower or any Subsidiary Guarantor, other than Landed Inventory and Customs Broker Inventory; (c) Inventory that is subject to a layaway purchase by any customer; (d) Inventory that is damaged or defective or has otherwise been segregated for return to the vendor thereof; 21 28 (e) Inventory that is not located in the United States of America; (f) Inventory which is not subject to a Lien in favor of the Administrative Agent or is subject to any Lien (other than Permitted Inventory Liens); (g) Inventory which is subject to a Lien in connection with Floor Planning Facilities; (h) Inventory that is being repaired or is used in the repair of other Inventory; and (i) Inventory consisting of "Samples" which is not included in the normal merchandising assortment but has been supplied by vendors for consideration to be included in the merchandising assortment. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Instrument": any "instrument" (as such term is defined in the UCC) now owned or hereafter acquired by the Borrower or any Subsidiary Guarantor. "Intellectual Property": as defined in subsection 5.17. "Intercompany Debt" means, with respect to the Borrower, any Indebtedness of the Borrower to any Subsidiary Guarantor, and with respect to any Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor to the Borrower or any other Subsidiary Guarantor, including all amounts payable in respect thereof whether in respect of principal, interest or otherwise. "Interest Expense": of any Person for any period, (a) the amount of interest expense, both expensed and capitalized, of such Person and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP for such period, plus, without duplication, that portion of payments under Financing Leases of such Person attributable to interest expense of such Person for such period in accordance with GAAP minus (b) the amount of interest income of such Person and its Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP for such period. "Interest Payment Date": (a) as to any ABR Loan, the last day of each month, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period and (d) as to any Swing Line Loan, the last day of each month. "Interest Period": with respect to any Eurodollar Loan: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than 22 29 three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) any Interest Period that would otherwise extend beyond, in the case of Eurodollar Loans which are Revolving Loans, the Revolving Credit Termination Date or, in the case of Eurodollar Loans which are Term Loans, beyond the Term Loan Termination Date, as the case may be; (3) 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 a calendar month; and (4) from the Effective Date until such time as the Administrative Agent notifies the Borrower of the completion of the syndication of this credit facility, "Interest Period" shall mean the period commencing on the borrowing or conversion date, as the case may be, with respect to all Eurodollar Loans and ending seven or fourteen days or one month thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto, and agreed to by the Administrative Agent. "Interim Maximum Amount": as defined in subsection 3.1 of this Agreement. "Interim Reserve Amount": an amount equal to, (a) from the Effective Date until the date (i) the Administrative Agent accepts the Business Plan and (ii) the Borrower and the Agents mutually agree on new and revised covenants pursuant to subsection 11.23 (such date, the "Plan Acceptance Date"), $125,000,000, and (b) from and after the Plan Acceptance Date, zero. "Inventory": goods now owned or hereafter acquired by the Borrower or any Subsidiary Guarantor and held for sale or lease or to be furnished under contracts of service or so leased or furnished, and all raw materials, work in process or materials used or consumed in a business, and in any event including all "inventory" (as such term is defined in the UCC) but excluding Equipment. "Inventory Value": with respect to any Inventory of the Borrower or any Subsidiary Guarantor reflected on the Borrower's Borrowing Base Certificate, the value of such Inventory valued at cost on the IE System on a basis consistent with the Borrower's or such Subsidiary Guarantor's current and historical accounting practice (without giving effect to markdowns, intercompany profit, rebates and discounts, accounts payable inventory accruals and capitalized inventory costs on the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries in respect of Inventory), plus freight charges incurred in connection therewith, minus accruals for deferred volume rebates (it being understood that the amount of freight 23 30 charges and accruals for deferred volume rebates shall be determined monthly as of the end of the most recent fiscal month, notwithstanding the fact that Borrowing Base Certificates may be delivered more frequently than monthly pursuant to this Agreement). The value of the Inventory as set forth above will, without duplication for any element of the Shrink Reserve, be calculated net of the reserve established by the Borrower or any Subsidiary Guarantor on a basis consistent with the Borrower's or such Subsidiary Guarantor's current and historical accounting practice in respect of lost, misplaced or stolen Inventory at such time. "Investment": as defined in subsection 8.8. "Investment Securities": all Instruments or "securities" (as such term is defined in the UCC) now owned or hereafter acquired by the Borrower or any Subsidiary Guarantor, other than (a) Pledged Stock, (b) Capital Stock of any Subsidiary that is not expressly required to be pledged pursuant this Agreement or the Pledge Agreement, (c) Cash Equivalents and (d) any note, debenture, bond or other instrument evidencing Intercompany Debt. "Issuing Banks": initially, each Lender and Affiliate of a Lender specified on Schedule 1.1(a) as an Issuing Bank in its capacity as issuer of a Letter of Credit. Additional Lenders or Affiliates of Lenders may from time to time be designated as "Issuing Banks" by the Borrower (with the consent of such Lender and with the consent (which shall not be unreasonably withheld) of the Administrative Agent) by written notice to such effect from the Borrower to the Administrative Agent. "Judgment Currency": as defined in subsection 11.19. "Landed Inventory": any Inventory which has arrived in the United States and cleared customs but which has not been delivered to property that is owned or leased by the Borrower or any Subsidiary Guarantor so long as such Inventory is (a) fully paid and subject only to a Lien in favor of the Administrative Agent (other than Permitted Inventory Liens), (b) is in the possession of the Borrower or any Subsidiary Guarantor or any agent thereof and (c) such Inventory is reported in a Borrowing Base Certificate separately from other Inventory included in the calculation of the Available Inventory Amount. "Landlord Lien Reserve Amount": a reserve established by the Administrative Agent with respect to Inventory located at any leased location of the Borrower or the Subsidiary Guarantors for which the Administrative Agent has not received a Landlord Lien Waiver, equal to (i) if the leased location is in any of the states of Washington, Virginia or Pennsylvania, an amount equal to three months' rental expense for each such leased location, (ii) if the leased location is in any of the states of Alabama, Arizona, Arkansas, Florida, Iowa, Kentucky, New Mexico, Oregon or Texas or in the District of Columbia, an amount equal to three months' rental expense for each such leased location for which the Borrower or such Subsidiary Guarantor is past due in the payment of rental obligations for such leased location, and (iii) if the leased location is located in any other state, zero; provided that the Administrative Agent reserves the right, in its sole discretion exercised commercially reasonably, to add or remove any state from the list of states in clauses (i) and (ii) of this definition as a result of any changes in applicable law which impacts such state's treatment of statutory or common law lien priorities as between lenders and landlords. "Landlord Lien Waiver": a waiver in form and substance reasonably satisfactory to the Administrative Agent, waiving a landlord's security interest in respect of Inventory located at any location not owned by the Borrower or its Restricted Subsidiaries. 24 31 "L/C Commitment": the lesser of (a) $200,000,000 and (b) the Revolving Credit Commitments then in effect. "L/C Fee Payment Date": the last day of each month and the Revolving Credit Termination Date. "L/C Obligations": at any time, an amount equal to the sum of (a) the Trade Letter of Credit Outstandings at such time and (b) the Standby Letter of Credit Outstandings at such time. "L/C Participants": the collective reference to all the Revolving Credit Lenders. "Lenders": as defined in the preamble to this Agreement, provided that Issuing Banks shall be deemed parties to this Agreement and Lenders in the Security Documents for all purposes thereof. "Letters of Credit": as defined in subsection 3.6(a). "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": any Term Loan, Revolving Loan or Swing Line Loan, as the case may be. "Loan Documents": this Agreement, any Notes, the Master Collateral Agreement, the Subsidiaries Guarantee, the Security Documents, any Applications, the Blocked Account Agreements, the other documents executed or delivered pursuant to subsection 6.1 by the Borrower or any Subsidiary of the Borrower, any Derivative Agreements, and all other instruments, agreements and written contractual obligations between the Borrower and any Subsidiary of the Borrower, on the one hand, and any of the Agents or the Lenders, on the other hand, in each case delivered to either the Administrative Agent or such Lender before, on, or after the Effective Date pursuant to or in connection with the transactions (including, without limitation, the cash management arrangements) contemplated hereby. "Loan Parties": the collective reference to the Borrower, the Subsidiary Guarantors and any other Subsidiary from time to time party to any Loan Document. "Lockbox Agreement": any "Lockbox Agreement" (i) entered into among the Borrower or any Subsidiary Guarantor, a Depositary Bank and the Existing Administrative Agent, in substantially the form of Exhibit F to the Existing Collateral Agreement, or (ii) entered into among the Borrower or any Subsidiary Guarantor, a Depositary Bank and the Administrative Agent pursuant to subsection 3.1 of the Master Collateral Agreement, as the same may be amended, modified, supplemented, extended or renewed from time to time. "LTCB Permitted Mortgage Financing": all Indebtedness, if any, and other obligations of the Borrower and its Subsidiaries, now existing or hereafter arising, under or in connection with (a) that certain Indenture dated June 28, 1990 by and among the Borrower, H.J. Wilson Co., Inc., The Long-Term Credit Bank of Japan, Limited, New York Branch, as administrative agent, and The Bank of New York (as successor trustee to Sovran Bank/Central 25 32 South), as trustee, and (b) the guaranties, mortgage and security and other agreements, instruments and other documents from time to time executed and delivered in connection therewith, in each case, subject to compliance with the terms hereof, as the same may now or hereafter be amended, restated, modified, increased extended, refinanced, replaced or refunded. "Majority Lenders": at any time, Lenders the Voting Percentages of which aggregate more than 50%. "Majority Revolving Credit Lenders": at any time, Revolving Credit Lenders the Revolving Credit Commitment Percentages of which aggregate more than 50%. "Majority Term Loan Lenders": at any time, Term Loan Lenders whose Term Loans aggregate more than 50% of the outstanding principal amount of all Term Loans. "Management Restructuring Consultant": Jay Alix & Associates. "Mandatory Prepayment Event": any event which requires the Borrower or any Restricted Subsidiary to make any mandatory prepayment in respect of the principal of any Subordinated Debentures or any other Subordinated Debt or to make (or offer to make) any mandatory redemption, defeasance or purchase of any Subordinated Debentures or any other Subordinated Debt, in any such case prior to the stated maturity thereof. "Master Collateral Agreement": the Amended and Restated Master Collateral Agreement to be made by the Borrower and each Subsidiary Guarantor party thereto in favor of the Administrative Agent, in substantially the form of Exhibit C, as the same may be amended, supplemented or otherwise modified from time to time. "Material Adverse Effect": a material adverse effect on (a) the business, operations, performance, property, or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or (b) the ability of the Borrower or any Subsidiary Guarantor to perform their respective obligations under this Agreement or any of the other Loan Documents or the material rights or remedies, of the Administrative Agent or the Lenders hereunder or thereunder. "Material Real Property": real property not subject to a mortgage, deed of trust or other similar instrument (other than pursuant hereto or any other Loan Document) that (a) (i) is owned in fee by the Borrower or any Subsidiary Guarantor and is not subject to a ground lease in favor of any other Person as lessee, (ii) is located in the United States or Puerto Rico and (iii) (A) has been developed with a retail store, distribution center, shopping center or office building with respect to which a certificate of occupancy or temporary certificate of occupancy or the local equivalent thereof (or any other similar proof of completion) shall have been issued by the relevant Governmental Authority, (B) is being developed with a retail store, distribution center, shopping center or office building which is under construction as of the Effective Date or (C) is undeveloped and has a book value (excluding soft costs) of at least $1,000,000 or (b) (i) (A) consists of a developed retail store, distribution center, shopping center or office building with respect to which a certificate of occupancy or temporary certificate of occupancy or the local equivalent thereof (or any other similar proof of completion) shall have been issued by the relevant Governmental Authority, or (B) is being developed with a retail store, distribution center, shopping center or office building which was under construction as of the Effective Date, (ii) is located on property which is subject to a ground lease in favor of the Borrower or any Subsidiary Guarantor as lessee and no consent 26 33 shall be required under such ground lease to mortgage or foreclose upon such property (or such consent shall have been obtained), (iii) is or, upon completion, will be classified as an owned retail store, distribution center, shopping center or office building by the Borrower or such Subsidiary Guarantor and (iv) is located in the United States or Puerto Rico. "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Mechanics' Lien Reserve Amount": with respect to any parcel of Eligible Mortgaged Real Property at any time, an amount equal to the excess, if any, of (a) the sum of all outstanding amounts which are then secured by mechanics' liens on such parcel of Eligible Mortgaged Real Property and which have been outstanding for a period in excess of one year over (b) $200,000. "Mortgage Assignment": each assignment of a Mortgage (including any Mortgage held by the Borrower or any Subsidiary Guarantor as an assignee of any other Person) executed and delivered from time to time to and in favor of the Administrative Agent pursuant to this Agreement or the Master Collateral Agreement, in a form reasonably satisfactory to the Administrative Agent and the Borrower and as appropriate under applicable law in the jurisdiction in which such real property is located, as the same may be amended, modified, supplemented, extended or renewed from time to time. "Mortgage Value": with respect to any parcel of Eligible Mortgaged Real Property, the lesser of (a) the maximum stated amount secured by the Lien on such parcel of Eligible Mortgaged Real Property granted in favor of the applicable secured mortgagee pursuant to the relevant Mortgage and (b) the value of such parcel of Eligible Mortgaged Real Property set forth in the Existing Appraisal delivered with respect thereto. "Mortgaged Property": all property of the Borrower and any Subsidiary Guarantor in which the Administrative Agent is granted a lien or security interest pursuant to the Mortgages. "Mortgages": the collective reference to the fee and ground leasehold mortgages, deeds of trust and other similar documents executed and delivered from time to time by the Borrower and the Subsidiary Guarantors in favor of the Administrative Agent, pursuant to the Master Collateral Agreement, the Existing Credit Agreement, the credit agreement amended and restated by the Existing Credit Agreement, or this Agreement, including those mortgages and deeds of trust assigned to the Administrative Agent in connection with this Agreement, and substantially in the form of Exhibit B to the Master Collateral Agreement (other than in the case of a Mortgage delivered in connection with the credit agreement amended and restated by the Existing Credit Agreement) or, if such Exhibit is not appropriate under applicable law in the jurisdiction in which the relevant real property is located, in such other form as shall be reasonably satisfactory to the Borrower and the Administrative Agent, as each of the same may be amended, supplemented or otherwise modified from time to time. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. 27 34 "Net Income": of any Person for any period, net income of such Person and its Consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP for such period. "Net Recoverable Value": as to the Inventory of the Borrower and the Subsidiary Guarantors, the amount determined based upon periodic audits or appraisals of such Inventory to be equal to the percentage of the cost of Inventory which could be realized (net of disposal costs and expenses) in a liquidation sale of the Inventory at such time. "Non-Excluded Taxes": as defined in subsection 4.10. "Notes": the collective reference to any Term Notes, Revolving Credit Notes or Swing Line Notes. "Operating Assets" means assets employed by any Loan Party in the operation of its business (including, without limitation, assets constituting property, plant or equipment but excluding assets held for investment). "Original Mortgages": the Mortgages executed and delivered pursuant to the Existing Credit Agreement or any credit agreement amended and restated by the Existing Credit Agreement, after giving effect to the provisions of subsection 2.12 of the Master Collateral Agreement. "OSS Disposition": the sale or other disposition of the Capital Stock in, or all or substantially all of the assets of, the OSS Subsidiary for fair market value and on terms and conditions reasonably satisfactory to the Administrative Agent. "OSS Subsidiary": the Borrower's office supply Subsidiary. "Overdraft": at any time, the amount by which the aggregate amount debited from any deposit, concentration, operating or disbursement account maintained by the Borrower or any Subsidiary Guarantor with any Lender or any Affiliate of any Lender, as a result of processing of payment orders issued by the Borrower or such Subsidiary Guarantor or otherwise, exceeds the aggregate funds on deposit in such account. "parcel": when used in connection with any parcel of real property, means such parcel of real property, together with all of the structures, buildings and other improvements located thereon and all other property associated therewith and, when used in connection with any parcel of real property subject to a ground lease in favor of the Borrower or any Subsidiary Guarantor as lessee, means the leasehold interest in such ground lease. "Participant": as defined in subsection 11.6(b). "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any Governmental Authority which succeeds to the powers and functions thereof. "Permanent Mortgage Financing": collectively, the LTCB Permitted Mortgage Financing and the First Union Permitted Mortgage Financing. "Permitted Account Liens": the collective reference to Liens permitted by subsections 8.3(a), 8.3(b) and 8.3(l). 28 35 "Permitted Book-Entry Securities": securities which conform in all respects to the requirements set forth in the definition of Cash Equivalents except that such securities are not evidenced by an Instrument and the Administrative Agent or its agent does not have possession thereof; provided that with respect to any security of which the Administrative Agent or its agent does not have physical possession, the Administrative Agent shall have acquired a perfected first priority security interest therein or in the security entitlement with respect thereto in the manner provided by the UCC. "Permitted Inventory Liens": the collective reference to Liens permitted by subsections 8.3(a), 8.3(b) and 8.3(1). "Permitted Mortgage Liens": the collective reference to Liens permitted by subsections 8.3(a), 8.3(b), 8.3(e) and 8.3(l). "Permitted Sale-Leaseback": as defined in subsection 8.11. "Permitted Trade L/C Facility": all Indebtedness, if any, and other obligations of the Borrower and its Subsidiaries, now existing or hereafter arising, under or in connection with (a) any letters of credit issued at any time for the account of the Borrower or any of its Subsidiaries pursuant to that certain Letter of Credit Application Agreement dated May 31, 1997 by and among Wholesale Supply Company, Inc., the Borrower and First American National Bank and (b) the commitment letters, security agreements, guarantees, instruments and other documents executed and delivered from time to time in connection therewith, in each case, subject to compliance with the terms hereof, as the same may now or hereafter be amended, restated, modified, increased, extended, refinanced, replaced or refunded from time to time. "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, limited liability company, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Plan Acceptance Date": as defined in the definition of "Interim Reserve Amount". "Pledge Agreement": the Second Amended and Restated Securities Pledge Agreement to be made by the Borrower and certain of the Subsidiary Guarantors in favor of the Administrative Agent, in substantially the form of Exhibit C to the Master Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Pledged Securities": the collective reference to (i) the Pledged Stock, (ii) all Investment Securities, (iii) all Cash Equivalents (including any Permitted Book-Entry Securities) and funds held or on deposit from time to time in the Securities Accounts, and (iv) all Proceeds thereof, except as provided for in Section 4 of the Pledge Agreement. "Pledged Stock": the shares of Capital Stock set forth on Schedule A to the Pledge Agreement and other shares of Capital Stock pledged thereunder from time to time pursuant to Section 3(d) thereof. 29 36 "Pledgors": the collective reference to the pledgors parties to the Pledge Agreement. "Post Closing Real Estate Matters": as defined in subsection 7.10(c). "Proceeds" has the meaning assigned to such term in the UCC. "Protective Advance": as defined in subsection 3.16(f). "Qualified Stock": any stock of the Borrower which does not by its terms mature or require repurchase or redemption thereof in whole or in part on or prior to the first anniversary of the Revolving Credit Termination Date or the Term Loan Maturity Date. "Real Property Amortization Amount": with respect to any parcel of Eligible Mortgaged Real Property at any time, an amount equal to the product of (a) an amount equal to 1.5% of the initial Mortgage Value of such parcel of Eligible Mortgaged Real Property (after giving effect to the delivery of any Existing Appraisal with respect thereto), times (b) the number of full three-month periods that have been elapsed since the Effective Date. "Register": as defined in subsection 11.6(d). "Regulation U": Regulation U of the Board of Governors as in effect from time to time. "Regulation X": Regulation X of the Board of Governors as in effect from time to time. "Reimbursement Agreement": as defined in subsection 6.1(w). "Reimbursement Obligation": the obligation of the Borrower pursuant to subsection 3.10(a) to reimburse each Issuing Bank for amounts drawn under any Letter of Credit issued by such Issuing Bank. "Releasees": as defined in subsection 11.24. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043 of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. ss. 4043. "Required Lenders": at any time, Lenders the Voting Percentages of which aggregate more than 66-2/3%. "Requirement of Law": as to any Person, the Certificate or Articles of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, statute, ordinance, code, decree, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject (including, without limitation, laws, ordinances and regulations pertaining to the zoning, occupancy and subdivision of real property). 30 37 "Reserve Calculation Date": the date of the second Borrowing Base Certificate of any month, in which Borrowing Base Certificate the various reserve amounts shall be calculated and/or revised based upon the operating results as of the end of the previous fiscal month. "Responsible Officer": the chief executive officer, the president, any executive vice president, the chief financial officer or the treasurer of the Borrower or, with respect to financial matters, the chief executive officer, the president, the executive vice president-finance, the chief financial officer or treasurer of the Borrower, provided that, for purposes of subsection 6.3(f) of the Master Collateral Agreement and subsection 7.7 and Section 9(d) only, a "Responsible Officer" shall also include the general counsel and any assistant treasurer of the Borrower. "Restricted Payments": as defined in subsection 8.6. "Restricted Subsidiaries": collectively, the Domestic Subsidiaries and Foreign Subsidiaries. "Revolving Credit Applicable Margin": for each Type of Revolving Loan, the rate per annum set forth under the relevant column heading below: ABR Loans Eurodollar Loans --------- ---------------- 1.50% 2.75% "Revolving Credit Commitment": as to any Lender, the obligation of such Lender to make Revolving Loans to and/or participate in Swing Line Loans to and/or issue or participate in Letters of Credit issued on behalf of the Borrower hereunder in an aggregate principal and/or face amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1(a) under the heading "Revolving Credit Commitment", as such amount may be reduced from time to time pursuant to this Agreement or as such amount may be adjusted from time to time pursuant to subsection 11.6. "Revolving Credit Commitment Percentage": as to any Lender (a) at any time prior to the termination of the Revolving Credit Commitments, the percentage of the Revolving Credit Commitments then constituted by such Lender's Revolving Credit Commitment and (b) at any time after the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) such Lender's Revolving Loans then outstanding plus (y) the product of such Lender's Revolving Credit Commitment Percentage immediately prior to the termination of the Revolving Credit Commitments (after giving effect to any permitted assignment pursuant to subsection 11.6) times the sum of (1) the aggregate principal amount of Swing Line Loans then outstanding plus (2) the L/C Obligations then outstanding then constitutes of (ii) the sum of (x) the aggregate principal amount of Revolving Loans of all the Lenders then outstanding plus (y) the aggregate principal amount of all Swing Line Loans then outstanding plus (z) the aggregate L/C Obligations then outstanding. "Revolving Credit Commitment Period": the period from and including the Effective Date to but not including the Revolving Credit Termination Date or such earlier date on which the Revolving Credit Commitments shall terminate as provided herein. "Revolving Credit Extensions of Credit": as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Loans made by such Lender then outstanding and (b) such Lender's Revolving Credit Commitment Percentage of 31 38 the sum of (i) the aggregate principal amount of Swing Line Loans then outstanding and (ii) the L/C Obligations then outstanding. "Revolving Credit Lender": any Lender with an unused Revolving Credit Commitment hereunder and/or any Revolving Loans outstanding hereunder. "Revolving Loans": as defined in subsection 3.1(a). "Revolving Credit Note": as defined in subsection 4.13(d). "Revolving Credit Termination Date": July 20, 2001. "Sale-Leaseback": as defined in subsection 8.11. "SEC": the Securities and Exchange Commission and any Governmental Authority which succeeds to the powers and functions thereof. "Secured Obligations": all of the following, in each case whether now existing or hereafter incurred or created, except to the extent otherwise expressly provided in the agreements or instruments relating thereto: (i) the Credit Agreement Obligations; (ii) all sums payable by the Borrower and the Subsidiary Guarantors under the Master Collateral Agreement or any Security Document; (iii) all sums payable by any Subsidiary Guarantor under the Subsidiaries Guarantee; (iv) liabilities of the Borrower or any Subsidiary Guarantor for Overdrafts; (v) liabilities and obligations of the Borrower or any Subsidiary Guarantor under Derivative Agreements; and (vi) obligations of the Borrower or any Subsidiary Guarantor under subsections 4.10, 4.11, 10.7, 11.5 and 11.20 of the Existing Credit Agreement. When used in this Agreement or any of the other Loan Documents with respect to any of the Secured Obligations that constitute the obligations of the Borrower or any Subsidiary Guarantor in respect of a Letter of Credit issued on behalf of the Borrower or such Subsidiary Guarantor or under any Derivative Agreement or any similar obligation, the term "outstanding" shall include, at any time, without duplication, the aggregate of the principal, interest and other amounts then outstanding that are the subject of such Letter of Credit or similar obligation that have not then been reimbursed by the Borrower or the relevant Subsidiary Guarantor and the amount then available to be drawn or demanded under such Letter of Credit or similar obligation (assuming compliance with all conditions to drawing) or the termination liabilities, if any, of the Borrower or the Subsidiary Guarantor under such Derivative Agreement. "Securitization Entity": with respect to the Borrower or any Subsidiary, a corporation, partnership, trust, limited liability company or other entity that is formed by the 32 39 Borrower or such Subsidiary for the purpose of effecting or facilitating a Securitization Transaction and which engages in no business and incurs no Indebtedness or other liabilities other than those related to or incidental to the Securitization Transaction. "Securitization Transaction": a transaction or series of related transactions pursuant to which a corporation, partnership, trust, limited liability company or other entity incurs obligations or issues interests, the proceeds of which are used to finance a discrete pool (which may be fixed or revolving) of receivables, leases or other financial assets, or a discrete portfolio of real property or equipment, subject in each case to the approval of the Agents. "Securities Account": any account which is maintained with the Administrative Agent or any agent thereof in accordance with Section 9(e) of the Pledge Agreement, in which all Pledged Securities which are Cash Equivalents (other than Excepted Cash Equivalents) are to be held by the Administrative Agent or a custodian or other agent of the Administrative Agent, subject to release upon request by the relevant Pledgor strictly in accordance with Section 9(c) of the Pledge Agreement, and in each of which the Administrative Agent shall have a perfected first priority security interest. "Security": as defined in Section 2 of the Security Agreement. "Security Agreement": the Second Amended and Restated Security Agreement and Collateral Assignment to be made by the Borrower and the Subsidiary Guarantors in favor of the Administrative Agent, substantially in the form of Exhibit A-1 to the Master Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Security Documents": the collective reference to the Master Collateral Agreement, the Security Agreement, the Pledge Agreement, the Blocked Account Agreements, the Custody and Control Agreements, the Lockbox Agreements, the Mortgages, the Mortgage Assignments and each other agreement entered into pursuant to subsection 7.3(b) of the Master Collateral Agreement. "Senior Notes Indenture": the Indenture, dated as of October 15, 1993, between the Borrower and State Street Bank and Trust Company (as successor trustee to The First National Bank of Boston), as trustee, as amended, supplemented or otherwise modified from time to time. "Shrink Reserve": as of any Calculation Date, an amount equal to 1.75% of the cost of Inventory as reflected on the IE System. Such Shrink Reserve percentage shall adjust from time to time at the Agents' sole discretion exercised commercially reasonably in accordance with customary business practices, based on the results of the Borrower's cycle and physical Inventory counts. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Special Purpose Subsidiary": any Subsidiary of the Borrower organized solely for the purpose of (a) holding a license or permit issued by any Governmental Authority and used in connection with the business of the Borrower and/or its Subsidiaries or (b) providing employee services for use in the foreign operations of the Borrower or any of its Subsidiaries, provided that such Subsidiary shall only be a "Special Purpose Subsidiary" for so long as such Subsidiary does not own any assets (other than any such license or permit and other than any 33 40 assets with a book value not exceeding $5,000,000 in the aggregate) and does not engage in any business other than holding such license or permit or providing such employee services and, in each case, activities directly related thereto. "Standby L/C Fee Rate": at any time, the rate per annum equal to 2.375% on the aggregate undrawn amount of Standby Letters of Credit; provided, however, during the continuance of an Event of Default the Standby L/C Fee Rate shall equal 4.375% per annum. "Standby Letter of Credit": as defined in subsection 3.6(b)(i). "Standby Letter of Credit Outstandings": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Standby Letters of Credit issued in Dollars, (b) the Dollar Equivalent of the aggregate then undrawn and unexpired amount of then outstanding Letters of Credit issued in currencies other than Dollars (such Dollar Equivalent to be determined as of the date of issuance of such Standby Letter of Credit), (c) the aggregate amount of Reimbursement Obligations in respect of Standby Letters of Credit issued in Dollars which have not then been paid pursuant to subsection 3.10(a) and (d) (i) the Dollar Equivalent of the aggregate amounts of Reimbursement Obligations in respect of Standby Letters of Credit issued in currencies other than Dollars which have not been reimbursed pursuant to subsection 3.10(a) (such Dollar Equivalent to be calculated as of the date such Reimbursement Obligation becomes due and payable) and which have not been converted into Dollars in accordance with subsection 3.10(a) and (ii) the aggregate amount of Reimbursement Obligations in respect of Standby Letters of Credit issued in currencies other than Dollars which have not been reimbursed pursuant to subsection 3.10(a) and which have been converted into Dollars in accordance with such subsection. "Subordinated Debentures": the Borrower's 9% Senior Subordinated Debentures due 2004 issued pursuant to the Subordinated Debt Indenture. "Subordinated Debt Indenture": the Indenture, dated as of February 15, 1993, between the Borrower and First American National Bank, as trustee, as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Subsidiaries Guarantee": the Second Amended and Restated Subsidiaries Guarantee to be executed and delivered by each Subsidiary Guarantor, substantially in the form of Exhibit B, as the same may be amended, supplemented or otherwise modified from time to time. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantor": each Subsidiary set forth on Schedule 5.13 under the heading "Initial Subsidiary Guarantors", together with each other Subsidiary that becomes a party to the Subsidiaries Guarantee in compliance with subsection 7.11(b). 34 41 "Swing Line Commitment": the lesser of (a) $50,000,000 and (b) the Revolving Credit Commitments then in effect. "Swing Line Lender": Citicorp and any other Lender acceptable to the Administrative Agent that agrees to be a Swing Line Lender. "Swing Line Loans": as defined in subsection 3.14. "Swing Line Note": as defined in subsection 4.13(f). "Tax Code": the Internal Revenue Code of 1986, as amended from time to time. "Telerate Page 3750": the display page currently so designated on the Dow Jones Telerate Service (or such other page as may replace that service for the purpose of displaying comparable rates or prices). "Term Loan": as defined in subsection 2.1. "Term Loan Applicable Margin": for each Type of Term Loan, the rate per annum set forth under the relevant column heading below: ABR Loans Eurodollar Loans --------- ---------------- 1.50% 2.75% "Term Loan Lender": any Lender with Term Loans outstanding hereunder. "Term Loan Maturity Date": July 20, 2001. "Term Note": as defined in subsection 4.13(e). "Trade L/C Fee Rate": at any time the rate per annum equal to 1.25% on the aggregate undrawn amount of Trade Letters of Credit; provided, however, during the continuance of any Event of Default, the Trade L/C Fee Rate shall equal 3.25% per annum. "Trade Letter of Credit": as defined in subsection 3.6(b)(i). "Trade Letter of Credit Outstandings": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Trade Letters of Credit issued in Dollars, (b) the Dollar Equivalent of the aggregate then undrawn and unexpired amount of the then outstanding Trade Letters of Credit issued in currencies other than Dollars (such Dollar Equivalent to be calculated as of the date of issuance of such Letters of Credit), (c) the aggregate amount of Reimbursement Obligations in respect of Trade Letters of Credit issued in Dollars which have not then been paid pursuant to subsection 3.10(a) and (d) (i) the Dollar Equivalent of the aggregate amount of Reimbursement Obligations in respect of Trade Letters of Credit issued in currencies other than Dollars which have not then been paid pursuant to subsection 3.10(a) (such Dollar Equivalent to be calculated as of the date such Reimbursement Obligation becomes due and payable) and which have not been converted into Dollars in accordance with subsection 3.10(a) and (ii) the aggregate amount of Reimbursement 35 42 Obligations in respect of Trade Letters of Credit issued in currencies other than Dollars which have not been reimbursed pursuant to subsection 3.10(a) and which have been converted into Dollars in accordance with such subsection. "Tranche": the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Eurodollar Loans shall originally have been made on the same day). "Transferee": as defined in subsection 11.6(f). "Transaction Costs": the fees, costs and expenses payable by the Borrower in connection with the execution, delivery and performance of the Loan Documents and the transactions contemplated thereby. "Type": as to any Term Loan or Revolving Loan, its nature as an ABR Loan or a Eurodollar Loan. "UCC": the Uniform Commercial Code as in effect in the State of New York from time to time or, where applicable as to specific Collateral, any other relevant state. "UCC Filing Collateral": Collateral (other than fixtures) as to which filing financing statements under the UCC of the applicable jurisdiction is an appropriate method of perfection of a security interest in such Collateral. "UCC Local Filing Collateral": with respect to any State, UCC Filing Collateral located in such State as to which a security interest may be perfected only by filing a UCC financing statement in each county or other local filing office of such State in which such Collateral is located. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended or revised from time to time. "Voting Percentage": as to any Lender (a) at any time prior to the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) such Lender's Revolving Credit Commitment plus (y) the outstanding principal amount of such Lender's Term Loan then constitutes of (ii) the sum of (x) the Revolving Credit Commitments of all the Lenders plus (y) the aggregate principal amount of Term Loans of all the Lenders then outstanding, and (b) at any time after the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) the principal amount of such Lender's Loans (other than Swing Line Loans) then outstanding plus (y) the product of such Lender's Revolving Credit Commitment Percentage times the L/C Obligations and Swing Line Loans then outstanding then constitutes of (ii) the sum of (x) the aggregate principal amount of Loans of all the Lenders then outstanding plus (y) the aggregate L/C Obligations of all the Lenders then outstanding. "Warehouseman's Waiver": a waiver from the owner/operator of a third party warehouse facility in form and substance satisfactory to the Administrative Agent in respect of Inventory of the Borrower and any Subsidiary Guarantor located at such warehouse facility. "Y2K Compliance": the ability of a computer program to (i) record, store, process, calculate, present and, where appropriate, insert time and accurate dates and calculations for 36 43 calendar dates falling on or after (and, if applicable, spans of time including) January 1, 2000, (ii) record, store, process, calculate and present any information and/or data dependent on or relating to such dates in the same manner, and with the same functionality, data integrity and performance, as the Software records, stores, processes, calculates and presents calendar dates on or before December 31, 1999 and in such fashion as to respond to two-digit date input in a way that eliminates all ambiguities as to the century of concern, and treats the year 2000 as a leap-year and correctly and accurately regards and processes data and information with respect thereto, and (iii) lose no functionality with respect to the introduction of records, including but not limited to back-up and archived information and/or data, containing dates falling on or after January 1, 2000 and "Y2K Compliant" has the correlative meaning. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Loan Document or any certificate or other document made or delivered pursuant hereto or thereto. (b) As used herein and in any other Loan Document, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The word "including" shall mean "including, without limitation" unless the context otherwise requires. (e) The meanings given to defined terms herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNTS AND TERMS OF TERM LOANS 2.1 Term Loans. On the Effective Date (i) Term Loans outstanding under the Existing Credit Agreement in an aggregate principal amount of $46,000,000 shall be deemed converted to Revolving Credit Loans, (ii) the balance of the Term Loans outstanding under the Existing Credit Agreement in an aggregate principal amount of $150,000,000 shall be deemed to be Term Loans outstanding under this Agreement and (iii) after giving effect thereto and to the assignments by Citicorp and BankBoston to the other Lenders on the Effective Date, which assignments are without recourse or representation to the assignors, are effected by the execution and delivery of this Agreement by the parties hereto and are agreed to by all of the parties hereto, each Term Loan Lender shall have outstanding a Term Loan owing to it by the Borrower in a principal amount equal to the amount set forth opposite such Lender's name on Schedule 1.1(a). The Term Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsection 4.2. 2.2 Repayment of Term Loans; Amortization. The Borrower hereby agrees to pay interest on the unpaid principal amount of the Term Loans from time to time outstanding from the Effective Date until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 4.4. The principal amount of the Term Loans shall be payable in nine equal quarterly installments, each in an aggregate principal amount equal to $375,000 on the first Business Day of the 37 44 months of January, April, July and October, beginning on April 1, 1999, and a final installment in an aggregate principal amount equal to the remaining principal balance thereof on the Term Loan Maturity Date. The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Term Loans from time to time outstanding from the Effective Date until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 4.4. SECTION 3. AMOUNTS AND TERMS OF REVOLVING CREDIT COMMITMENTS 3.1 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Revolving Credit Lender severally agrees to make revolving credit loans ("Revolving Loans") to the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Revolving Credit Lender's Revolving Credit Commitment Percentage of an amount equal to the sum of (i) the aggregate principal amount of Swing Line Loans then outstanding plus (ii) the then outstanding L/C Obligations (in each case, after giving effect to the use of proceeds of such Revolving Loans), does not exceed the amount of such Revolving Credit Lender's Revolving Credit Commitment, provided that no Revolving Credit Lender shall be required to make a Revolving Loan to the extent that, after giving effect thereto, the Aggregate Outstanding Extensions of Credit at such time would exceed (x) the Borrowing Base at such time or (y) during the period from the Effective Date to the Plan Acceptance Date, $600,000,000 (the "Interim Maximum Amount"). During the Revolving Credit Commitment Period, the Borrower may use the Revolving Credit Commitments by borrowing, prepaying and reborrowing the Revolving Loans in whole or in part, all in accordance with the terms and conditions hereof. (b) The Revolving Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 3.2 and 4.2. (c) On the Effective Date (i) all Revolving Loans under the Existing Credit Agreement and $46,000,000 of principal amount of Term Loans under the Existing Credit Agreement shall be deemed to be Revolving Loans outstanding under this Agreement, (ii) the Revolving Credit Commitments shall be reduced from $700,000,000 to $600,000,000, and (iii) after giving effect thereto and to the assignments by Citicorp and BankBoston of Revolving Loans and Revolving Credit Commitments to the other Lenders on the Effective Date, which assignments are without recourse to or representation by the assignors, are effected by the execution and delivery of this Agreement by the parties hereto and are agreed to by all of the parties hereto, the Revolving Credit Commitment of and the Revolving Loans owed by the Borrower to each Revolving Credit Lender shall be as set forth opposite such Lender's name under the heading "Revolving Credit Commitment" on Schedule 1.1(a). 3.2 Procedure for Revolving Credit Borrowing. The Borrower may borrow under the Revolving Credit Commitments during the Revolving Credit Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Loans are to be initially Eurodollar Loans or (b) one Business Day prior to the requested Borrowing Date, otherwise), which notice may be given by telephone (to be promptly confirmed in writing, including by facsimile), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor. Each borrowing under the Revolving Credit Commitments shall be in an amount equal to (x) in the case of ABR Loans (except as otherwise provided in subsection 3.16(a)), $5,000,000 or a whole multiple of $1,000,000 in 38 45 excess thereof (or, if the then Available Revolving Credit Commitments are less than $5,000,000, such lesser amount) and (y) in the case of Eurodollar Loans, $10,000,000 or a whole multiple of $l,000,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Revolving Credit Lender thereof. Each Revolving Credit Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 11.2 prior to 1:00 P.M., New York City time, on the Borrowing Date requested by the Borrower in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will be made available to the Borrower promptly (but in no event later than 1:00 P.M., New York City time) by the Administrative Agent crediting the account of the Borrower on the books of such office of the Administrative Agent with the aggregate of the amounts made available to the Administrative Agent by the Revolving Credit Lenders and in like funds as received by the Administrative Agent. 3.3 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a non-refundable commitment fee for the period from and including the first day of the Revolving Credit Commitment Period to but not including the Revolving Credit Termination Date, computed at a rate per annum equal to the Applicable Commitment Fee Rate then in effect on the average daily amount of the Available Revolving Credit Commitment of such Revolving Credit Lender during the period (calculated as if no Swing Line Loans were outstanding during such period) for which payment is made, payable monthly in arrears on the last day of each month and on the Revolving Credit Termination Date (whether by stated maturity or otherwise) or such earlier date as the Revolving Credit Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the Effective Date. 3.4 Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than two Business Days' notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the amount of the Revolving Credit Commitments, provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Loans made on the effective date thereof, the aggregate principal amount of the Revolving Loans then outstanding, when added to the then outstanding L/C Obligations and the aggregate principal amount of then outstanding Swing Line Loans, would exceed the Revolving Credit Commitments then in effect. Any such reduction shall be in an amount equal to $10,000,000 or a whole multiple of $l,000,000 in excess thereof and shall reduce permanently the Revolving Credit Commitments then in effect. Upon receipt of any notice pursuant to this subsection 3.4, the Administrative Agent shall promptly notify each Revolving Credit Lender thereof. 3.5 Repayment of Revolving Loans. The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Revolving Credit Lender the then unpaid principal amount of each Revolving Loan of such Revolving Credit Lender on the Revolving Credit Termination Date (or such earlier date on which the Revolving Loans become due and payable pursuant to Section 9). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Revolving Loans from time to time outstanding from the Effective Date until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 4.4. 3.6 L/C Commitment. (a) Subject to the terms and conditions hereof, each Issuing Bank, in reliance on the agreements of the other Lenders set forth in subsection 3.9(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by such Issuing Bank; provided that no Issuing Bank shall have any obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations at such time would exceed the L/C Commitment, (ii) the Standby Letter of Credit Outstandings at such time would exceed 39 46 $100,000,000, (iii) the Aggregate Revolving Credit Outstandings at such time would exceed the aggregate amount of the Revolving Credit Commitments at such time, (iv) in the case of Letters of Credit issued in currencies other than Dollars only, the L/C Obligations in respect of Letters of Credit issued in currencies other than Dollars would exceed the Foreign L/C Commitment Sublimit at such time or (v) the Aggregate Outstanding Extensions of Credit at such time would exceed (x) the Borrowing Base at such time or (y) if applicable, the Interim Maximum Amount. (b) Each Letter of Credit shall: (i) be denominated in Dollars or such other currency that as of the date of issuance thereof is in the reasonable judgment of the relevant Issuing Bank (which shall be binding on the L/C Participants) freely convertible or exchangeable into Dollars as the Borrower, the relevant Issuing Bank and the Administrative Agent may from time to time agree, and shall be either (A) a standby letter of credit issued to support obligations of the Borrower or a Subsidiary, contingent or otherwise (a "Standby Letter of Credit"), or (B) a commercial letter of credit issued in respect of the purchase of inventory or other goods or services by the Borrower and its Subsidiaries in the ordinary course of business (a "Trade Letter of Credit"), and (ii) expire no later than the earlier of (A) five Business Days prior to the Revolving Credit Termination Date and (B) one year after the date of issuance thereof, provided that, subject to clause (A) above, any Letter of Credit may, at the request of the Applicant as set forth in the applicable Application, be automatically renewed on each anniversary of the issuance thereof for an additional period of one year or less unless the Issuing Bank which issued such Letter of Credit shall have given at least sixty days prior written notice to the Borrower and the beneficiary of such Letter of Credit that such Letter of Credit will not be renewed, in which case such Letter of Credit may, at the option of the Borrower, provide that the beneficiary of such Letter of Credit will be entitled to draw on such Letter of Credit at any time during the thirty days prior to the expiry thereof. (c) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. (d) No Issuing Bank shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Bank or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. 3.7 Procedure for Issuance of Letters of Credit. An Applicant may from time to time request that an Issuing Bank issue a Letter of Credit by delivering (a) to such Issuing Bank at its address for notices specified herein in such manner as may be agreed by or be reasonably acceptable to such Issuing Bank (including by electronic transmission) an Application therefor, completed to the satisfaction of such Issuing Bank, and such other certificates, documents and other papers and information as such Issuing Bank may reasonably request and (b) a notice to the Administrative Agent that such Letter of Credit has been requested. Upon receipt of any Application, each Issuing Bank agrees to process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall such Issuing Bank be required to issue any Letter of Credit earlier than two Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by such Issuing Bank and the Borrower. Each Issuing Bank shall furnish a copy of each Letter of Credit issued 40 47 by such Issuing Bank to the Borrower and the Administrative Agent promptly following the issuance thereof. 3.8 Letter of Credit Fees, Commissions and Other Charges. (a) The Borrower shall pay to the relevant Issuing Bank with respect to each Letter of Credit issued by such Issuing Bank under this Agreement, for the account of such Issuing Bank, a fronting fee with respect to the period from the date of issuance of such Letter of Credit to the expiration or termination date of such Letter of Credit, computed at a rate per annum equal to 0.375% on the average aggregate amount available to be drawn under such Letter of Credit during the period for which such fee is calculated. Such fronting fee shall be payable monthly in arrears on each L/C Fee Payment Date to occur after the issuance of such Letter of Credit and on the Revolving Credit Termination Date or on such earlier date as the Revolving Credit Commitments shall terminate as provided herein and shall be nonrefundable. (b) The Borrower shall pay to the Administrative Agent, for the account of the L/C Participants, a letter of credit commission with respect to each Trade Letter of Credit issued under this Agreement with respect to the period from the date of issuance of such Trade Letter of Credit to the expiration or termination date of such Letter of Credit, computed at a rate per annum equal to the Trade L/C Fee Rate in effect from time to time on the average aggregate amount available to be drawn under such Trade Letter of Credit during the period for which such fee is calculated. Such commission shall be shared ratably among the L/C Participants in accordance with their respective Revolving Credit Commitment Percentages. Such commission shall be payable in arrears on each L/C Fee Payment Date to occur after the issuance of such Letter of Credit and on the Revolving Credit Termination Date (or on such earlier date as the Revolving Credit Commitments shall terminate as provided herein) and shall be nonrefundable. (c) The Borrower shall pay to the Administrative Agent, for the account of the L/C Participants, a letter of credit commission with respect to each Standby Letter of Credit with respect to the period from the date of issuance of such Standby Letter of Credit to the expiration or termination date of such Letter of Credit, computed at a rate per annum equal to the Standby L/C Fee Rate in effect from time to time on the average aggregate amount available to be drawn under such Standby Letter of Credit during the period for which such fee is calculated. Such commission shall be shared ratably among the L/C Participants in accordance with their respective Revolving Credit Commitment Percentages. Such commission shall be payable in arrears on each L/C Fee Payment Date to occur after the issuance of such Letter of Credit and on the Revolving Credit Termination Date (or on such earlier date as the Revolving Credit Commitments shall terminate as provided herein) and shall be nonrefundable. (d) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse each Issuing Bank for such normal and customary costs and expenses as may be agreed upon by the Borrower and such Issuing Bank in connection with issuing, effecting payment under, amending or otherwise administering any Letter of Credit issued by such Issuing Bank. (e) The Administrative Agent shall, promptly following its receipt thereof, distribute to each Issuing Bank and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 3.9 L/C Participations. (a) Each Issuing Bank irrevocably agrees to grant and hereby grants to each L/C Participant (other than such Issuing Bank), and, to induce such Issuing Bank to issue Letters of Credit hereunder, each such L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from such Issuing Bank, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Credit Commitment Percentage in such Issuing Bank's obligations and 41 48 rights under each Letter of Credit issued by such Issuing Bank hereunder and the amount of each draft paid by such Issuing Bank thereunder. Each such L/C Participant unconditionally and irrevocably agrees with each Issuing Bank that, if a draft is paid under any Letter of Credit issued by such Issuing Bank for which such Issuing Bank is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Administrative Agent for the account of such Issuing Bank upon demand an amount equal to such L/C Participant's Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. (b) If any amount required to be paid by any L/C Participant to any Issuing Bank pursuant to subsection 3.9(a) in respect of any unreimbursed portion of any payment made by such Issuing Bank under any Letter of Credit issued by such Issuing Bank is paid to such Issuing Bank within three Business Days after the date such payment is due, such L/C Participant shall pay to such Issuing Bank on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Rate, during the period from and including the date such payment is required to the date on which such payment is immediately available to such Issuing Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to subsection 3.9(a) is not in fact made available to any Issuing Bank by such L/C Participant within three Business Days after the date such payment is due, such Issuing Bank shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Revolving Credit Loans that are ABR Loans hereunder. A certificate of any Issuing Bank submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after any Issuing Bank has made payment under any Letter of Credit issued by such Issuing Bank and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.9(a), such Issuing Bank receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by such Issuing Bank), or any payment of interest on account thereof, such Issuing Bank will distribute to such L/C Participant its pro rata share thereof. (d) If any payment received by any Issuing Bank pursuant to subsection 3.10 with respect to any Letter of Credit issued by it shall be required to be returned by such Issuing Bank, each L/C Participant shall pay to such Issuing Bank its pro rata share thereof. 3.10 Letter of Credit Reimbursement Obligations. (a) The Borrower agrees to reimburse each Issuing Bank for the amount of (i) any draft paid by such Issuing Bank under any Letter of Credit issued by such Issuing Bank and (ii) any taxes, fees, charges or other costs or expenses reasonably incurred by such Issuing Bank in connection with such payment (including any such costs and expenses related to any conversion of any such amount into Dollars as contemplated by the next succeeding sentence). Except as otherwise agreed by the Borrower and the relevant Issuing Bank, each such payment shall be made to the relevant Issuing Bank at its address for notices specified herein in the currency in which the relevant Letter of Credit was issued in immediately available funds in such currency, provided that if the Borrower does not reimburse the relevant Issuing Bank for any draft paid by such Issuing Bank under any Letter of Credit issued by such Issuing Bank in a currency other than Dollars on the date required pursuant to subsection 3.10(b), such Issuing Bank shall convert such amount into Dollars at the rate of exchange then available to such Issuing Bank in the interbank market where its foreign currency exchange operations in respect of such currency are then being conducted and the Borrower shall thereafter be required to reimburse in Dollars such Issuing Bank for such amount with interest pursuant to subsection 3.10(b). 42 49 (b) If any draft shall be presented for payment under any Letter of Credit issued by any Issuing Bank, such Issuing Bank shall promptly notify the Borrower of the date and amount thereof. The Borrower shall reimburse each Issuing Bank pursuant to subsection 3.10(a) with respect to any drawing under any Letter of Credit issued by such Issuing Bank on (i) the Business Day on which such drawing is paid by such Issuing Bank, if notice of such drawing is given to the Borrower by such Issuing Bank prior to 12:00 Noon, New York City time, on the date such drawing is paid, or (ii) the first Business Day after notice of such drawing is given to the Borrower by the Issuing Bank, if such notice is given after 12:00 Noon, New York City time, on the date such drawing is paid, and, if such drawing is reimbursed after the date of such drawing, interest shall be payable on the amount of such drawing for the period from the date such drawing is paid by the Issuing Bank until reimbursed by the Borrower at the rate then applicable to Revolving Credit Loans that are ABR Loans hereunder. If any amount payable under this subsection is not paid when due, interest shall be payable on such amount from the date such amount becomes payable under this subsection until payment in full thereof at the rate which would be payable on any outstanding ABR Loans which were then overdue. 3.11 Obligations Absolute. (a) The Borrower's obligations under this Section 3 in respect of Letters of Credit shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower or any Applicant may have or have had against any Issuing Bank or any beneficiary of any Letter of Credit. (b) The Borrower also agrees with each Issuing Bank that such Issuing Bank shall not be responsible for, and the Borrower's Reimbursement Obligations shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any dispute between or among the Borrower, any Applicant and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of the Borrower or any Applicant against any beneficiary of such Letter of Credit or any such transferee. (c) No Issuing Bank shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit issued by such Issuing Bank, except for errors or omissions caused by such Issuing Bank's gross negligence or willful misconduct. (d) The Borrower agrees that any action taken or omitted by any Issuing Bank under or in connection with any Letter of Credit issued by such Issuing Bank or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the UCC and the Uniform Customs, shall be binding on the Borrower and shall not result in any liability of such Issuing Bank to the Borrower. 3.12 Letter of Credit Payments. The responsibility of each Issuing Bank to the Borrower in connection with any draft presented for payment under any Letter of Credit issued by such Issuing Bank shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. 3.13 Letter of Credit Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3 or any other terms of this Agreement or any other Loan Document, the provisions of this Section 3 shall apply and such inconsistent provision of such Application shall be of no force and effect. 3.14 Swing Line Commitment. Subject to the terms and conditions hereof, each Swing Line Lender, in reliance on the agreements of the other Lenders set forth in subsection 3.16, 43 50 agrees to make swing line loans ("Swing Line Loans") to the Borrower from time to time during the Revolving Credit Commitment Period, provided that (a) no Swing Line Lender shall have any obligation to make a Swing Line Loan if, after giving effect to any such Swing Line Loans and the use of proceeds thereof, (i) the aggregate principal amount of Swing Line Loans then outstanding would exceed the Swing Line Commitment, (ii) the Aggregate Revolving Credit Outstandings at such time would exceed the Revolving Credit Commitments in effect at such time or (iii) the Aggregate Outstanding Extensions of Credit at such time would exceed (x) the Borrowing Base at such time or (y) if applicable, the Interim Maximum Amount, and (b) all borrowings and prepayments of Swing Line Loans shall be made such that the aggregate principal amount of Swing Line Loans of each Swing Line Lender outstanding at any time shall be equal. During the Revolving Credit Commitment Period, the Borrower may use the Swing Line Commitment by borrowing, prepaying and reborrowing the Swing Line Loans in whole or in part, all in accordance with the terms and conditions hereof. All Swing Line Loans shall be ABR Loans. 3.15 Procedure for Swing Line Borrowing. The Borrower may borrow under the Swing Line Commitment during the Revolving Credit Commitment Period on any Business Day, provided that the Borrower shall give the relevant Swing Line Lender and the Administrative Agent irrevocable notice (which notice may be given by telephone (to be promptly confirmed in writing, including by facsimile) and must be received by the Swing Line Lender prior to 1:00 P.M. New York City time) on the requested Borrowing Date specifying the amount of the requested Swing Line Loan which shall be in an aggregate minimum amount of $l,000,000 or a whole multiple of $100,000 in excess thereof (or, if less, the unused portion of the Swing Line Commitment). The proceeds of the Swing Line Loan will be made available by the relevant Swing Line Lender to the Borrower at the office of the Swing Line Lender by 4:00 P.M., New York City time, on the Borrowing Date by crediting the account of the Borrower at such office with such proceeds. The Borrower may at any time and from time to time, subject to subsection 3.14, prepay the Swing Line Loans, in whole or in part, without premium or penalty, by notifying (which notice may be given by telephone (to be promptly confirmed in writing, including by facsimile)) the relevant Swing Line Lender and the Administrative Agent prior to 2:00 P.M., New York City time, on any Business Day of the date and amount of prepayment. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. Partial prepayments shall be in an aggregate principal amount of $100,000 or a whole multiple of $100,000 in excess thereof. 3.16 Refunding of Swing Line Loans; Participations in Swing Line Loans. (a) Except as otherwise provided in subsection 3.16(f), in the event that (i) the aggregate average daily outstanding principal amount of Swing Line Loans during any weekly period ending on Thursday (or, in the event Thursday is not a Business Day, on the next succeeding Business Day) of any week exceeds $30,000,000, and (ii) the principal amount of Swing Line Loans outstanding on the last day of such period exceeds $30,000,000, the Borrower shall, or the Administrative Agent may, on behalf of the Borrower (which hereby irrevocably authorizes the Administrative Agent to act on its behalf in such regard) request each Revolving Credit Lender to make a Revolving Loan (which shall be an ABR Loan) in an amount equal to such Lender's Revolving Credit Commitment Percentage of the amount by which the aggregate outstanding principal amount of Swing Line Loans on the last day of such period exceeds $20,000,000, regardless of whether the conditions set forth in subsection 6.2 have been satisfied in connection therewith. The Swing Line Lenders may, on behalf of the Borrower (which hereby authorizes the Swing Line Lenders to act on its behalf in such regard), at any time request each Revolving Credit Lender (including the Swing Line Lenders) to make a Revolving Credit Loan (which shall be an ABR Loan) in an amount equal to such Lender's Revolving Credit Commitment Percentage of the aggregate principal amount of Swing Line Loans then outstanding, regardless of whether the conditions set forth in subsection 6.2 have been satisfied in connection therewith. Unless any of the events described in paragraph (f) of Section 9 shall have occurred with respect to the Borrower (in which event the procedures of paragraph (c) of this subsection 3.16 shall apply) each Lender shall make 44 51 the proceeds of its Revolving Loan available to the Administrative Agent for the account of the relevant Swing Line Lender at the Administrative Agent's office specified in or pursuant to subsection 11.2 prior to 11:00 A.M., New York City time, in funds immediately available in Dollars on the Business Day next succeeding the date such notice is given. The proceeds of such Revolving Loans shall be immediately applied to repay the relevant Swing Line Loan. Effective on the day such Revolving Loans are made, the relevant Swing Line Loan so paid shall no longer be outstanding as a Swing Line Loan and shall no longer be due under the Swing Line Note. The Borrower authorizes each Swing Line Lender, upon written notice to the Borrower, to charge the Borrower's accounts with such Swing Line Lender (up to the amount available in each such account) in order to immediately pay the amount of its outstanding Swing Line Loans to the extent amounts received from the Lenders are not sufficient to repay in full such outstanding Swing Line Loans. (b) Notwithstanding anything herein to the contrary, and except as provided in subsection 3.16(f), no Swing Line Lender shall make any Swing Line Loans if the Swing Line Lender has received written notice that the conditions set forth in subsection 6.2 have not been satisfied in connection with the making of such Swing Line Loans and no Swing Line Lender shall otherwise be required to determine that, or take notice whether, the conditions precedent set forth in subsection 6.2 have been satisfied in connection with the making of any Swing Line Loan. (c) If prior to the making of a Revolving Loan pursuant to subsection 3.16(a) one of the events described in paragraph (f) of Section 9 shall have occurred and be continuing with respect to the Borrower, each Lender will, on the date such Revolving Loan was to or would have been made pursuant to the notice in subsection 3.16(a), purchase an undivided participating interest in the outstanding Swing Line Loans in an amount equal to (i) its Revolving Credit Commitment Percentage times (ii) the aggregate principal amount of Swing Line Loans then outstanding. Each Lender will immediately transfer to the Swing Line Lender, in immediately available funds, the amount of its participation. (d) Whenever, at any time after any Lender has purchased a participating interest in a Swing Line Loan, any Swing Line Lender receives any payment on account thereof, such Swing Line Lender will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded), provided, that in the event that such payment received by such Swing Line Lender is required to be returned, such Lender will return to such Swing Line Lender any portion thereof previously distributed by such Swing Line Lender to it. (e) Each Lender's obligation to make the Revolving Loans referred to in subsection 3.16(a) and to purchase participating interests pursuant to subsection 3.16(c) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any setoff, counterclaim, recoupment, defense or other right which such Lender or the Borrower may have against the relevant Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default, (iii) any adverse change in the condition (financial or otherwise) of the Borrower, (iv) any breach of this Agreement or any other Loan Document by the Borrower, any Subsidiary or any other Lender, or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (f) (i) The Administrative Agent may, as a Swing Line Lender hereunder, from time to time, after the occurrence and during the continuance of any Default or Event of Default, and subject to clause (C) of this subsection 3.16(f), and notwithstanding the requirements of subsections 6.2(a) and 6.2(b), make such disbursements and advances pursuant to the Loan Documents, in the form of Swing Line Loans, which the Administrative Agent, in its sole discretion, deems necessary or desirable to preserve or protect the Collateral or any portion thereof or to enhance the likelihood or 45 52 maximize the amount of repayment of the Loans and other Credit Agreement Obligations; provided that, after giving effect to any such Swing Line Loans and the use of proceeds thereof, (A) the aggregate principal amount of Swing Line Loans then outstanding would not exceed the Swing Line Commitment, (B) the Aggregate Revolving Credit Outstandings at such time would not exceed the Revolving Credit Commitment in effect at such time and (C) the Aggregate Outstanding Extensions of Credit at such time would not exceed (x) the Borrowing Base at such time or (y) if applicable, the Interim Maximum Amount (collectively, "Protective Advances"). The Administrative Agent shall notify the Borrower and each Lender in writing of such Protective Advance. All outstanding principal of, and interest on, the Protective Advances shall constitute Credit Agreement Obligations secured by the Collateral until paid in full by the Borrower. 3.17 Annual Revolving Credit Clean-Down. The Borrower agrees that during the period beginning on December 1 of each calendar year and ending on the following February 28 of the next calendar year, there shall be a period of at least 30 consecutive days during which the sum of the aggregate principal amount of all outstanding Loans shall not exceed $400,000,000. 3.18 Other Fees. The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates set forth in the Fee Letter dated January 7, 1999 from Citicorp and Salomon Smith Barney Inc, to the Borrower, and accepted by the Borrower on the same date. SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT 4.1 Optional and Mandatory Prepayments. (a) Subject to subsection 4.1(e), the Borrower may, at any time and from time to time, prepay the Loans, in whole or in part, without premium or penalty (except, with respect to Eurodollar Loans that are prepaid on a date other than the last day of the Interest Period with respect thereto, as provided under subsection 4.11), upon (i) in the case of prepayments of Eurodollar Loans, at least three Business Days' irrevocable notice (which notice may be given by telephone (to be promptly confirmed in writing, including by facsimile) to the Administrative Agent and (ii) in the case of prepayments of ABR Loans (other than Swing Line Loans), irrevocable notice (which notice may be given by telephone (to be promptly confirmed in writing, including by facsimile)) to the Administrative Agent prior to 11:30 A.M., New York City time, on the date of such prepayment, in each case specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice the Administrative Agent shall promptly notify each affected Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 4.11 in connection therewith and, in the case of prepayments of the Term Loans only, accrued interest to such date on the amount prepaid. Amounts prepaid on account of the Term Loans may not be reborrowed and will be applied to the installments thereof in the scheduled order of maturity thereof. Partial prepayments under this subsection 4.1(a) shall be, in the case of Eurodollar Loans, in an aggregate principal amount of $10,000,000 or a whole multiple of $1,000,000 in excess thereof and in the case of ABR Loans, in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. (b) If, at any time, the Aggregate Outstanding Extensions of Credit at such time exceed (x) the Borrowing Base at such time or (y) if applicable, the Interim Maximum Amount, the Borrower shall, without notice or demand, immediately repay Swing Line Loans then outstanding and/or, after the Swing Line Loans have been paid in full, Revolving Loans in an aggregate principal amount equal to the lesser of (i) the amount of such excess and (ii) the aggregate principal amount of Swing Line Loans and Revolving Loans then outstanding, together with interest accrued to the date of 46 53 such payment or prepayment on the principal so prepaid and any amounts payable under subsection 4.11 in connection therewith. To the extent that after giving effect to any prepayment of Swing Line Loans and Revolving Loans required by the preceding sentence, the Aggregate Outstanding Extensions of Credit at such time exceed the Borrowing Base at such time or the Interim Maximum Amount, if applicable, the Borrower shall, without notice or demand, immediately deposit in the Collateral Account upon terms reasonably satisfactory to the Administrative Agent an amount equal to the lesser of (i) the aggregate then outstanding L/C Obligations and (ii) the amount of such remaining excess. The Administrative Agent shall apply any cash deposited in the Collateral Account (to the extent thereof) to pay any Reimbursement Obligations which become due thereafter. To the extent that after giving effect to any prepayment of the Revolving Loans and cash deposits required by the preceding sentences, the Aggregate Outstanding Extensions of Credit at such time exceed the Borrowing Base at such time or the Interim Maximum Amount, if applicable, the Borrower shall, without notice or demand, immediately repay the Term Loans in the scheduled order of maturity thereof in an aggregate principal amount equal to the lesser of (i) the amount of such excess and (ii) the aggregate principal amount of Term Loans then outstanding, together with interest accrued to the date of such payment or prepayment on the principal so prepaid and any amounts payable under subsection 4.11 in connection therewith. The Borrower shall also prepay the Revolving Loans to the extent required to comply with subsection 3.16. (c) (i) The Borrower shall prepay the Term Loans and, if there are no Term Loans outstanding, the Revolving Loans, within three Business Days after the receipt by the Borrower or any Restricted Subsidiary of any Debt Issuance Proceeds in an amount equal to such Debt Issuance Proceeds. (ii) Subject to subsection 4.1(e), the Borrower shall repay the Revolving Loans, within three Business Days after the receipt by the Borrower or any Restricted Subsidiary of any Asset Sale Proceeds in respect of the Collateral, in an amount equal to such Asset Sale Proceeds, and concurrently therewith the Cumulative Asset Sale Reserve shall be increased by 50% of the positive difference between (A) the amount of such Asset Sale Proceeds and (B) the amount of such Asset Sale Proceeds which were included in the Borrowing Base immediately prior to such disposition. (d) Subject to subsection 4.1(e), the Borrower agrees that all available funds in the Collateral Account (except for Asset Sale Proceeds and Debt Issuance Proceeds) shall be applied first, pro rata, to the amount of the Swing Line Loans and any Reimbursement Obligations then outstanding, next to the outstanding principal amount of the Revolving Loans, then (i) on any Business Day that any funds are on deposit in the Collateral Account and no Default or Event of Default has occurred and is continuing, the Borrower may direct the Administrative Agent to transfer to the Borrower's disbursement account funds up to the difference between the Borrowing Base as reflected in the most recent Borrowing Base Certificate and 100% of the remaining Secured Obligations and (ii) on any Business Day that any funds are on deposit in the Collateral Account and a Default or Event of Default has occurred and is continuing, the Borrower may direct the Administrative Agent to transfer to the Borrower's disbursement account funds up to the difference between the Borrowing Base as reflected in the most recent Borrowing Base Certificate and 105% of the remaining Secured Obligations. The Borrower shall utilize funds on deposit in the Collateral Account that are available to it pursuant to the terms hereof prior to requesting Revolving Loans to be made hereunder. (e) The Borrower agrees that, (i) to the extent there are Asset Sale Proceeds as a result of the sale of any Eligible Mortgaged Real Property located within the State of Florida, such Asset Sale Proceeds shall only be applied in repayment of the Term Loans, and (ii) to the extent the Borrowing Base includes any Eligible Mortgaged Real Property located in the State of Florida, the Term Loans may not be reduced, as a result of the operation of subsection 4.1, by an amount less than 47 54 the aggregate Mortgage Value with respect to all such parcels of Eligible Mortgaged Real Property which are located within the State of Florida. The Mortgage Value of Eligible Mortgaged Real Property located in the State of Florida as of the date hereof is shown on Schedule 4.1(e). 4.2 Conversion and Continuation Options. (a) The Borrower may, subject to paragraph (b) below, elect from time to time to convert Eurodollar Loans to ABR Loans by giving the Administrative Agent irrevocable notice of such election prior to 1:00 P.M., New York City time, three Business Days prior to the date of conversion, which notice may be given by telephone (to be promptly confirmed in writing, including by facsimile), provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent irrevocable notice of such election prior to 1:00 P.M., New York City time, three Business Days prior to the date of conversion, which notice may be given by telephone (to be promptly confirmed in writing, including by facsimile). Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each affected Lender thereof. All or any part of outstanding Eurodollar Loans and ABR Loans may be converted as provided herein, provided that (i) no ABR Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and (ii) no ABR Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Revolving Credit Termination Date (in the case of conversions of Revolving Loans) or prior to the Term Loan Maturity Date (in the case of conversions of Term Loans). (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Eurodollar Loans, which notice may be given by telephone (to be promptly confirmed in writing, including by facsimile), provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has notified the Borrower that it has determined that such a continuation is not appropriate or (ii) after the date that is one month prior to the Revolving Credit Termination Date (in the case of continuations of Revolving Loans) or prior to the Term Loan Maturity Date (in the case of continuations of Term Loans), and provided further, that if the Borrower shall fail to give such notice or if such continuation is not permitted such Eurodollar Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. Upon receipt of any notice pursuant to this subsection 4.2(b), the Administrative Agent shall notify each affected Lender thereof. 4.3 Minimum Amounts and Maximum Number of Tranches. All borrowings, conversions and continuations of Eurodollar Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of Eurodollar Loans comprising each Tranche shall be equal to $10,000,000 or a whole multiple of $l,000,000 in excess thereof. In no event shall there be more than 20 Tranches outstanding at any time. 4.4 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such Interest Period plus (i) in the case of Eurodollar Loans which are Revolving Loans, the Revolving Credit Applicable Margin or (ii) in the case of Eurodollar Loans which are Term Loans, the Term Loan Applicable Margin. 48 55 (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus (i) in the case of ABR Loans which are Revolving Loans, the Revolving Credit Applicable Margin or (ii) in the case of ABR Loans which are Term Loans, the Term Loan Applicable Margin. (c) Each Swing Line Loan shall bear interest at a rate per annum equal to (i) the ABR plus the Revolving Credit Applicable Margin for ABR Loans. (d) Notwithstanding the rate of interest specified in this subsection 4.4 or elsewhere herein, effective immediately upon the occurrence of any Event of Default and for so long thereafter as such Event of Default is continuing, the principal balance of all Loans shall bear interest at a rate per annum which is the rate that would otherwise be applicable thereto pursuant to this Agreement plus 2% per annum. If all or a portion of (i) any interest payable on any Loan, (ii) any commitment fee or (iii) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is the rate described in paragraph (b)(i) of this subsection plus 2%, in each case from the date of such non-payment until such overdue interest, commitment fee or other amount is paid in full (as well after as before judgment). (e) Interest shall be payable in arrears on each Interest Payment Date, provided that (i) interest accruing pursuant to subsection 4.4(d) shall be payable from time to time on demand, (ii) interest on the Term Loans shall also be payable on the Term Loan Maturity Date (or such earlier date on which the Term Loans become due and payable pursuant to Section 9) and (iii) interest on the Revolving Loans shall also be due and payable on the Revolving Credit Termination Date (or such earlier date on which the Revolving Loans become due and payable pursuant to Section 9). 4.5 Computation of Interest and Fees. (a) Commitment fees and, whenever it is calculated on the basis of Citibank's prime rate, interest shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; and otherwise interest and fees and commissions in respect of Letters of Credit shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the affected Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the affected Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be presumed correct in the absence of manifest error. (c) Each Lender shall use its best efforts to furnish quotations of rates to the Administrative Agent as contemplated hereby. If any of the Lenders shall be unable or shall otherwise fail to supply such rates to the Administrative Agent upon its request, the rate of interest shall, subject to the provisions of this subsection 4.5, be determined on the basis of the quotations of the remaining Lenders or Lender. 4.6 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or 49 56 (b) the Administrative Agent shall have received notice from any Lender that the making or continuation of any Eurodollar Loan has become impracticable as a result of a contingency occurring after the date hereof which materially and adversely affects the London interbank market, the Administrative Agent shall give facsimile or telephonic notice thereof to the Borrower and the affected Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any ABR Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans which the Borrower has requested to continue as such pursuant to subsection 4.2(b) shall be converted, on the first day of such Interest Period, to ABR Loans, provided that, in the case of clause (b) above, only the Eurodollar Loan of a Lender which delivers a notice pursuant to such clause shall be subject to this sentence and the following sentence. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert ABR Loans to Eurodollar Loans. 4.7 Pro Rata Treatment and Payments. (a) Except as otherwise provided in subsections 3.6 through 3.16, all payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 1:00 P.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Revolving Credit Lenders or the Term Loan Lenders, as the case may be, at the Administrative Agent's office specified in or pursuant to subsection 11.2 (except as otherwise provided herein) in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders entitled to receive the same promptly upon receipt in like funds as received. If any payment hereunder (other than payments on Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal. Interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its portion of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's portion of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans hereunder, on demand, from the Borrower. (c) Each borrowing by the Borrower of Revolving Loans shall be made ratably from the Revolving Credit Lenders in accordance with their respective and Revolving Credit Commitment Percentages. Any reduction of the Revolving Credit Commitments shall be made ratably 50 57 among the Lenders, in accordance with their respective Revolving Credit Commitment Percentages. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Loans then held by the Revolving Credit Lenders. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Term Loans shall be made pro rata according to the respective outstanding principal amounts of the Term Loans then held by the Term Loan Lenders. 4.8 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, such Lender shall give prompt notice thereof to the Borrower and the Administrative Agent and thereafter (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be suspended during the period of illegality and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 4.11. 4.9 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof shall increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit or reduce any amount receivable hereunder in respect thereof including any such cost or reduced amount receivable resulting from (i) any tax of any kind whatsoever with respect to this Agreement, any Note, any Eurodollar Loan, any Letter of Credit issued or participated in by it or any Application, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 4.10 and changes in the rate of tax on the overall gross or net income of such Lender) or (ii) any reserve, special deposit, compulsory loan or singular requirement against assets held by deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder, then, in any such case, within 15 days after demand therefor (accompanied by the certificate contemplated by subsection 4.9(c) with respect thereto) the Borrower shall pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand therefor (accompanied by the certificate contemplated by subsection 4.9(c) with respect thereto), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. 51 58 (c) If any Lender becomes entitled to claim any additional amounts pursuant to this subsection 4.9, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled, provided that no Lender shall be entitled to claim any such additional amount (i) with respect to the period which is more than 180 days prior to the delivery of such notice or (ii) if such Lender shall not seek as a result of such event payment of any similar amounts from at least one other borrower to whom it has extended credit. A certificate as to any additional amounts payable pursuant to this subsection 4.9 submitted by such Lender to the Borrower (with a copy to the Administrative Agent) setting forth in reasonable detail the calculation of such amounts and the basis therefor shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 4.10 Indemnification for Taxes. (a) All payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise and excise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Note, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection 4.10. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (i) in the case of a Lender or a Transferee that is a "bank" under Section 881(c)(3)(A) of the Tax Code: (A) on or before the date it becomes a party to this Agreement (or, in the case of a Participant, on or before the date such Participant becomes a Participant hereunder), deliver to the Borrower and the Administrative Agent (I) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or 52 59 successor applicable form, as the case may be, and (II) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be; (B) deliver to the Borrower and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and (C) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; and (ii) in the case of a Lender or a Transferee that is not a "bank" under Section 881(c)(3)(A) of the Tax Code: (A) on or before the date it becomes a party to this Agreement (or, in the case of a Participant, on or before the date such Participant becomes a Participant hereunder), deliver to the Borrower and the Administrative Agent (I) a statement under penalties of perjury that such Lender or Transferee (x) is not a "bank" under Section 881(c)(3)(A) of the Tax Code, is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements, (y) is not a 10-percent shareholder within the meaning of Section 881(c)(3)(B) of the Tax Code and (z) is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Tax Code and (II) a properly completed and duly executed internal Revenue Service Form W-8 or applicable successor form; (B) deliver to the Borrower and the Administrative Agent two further properly completed and duly executed copies of such Form W-8, or any successor applicable form, on or before the date that any such Form W-8 expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower or upon the request of the Borrower; and (C) obtain such extensions of time for filing and completing such forms or certifications as may be reasonably requested by the Borrower or the Administrative Agent; unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8 or W-9 provided pursuant to subsection 4.10(b)(i)(A)(II) that it is entitled to an exemption from United States backup withholding tax. Each Person that shall become a Lender or a Participant pursuant to subsection 11.6 shall, upon the effectiveness of the related transfer, be required 53 60 to provide all of the forms and statements required pursuant to this subsection, provided that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased. 4.11 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or reasonable expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans, after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar Loan, after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment or conversion of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto, which loss shall be equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid or converted, or not so borrowed, converted or continued, for the period from the date of such prepayment or conversion or of such failure to borrow, convert or continue to the last day of such Interest Period (or proposed Interest Period), respectively, in each case at the applicable Eurodollar Rate (exclusive of any Revolving Credit Applicable Margin or Term Loan Applicable Margin) for such Eurodollar Loans provided for herein over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market (it being understood that the Borrower shall not be required to indemnify any Lender for lost profits). A certificate as to any amounts payable pursuant to this subsection 4.11 submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 4.12 Change of Lending Office. Each Lender agrees that if it makes any demand for payment under subsection 4.9 or 4.10(a), or if any adoption or change of the type described in subsection 4.8 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for the Borrower to make payments under subsection 4.9 or 4.10(a), or would eliminate or reduce the effect of any adoption or change described in subsection 4.8. 4.13 Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from the Loans of such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (b) The Administrative Agent shall maintain the Register pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder, the Type thereof and each Interest Period (if any) applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (c) The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 4.13(a) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans in accordance with the terms of this Agreement. 54 61 (d) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note of the Borrower evidencing the Revolving Loans of such Lender, substantially in the form of Exhibit D (each, "Revolving Credit Note"), payable to the order of such Lender. Each Lender is hereby authorized to record the date, Type and amount of each Revolving Loan of such Lender, the date and amount of each payment or prepayment of principal thereof, each continuation of all or a portion thereof as the same Type, each conversion of all or a portion thereof to another Type and, in the case of Eurodollar Loans, the length of each Interest Period and Eurodollar Rate with respect thereto, on the schedule (or any continuation of the schedule) annexed to and constituting a part of its Revolving Credit Note, as the case may be, and any such recordation shall, to the extent permitted by applicable law, constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure to make any such recordation (or any error therein) shall not affect the obligation of the Borrower to repay (with applicable interest) the Revolving Loans in accordance with the terms of this Agreement. (e) The Borrower agrees that, upon the request to the Administrative Agent by any Term Loan Lender, the Borrower will execute and deliver to such Term Loan Lender a promissory note of the Borrower evidencing the Term Loan of such Term Loan Lender, substantially in the form of Exhibit E (a "Term Note"), payable to the order of such Term Loan Lender and in a principal amount equal to, the outstanding Term Loan of such Term Loan Lender. Each Term Loan Lender is hereby authorized to record the date, Type and amount of the Term Loan of such Term Loan Lender, the date and amount of each payment or prepayment of principal thereof, each continuation of all or a portion thereof as the same Type, each conversion of all or a portion thereof to another Type and, in the case of Eurodollar Loans, the length of each Interest Period and Eurodollar Rate with respect thereto, on the schedule (or any continuation of the schedule) annexed to and constituting a part of its Term Note, as the case may be, and any such recordation shall, to the extent permitted by applicable law, constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure to make any such recordation (or any error therein) shall not affect the obligation of the Borrower to repay (with applicable interest) the Term Loans in accordance with the terms of this Agreement. (f) The Borrower agrees that, upon the request to the Administrative Agent by any Swing Line Lender, the Borrower will execute and deliver to such Swing Line Lender a promissory note of the Borrower evidencing the Swing Line Loans of such Swing Line Lender, substantially in the form of Exhibit F (a "Swing Line Note"), payable to the order of such Swing Line Lender and in a principal amount equal to the Swing Line Commitment. Each Swing Line Lender is hereby authorized to record the date and amount of each Swing Line Loan made by it and the date and amount of each payment or prepayment of principal thereof on the schedule (or any continuation of the schedule) annexed to and constituting a part of its Swing Line Note, as the case may be, and any such recordation shall, to the extent permitted by applicable law, constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure to make any such recordation (or any error therein) shall not affect the obligation of the Borrower to repay (with applicable interest) the Swing Line Loans in accordance with the terms of this Agreement. SECTION 5. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Lenders to enter into this Agreement and to make or continue to make the Extensions of Credit, the Borrower hereby represents and warrants to the Administrative Agent and each Lender that: 5.1 Financial Condition. The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at December 28, 1997 and the related consolidated statements of income 55 62 and retained earnings and cash flows for the Fiscal Year ended on such date, reported on by Deloitte & Touche, copies of which have heretofore been furnished to each Lender, are complete and correct in all material respects and present fairly the consolidated financial condition of the Borrower and its Consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the Fiscal Year then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 30, 1998 and the related unaudited consolidated statements of, financial condition, income and retained earnings and cash flows for the nine-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Except as set forth on Schedule 5.1, neither the Borrower nor any of its Consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation not permitted under subsection 8.2, material contingent liability or liability for taxes, or any material long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto. Except as set forth on Schedule 5.1, during the period from December 28, 1997 to and including the date hereof, there has been no sale, transfer or other disposition by the Borrower or any of its Consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any capital stock of any other Person) material in relation to the consolidated financial condition of the Borrower and its Consolidated Subsidiaries at December 28, 1997. 5.2 No Change. Except as set forth on Schedule 5.2, since September 30, 1998, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. 5.3 Existence; Compliance with Law. Each of the Borrower and its Restricted Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation, foreign limited liability company or foreign limited partnership, as the case may be, and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except, in each case, where the failure to be so organized, existing, in good standing or qualified, or the failure to have such power or authority or to so comply, could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.4 Power; Authorization; Enforceable Obligations. Each of the Borrower and its Restricted Subsidiaries has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and (in the case of the Borrower) to borrow and obtain the other Extensions of Credit hereunder and has taken all necessary corporate or other action to authorize the Extensions of Credit on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to, or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the Extensions of Credit hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents to which the Borrower or any of its Restricted Subsidiaries is a party except as may be necessary to perfect the 56 63 Liens created pursuant to the Security Documents, except as described on Schedule 5.4 and except those which have been obtained, made or waived. This Agreement has been, and each other Loan Document will be, duly executed and delivered on behalf of the Borrower and each of its Restricted Subsidiaries that is a party thereto. This Agreement constitutes, and each other Loan Document when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower and each of its Restricted Subsidiaries that is a party thereto enforceable against the Borrower and each such Restricted Subsidiary in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 5.5 No Legal Bar. The execution, delivery and performance of the Loan Documents to which the Borrower or any of its Restricted Subsidiaries is a party, the Extensions of Credit hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Borrower or of any of its Restricted Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation (other than pursuant to the Loan Documents), except as of any date after the Effective Date, to the extent (a) that any such violations (individually or in the aggregate) could not reasonably be expected to have a Material Adverse Effect and (b) that any such Liens would otherwise be permitted under subsection 8.3. 5.6 No Material Litigation. Except as set forth on Schedule 5.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Restricted Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby or (b) which could reasonably be expected to have a Material Adverse Effect. 5.7 No Default. As of the date hereof, except as set forth on Schedule 5.7, neither the Borrower nor any of its Restricted Subsidiaries is in default under or with respect to any of its Contractual Obligations, and no other party is in default under or with respect to any Contractual Obligation in respect of Indebtedness or other obligations greater than $1,000,000 owed to the Borrower or any of its Restricted Subsidiaries. As of any date after the Effective Date, except as set forth on Schedule 5.7, (i) neither the Borrower nor any of its Restricted Subsidiaries is in default under or with respect to any Contractual Obligation in respect of Indebtedness or other obligations greater than $1,000,000, and (ii) no other party is in default under or with respect to any Contractual Obligation in respect of Indebtedness or other obligations greater than $1,000,000 owed to the Borrower or any of its Restricted Subsidiaries, in each case which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 5.8 No Burdensome Restrictions. Except as set forth on Schedule 5.8, no Requirement of Law or Contractual Obligation of the Borrower or any of its Restricted Subsidiaries could reasonably be expected to have a Material Adverse Effect. 5.9 Taxes. Each of the Borrower and its Restricted Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property (including, without limitation, any Material Real Property) and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any such tax returns, taxes, fees or other charges (i) the amount or validity of which are then being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be, 57 64 or (ii) which, if not paid or filed, could not reasonably be expected to have a Material Adverse Effect); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge (other than with respect to any such tax, fee or other charge the amount or validity of which is then being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be) which could reasonably be expected to have a Material Adverse Effect. 5.10 Federal Regulations. No part of the proceeds of any Extension of Credit will be used in violation of Regulation U and in no event shall "margin stock" constitute 25% or more of the assets of the Borrower and its Restricted Subsidiaries that are subject to the restrictions contained in Section 8. 5.11 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Tax Code or Section 302 of ERISA) which could reasonably be expected to have a Material Adverse Effect has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan. Each Plan has complied in all material respects with the applicable provisions of ERISA and the Tax Code, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. No termination of a Single Employer Plan has occurred, except where such a termination could not reasonably be expected to have a Material Adverse Effect, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plan) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits, except to the extent any such excess (individually or in the aggregate) could not reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, except where such withdrawal could not reasonably be expected to have a Material Adverse Effect, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made, except where such liability could not reasonably be expected to have a Material Adverse Effect. No such Multiemployer Plan is in Reorganization or Insolvency. 5.12 Investment Company Act; Other Regulations. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. To the best knowledge of the Borrower, the Borrower is not subject to regulation under any federal or state statute or regulation (other than Regulation X) which limits its ability to incur Indebtedness. 5.13 Subsidiaries. Schedule 5.13 sets forth all the Subsidiaries of the Borrower at the date hereof. 5.14 Environmental Matters. To the knowledge of the Borrower, except as set forth on Schedule 5.14: (a) The Mortgaged Properties do not contain any Materials of Environmental Concern in amounts or concentrations or under such conditions which (i) constitute a violation of, or (ii) could reasonably be expected to give rise to liability under, any Environmental Law, except in either case insofar as such violation or liability, or any aggregation thereof, could not reasonably be expected to have a Material Adverse Effect. 58 65 (b) The Mortgaged Properties and all operations at the Mortgaged Properties are in compliance, and have within the periods covered by the applicable statute of limitations been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Mortgaged Properties or violation of any Environmental Law with respect to the Mortgaged Properties or the business operated by the Borrower or any of its Restricted Subsidiaries at the Mortgaged Properties (the "Business"), except for any such noncompliance, contamination or violation (or any aggregation thereof) which could not reasonably be expected to have a Material Adverse Effect. (c) Neither the Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, noncompliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Mortgaged Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened, except insofar as such notice or threatened notice, or any aggregation thereof, does not involve a matter or matters that could reasonably be expected to have a Material Adverse Effect. (d) Materials of Environmental Concern have not been transported or disposed of from the Mortgaged Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Mortgaged Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, could not reasonably be expected to have a Material Adverse Effect. (e) No judicial proceeding or governmental or administrative action is pending or threatened under any Environmental Law to which the Borrower or any Restricted Subsidiary is or could reasonably be expected to be named as a party with respect to the Mortgaged Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Mortgaged Properties or the Business except insofar as such proceeding, action, decree, order or other requirement, or any aggregation thereof, could not reasonably be expected to have a Material Adverse Effect. (f) There has been no release or threat of release of Materials of Environmental Concern at or from the Mortgaged Properties, or arising from or related to the operations of the Borrower or any Restricted Subsidiary in connection with the Mortgaged Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under Environmental Laws except insofar as any such violation or liability referred to in this paragraph, or any aggregation thereof, could not reasonably be expected to have a Material Adverse Effect. (g) Each of the representations and warranties set forth in subsections 5.14(a) through (f) is true and correct with respect to each parcel of real property owned or operated by the Borrower or any of its Restricted Subsidiaries (other than the Mortgaged Properties) except to the extent that the facts and circumstances giving rise to any such failure to be so true and correct could not reasonably be expected to have a Material Adverse Effect. 5.15 The Security Documents. (a) The provisions of the Security Agreement are effective to create in favor of the Administrative Agent a legal and valid security interest in all right, title and interest of the Borrower or any Subsidiary Guarantor party thereto in the collateral described 59 66 therein (subject to Section 10 thereof), and, pursuant to the financing statements referred to in Schedule 5.15, the Administrative Agent has a fully perfected security interest in all right, title and interest of the Borrower or such Subsidiary Guarantor, as the case may be, in all "accounts", "chattel paper", "inventory", "investment property" or "general intangibles" (each as defined in the applicable UCC) described in such financing statements, all other UCC Filing Collateral (other than UCC Local Filing Collateral) described in such financing statements and all UCC Local Filing Collateral described in such financing statements, in each case superior (to the extent that priority can be obtained by filing UCC financing statements) in right to any Liens of any third person against such collateral or interests therein, subject only to Liens permitted under subsection 8.3; (b) The provisions of the Pledge Agreement, together with possession by the Administrative Agent (or any agent acting on its behalf) of the Pledged Securities described therein (or, in the case of Pledged Securities constituting "securities" (as defined in the applicable UCC), together with the "transfer" to the Administrative Agent (or any agent acting on its behalf) of such Pledged Securities in accordance with the applicable UCC) (or any other appropriate method for the perfection of the security interest in such Pledged Securities in accordance with the applicable UCC), are effective to create in favor of the Administrative Agent a legal and valid security interest in all right, title and interest of the Borrower or any Subsidiary Guarantor party thereto, as the case may be, in the Pledged Securities (subject to Section 14 of the Pledge Agreement). Thereafter, the Administrative Agent will have a fully perfected security interest in the Pledged Stock and all other Pledged Securities described in the Pledge Agreement which are then in the possession of the Administrative Agent (or any agent acting on its behalf) (or, in the case of Pledged Securities constituting "securities" (as defined in the applicable UCC), which have been "transferred" to the Administrative Agent (or any agent acting on its behalf) in accordance with the applicable UCC (or the security interest in which has otherwise been perfected in accordance with the applicable UCC)), which security interest is (i) in the case of Pledged Stock, superior in right to any Liens of any third person against such collateral or interests therein, subject to Section 14 of the Pledge Agreement and to Liens permitted under subsection 8.3(a) and (ii) in the case of all other Pledged Securities, superior (to the extent that priority can be obtained by possession or "transfer" (or any other appropriate method for the perfection in accordance with the applicable UCC) of such other Pledged Securities) in right to any Liens of any third person against such collateral or interests therein, subject to Section 14 of the Pledge Agreement and to Liens permitted by subsection 8.3(a); and (c) Following the execution and delivery of Mortgage Assignments relating thereto, each Mortgage will be effective to create in favor of the Administrative Agent, a legal, valid and enforceable Lien on all right, title and interest of the Borrower or any Subsidiary Guarantor party thereto, as the case may be, in the Mortgaged Property thereunder. When each Mortgage and Mortgage Assignment and the related fixture filings are duly recorded in the appropriate office or offices and any mortgage recording fees and taxes in respect thereof have been paid and compliance is otherwise had with the formal requirements of state law applicable to the recording of real estate mortgages generally, such Mortgage will constitute a fully perfected Lien on and security interest in that portion of the Mortgaged Property constituting real property or fixtures (prior to all mortgages on the Mortgaged Property other than those which have been assigned to the Administrative Agent and those in existence on the Effective Date), subject only to the encumbrances and exceptions to title expressly set forth or referred to in such Mortgage, and to Liens permitted by subsection 8.3; subject, in the case of clauses (a) through (c) above, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and to principles of equity whether considered in a proceeding in equity or at law. 5.16 Ownership of Property; Liens. Each of the Borrower and each Restricted Subsidiary has good title in fee simple to, or valid ground leasehold interests in, their respective 60 67 Material Real Properties and has good title in fee simple to their other owned real property and valid ownership interests in their owned personal property, in each case that is material to the operation of their respective businesses, subject to defects in title and leasehold and other interests which are not material to the business, operations and financial condition of the Borrower and its Restricted Subsidiaries taken as a whole and other than those items referred to in the applicable Mortgages or in the schedules to the applicable Mortgages, and none of such property is subject to any Lien other than Liens permitted under subsection 8.3. 5.17 Intellectual Property. The Borrower and each of its Restricted Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). Except as set forth on Schedule 5.17, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, which could reasonably be expected to have a Material Adverse Effect, nor does the Borrower know of any valid basis for any such claim. Except as set forth on Schedule 5.17, to the Borrower's knowledge, the use of such Intellectual Property by the Borrower and its Restricted Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 5.18 Pledged Stock. As of the date hereof, the shares of Capital Stock listed on Schedule A to the Pledge Agreement will constitute all the issued and outstanding shares of Capital Stock of the issuers thereof listed on said Schedule that are owned by the Borrower or the Subsidiary Guarantors party to the Pledge Agreement; all such shares have been duly and validly issued and are fully paid and nonassessable; the relevant Pledgor of said shares is the record and beneficial owner of said shares; and said shares are free of any Liens or options in favor of, or claims of, any other Person, except the Lien of the Pledge Agreement (subject to Section 14 thereof) and Liens permitted under subsection 8.3(a). 5.19 Real Estate Matters. The real property described on Schedule 5.19 constitutes all of the Material Real Property of the Borrower or any Subsidiary Guarantor on the date hereof. 5.20 [Reserved] 5.21 Purpose of Loans; Use of Proceeds. The proceeds of the Revolving Loans, and Swing Line Loans will be used to pay Transaction Costs, to provide working capital from time to time for the Borrower and its subsidiaries and for other general corporate purposes. 5.22 Accuracy of Information. All statements and other information (other than statements and information constituting projections or forward-looking statements) contained in any written documents or other materials provided to the Administrative Agent and the Lenders by the Borrower are, when taken as a whole, correct in all material respects and do not contain any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made. All statements and other information constituting projections which are contained in any written documents or other materials provided to the Administrative Agent and the Lenders by the Borrower were prepared based on good faith estimates and assumptions of the Borrower believed to be reasonable at the time such projections were prepared. 61 68 5.23 Depositary Accounts. Schedule 5.23 sets forth a true and complete list of all bank accounts maintained by the Borrower and its Restricted Subsidiaries as of the date hereof. 5.24 Senior Indebtedness. All Secured Obligations owing by the Borrower under the Loan Documents constitute "Senior Indebtedness" under and as defined in the Subordinated Debt Indenture. No Indebtedness (other than the Secured Obligations owing by the Borrower under the Loan Documents) has been designated as "Designated Senior Debt" under the Subordinated Debt Indenture. 5.25 Y2K Compliance. Except as disclosed on Schedule 5.25, the Borrower (a) has reviewed the areas within its operations and the operations of its Subsidiaries that utilize computers; (b) has completed the development of a program for testing whether all computer systems necessary for the current operation of its business and the business of its Subsidiaries taken as a whole are Y2K Compliant; (c) has tested all such computer systems for Y2K compliance and furnished to the Administrative Agent a written report of the results thereof; (d) has developed a written course of action to make all the computer systems utilized by it or any of its Subsidiaries and necessary for the business of the Borrower and its Subsidiaries taken as a whole Y2K Compliant and furnished to the Administrative Agent a copy thereof; (e) has identified all the changes, modifications and corrections indicated in the course of action referred to in clause (d) above; (f) has identified those of its customers, suppliers and others who are critical to its business and that of its Subsidiaries taken as a whole or with whom it electronically transmits or receives data and inquired of them as to whether the computer systems utilized by such customers, suppliers and others and critical for their operations are Y2K Compliant, and summarized the results of such inquiries in a written report, a copy of which it has furnished to the Administrative Agent; (g) has tested each computer system necessary to the business of the Borrower and its Subsidiaries taken as a whole interfacing with customers, suppliers and others identified pursuant to clause (f) above; (h) has implemented all the changes, modifications and corrections required by the tests refereed to in clause (g) above; (i) has developed a written contingency plan for action to be taken by the Borrower and its Subsidiaries in the event that any of the computer systems utilized by it in its business and the business of its Subsidiaries or by the customers, suppliers and others identified pursuant to clause (f) above and critical for their operations is not Y2K Compliant; and (j) has no reason to believe and does not believe that it will be unable to complete the testing or make the modifications not yet completed that are shown on Schedule 5.25 or implement any contingency plan referred to in clause (i) above except for any inability that will not have a Material Adverse Effect. 62 69 5.26 Subordinated Debentures and Senior Note Indenture . As of the Effective Date, the Borrower has delivered to the Administrative Agent a complete and correct copy of the Subordinated Debt Indenture and the Senior Notes Indenture. The subordination provisions of the Subordinated Debentures are enforceable against the holders of the Subordinated Debentures by the Administrative Agent and the Lenders. SECTION 6. CONDITIONS 6.1 Conditions to Effectiveness. This Agreement shall become effective upon satisfaction or waiver of the following conditions (except that subsection 11.21(b) shall become effective upon satisfaction of the condition set forth in subsection 6.1(q)): (a) Execution of Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Borrower, with a counterpart for the Administrative Agent and each Lender, (ii) each of the Security Documents, each executed and delivered by a duly authorized officer of each Loan Party that is a party thereto, with a copy for each Lender, and (iii) the Subsidiaries Guarantee, executed and delivered by a duly authorized officer of each Subsidiary Guarantor that is a party thereto, with a copy for each Lender. (b) Closing Certificate. The Administrative Agent shall have received, with a copy for each Lender, a certificate of the Borrower, dated the Effective Date, substantially in the form of Exhibit G, with appropriate insertions and attachments, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (c) Corporate Proceedings of the Borrower. The Administrative Agent shall have received, with a copy for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party (ii) the Extensions of Credit contemplated hereunder and (iii) the granting by it of the Liens created pursuant to the Security Documents, certified by the Secretary or an Assistant Secretary of the Borrower as of the Effective Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (d) [Reserved] (e) Borrower Incumbency Certificate. The Administrative Agent shall have received, with a copy for each Lender, a certificate of the Borrower, dated the Effective Date, as to the incumbency and signature of the officers of the Borrower executing any Loan Document reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (f) Corporate Proceedings of Subsidiaries. The Administrative Agent shall have received, with a copy for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors or sole shareholder of each Restricted Subsidiary which is a party to a Loan Document authorizing (i) the execution, delivery and performance of the Loan Documents to which it is a party and (ii) the granting by it of the Liens created pursuant to the Security Documents to which it is a party certified by the Secretary or an Assistant Secretary of each such Subsidiary as of the Effective Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. 63 70 (g) Subsidiary Incumbency Certificates. The Administrative Agent shall have received, with a copy for each Lender, a certificate of each Restricted Subsidiary of the Borrower which is a party to a Loan Document, dated the Effective Date, as to the incumbency and signature of the officers of such Subsidiary acknowledging and consenting to the execution and delivery of this Agreement by the Borrower, reasonably satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of such Subsidiary. (h) Fees. The Administrative Agent, the Collateral Monitoring Agent, the Arranger and Book Manager and each Lender shall have received or concurrently receive the Transaction Costs payable on or prior to the Effective Date (including, without limitation, the reasonable legal fees of counsel to the Existing Administrative Agent) and the Administrative Agent shall have been reimbursed for all expenses for which invoices have been presented to the Borrower. (i) Legal Opinions. The Administrative Agent shall have received, with a copy for each Lender, the following executed legal opinions: (i) the executed legal opinion of Shearman & Sterling, counsel to the Borrower and the other Loan Parties, substantially in the form of Exhibit H-1; (ii) the executed legal opinion of counsel in each of the jurisdictions listed on Schedule 6.1(i), which opinions shall be substantially to the effect set forth in Exhibit H-2 (with such modifications thereto as are reasonably acceptable to the Administrative Agent) and otherwise be reasonably satisfactory in form and substance to the Administrative Agent (it being understood that certain matters of New York law required to be covered pursuant to this clause (ii) may be covered by the opinion delivered pursuant to clause (i) above); and (iii) such other legal opinions as the Administrative Agent may reasonably require. (j) UCC Filings. The Administrative Agent shall have received evidence in form and substance reasonably satisfactory to them that all the filings described in Schedule 5.15 shall have been completed (or arrangements, reasonably satisfactory to the Administrative Agent, for the completion thereof shall have been made). (k) Assignments of Mortgages. The Administrative Agent shall have received Mortgage Assignments, each executed and delivered by a duly authorized officer of the party thereto, with respect to each parcel of Material Real Property listed in Part I of Schedule 5.19 other than with respect to a parcel of Material Real Property not subject to an Original Mortgage to the extent the Administrative Agent so agrees (any such parcel of Material Real Property to become subject to a Mortgage as soon after the Effective Date as the Administrative Agent shall reasonably require) (it being understood and agreed that certain Mortgages executed in connection with the Existing Credit Agreement are being amended in connection with this Agreement (such amendments to be in form and substance reasonably satisfactory to the Administrative Agent) and that all Mortgages delivered pursuant to the Existing Credit Agreement, and the credit agreement amended and restated by the Existing Credit Agreement, as amended, shall satisfy the requirements of this Agreement with respect to the parcels of Material Real Property subject thereto). (l) Lien Searches. The Administrative Agent shall have received the results of a recent search in the jurisdictions listed on Schedule 6.1(l) of the UCC, judgment and tax lien filings (as indicated on such Schedule) which may have been filed with respect to personal property of the 64 71 Borrower and the Subsidiary Guarantors, and the results of such search shall be reasonably satisfactory to the Administrative Agent. (m) [Reserved]. (n) No Material Adverse Change. Except as set forth on Schedule 5.2, there shall have occurred no material adverse change in the business, condition (financial or otherwise), operations, performance or properties of the Borrower and its subsidiaries since September 30, 1998. (o) No Litigation. There shall exist no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that, if adversely determined, could reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower and its subsidiaries. (p) Consents and Approvals. All governmental and third party consents and approvals necessary in connection with the Credit Facility and grant of security interests shall have been obtained (without the imposition of any conditions that are not reasonably acceptable to the Lenders) and shall remain in effect; and no law or regulation shall be applicable in the reasonable judgment of the Lenders that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby. (q) Insurance and Bonding. The Lenders shall be satisfied with the amount, types and terms and conditions of all insurance and bonding maintained by the Borrower and its subsidiaries, and the Lenders shall have received endorsements naming the Administrative Agent, on behalf of the Lenders, as an additional insured and loss payee under all insurance policies to be maintained with respect to the properties of the Borrower and its Subsidiaries forming part of the Lenders' Collateral. (r) [Reserved] (s) Flood Insurance. To the extent required by applicable law, the Administrative Agent shall have received (i) evidence of a policy of flood insurance which (A) covers any parcel of Material Real Property subject to a first priority Mortgage located in an area identified as an area having special flood hazards by the Secretary of Housing and Urban Development or other applicable agency, and (B) otherwise complies with such applicable law and (ii) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board of Governors. (t) Management Restructuring Consultant. The Borrower shall have retained the Management Restructuring Consultant. (u) [Reserved] (v) Payment of Obligations under the Existing Credit Agreement. On the Effective Date the Company shall have paid all interest, fees and expenses accrued under the Existing Credit Agreement through the Effective Date whether or not due and payable on the Effective Date. (w) CIBC Amendment and Waiver. The Administrative Agent shall have received an amendment and waiver from Canadian Imperial Bank of Commerce, New York Agency ("CIBC") in respect of that certain Amended and Restated Reimbursement Agreement dated as of October 25, 1994, as amended (the "Reimbursement Agreement"), by and among the Borrower, certain 65 72 of its Subsidiaries, the lenders party thereto, and CIBC as agent, waiving any defaults which may have occurred or may presently exist under the Reimbursement Agreement and amending certain of the covenants and terms thereunder, which amendment and waiver shall be in form and substance reasonably acceptable to the Administrative Agent in its sole discretion exercised commercially reasonably. (x) FANB Amendment and Waiver. The Administrative Agent shall have received an amendment and waiver from First American National Bank ("FANB") in respect of that certain Indenture dated as of February 15, 1993, as amended (the "Indenture"), by and among the Borrower, as issuer, and FANB, as trustee, waiving any defaults which may have occurred or may presently exist under the Indenture and amending certain of the covenants and terms thereunder, which amendment and waiver shall be in form and substance reasonably acceptable to the Administrative Agent in its sole discretion exercised commercially reasonably. (y) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. 6.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any Extension of Credit requested to be made by it on any date (including, without limitation, its initial Extension of Credit) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by the Loan Parties in or pursuant to Section 5 and in or pursuant to the other Loan Documents shall be true and correct in all material respects and as of such date as if made on and as of such date, except to the extent such representations and warranties related to a specific earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date, provided, that if such earlier date is the "date hereof", such representation and warranty shall also be true and correct in all material respects on and as of the Effective Date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Extension of Credit requested to be made on such date. (c) Borrowing Base. After giving effect to the Extensions of Credit requested to be made on any such date and the use of proceeds thereof, the Aggregate Outstanding Extensions of Credit at such time shall not exceed the Borrowing Base at such time or the Interim Maximum Amount, if applicable. (d) No Legal Impediment. The making of the Loans on such date does not violate any Requirement of Law and is not enjoined, temporarily, preliminarily or permanently. (e) Borrowing Base Certificate. The Administrative Agent shall have received a Borrowing Base Certificate, executed and delivered by a duly authorized officer of the Borrower. (f) Interim Reserve Amount. From and after the first anniversary of the date hereof, the Interim Reserve Amount shall have been reduced to zero in accordance with the definition of Interim Reserve Amount. 66 73 Each Extension of Credit to the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that, except to the extent waived in accordance with this Agreement, the conditions contained in this subsection have been satisfied. SECTION 7. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any Letter of Credit remains outstanding or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Restricted Subsidiaries to: 7.1 Financial Statements. Furnish to the Administrative Agent with a copy for each Lender: (a) as soon as available, but in any event within 90 days after the end of each Fiscal Year of the Borrower, a copy of the consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures as of the end of and for the previous Fiscal Year, reported on without a qualification as to the scope of the audit, by Deloitte & Touche or other independent certified public accountants of nationally recognized standing, together with a copy of the Borrower's Form 10-K filed with the SEC for such Fiscal Year; (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each Fiscal Year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its Consolidated Subsidiaries for such quarter and the portion of the Fiscal Year through the end of such quarter, setting forth in each case in comparative form the figures for the previous Fiscal Year as set forth in the Borrower's Form 10-Q filed with the SEC for such quarterly period, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); (c) as soon as available, but in any event not later than 30 days after the end of each fiscal month (other than a fiscal month which is also the end of a quarterly period), an unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries in summary form as at the end of such fiscal month and the related unaudited consolidated statement of income of the Borrower and its Consolidated Subsidiaries in summary form for such fiscal month, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); (d) as soon as available, but in any event not later than 60 days after the commencement of each Fiscal Year, an annual review of the results of operations for the preceding Fiscal Year setting forth a comparison to the projections of the operating budget and cash flow budget for such preceding Fiscal Year delivered to the Lenders and containing a discussion in reasonable detail of any material differences therein; and (e) as soon as available, but in any event not later than 120 days after the Effective Date, the Business Plan. All such financial statements referred to in paragraphs (a) and (b) above shall be complete and correct in all material respects (subject to, in the case of the financial statements referred to in paragraph (b) 67 74 above, normal year-end adjustments) and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). The financial statements referred to in paragraph (c) above shall be prepared in summary form and otherwise in a manner consistent with the Borrower's current internal reporting practices. 7.2 Certificates; Other Information. Furnish to the Administrative Agent with a copy for each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 7.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default under subsection 8.1, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 7.1(a) and (b), a certificate of a Responsible Officer (i) stating that such Responsible Officer has obtained no knowledge of any Default or Event of Default with respect to the period covered by such financial statements except as specified in such certificate and (ii) setting forth, in reasonable detail, a calculation of the financial covenants set forth in subsection 8.1 for the period corresponding to such financial statements; (c) on or prior to Thursday of each week, an officer's certificate as of the previous Sunday substantially in the form of Exhibit I (a "Borrowing Base Certificate"), certified by a Responsible Officer as true and correct, provided that any reserves of the types described in the definition of "Borrowing Base" shall be calculated and/or revised in each Borrowing Base Certificate delivered on the Reserve Calculation Date, and provided, further, that as to each Borrowing Base Certificate, (A) Available Cash Equivalents shall be calculated as of the date of delivery of the Borrowing Base Certificate, and (B) In-Transit Cash shall be calculated as of the date immediately preceding the date of delivery of the Borrowing Base Certificate. (d) concurrently with the delivery of the financial statements referred to in subsections 7.1(a) and (b), a certificate of a Responsible Officer setting forth a list of all stores and distribution centers owned or leased and classified as owned by the Borrower or any of its Restricted Subsidiaries for which a certificate of occupancy or a temporary certificate of occupancy has been issued during the period covered by such financial statements; (e) not later than (i) 90 days after the beginning of each Fiscal Year of the Borrower (or in the case of the 1999 Fiscal Year, 120 days after the Effective Date), a copy of the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for such Fiscal Year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of assumptions believed to have been reasonable when made and (ii) 45 days after the first day of the third fiscal quarter of such fiscal year, a certificate of a Responsible Officer updating such projections and budgets for any significant changes since the delivery thereof; (f) promptly after the same are sent, copies of all financial statements and reports which the Borrower sends to its stockholders, and promptly after the same are filed, copies of all reports on Form 8-K which the Borrower may make to, or file with, the SEC; and 68 75 (g) promptly, such additional financial, Collateral and other information and business reports as the Agents (on their own behalf or on behalf of any Lender) may from time to time reasonably request. 7.3 Payment of Obligations. Except as set forth on Schedule 7.3, pay, discharge or otherwise satisfy (whether by exchange, compromise, settlement or similar satisfaction of such obligations) at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be, and except where the failure to so pay, discharge or otherwise satisfy such obligation could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 7.4 Maintenance of Existence; Compliance with Contractual Obligations and Requirements of Law. Except as set forth on Schedule 7.4, preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to subsection 8.4 and except where the failure to maintain such rights, privileges and franchises could not, in the aggregate, reasonably be expected to have a Material Adverse Effect; comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 7.5 Maintenance of Property; Insurance. Keep its property necessary in its business in good working order and condition, ordinary wear and tear excepted, if the failure to do so could reasonably be expected to have a Material Adverse Effect; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the same general area by similar companies of comparable size engaged in the same or a similar business and owning or operating similar properties in localities where the Borrower and its Restricted Subsidiaries operate and furnish upon the written request of the Administrative Agent information as to the insurance carried. 7.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and, upon reasonable prior written notice, permit representatives of the Administrative Agent or the Majority Lenders to visit and inspect any of its properties and examine and make abstracts from the books of account of the Borrower and its Restricted Subsidiaries at any reasonable time and as often as may reasonably be desired and, during normal business hours, to discuss the business, operations, properties and financial and other condition of the Borrower and its Restricted Subsidiaries with officers and employees of the Borrower and its Restricted Subsidiaries and, in the presence of a Responsible Officer, with its independent certified public accountants. 7.7 Notices. Promptly upon a Responsible Officer becoming aware thereof, give notice to the Administrative Agent (which shall promptly give notice thereof to each Lender) of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Restricted Subsidiaries which could reasonably be expected to have a Material Adverse Effect or (ii) litigation, investigation or proceeding which may exist at any time between the 69 76 Borrower or any of its Subsidiaries and any Governmental Authority, which could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $20,000,000 or more to the extent not covered by insurance or in which injunctive or similar relief is sought which, in any such case, could reasonably be expected to have a Material Adverse Effect; (d) the following events, as soon as administratively practicable and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan which, in any case, could reasonably be expected to have a Material Adverse Effect or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan which, in any case, could reasonably be expected to have a Material Adverse Effect; and (e) if the Borrower or any of the Subsidiary Guarantors cease to perform cycle counts in accordance with historical practices. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 7.8 Environmental Laws. (a) Comply with all applicable Environmental Laws and obtain and comply in all material respects with and maintain any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except in any such case to the extent that failure to do so could not be reasonably expected to have a Material Adverse Effect. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect. 7.9 Further Assurances. Upon the request of the Administrative Agent at any time, promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all documents (including, without limitation, financing statements and continuation statements) for filing under the provisions of the UCC or any other Requirement of Law which are necessary or, in the reasonable opinion of the Administrative Agent, advisable to maintain in favor of the Administrative Agent Liens on the Collateral that are duly perfected (to the extent that the same are contemplated to be so perfected under the terms of the Loan Documents) in accordance with all applicable Requirements of Law. 70 77 7.10 Mortgages; Etc. (a) With respect to any parcel of Material Real Property acquired after the Effective Date or any parcel of property that initially qualifies as a parcel of Material Real Property after the Effective Date (other than any parcel of Excluded Property), within 90 days thereafter (or, if the Borrower intends to incur secured Indebtedness permitted under subsection 8.3(g), within 180 days thereafter), execute and deliver to the Administrative Agent a Mortgage with respect to such parcel of Material Real Property unless a Lien is granted in favor of third parties on such parcel of Material Real Property pursuant to subsection 8.3(g), (i), (j), (k), (q) or (r) or such parcel of Material Real Property has been sold. (b) With respect to each parcel of real property described on Schedule 7.10(b) ("Excluded Properties"), execute and deliver to the Administrative Agent a Mortgage with respect to such parcel of Excluded Property unless a Lien is granted in favor of one or more third parties on such parcel of Excluded Property pursuant to subsection 8.3(f), (g), (i), (j), (k), (q) or (r) or the consent of any lessor of such parcel of Excluded Property that is subject to a ground lease is required and not obtained. (c) With respect to any parcel of Eligible Mortgaged Real Property as of the Effective Date that initially qualifies for inclusion in the Borrowing Base as a parcel of Eligible Mortgaged Real Property, on or before 30 days after the Effective Date (or such later date as agreed by the Administrative Agent) the Borrower shall use reasonable best efforts to deliver or perform each of the post-closing requirements listed on Schedule 7.10(c) (the "Post Closing Real Estate Requirements"); provided that the Borrower or a Subsidiary Guarantor shall comply with clauses (4) and (5) on Schedule 7.10(c) regardless of whether such Mortgaged Property is Eligible Mortgaged Real Property. 7.11 Additional Collateral. (a) Subject to the terms of the Reimbursement Agreement, with respect to any assets acquired after the Effective Date by the Borrower or any Subsidiary Guarantor that are intended to be subject to the Lien created by any of the Security Documents but which are not so subject (other than any assets described in subsection 7.10 or paragraph (b), (c) or (d) of this subsection), promptly (and in any event within 30 days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments to the relevant Security Documents or such other documents as the Administrative Agent shall reasonably deem necessary or advisable to grant to the Administrative Agent a Lien on such assets, (ii) take all actions reasonably deemed necessary or advisable by the Administrative Agent to cause such Lien to be duly perfected (to the extent contemplated therein and in the other Loan Documents) in accordance with all applicable Requirements of Law, including, without limitation the filing of financing statements in such jurisdictions as may be requested by the Administrative Agent (it being agreed that no action shall be required pursuant to this clause (ii) to perfect a Lien (1) in assets that would not constitute UCC Filing Collateral or (2) in assets constituting UCC Filing Collateral if such perfection relates to assets constituting UCC Filing Collateral with an aggregate book value of less than $1,000,000), and (iii) with respect to assets constituting UCC Filing Collateral with a book value in excess of $1,000,000 that are perfected under the laws of any jurisdiction, if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (b) With respect to any Person that, subsequent to the Effective Date, becomes a Domestic Subsidiary (other than a Credit Card Subsidiary) promptly: (i) execute and deliver to the Administrative Agent a new pledge agreement or such amendments to the relevant Pledge Agreement as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent a Lien on the Capital Stock of such Domestic Subsidiary which is owned by the Borrower or any of its Subsidiaries, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the 71 78 pledgor thereof, (iii) cause such new Domestic Subsidiary (A) to become a party to the Subsidiaries Guarantee and the Subsidiaries Security Agreement, in each case pursuant to documentation which is in form and substance satisfactory to the Administrative Agent, and (B) to take all actions reasonably deemed necessary or advisable by the Administrative Agent to cause the Lien created by the Subsidiaries Security Agreement to be duly perfected (to the extent contemplated therein and in the other Loan Documents) in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be requested by the Administrative Agent (it being agreed that no action shall be required pursuant to this clause (iii) to perfect a Lien in assets that would not constitute UCC Filing Collateral or in assets constituting UCC Filing Collateral if such perfection relates to assets constituting UCC Filing Collateral with an aggregate book value of less than $1,000,000) and (iv) with respect to assets of any such Domestic Subsidiary with a book value in excess of $l,000,000 that are perfected under the laws of any jurisdiction, if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (c) With respect to any Person that, subsequent to the Effective Date, becomes a Foreign Subsidiary with a net worth in excess of $l,000,000 or Inventory with a book value in excess of $1,000,000, promptly upon the request of the Administrative Agent: (i) execute and deliver to the Administrative Agent a new pledge agreement or such amendments to the relevant Pledge Agreement as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent a Lien on the Capital Stock of such Subsidiary which is owned by the Borrower or any of its Subsidiaries (provided that in no event shall more than 65% of the Capital Stock of any such Subsidiary be required to be so pledged) and (ii) deliver to the Administrative Agent any certificates representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, and take or cause to be taken all such other actions under the law of the jurisdiction of organization of such Foreign Subsidiary as may be necessary or advisable to perfect such Lien on such Capital Stock. (d) If the Borrower or any Subsidiary Guarantor shall acquire any Investment Securities (other than Investment Securities of any issuer aggregating less than $1,000,000) such Loan Party shall deliver certificates representing such Investment Securities to the Administrative Agent or its agent or custodian (or otherwise "transfer" such Investment Security (within the meaning of the applicable UCC) to the Administrative Agent or its agent or custodian (or take such other action as shall be required to perfect the security interest of the Collateral in accordance with the applicable UCC)), together with, when necessary or appropriate, undated powers as provided in Section 2(b) of the Pledge Agreement, to be held by the Administrative Agent (or its agent or custodian) as Pledged Securities, subject to the terms of the Pledge Agreement, as collateral security for the Secured Obligations. 7.12 Management Restructuring Consultant. Unless the Administrative Agent determines in its sole discretion that a management restructuring consultant is no longer required, upon the resignation of the Management Restructuring Consultant, the Borrower shall be required to retain another management restructuring consultant with duties and responsibilities substantially the same as the Management Restructuring Consultant and otherwise satisfactory to the Administrative Agent within 30 Business Days after such resignation. 7.13 Business Plans and Projections. Furnish to the Administrative Agent annual updates of the Borrower's Business Plan and financial projections and, not later than each August 31, an update of the Borrower's Business Plan and financial projections through the following January 31st. 72 79 7.14 Depositary Account and Payments System; Cash Dominion. The Borrower shall establish a depositary account and payments system reasonably satisfactory to the Administrative Agent, all as more fully described in the Master Collateral Agreement, enter into cash management arrangements reasonably satisfactory to the Administrative Agent with respect to cash dominion, and make arrangements in respect of Securities Accounts; provided, that if within 30 days after the Effective Date the Borrower is unable to establish a depositary account and payment system or cash management arrangements satisfactory to the Administrative Agent with any particular financial institution, the Administrative Agent may direct the Borrower to relocate, and the Borrower promptly shall relocate, its depositary accounts from such financial institution to another financial institution willing to establish such a depository account and payments system and cash management arrangements as are satisfactory to the Administrative Agent in its sole discretion acting commercially reasonably. 7.15 Ongoing Y2K Reports. The Borrower will certify to the Administrative Agent each month that the representation and warranty contained in subsection 5.25 remains true and correct and, if exceptions are set forth on Schedule 5.25, the progress made during the preceding month with respect to the elimination thereof will in any event eliminate the exception set forth on Schedule 5.25 with respect to clauses (e) and (f) of Schedule 5.25 by March 31, 1999, to clauses (g) and (h) of Schedule 5.25 by June 30, 1999 and to clauses (i) and (j) of Schedule 5.25 by September 30, 1999. 7.16 Securing of Waivers. The Borrower will use its best efforts to obtain such Customs Broker Waivers, Landlord Lien Waivers and Warehouseman's Waivers as the Administrative Agent shall request in writing in its sole discretion exercised commercially reasonably and in accordance with customary business practices. The covenants in this Section 7 are subject to amendment and revision as mutually agreed between the Borrowers and the Agents in accordance with subsection 11.23. SECTION 8. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect or any Letter of Credit remains outstanding or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower shall not, and (except in the case of subsection 8.1) shall not permit any of its Restricted Subsidiaries to, directly or indirectly: 8.1 Financial Condition Covenants. (a) [Reserved]. (b) Capital Expenditures. For each Fiscal Year described below, make cumulative Capital Expenditures in any fiscal period of such Fiscal Year in an aggregate and cumulative year-to-date amount in excess of the amount set forth next to such fiscal period: MAXIMUM CUMULATIVE FISCAL PERIOD CAPITAL EXPENDITURE ------------- ------------------- 1999: 1st Quarter $20,000,000 2nd Quarter 35,000,000 3rd Quarter 45,000,000 4th Quarter 50,000,000 73 80 2000: 1st Quarter 20,000,000 2nd Quarter 35,000,000 3rd Quarter 45,000,000 4th Quarter 50,000,000 2001: 1st Quarter 20,000,000 2nd Quarter 35,000,000 3rd Quarter 45,000,000 4th Quarter 50,000,000 provided, however, for any Fiscal Year in which the Capital Expenditures made by the Borrower and its Restricted Subsidiaries are less than the amount permitted pursuant hereto, the Capital Expenditure limit for the next Fiscal Year shall be increased by 50% of the difference between the amount permitted pursuant hereto for such Fiscal Year and such actual Capital Expenditures made during such Fiscal Year, and the expenditures of such excess may be made at any time during the applicable carry-forward Fiscal Year. Notwithstanding the foregoing, no Capital Expenditures shall be made if, before or after giving effect to the making of such Capital Expenditure, a Default or Event of Default then exists or thereafter would exist. 8.2 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) the Subsidiaries Guarantee and any Guarantee Obligations arising under any of the other Loan Documents; (b) Guarantee Obligations in existence on the Effective Date and (i) set forth on Schedule 8.2(b) or (ii) otherwise not exceeding $5,000,000 in the aggregate; (c) Guarantee Obligations of the Borrower or any Restricted Subsidiary of obligations (other than the Subordinated Debentures) of any Restricted Subsidiary or the Borrower which obligations are otherwise permitted under this Agreement; (d) Guarantee Obligations entered into in connection with surety, appeal, payment and performance bonds (and other obligations of a like nature) incurred in the ordinary course of business; (e) subject to subsection 8.8(e), Guarantee Obligations of the Borrower or any Restricted Subsidiary of Indebtedness or other obligations incurred in the ordinary course of business of Subsidiaries that are not Subsidiary Guarantors (including, without limitation, obligations in respect of indemnifications on behalf of Credit Card Subsidiaries as contemplated by the proviso to the definition of Credit Card Subsidiaries, to the extent such obligations constitute Guarantee Obligations); provided that the aggregate amount of the Indebtedness or other obligations shall not exceed (i) in the case of Indebtedness and other obligations in respect of non-Credit Card Program obligations, together with Investments permitted pursuant to subsection 8.8(e), $10,000,000 and (ii) in the case of Indebtedness and other obligations in respect of Credit Card Program obligations, together with Investments permitted pursuant to subsection 8.8(h), $25,000,000; (f) Guarantee Obligations in respect of obligations of vendors to the Borrower and its Restricted Subsidiaries created in the ordinary course of business; 74 81 (g) Guarantee Obligations of the Borrower or any Restricted Subsidiary of Indebtedness or other obligations of Securitization Entities incurred in connection with Securitization Transactions; (h) Guarantee Obligations in respect of (i) the Permitted Trade L/C Facility and other obligations in respect of Trade Letters of Credit and (ii) other obligations in respect of Standby Letters of Credit, provided that the aggregate outstanding amount of all such Guarantee Obligations (not otherwise permitted pursuant to this subsection 8.2) shall at no time exceed, in the case of clause (i) $100,000,000, and in the case of clause (ii) $10,000,000; and (i) Guarantee Obligations of the Borrower or any Restricted Subsidiary incurred in the ordinary course of business in respect of obligations (other than Indebtedness) of others and other Guarantee Obligations (in each case not otherwise permitted pursuant to this subsection 8.2) incurred after the Effective Date, provided that the aggregate amount of all such Guarantee Obligations for the Borrower and its Restricted Subsidiaries shall not exceed $15,000,000 at any one time outstanding. 8.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of Foreign Subsidiaries, generally accepted accounting principles in effect from time to time in their respective jurisdictions of incorporation); (b) carriers', warehousemen's, mechanics', landlord's, materialmen's, repairmen's or other like Liens (including statutory Liens and other Liens arising by operation of law) arising in the ordinary course of business securing amounts which do not in the aggregate impair the use thereof in the operation of the business of the Borrower and its Restricted Subsidiaries, which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (c) (i) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements and (ii) Liens granted to banks in the ordinary course of business in connection with deposit, disbursement or concentration accounts (other than in connection with borrowed money) maintained with such banks on funds and other items in such accounts; (d) Liens granted and deposits made in connection with the performance of bids, trade arrangements and real estate related contracts entered into in the ordinary course of business (in each case, other than for borrowed money), utilities, leases, statutory obligations, surety, appeal and performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions, subdivisions, parcelizations and other similar encumbrances incurred in the ordinary course of business which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Restricted Subsidiary; 75 82 (f) Liens in existence on the Effective Date and (i) listed on Schedule 8.3(f) securing Indebtedness or other obligations described on such Schedule or (ii) otherwise securing Indebtedness or other obligations not exceeding $8,000,000 in the aggregate; (g) Liens securing Indebtedness or other obligations of the Borrower and its Restricted Subsidiaries incurred after the Effective Date to finance the acquisition, construction or completion of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise), including, without limitation, improvements, provided that (i) such Liens are created within 180 days after such acquisition, construction or completion and (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness or other obligations and the proceeds thereof; and the Indebtedness or other obligations secured by such Liens do not exceed a principal amount of $35,000,000. (h) Liens on assets of any Foreign Subsidiary securing Indebtedness of such Foreign Subsidiary and other obligations incurred in the ordinary course of business; (i) Liens on the fixed assets of a corporation which becomes a Restricted Subsidiary after the Effective Date and Liens existing on fixed assets acquired by the Borrower or a Restricted Subsidiary after the Effective Date, in either case securing Indebtedness or other obligations, provided that no such Liens shall cover any current assets (including Accounts or Inventory) of the Borrower or any Restricted Subsidiary, the Capital Stock of any Subsidiary (including, without limitation, any Securitization Entity or Credit Card Subsidiary) or any Indebtedness of the Borrower or any Subsidiary, and provided, further, that (A) such Liens existed at the time such corporation became a Restricted Subsidiary or such fixed asset was acquired and were not created in anticipation thereof, (B) any such Lien is not spread to cover any additional property or assets of such corporation after the time such corporation becomes a Restricted Subsidiary or such fixed asset is acquired, and (C) the amount of Indebtedness or other obligations secured thereby is not increased; (j) Liens securing Indebtedness or other obligations which refunds, refinances extends or otherwise restructures any other Indebtedness or other obligations to the extent such refunded or refinanced Indebtedness or other obligation was originally permitted to be secured pursuant to this subsection, provided that the principal amount of such Indebtedness is not increased (other than by an amount equal to any costs and expenses incurred in connection with such refunding or refinancing) and that no such Lien is spread to cover additional property; (k) Liens (not otherwise permitted hereunder) which secure Indebtedness or other obligations not exceeding (as to the Borrower and all its Restricted Subsidiaries) $20,000,000 in aggregate principal or face amount at any time outstanding, provided that no such Liens shall cover any current assets (including Accounts or Inventory) of the Borrower or any Restricted Subsidiary, the Capital Stock of any Subsidiary (including, without limitation, any Securitization Entity or Credit Card Subsidiary) or any Indebtedness of the Borrower or any Subsidiary; (l) Liens created pursuant to the Security Documents; (m) Liens created in favor of any Person who delivers goods under a consignment to the Borrower or a Restricted Subsidiary, provided that the Borrower or such Restricted Subsidiary treats and designates on its books and records such goods as "goods on consignment" for all purposes and such goods are not included as Inventory of the Borrower or such Restricted Subsidiary, as the case may be, on the books of the Borrower or such Restricted Subsidiary, as the case may be; (n) Subject to execution and delivery of intercreditor agreements reasonably satisfactory to the Administrative Agent, Liens granted to secure the Borrower's or any Restricted 76 83 Subsidiary's obligations under any Floor Planning Facility, provided that such Liens are limited to the goods financed pursuant to such Floor Planning Facility and the proceeds of such goods; (o) Liens covering Accounts, credit card receivables and related assets owned or that may be deemed owned by the Borrower and its Restricted Subsidiaries in connection with a Credit Card Program; (p) Liens arising from offsets, deposits or restricted assets granted by any Credit Card Subsidiary in respect of a Credit Card Program; (q) Liens on (i) real property (and related fixtures and leases) owned or leased by the Borrower or any Restricted Subsidiary securing Indebtedness including, Designated Material Real Property, and (ii) other assets not constituting real property securing Indebtedness to the extent such Liens on such other assets are purchase money security interests in such assets, provided that if any such Lien is granted on a parcel of Designated Material Real Property to replace (x) any then existing Lien on any parcel of real property which secures any Permanent Mortgage Financing or (y) any letter of credit issued after the Effective Date to replace a Lien on any parcel of real property which previously secured any Permanent Mortgage Financing, in each case in accordance with the terms thereof, then (1) such parcel of Designated Material Real Property shall cease to be a parcel of Designated Material Real Property for purposes of this Agreement and (2) the parcel of real property which is then or was previously subject to a Lien to secure any Permanent Mortgage Financing (A) must have a fair market value valued on an "alternative use" basis (as determined in good faith by the Borrower) approximately equal to the fair market value valued on an "alternative use" basis (as determined in good faith by the Borrower) of the relevant parcel of Designated Material Real Property and (B) shall be deemed to be a parcel of Designated Material Real Property for all purposes of this Agreement; (r) Liens arising under or in connection with Permitted Sale-Leasebacks; (s) Liens (including possessory Liens) on cash (and corresponding Liens on cash collateral accounts and all investments of amounts on deposit therein), commercial documents relating to goods financed under the relevant facility or trade letters of credit, such goods and the proceeds thereof, in each case securing the Permitted Trade L/C Facility and other obligations in respect of Trade Letters of Credit, provided that no such Lien may extend to or cover such commercial documents, goods or related proceeds after such goods are delivered to a warehouse, distribution center or store owned or leased by the Borrower or a Restricted Subsidiary (it being understood that the Administrative Agent may (and, to the extent the same is reasonably satisfactory to it, shall) enter into one or more intercreditor agreements with respect to the Permitted Trade L/C Facility or other Trade Letters of Credit with respect to the foregoing); (t) Liens arising out of the deposit arrangement described on Schedule 5.23; (u) Liens arising in connection with Acquisitions and other Investments permitted pursuant to subsection 8.8(l); and (v) From the date hereof until 90 days after the date hereof, Liens in respect of (i) that certain Security Agreement dated as of June 25, 1997, between Transamerica Commercial Finance Corporation, the Borrower and certain Subsidiaries, and (ii) that certain Restated Security Agreement dated as of July 9, 1997, between NationsCredit Commercial Corporation of America and the Borrower, in each case to the extent and solely to the extent that no monetary or other obligations remain outstanding thereunder from and after the date hereof; 77 84 provided that, notwithstanding the foregoing, no Lien created, incurred, assumed or suffered to exist pursuant to this subsection 8.3 (other than Permitted Inventory Liens and Liens permitted under subsections 8.3(h), 8.3(m), 8.3(n), 8.3(s) and 8.3(v)) shall be a Lien on Inventory or Accounts of the Borrower or any of its Restricted Subsidiaries. 8.4 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets except: (a) any Restricted Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrower (provided that a Subsidiary Guarantor or wholly owned Restricted Subsidiary or Restricted Subsidiaries shall be the continuing or surviving corporation and provided, further, that if one of the parties to such transaction (i) is a Subsidiary Guarantor then the continuing or surviving corporation shall be a Subsidiary Guarantor or (ii) is not a Restricted Subsidiary, no Default shall result therefrom); (b) any Restricted Subsidiary may convey, sell, lease, transfer, assign or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Subsidiary Guarantor or any wholly owned Restricted Subsidiary of the Borrower (provided that if such selling Restricted Subsidiary is a Subsidiary Guarantor then the acquiring Restricted Subsidiary shall be a Subsidiary Guarantor); and (c) any Restricted Subsidiary may be merged or consolidated with or into, or convey, sell, lease, transfer, assign or otherwise dispose of any or all of its assets to, any Person to the extent that the sale or other disposition of the assets of such Restricted Subsidiary would be permitted under subsection 8.5. 8.5 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Restricted Subsidiary, issue or sell any shares of such Restricted Subsidiary's Capital Stock to any Person (other than the Borrower or any Subsidiary Guarantor or, if such Restricted Subsidiary is not (x) a wholly-owned Restricted Subsidiary, pro-rata to the owners of the equity securities of such Restricted Subsidiary or (y) a Subsidiary Guarantor, to any Restricted Subsidiary), except: (a) the sale or other disposition of uneconomical, obsolete, surplus or worn out assets in the ordinary course of business, including, without limitation, in connection with store closures and real estate development or divestiture activities; (b) the sale or other disposition of Inventory and other Current Assets not subject to Liens in the ordinary course of business (including sales of Inventory and other Current Assets not subject to Liens in connection with closed stores or stores to be closed or sold and sales of discontinued Inventory pursuant to the Business Plan) and transfers of assets among the Borrower and the Subsidiary Guarantors pursuant to reasonable business requirements; (c) (i) the sale or discount of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof and (ii) sales or other dispositions of Cash Equivalents in the ordinary course of business in each case at fair market value and on commercially reasonable terms; 78 85 (d) as permitted by subsection 8.4(b); (e) the OSS Disposition; (f) Asset Sales of any assets (other than, directly or indirectly, Inventory) in connection with Permitted Sale-Leasebacks or Securitization Transactions, provided that (i) in the case of an Asset Sale in connection with a Permitted Sale-Leaseback to the extent otherwise permitted hereunder (other than an Asset sale in connection with a Securitization Transaction), the proceeds of any such Permitted Sale-Leaseback shall be entirely in cash and shall be not less than 100% of the fair market value of the assets being sold (as determined by the Borrower in good faith) and (ii) in the case of an Asset Sale in connection with a Securitization Transaction (which may be in the form of a capital contribution to the relevant Securitization Entity), the purchase price (including the Capital Stock of any Securitization Entity owned by the Borrower or any Restricted Subsidiary) with respect to the assets sold or disposed shall be not less than the fair market value of such assets (as determined by the Borrower in good faith); (g) the sale or other disposition of any property (other than, directly or indirectly, Inventory and other Current Assets, and other than any sale or other disposition which is otherwise permitted under this subsection 8.5), provided that at the time of and after giving effect to such sale or disposition, the aggregate fair market value of all assets so sold or disposed of in any Fiscal Year pursuant to this paragraph (f) shall not exceed an amount equal to $125,000,000; (h) subject to the other terms and provisions hereof, leases or subleases (or assignments of leases) or licenses or sublicenses (or assignments of licenses or sublicenses) of any assets in the ordinary course of business; (i) sales and other dispositions of assets in connection with Investments (other than Investments received in respect of the sale or disposition of Fixed Assets) permitted under subsection 8.8; (j) sales or other dispositions of Accounts, credit card receivables and related assets in connection with a Credit Card Program; and (k) issuances, sales and other dispositions of Capital Stock by any Credit Card Subsidiary to any Person so long as after giving effect thereto, such Credit Card Subsidiary remains a Subsidiary. 8.6 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock or Qualified Stock of the Borrower or options or warrants with respect thereto) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock (including Qualified Stock) of the Borrower or any warrants or options to purchase any such Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Restricted Subsidiary (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being herein called "Restricted Payments"), except that the Borrower may (i) purchase or exchange then-existing employee stock options for consideration consisting solely of (subject to subsection 8.15) Capital Stock of the Borrower and (ii) may purchase or redeem up to $1,000,000 in Capital Stock solely for the purpose of purchasing minority interests in order for such Subsidiaries to become wholly owned Subsidiaries of the Borrower. 79 86 8.7 Limitation on Indebtedness. The Borrower shall not create or suffer to exist, or permit any Restricted Subsidiary to create or suffer to exist, any Indebtedness except: (a) the Credit Agreement Obligations; (b) Guarantee Obligations permitted by subsection 8.2; (c) current or non-current liabilities for goods or services purchased in the ordinary course of business; (d) Intercompany Debt; (e) Indebtedness secured by Liens permitted by subsection 8.3, including without limitation, in respect of Floor Planning Facilities permitted under subsection 8.3(n) and Acquisitions permitted under subsection 8.3(u); (f) Indebtedness outstanding on the Effective Date and listed on Schedule 8.7(f) and refinancings thereof to the extent permitted under subsection 8.9; and (g) Indebtedness of the Borrower arising pursuant to Derivative Agreements entered into with any Lender for the purpose of hedging the Borrower's interest rate exposure and not for speculative purposes, and Indebtedness in respect of cash management obligations. 8.8 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of any Person or consummate any Acquisition (an "Investment"), except for: (a) extensions of trade credit and prepaid expenses made in the ordinary course of business; (b) Investments in Cash Equivalents; provided that the maximum amount of Cash Equivalents held in accounts over which the Administrative Agent does not have "control" (as defined in the UCC) shall not exceed the sum of (i) $2,000,000 plus (ii) the product of $20,000 multiplied by the number of the Borrower's or its Subsidiary Guarantors' stores operating on the date of determination; (c) (i) loans to officers of the Borrower or any Subsidiary, (ii) loans and advances to employees of the Borrower or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business, and (iii) loans by the Borrower to its employees (other than to officers of the Borrower or any Subsidiary) in connection with management incentive plans, provided that the aggregate outstanding principal amount of all such loans and advances shall not exceed $5,000,000 at any time; (d) Investments by the Borrower in Subsidiary Guarantors and Investments by Restricted Subsidiaries in the Borrower and in Subsidiary Guarantors; (e) Investments not otherwise permitted hereunder by the Borrower and Restricted Subsidiaries in Subsidiaries that are not Subsidiary Guarantors, provided that, after giving effect to such Investments, the aggregate then outstanding amount of all such Investments (including Investments in such Subsidiaries in the nature of sales and transfers of assets (including, pursuant to a transaction permitted under subsection 8.4) for less than fair market value and Guarantee Obligations pursuant to subsection 8.2(e)) made subsequent to the Effective Date pursuant to this paragraph (e), 80 87 together with Guarantee Obligations permitted pursuant to subsection 8.2(e), shall not exceed $10,000,000, provided, further, that the conversion of any Indebtedness owed to the Borrower or any Restricted Subsidiary by any Subsidiary into equity of such Subsidiary shall not constitute an additional Investment in such Subsidiary by the Borrower or such Restricted Subsidiary for purposes of the limitation contained in the immediately preceding proviso; (f) Investments received in connection with the creation and collection of accounts receivable in the ordinary course of business; (g) Investments received as consideration in connection with any Asset Sale or other disposition of assets permitted hereunder; (h) Investments not otherwise permitted hereunder in Credit Card Subsidiaries in an amount, together with Guaranteed Obligations permitted pursuant to subsection 8.2(e), not to exceed $25,000,000 outstanding at any time; (i) Investments by Credit Card Subsidiaries in connection with the Credit Card Program; (j) loans and advances to suppliers in the ordinary course of business consistent with past practice but in any event not in excess of an outstanding principal amount of $500,000; (k) purchases of Accounts, credit card receivables and related assets by Credit Card Subsidiaries in connection with the Credit Card Program; and (l) Acquisitions and other Investments not otherwise permitted hereunder made by the Borrower or any of its Restricted Subsidiaries, provided that, after giving effect thereto, (i) the aggregate outstanding amount of all such Investments (other than Acquisitions) made at any time after the Effective Date, shall not exceed the sum of $2,000,000 and (ii) the aggregate outstanding amount of all such Acquisitions (including assumed Indebtedness and the fair market value of Capital Stock issued) and other Investments made at any time after the Effective Date shall not exceed the sum of $20,000,000. 8.9 Limitation on Optional Payments and Modifications of Debt Instruments. At any time (a) make any optional payment or prepayment on or optionally redeem or purchase any Indebtedness (other than the Loans and Indebtedness of the Borrower or any Restricted Subsidiary to the Borrower or any Restricted Subsidiary) of the Borrower or any Subsidiary, (b) make any optional payment or prepayment on account of the principal of, or interest on, or secure any amendment or waiver of any terms of, or optionally redeem or purchase, any Subordinated Debentures, provided that the Borrower may pay interest on the Subordinated Debentures pursuant to the terms of the Subordinated Debt Indenture or (c) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms relating to the payment or prepayment of principal of or interest on, any Indebtedness described in clause (a), or the Subordinated Debentures or the Subordinated Debt Indenture (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon); provided, that the Borrower and its Restricted Subsidiaries may prepay Indebtedness (other than the Subordinated Debentures) permitted hereunder (A) from the proceeds of new Indebtedness incurred to refinance such Indebtedness and permitted hereunder to be incurred, (B) under Financing Leases for stores and other property no longer occupied or used by the Borrower or such Restricted Subsidiary in connection with the settlement, termination or assignment of such Financing Lease, (C) secured by assets in connection with any sale or other disposition of such assets permitted under subsection 8.5, (D) consisting of Floor Planning 81 88 Facilities, (E) incurred after the Effective Date and otherwise permitted hereunder to the extent such prepayment is financed with the proceeds of other Indebtedness (other than Loans) permitted hereunder, (F) consisting of Financing Leases as long as such Financing Leases are paid in full in connection with any such prepayment and such prepayment is made in connection with the closure or sale of a parcel of real property subject to such Financing Lease, (G) secured by a Lien on any parcel of Material Real Property so long as such Indebtedness is paid in full in connection with any such prepayment and such prepayment is financed with the proceeds of other Indebtedness (other than Loans) permitted hereunder, (H) that is short term Indebtedness and unsecured, and (I) from proceeds of the issuance of Capital Stock, but only if after giving effect to such issuance, no Default or Event of Default would have occurred and be continuing. 8.10 Limitation on Transactions with Affiliates. Except as set forth on Schedule 8.10, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under this Agreement or (b) upon fair and reasonable terms no less favorable to the Borrower or such Restricted Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. 8.11 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Restricted Subsidiary of real or personal property (other than Capital Stock) which has been or is to be sold or transferred by the Borrower or such Restricted Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Restricted Subsidiary (such arrangement, a "Sale-Leaseback"), except for Sale-Leasebacks in the ordinary course of the Borrower's or such Restricted Subsidiary's business, consistent with past practice and at market rates and subject to compliance with subsection 8.5(e), or Sale-Leasebacks in connection with Securitization Transactions ("Permitted Sale-Leasebacks"), in each case on terms and conditions acceptable to the Administrative Agent in its sole discretion, exercised commercially reasonably and in accordance with its customary criteria. For the avoidance of doubt, Sale-Leasebacks that result in a Financing Lease shall be treated as Indebtedness for all purposes of this Agreement. 8.12 Fiscal Years and Quarters. Change the last day of the Fiscal Year of the Borrower (other than to a day on or about January 31 of any calendar year) or permit any Fiscal Year to be less than a period of approximately 365 days or permit any fiscal quarter to be less than a period of approximately 90 days. 8.13 Limitation on Conduct of Business. Enter into any business either directly or through any Restricted Subsidiary except for businesses in which the Company and its Subsidiaries are engaged on the date of this Agreement and businesses related or similar thereto or entered into in connection with any of the foregoing. 8.14 No Other Designated Senior Debt. Create any "Designated Senior Debt" other than the Indebtedness of the Borrower hereunder pursuant to the Subordinated Debt Indenture or any Indenture with respect to Subordinated Debt the proceeds of which are used to refinance the Subordinated Debentures, in each case without the prior written consent of the Majority Lenders. 8.15 Limitation on Issuances of Capital Stock. Issue (a) any preferred stock or (b) any class of redeemable common stock, provided, however, that the Borrower may issue Qualified Stock. 8.16 Foreign Holding Companies, Inactive Subsidiaries and Special Purpose Subsidiaries. Permit the aggregate book value of the assets of all Foreign Holding Companies 82 89 (exclusive of assets consisting of advances or loans to the Borrower or any of its Subsidiaries and Capital Stock of Foreign Subsidiaries and other Foreign Holding Companies), Inactive Subsidiaries and Special Purpose Subsidiaries (exclusive of assets consisting of licenses or permits) to exceed $25,000,000 at any time. The covenants in this Section 8 are subject to amendment and revision as mutually agreed between the Borrowers and the Agents in accordance with subsection 11.23. SECTION 9. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any Reimbursement Obligation within two Business Days after such Reimbursement Obligation becomes due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or (b) Any representation or warranty made or deemed made by the Borrower or any other Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) The Borrower shall default in the observance or performance of any agreement contained in subsection 7.7(a) or 7.12, or Section 8, or the Borrower shall fail to deliver a Borrowing Base Certificate pursuant to subsection 7.2(c) within 2 Business Days after such Borrowing Base Certificate was due pursuant to such subsection; or (d) The Borrower or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date upon which written notice thereof is given to the Borrower by the Administrative Agent or the Majority Lenders or (ii) the date upon which a Responsible Officer becomes aware of such default; or (e) The Borrower or any of its Restricted Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Loans) or in the payment of any Guarantee Obligation, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (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 (but after the expiration of all grace periods applicable thereto), such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; provided, however, that (x) no Default or Event of Default shall exist under this paragraph (A) unless the aggregate amount of Indebtedness (other than Indebtedness in respect of Floor Planning Facilities) and/or Guarantee Obligations in respect of which any default or 83 90 other event or condition referred to in this paragraph shall have occurred shall be equal to at least $10,000,000 or (B) unless the aggregate amount of Indebtedness in respect of Floor Planning Facilities in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $20,000,000 and (y) clause (ii) above shall not apply to Indebtedness that becomes due solely as a result of the voluntary sale or transfer of property or assets or prepayments that become due as a result of any issuance of Capital Stock or incurrence of Indebtedness (in each case to the extent such, sale, transfer, issuance or incurrence is permitted by the terms of such Indebtedness); or (f) (i) The Borrower or any of its Restricted Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Restricted Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Restricted Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Restricted Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Restricted Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Restricted Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Tax Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Majority Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Majority Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or (h) One or more judgments or decrees shall be entered against the Borrower or any of its Restricted Subsidiaries involving in the aggregate a liability (to the extent not paid or covered by insurance) of $15,000,000 or more, and such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or 84 91 (i) (i) For any reason (other than any act on the part of the Administrative Agent or any Lender or any act or failure to act (except to the extent such act or failure to act constitutes a breach of the relevant Blocked Account Agreement or Lockbox Agreement on the part of any Depositary Bank) the Subsidiaries Guarantee or any Security Document ceases to be or is not in full force and effect in any material respect and such default shall continue unremedied for 30 days after the earlier of receipt by the Borrower of notice of such default from the Administrative Agent or actual knowledge of such default by a Responsible Officer, (ii) the Borrower or any of its Restricted Subsidiaries shall assert in writing that the Subsidiaries Guarantee or any Security Document has ceased to be or is not in full force and effect or (iii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby except to the extent contemplated hereunder and under the other Loan Documents; or (j) (i) Any Person or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) (A) shall have acquired beneficial ownership of 50% or more of any outstanding class of Capital Stock having ordinary voting power in the election of directors of the Borrower or (B) shall obtain the power (whether or not exercised) to elect a majority of the Borrower's directors, or (ii) (A) the Board of Directors of the Borrower shall not consist of a majority of Continuing Directors; "Continuing Directors" shall mean the directors of the Borrower on the Effective Date and each other director, if such other director's nomination for election to the Board of Directors of the Borrower is recommended by a majority of the then Continuing Directors and (B) the Chief Executive Officer of the Borrower shall resign or be removed during the period commencing three months prior to the date the Board of Directors shall not consist of a majority of Continuing Directors and ending six months after such date; or (k) the occurrence of a Mandatory Prepayment Event with respect to the Subordinated Debentures; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of each Issuing Bank and the L/C Participants, a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement and the other Loan Documents. Amounts held in such cash collateral account shall be 85 92 applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the Notes. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the Notes shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower. The Borrower shall execute and deliver to the Administrative Agent, for the account of each Issuing Bank and the L/C Participants, such further documents and instruments as the Administrative Agent may reasonably request to evidence the creation and perfection of the security interest in such cash collateral account. SECTION 10. ADMINISTRATIVE AGENT AND THE COLLATERAL MONITORING AGENT 10.1 Appointment. Each Lender hereby irrevocably designates and appoints each Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each Lender irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto, including, without limitation, all powers, rights and remedies provided in the Master Collateral Agreement. Notwithstanding any provision to the contrary elsewhere in this Agreement, neither Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the either Agent. 10.2 Delegation of Duties. Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 10.3 Exculpatory Provisions. No Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. No Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower. 10.4 Reliance by Agents. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, facsimile, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by such Agent. The Administrative Agent may 86 93 deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of Lenders entitled to so act in accordance with the terms of this Agreement as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of Lenders entitled to so act in accordance with the terms of this Agreement, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 10.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall promptly give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by Lenders entitled to so act in accordance with the terms of this Agreement; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 10.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that no Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by either Agent hereafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by such Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agents 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 analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 10.7 Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Voting Percentages in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the 87 94 Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of 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. The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. Each Agent shall have the right to deduct any amount owed to it by any Lender under this Agreement from any payment made by it to such Lender hereunder. 10.8 Agent in Its Individual Capacity. Each Agent and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from and generally engage in any kind of business with the Borrower as though such Agent were not an Agent hereunder and under the other Loan Documents. With respect to the Loans made by it or any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent hereunder, and the terms "Lender" and "Lenders" shall include such Agent in its individual capacity. 10.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 25 Business Days' notice to the Borrower and the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Borrower), shall succeed to the rights, powers and duties of the Administrative Agent hereunder. Effective upon such appointment and approval, the term "Administrative Agent" shall mean such successor agent, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. SECTION 11. MISCELLANEOUS 11.1 Amendments and Waivers. Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. The Majority Lenders may, or, with the written consent of the Majority Lenders or the Administrative Agent, as applicable, may, from time to time, (a) enter into with the applicable Loan Party or Parties written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding, deleting or revising any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Majority Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall: (i) reduce the amount or extend the scheduled date of maturity of any Loan or of any installment thereof, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Commitments, in each case without the consent of each Lender adversely affected thereby, 88 95 (ii) (A) amend, modify or waive any provision of this subsection or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents or any other provision of any other Loan Document, release or subordinate the interest of the Administrative Agent in the Collateral or the Subsidiary Guarantors, except that (x) the Administrative Agent may release or subordinate the Administrative Agent's interest in up to $10,000,000 of the Collateral, with the consent of the Agents, (y) the Administrative Agent may release or subordinate the Administrative Agent's interest in $10,000,001 to $50,000,000 of the Collateral, with the consent of the Required Lenders, and (z) the Administrative Agent may release or subordinate the Administrative Agent's interest in more than $50,000,000 of the Collateral, with the consent of all the Lenders, or (B) reduce the percentage specified in the definition of Majority Lenders or Required Lenders without the written consent of all the Lenders, (iii) increase (A) any percentage set forth in the definition of Borrowing Base, Available Inventory Amount or Available Accounts Receivable Amount or Available L/C Amount without the consent of all the Lenders; provided, the Agents may increase the percentages set forth in the definition of Borrowing Base, Available Inventory Amount, Available Accounts Receivable Amount or Available L/C Amount by up to an additional 5% above the percentages as of the Effective Date with the consent of the Required Lenders, (B) the amount set forth in clause (ii) of the definition of Available Mortgaged Real Estate Amount without the consent of the Required Lenders and the Agents, (C) the maximum aggregate amount of Commitments hereunder without the consent of the Required Lenders or (D) the amount set forth in the definition of Interim Reserve Amount or the structure of the Cumulative Asset Sale Reserve without the consent of the Required Lenders and the Agents, (iv) amend, modify or waive any provision of Section 2 or subsection 4.1(c) without the written consent of the Majority Term Loan Lenders or reduce the percentage specified in the definition of Majority Term Loan Lenders without the consent of all the Term Loan Lenders, (v) amend, modify or waive any provision of Section 3 or of subsection 6.2 without the prior written consent of the Majority Revolving Credit Lenders or reduce the percentage specified in the definition of Majority Revolving Credit Lenders without the consent of all the Revolving Credit Lenders, (vi) amend, modify or waive any provision of subsection 4.7(c) of this Agreement or of Section 3.5(a) or 3.5(b) of the Master Collateral Agreement without the written consent of the Majority Term Loan Lenders and the Majority Revolving Credit Lenders, (vii) amend, modify or waive any provision of subsections 3.6 through 3.13 without the consent of each Issuing Bank adversely affected in any material respect thereby, (viii) amend, modify or waive any provision of subsections 3.14, 3.15 or 3.16 without the consent of the Swing Line Lender, or (ix) amend, modify or waive any provision of Section 10 without the written consent of the Agent adversely affected thereby. 89 96 Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrower, the Lenders, and the Administrative Agent shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. If, in connection with any proposed amendment, supplement, modification, consent or waiver of any provisions of this Agreement or any other Loan Documents as contemplated by this subsection 11.1, the consent of Lenders whose Voting Percentages aggregate at least 90% is obtained but the consent of one or more of the other Lenders is not obtained, then the Borrower may replace each such non-consenting Lender or Lenders with one or more replacement Lenders pursuant to subsection 11.7 so long as at the time of such replacement, each replacement Lender consents to the proposed amendment, supplement, modification, consent or waiver, provided, that the Borrower shall not have the right to replace any Lender solely as a result of the exercise of such Lender's rights (and the withholding of any required consent of such Lender) pursuant to clauses (i), (ii) or (iii) of the first proviso of this subsection 11.1. 11.2 Notices. Unless otherwise expressly provided herein, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and shall be deemed to have been duly given or made (a) in the case of delivery by hand (including by overnight courier), when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower and the Agents, and as set forth in Schedule 11.2 in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: The Borrower: Service Merchandise Company, Inc. 7100 Service Merchandise Drive Brentwood, TN 37027 Attention: Treasurer Fax: (615) 660-3667 Telephone: (615) 660-3477 With a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Attention: Douglas P. Bartner, Esq. Fax: (212) 848-7179 Telephone: (212) 848-8190 The Collateral Monitoring Agent: BankBoston, N.A. 40 Broad Street Boston, Massachusetts 02109 Attention: Betsy Ratto Fax: (617) 434-4339 Telephone: (617) 434-4113 90 97 The Administrative Agent: Citicorp USA, Inc. 399 Park Avenue 6th Floor New York, New York 10043 Attention: Keith R. Karako Fax: (212) 793-1290 Telephone: (212) 559-3149 With a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Ronald F. Daitz, Esq. Fax: (212) 310-8007 Telephone: (212) 310-8337 provided that any notice, request or demand to or upon the Agents or the Lenders pursuant to subsections 3.2, 3.4, 3.6, 3.15, 4.1, 4.2 or 4.7 shall not be effective until received. Whenever either Agent sends a notice by mail, such Agent will use reasonable efforts to also send such notice by one of the other means of notice permitted hereunder, provided that the failure to do so shall not affect in any way the validity of any delivery by mail pursuant to this subsection or otherwise result in any liability to the Agents or the Lenders. 11.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 11.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 11.5 Payment of Expenses and Taxes; Indemnity. The Borrower agrees (a) to pay or reimburse the Agents for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of one counsel for all of the Agents together, (b) (i) to pay or reimburse the Agents for all its reasonable out-of-pocket costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, costs and expenses which the Administrative Agent may incur in enforcing or protecting its Liens on or rights and interest in the Collateral, and the fees and disbursements of counsel to the Agents, and (ii) to pay or reimburse each Lender for all its reasonable out-of-pocket costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents following the occurrence and during the continuation of a Default or an Event of Default, including, without limitation, the fees and disbursements of counsel to each Lender, (c) to pay, indemnify, and hold each Lender and the Agents (and their respective 91 98 directors, officers, employees and agents) harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise (other than excise taxes imposed in lieu of net income taxes) and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Agents (and their respective directors, officers, employees and agents) harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits and reasonable out-of-pocket costs, expenses or disbursements (including, without limitation, the reasonable fees and expenses of the same counsel for all of the Lenders or the Agents (absent a conflict of interest or inability to join the relevant actions or proceedings, in which additional counsel may be retained by the Agents and Lenders)) of any kind or nature whatsoever with respect to any claim, litigation, investigation or proceeding relating to the execution, delivery, enforcement, performance and administration of this Agreement and the other Loan Documents and any such other documents or any use of any of the Extensions of Credit, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"), provided that the Borrower shall have no obligation hereunder to the Agents or any Lender (or their respective directors, officers, employees or agents) with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of the Agents or any such Lender (or their respective directors, officers, employees or agents, as the case may be), provided, however, that in connection with the enforcement or preservation of any rights under this Agreement or the other Loan Documents, the Borrower shall not be required to pay or reimburse the Lenders for more than one counsel to all of the Lenders and for one counsel to each of the Agents. The agreements in this subsection shall survive the termination of this Agreement and the repayment of the Loans and all other amounts payable hereunder. 11.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any interest of such Lender in any Letter of Credit, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. No Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Loan Document except for those specified in clauses (i) and (ii) of the proviso to subsection 11.1. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a 92 99 Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 11.8(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of subsections 4.9, 4.10 and 4.11 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it were a Lender; provided that, in the case of subsection 4.10, such Participant shall have complied with the requirements of said subsection and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. Each Lender promptly shall notify the Administrative Agent in writing of the sale of any participating interest in a Loan to any Participant. (c) Any Lender may, in the ordinary course of its business of making or investing in loans and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof or, with the consent of the Agents (which shall not be unreasonably withheld), to an additional bank, financial institution or other entity that is then engaged in the business of lending money (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit J, executed by such Assignee and such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower and the Agents) and delivered to the Agents for its acceptance and recording in the Register, with a copy thereof to the Borrower, provided that (a) in the case of any such assignment (other than to a Lender or an Affiliate of a Lender), the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Commitments remaining with the assigning Lender are each not less than $10,000,000 (or such lesser amount as may be agreed to by the Borrower and the Agents), (b) assignments shall not be required to be made on a ratable basis between the Commitments and/or Loans held by any Lender, (c) assignments by a Revolving Credit Lender of all or a portion of its Revolving Loans and/or Revolving Credit Commitment must be to either (i) a commercial bank having total assets in excess of $5,000,000,000 or any of its Affiliates, or (ii) a finance company, insurance company or other financial institution or fund which is regularly engaged in the making of, purchasing or investing in loans and having total assets in excess of $300,000,000 ("Eligible Assignee"), (d) any Lender may make an assignment consisting solely of Term Loans (without regard to the requirements of clause (a) above) so long as the aggregate principal amount of Term Loans so assigned is at least $5,000,000, and (e) the consent of the Borrower shall be required in connection with any assignment to a Lender or an Affiliate of a Lender solely to the extent that after giving effect thereto such Lender or Affiliate would be entitled to receive any greater payment under subsection 4.9, 4.10 or 4.11 at such time than the assigning Lender is entitled to receive at such time. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (e) of this subsection, the consent of the Borrower shall not be required (other than as to the minimum amount of any assignment required under this paragraph), and, unless requested by the Assignee and/or the assigning Lender, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs at any time 93 100 when any of the events described in Section 9(f) with respect to the Borrower shall have occurred and be continuing. (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 11.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower and the Administrative Agent) together with payment to the Administrative Agent of a registration and processing fee of $5,000, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower; provided, however, that no such registration and processing fee shall be paid in connection with the initial syndication of the Loans. (f) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 11.17, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection do not prohibit any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with Regulation A of the Board of Governors or other applicable law or the creation of a security interest by any Lender other than a commercial bank. (h) So long as no Default or Event of Default shall have then occurred and be continuing, no assignment by a Lender pursuant to this subsection 11.6 shall be permitted without the consent of the Administrative Agent and the Borrower if, after giving effect thereto, any Lender other than the Agents would hold in excess of 20% of the aggregate Voting Percentages at any such time. 11.7 Replacement of Lenders under Certain Circumstances. The Borrower shall be permitted to replace any Lender which (a) requests reimbursement for amounts owing pursuant to subsection 4.9 or 4.10, (b) has received a written notice from the Borrower of an impending change in law that would entitle such Lender to payment of additional amounts under subsection 4.9 or 4.10(a), unless such Lender designates a different lending office before such change in law becomes effective and such alternate lending office obviates the need for the Borrower to make payments of additional amounts under subsection 4.9 or 4.10(a), (c) is affected in the manner described in subsection 4.6(b) or 4.8 and as a result thereof any of the actions described in subsection 4.6 or 4.8, as the case may be, are required to be taken, (d) does not consent to any proposed amendment, supplement, modification, 94 101 consent or waiver of any provisions of this Agreement or any other Loan Document as contemplated by the last sentence of subsection 11.1, or (e) defaults in its obligation to make Loans or issue, or participate in, any Letter of Credit, provided that (i) such replacement does not conflict with any Requirement of Law, (ii) no Event of Default shall have occurred and be continuing at the time of such replacement, (iii) the Borrower shall repay (or the replacement bank or institution shall purchase, at par) all Loans and other amounts owing to such replaced Lender prior to the date of replacement, (iv) the Borrower shall be liable to such replaced Lender under subsection 4.11 if any Eurodollar Loan owing to such replaced Lender shall be prepaid (or purchased) other than on the last day of the Interest Period relating thereto, (v) the replacement bank or institution, if not already a Lender, and the terms and conditions of such replacement, shall be reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of subsection 11.6 (provided that the Borrower or replacement Lender shall be obligated to pay the registration and processing fee referred to therein), (vii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to subsection 4.9 or 4.10, as the case may be, and (viii) any such replacement shall not be deemed to be a waiver of any rights which the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender. 11.8 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 9(f), or otherwise), and, after giving effect to any such payment or the receipt of any such collateral, such benefitted Lender shall have received a greater proportionate payment (determined in accordance with subsection 4.7) or interest in collateral than that received by any other relevant Lender, if any, in respect of such other relevant Lender's relevant Loans or, if applicable, the Reimbursement Obligations owing to it, or interest thereon, such benefitted Lender shall purchase for cash from the other relevant Lenders a participating or other similar interest in such portion of each such other relevant Lender's relevant Loans or, if applicable, the Reimbursement Obligations owing to it, or shall provide such other relevant Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders entitled to the same under this subsection, provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender and each Affiliate of any Lender shall have the right, without prior notice to the Borrower but subject to the prior consent of the Administrative Agent or the Majority Lenders, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) which is not paid when due to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender or any Affiliate of such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. 11.9 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), 95 102 and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 11.10 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.11 Integration. This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Agents or any Lender relative to the subject matter hereof or thereof not expressly set forth or referred to herein or in the other Loan Documents; provided, however, it is understood and agreed that the provisions of the Commitment Letter dated as of January 7, 1999 from Citibank and Salomon Smith Barney Inc, to the Borrower, and accepted by the Borrower on such date, under the heading "Syndication" shall survive the execution and delivery of this Agreement. 11.12 Termination. This Agreement shall terminate when the Commitments have terminated or expired, no Loan or Letter of Credit is outstanding (other than Letters of Credit which have been cash collateralized in a manner substantially the same as the manner described pursuant to the penultimate paragraph of Section 9) and the other then unpaid or accrued Credit Agreement Obligations have been paid in full. 11.13 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 11.14 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) to the extent permitted by applicable law, consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in subsection 11.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other court of competent jurisdiction; and 96 103 (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 11.15 Acknowledgements. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Agents nor any Lender has any fiduciary relationship with or fiduciary duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Agents and the Lenders, on the one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders or among the Borrower and the Agents. 11.16 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 11.17 Confidentiality. Each of the Administrative Agent, the Collateral Monitoring Agent and the Lenders agrees to keep confidential all information provided to it by the Borrower or the Administrative Agent pursuant to or in connection with this Agreement that is designated by the Borrower in writing as confidential (the "Confidential Information"); provided that nothing herein shall prevent any Lender or the Administrative Agent or the Collateral Monitoring Agent from disclosing any such Confidential Information (i) to the Administrative Agent, the Collateral Monitoring Agent or any other Lender, (ii) to any Transferee or prospective Transferee which receives such Confidential Information having been made aware of the confidential nature thereof and which has agreed in writing to be bound by the terms of this subsection 11.17, (iii) to its directors, officers, employees, employees of affiliates, examiners and professional advisers who have a need to know such Confidential Information in accordance with customary banking practices and who receive such Confidential information having been made aware of the restrictions of this subsection and, in the case of professional advisers, having agreed to be bound thereby, (iv) upon the request or demand of any Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) in connection with the exercise of any remedy hereunder, (vii) which is now or hereafter becomes generally available to the public other than as a result of a disclosure by such Lender, the Collateral Monitoring Agent or the Administrative Agent or a disclosure known to such Lender, the Collateral Monitoring Agent or the Administrative Agent to have been made by any person or entity to which such Lender or the Administrative Agent has delivered such Confidential Information, (viii) which was available to such Lender, the Collateral Monitoring Agent or the Administrative Agent prior to its disclosure to such Lender or the Administrative Agent by the Borrower, or (ix) which becomes available to such Lender or the Administrative Agent from a source other than the Borrower, provided that such source is not (1) known to such Lender, the Collateral Monitoring Agent or the Administrative Agent to be bound by a confidentiality agreement with the Borrower or (2) known to such Lender, the Collateral Monitoring Agent or the Administrative Agent to be otherwise prohibited 97 104 from transmitting the information to such Lender, the Collateral Monitoring Agent or the Administrative Agent by a contractual, legal or fiduciary obligation. 11.18 Section Headings. The Section and subsection headings in this Agreement are for convenience in reference only and shall not deemed to alter or affect the interpretation of any provisions hereof. 11.19 Judgment Currency. The obligation of the Borrower under this Agreement to make payments in respect of each Reimbursement Obligation in the currency in which it is outstanding (the "Agreement Currency") shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any other currency (the "Judgment Currency") except to the extent that such tender or recovery of the Judgment Currency results in the effective receipt by the Lenders or the relevant Issuing Banks, as the case may be, of the full amount of the Agreement Currency payable under this Agreement and the Borrower agrees to indemnify the Lenders or the relevant Issuing Banks, as the case may be (and the Lenders or the relevant Issuing Banks, as the case may be, shall have an additional legal claim) for any difference between such full amount and the amount effectively received by such Lenders or such Issuing Banks, as the case may be, pursuant to any such tender or recovery. Each Lender's or Issuing Bank's determination of amounts effectively received by such Lender or Issuing Bank shall be presumed correct absent manifest error. If a judgment in respect of the obligations of the Borrower hereunder is rendered in a currency other than the Agreement Currency and if, upon receipt of the full amount of such judgment in such currency and the conversion into, and receipt of such amount in the Agreement Currency, such amount of the Agreement Currency exceeds the obligations of the Borrower hereunder, such excess amount shall be remitted to the Borrower by the Lenders or the relevant Issuing Banks, as the case may be. The obligations of the Borrower under this subsection shall survive the termination of this Agreement and the repayment of the Loans and all other amounts payable hereunder. 11.20 Special Provisions. (a) The Lenders (which are Revolving Credit Lenders under the Existing Credit Agreement) hereby waive any requirements for notice of prepayment, commitment terminations, minimum amounts of prepayments of Revolving Loans (as defined in the Existing Credit Agreement), ratable reductions of Revolving Credit Commitments (as defined in the Existing Credit Agreement) and ratable payments on account of the principal or interest of any Revolving Loan (as defined in the Existing Credit Agreement) under the Existing Credit Agreement to the extent such prepayment, reductions or payments are required pursuant to subsection 6.1(p). (b) The Lenders hereby confirm that, from and after the making of the initial Loans, all participations of the Lenders in respect of Letters of Credit outstanding hereunder pursuant to subsection 3.9(a) shall be based upon the Revolving Credit Commitment Percentages of the Lenders (after giving effect to this Agreement). 11.21 Amendments to Original Mortgages. The Borrower, the Agents and the Lenders acknowledge that certain provisions of the Original Mortgages are being amended and modified as provided in the Master Collateral Agreement. 11.22 Review of Business Plan. Promptly after delivery of the Business Plan to the Administrative Agent pursuant to subsection 7.1(e), the Administrative Agent will (i) review the Business Plan and (ii) use reasonable efforts to facilitate the Borrower's presentation thereof to the Lenders. In the event the Administrative Agent does not accept the Business Plan as submitted, the Administrative Agent promptly will provide the Borrower with an explanation of the reasons for such rejection. 98 105 11.23 Negotiation of Revised Covenants. As soon as practicable after the Administrative Agent's acceptance of the Business Plan, the Borrower and the Agents will (i) review the provisions of subsection 3.17 and Sections 7 and 8, (ii) negotiate in good faith to determine whether any of such provisions should be revised as a result of the acceptance of the Business Plan and (iii) negotiate in good faith additional provisions or covenants, including EBITDA or similar cash flow covenants appropriate for this facility as a result of the acceptance of the Business Plan. Any such revised or additional provisions or covenants must be approved by the Majority Lenders. 11.24 Releases. In further consideration of the Agents' and the Lenders' execution of this Agreement, the Borrower and each of the other Loan Parties hereby release the Existing Administrative Agent and the Existing Lenders, and the Agents and the Lenders, and each of their respective affiliates, officers, employees, directors, agents and attorneys (collectively, the "Releasees") from any and all claims, demands, liabilities, responsibilities, disputes, causes of action (whether at law or equity) and obligations of every nature whatsoever, whether liquidated or unliquidated, known or unknown, matured or unmatured, fixed or contingent, that the Borrower or any other Loan Party may have against the Releasees which arise from or relate to any act or omission to act of any Releasee prior to the date hereof with respect to the Existing Credit Agreement and the other Existing Loan Documents. Each of the Borrower and the other Loan Parties agree that it will not, by reason of any act or omission to act of the Existing Administrative Agent or any Existing Lender, (i) assert or claim against the Agents or any Lender, (ii) seek to avoid any liability or obligation under, on account of, or arising out of, this Agreement or any of the other Loan Documents, (iii) assert or claim that any liability or obligation under this Agreement or the other Loan Documents is not enforceable strictly in accordance with its terms. 11.25 Documents Evidence the Same Indebtedness. This Agreement and the other Loan Documents together evidence the same Indebtedness heretofore evidenced by, and this Agreement and the other Loan Documents together amend and restate in their entirety, the Existing Credit Agreement and the Loan Documents (as defined in the Existing Credit Agreement) (the "Existing Loan Documents"); provided that this Agreement and the other Loan Documents shall not be construed to evidence a payment and readvance of the loan principal, interest and other sums, if any, heretofore evidenced by the Existing Credit Agreement and the Existing Loan Documents, it being the intention of the Borrower, and by their acceptance hereof, the Agent and the Lenders, that all such documents evidence the same Indebtedness. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 99 106 IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and Restated Credit Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. SERVICE MERCHANDISE COMPANY, INC., as the Borrower By: -------------------------------- Thomas L. Garrett, Jr. Treasurer Signature Page to Service Merchandise Company, Inc. Second Amended and Restated Credit Agreement 107 CITICORP USA, INC., as Administrative Agent, as a Lender By: -------------------------------- Keith R. Karako Attorney-in-Fact CITIBANK, N.A., as an Issuing Bank By: -------------------------------- Keith R. Karako Attorney-in-Fact Signature Page to Service Merchandise Company, Inc. Second Amended and Restated Credit Agreement 108 BANKBOSTON, N.A., as Documentation Agent and Collateral Monitoring Agent, as a Lender, and as an Issuing Bank By: -------------------------------- Betsy Ratto Vice President Signature Page to Service Merchandise Company, Inc. Second Amended and Restated Credit Agreement 109 NATIONAL CITY COMMERCIAL FINANCE, INC. as a Lender By: -------------------------------- Name: Title: Signature Page to Service Merchandise Company, Inc. Second Amended and Restated Credit Agreement 110 HELLER FINANCIAL, INC. as a Lender By: -------------------------------- Name: Title: Signature Page to Service Merchandise Company, Inc. Second Amended and Restated Credit Agreement 111 FOOTHILL INCOME TRUST, L.P., as a Lender By: FIT GP, LLC, its general partner By: ---------------------------- Name: Title: Managing Member FOOTHILL CAPITAL CORPORATION as a Lender By: -------------------------------- Name: Title: Signature Page to Service Merchandise Company, Inc. Second Amended and Restated Credit Agreement 112 JACKSON NATIONAL LIFE INSURANCE COMPANY, as a Lender By: PPM FINANCE, INC., its Attorney-in-Fact By: --------------------------- Name: Title: Signature Page to Service Merchandise Company, Inc. Second Amended and Restated Credit Agreement 113 Schedule 1.1(a) TO CREDIT AGREEMENT COMMITMENTS
============================================================================================================== LENDER TOTAL REVOLVER TERM LOAN ============================================================================================================== Citicorp USA, Inc. 175,000,000 140,000,000 35,000,000 - -------------------------------------------------------------------------------------------------------------- BankBoston, N.A. 175,000,000 140,000,000 35,000,000 - -------------------------------------------------------------------------------------------------------------- National City Commercial 100,000,000 80,000,000 20,000,000 Finance Inc. * - -------------------------------------------------------------------------------------------------------------- Heller Financial, Inc. * 100,000,000 80,000,000 20,000,000 - -------------------------------------------------------------------------------------------------------------- Foothill Income Trust, L.P. * 50,000,000 40,000,000 10,000,000 - -------------------------------------------------------------------------------------------------------------- Foothill Capital Corporation * 50,000,000 40,000,000 10,000,000 - -------------------------------------------------------------------------------------------------------------- Jackson National Life Insurance 100,000,000 80,000,000 20,000,000 Company * - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- TOTAL 750,000,000 600,000,000 150,000,000 ==============================================================================================================
* Managing Agents 114 Schedule 4.1(e) TO CREDIT AGREEMENT ELIGIBLE MORTGAGE REAL ESTATE IN FLORIDA
STORE # STREET CITY STATE ZIP USE HOLDING - ------- ------ ---- ----- --- --- ------- 0262 4340 Hillsborough Avenue Tampa FL 33614 SMC Fee 0295 730 Sand Lake Road Orlando FL 32890 SMC Fee 0390 12801 West Sunrise Blvd. Sunrise FL 33323 SMC Fee 0059 10340 U.S. 19 Port Richie FL 34668 SMC Gr/Lease 0303 150 S. State Road 434 Altamonte FL 37214 SMC Gr/Lease Springs 0347 1500 Douglas Road Coral Gables FL 33134 SMC Gr/Lease 0388 7775 S.W. 40th Street Miami FL 33155 SMC Gr/Lease
115 Schedule 5.1 TO CREDIT AGREEMENT CHARGES 1. See Schedule 5.6, Litigation, hereof, which is incorporated herein by reference. 2. The following list of properties were disposed of by the Borrower since December 28, 1997, either through sale or lease termination/assignment:
STORE LOCATION HOLDING STORE CLOSED DISPOSITION DATE - -------------- ------- ------------ ---------------- NASHVILLE TN LEASE ---- 12/31/1997 FT. WORTH TX LEASE 07/10/1997 12/31/1997 TAMPA FL GR/LEASE 01/15/1998 12/31/1997 ROANOKE VA FEE ---- 01/22/1998 MEMPHIS TN LEASE 01/15/1998 01/31/1998 BLOOMINGTON IN LEASE 10/11/1994 01/31/1998 SOUTHFIELD MI LEASE 07/10/1997 02/28/1998 COLLEGE PARK GA LEASE 01/15/1998 02/28/1998 LOS ANGELES CA LEASE 07/10/1997 12/31/1997 FULLERTON CA LEASE 07/10/1997 03/01/1998 PORT ALLEN LA FEE ---- 05/14/1998 BRENTWOOD TN FEE ---- 05/20/1998 COLUMBIA SC FEE 07/10/1997 06/26/1998 ARLINGTON TX GR/LEASE 07/10/1997 06/30/1998 FORT WAYNE IN LEASE 07/10/1997 06/30/1998 GARDEN GROVE CA LEASE 07/10/1997 06/30/1998 BOARDMAN OH FEE 07/10/1997 07/01/1998 LAHABRA CA LEASE 07/10/1997 07/01/1998 MILPITAS CA LEASE 07/10/1997 07/10/1998 SOUTH DADE FL LEASE 05/10/1998 07/31/1998 LOMBARD IL LEASE 07/01/1986 07/31/1998 HOLLYWOOD FL LEASE 01/15/1998 08/06/1998 DURHAM NC LEASE 05/10/1998 08/27/1998 VICTORVILLE CA FEE 07/10/1997 09/09/1998 DENTON TX FEE 07/10/1997 09/24/1998 DALLAS TX FEE 07/10/1997 09/25/1998 COLUMBUS OH FEE ---- 09/25/1998 COLORADO SPR CO FEE ---- 10/19/1998 NEWARK CA GR/LEASE 07/10/1997 11/16/1998 WEST HARTFORD CT GR/LEASE 07/10/1997 11/30/1998 SALINAS CA LEASE 07/10/1997 12/01/1998 RENO NV FEE 07/10/1997 12/23/1998 N. COLLEGE HILLS OH FEE 07/10/1997 12/28/1998
116 Schedule 5.1 TO CREDIT AGREEMENT (CONTINUED) 3. Partnership Interest in The Cool Springs Pointe, Brentwood, TN Shopping Center was disposed of January 1999. 4. Interest Rate Swaps as of 12/28/98.
SWAP VAR RATE CURRENT STATE PAYMENT AMOUNT MATURITY BANK DATE BASE VAR RATE FIXED RATE DATES ------ -------- ---- ---- ---- -------- ---------- ----- 35,000,000.00 12/20/00 BANK OF 12/22/97 3 MO LIBOR 5.23375000 5.97700000 3/22/99, 6/22/99, AMERICA 9/22/99, 12/22/99 30,000,000.00 12/22/00 CITIBANK 12/22/97 3 MO LIBOR 5.23375000 5.98000000 BANK OF 60,000,000.00 12/22/00 BOSTON 12/22/97 3 MO LIBOR 5.23375000 5.96500000 - -------------- 125,000,000.00
5. See attached list of public disclosures. 6. See list of Letters of Credit attached to Schedule 8.7(f) which is incorporated herein by reference. 117 Schedule 5.1 TO CREDIT AGREEMENT (Attachment) SERVICE MERCHANDISE COMPANY SECURITIES FILINGS SINCE DECEMBER 28, 1997 DATE FORM TYPE FILED - ----------------------------------------------------------------------------- 8-K 02/03/98 8-A12B 02/03/98 SC 13G 02/12/98 SC 13G 03/03/98 DEF 14A 03/13/98 10-K405 03/30/98 10-Q 05/13/98 11-K 06/26/98 10-Q 08/12/98 8-K 10/30/98 8-K 11/04/98 8-A12B/A 11/04/98 10-Q 11/12/98 8-K 12/15/98 8-K 01/12/99 118 SERVICE MERCHANDISE COMPANY, INC. PRESS RELEASES Earnings Releases: - ------------------ 02/06/98 Service Merchandise reports fourth quarter results 04/14/98 Service Merchandise reports first quarter results 07/14/98 Service Merchandise reports second quarter results 10/13/98 Service Merchandise reports third quarter results Management Changes: - ------------------- 01/29/98 Service Merchandise Chair Raymond Zimmerman to retire; Board Member James Poole selected as Board Chairman 04/29/98 Gilmartin to join Service Merchandise as Senior VP/Hardlines 05/13/98 Service Merchandise promotes McKeaney to VP/Marketing/Advertising 06/01/98 Dearing-Beckmann appointed AVP 06/30/98 Bayer appointed VP/GMM 07/29/98 Service Merchandise appoints Owen Dorsey SVP/Human Resources 07/30/98 Baumgardner appointed VP 08/03/98 Service Merchandise expands Board; elects two seasoned retail veterans 08/13/98 Hollands appointed AVP/DMM 01/08/99 Service Merchandise obtains $750 Million financing commitment; close to naming new CEO 01/11/99 Service Merchandise appoints Bettina M. Whyte Interim CEO; Company engages Jay Alix & Associates to lead turnaround efforts Other: - ------ 12/31/97 Service Merchandise to close Tampa, FL Store 12/31/97 Service Merchandise to close Hollywood, FL Store 12/31/97 Service Merchandise to close Memphis, TN Store 01/07/98 Service Merchandise launches whole new look on the Internet 01/13/98 Dream Home announcement 119 01/21/98 Super Bowl contest winners 01/23/98 Davis to receive humanitarian award 02/02/98 Valentine Sweepstakes announcement 02/03/98 Service Merchandise delivers on credit initiative; credit card processing conversion accomplished on schedule; should add up to $12-15 Million in pre-tax income 02/03/98 Service Merchandise adopts shareholder rights plan; plan replaces the rights agreement scheduled to expire on February 8, 1998 02/10/98 Service Merchandise gives Bill Elliott green flag 02/18/98 Service Merchandise to Consolidate call center operations in Johnson City, TN 03/09/98 Nashville call center consolidation 03/17/98 New MDA board, officers 04/01/98 $10,000 reward for Cincinnati robbery info 04/06/98 Service Merchandise to close one Miami, FL store 04/06/98 Service merchandise to close Caselberry, FL store 04/06/98 Service Merchandise to close Durham, NC store 04/06/98 Service Merchandise to close Saratoga Springs store 04/14/98 Zimmerman award winners 04/30/98 Service Merchandise to open "Treasure Quest" Clearance Center in Bowling Green, KY 06/02/98 Treasure Quest grand opening 06/18/98 All-star contest announcement (local) 06/18/98 All-star contest announcement (trade) 06/25/98 Service Merchandise corrects DCR Credit Rating Announcement 07/02/98 All-star contest winners 08/06/98 Service Merchandise on target to roll out new "self-serve" shopping format, new merchandise mix by Labor Day 08/21/98 Service Merchandise to Convert Denver, CO store to Clearance Outlet 08/21/98 Service Merchandise to Convert Springfield, OH store to Clearance Outlet 120 08/21/98 Service Merchandise to Convert Two Columbus, OH stores to Clearance Outlets 08/21/98 Service Merchandise to Convert Clay, NY store to Clearance Outlet 09/01/98 Think there's nothing new at Service Merchandise Company? Labor Day weekend launch will entice customers to "Discover the New Merchandise" 09/10/98 Service Select/Elizabethtown, KY 09/10/98 Service Select/Casselberry, FL 09/10/98 Service Select/Spring Hill, FL 09/10/98 Service Select/Bowling Green, KY 09/10/98 Service Select/Kissimmee, FL 09/10/98 Service Merchandise experiences favorable customer response to Labor Day weekend kick-off event of new format 09/24/98 Service Merchandise to open five new Service Select stores; Kissimmee, FL store opens September 26 10/28/98 Service Merchandise amends covenant to credit agreement 10/29/98 Service Merchandise Superstore: The Fine Jewelry and Home Decorative Solution; Test concept store from Service Merchandise to open November 21 in Bradenton, FL 11/03/98 Service Merchandise Board amends shareholder rights plan 12/02/98 Service Merchandise issues first of three holiday sales updates 12/07/98 With $150,000 Prize, Holiday Looking Bright for Lucky Couple - Oxford, MI couple wins big in Gift Registry at Service Merchandise/Dream Home Sweepstakes 12/15/98 Service Merchandise issues second of three holiday sales updates; company reports decreased sales and exercises interest grace period on 9% subordinated debentures 12/15/98 Dream Home local winner - Detroit 12/15/98 Reno, NV store to close 12/15/98 Wichita, KS store to close 12/15/98 Waterbury, CT store to close 12/30/98 Service Merchandise issues third holiday sales update 01/05/99 East Meadow, NY store to close 121 01/05/99 Tewksbury, MA store to close 01/13/99 Service Merchandise pays interest due on 9% Subordinated debentures 122 Schedule 5.2 TO CREDIT AGREEMENT CHANGES There have been no changes since September 30, 1998, except for the following: 1. James E. Poole, Chairman of the Board of Directors and Gary M. Witkin, President, CEO and Director, have each resigned their roles with the Borrower. 2. Borrower has received threats from vendors indicating their intention to file a Petition of Involuntary Bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. To date, to the Borrower's knowledge, no vendor has actually filed such a petition. Such a filing, if made, could have a Material Adverse Effect. 3. Borrower has experienced operating losses and declining operational and financial performance through fourth quarter 1998 as disclosed to the Lenders and may continue to experience operating loss and declining operational and financial performance as indicated on projections delivered to the Lenders prior to the date hereof. 4. Borrower's failure to have paid amounts due to its trade debt, factors and related entities. 5. Borrower's failure to have paid amounts due to landlords and lessors under the Borrower's real property and equipment leases. 6. Borrower's failure to negotiate with public bond holders for a reduction or change in interest and/or principal terms and/or exchange offer terms. 7. Borrower's inability to maintain the existing Credit Card Program, or establish a new credit card program. 8. Borrower's loss of key management and key employees. 9. Breach by CIT of an agreement to return approximately $18 million to Borrower pursuant to an agreement to provide vendor financing if the Borrower were to file under Chapter 11 of the U.S. Bankruptcy Code. 123 Schedule 5.4 TO CREDIT AGREEMENT CONSENTS None. 124 Schedule 5.6 TO CREDIT AGREEMENT MATERIAL LITIGATION State of Florida, Office of the Attorney General, Department of Legal Affairs v. Service Merchandise, Inc., No. 98-7125 in the Circuit Court, Second Judicial Circuit of Florida in and for Leon county - The Attorney General for the State of Florida has alleged that Service Merchandise violated the Florida Unfair and Deceptive Trade and Practices Act and certain Florida lottery and gaming statutes, in conducting its 1998 Valentine's Day sales. The state has demanded billions of dollars in their complaint. TCSHC, Inc. v. Service Merchandise Company, Inc., U.S. District Court, Middle District of Tennessee, Case No. 3:93-0759 - On November 14, 1989, TCSHC, Inc. sued Service Merchandise Company, Inc. ("SMC") for breach of contract for $987,067, plus interest, arising out of the Stock Purchase Agreement pursuant to which TCSHC purchased all of the outstanding stock of The Computer Shoppe from SMC. In its answer, SMC denied all allegations and counterclaimed against Plaintiff for $125,938, plus interest, which is the amount still due SMC under the Stock Purchase Agreement. The Plaintiff subsequently amended its complaint to add claims for breach of warranties and misrepresentations and to increase its damage claim to $17 million. The breach of warrant and misrepresentation claims are based on TCSHC's claims that the financial statements provided to them at closing failed to correctly reflect liabilities, inventory and other assets. The Court granted SMC's Motion to add two individuals as counter-defendants. This case is set for trial in February of 1999. Informal SEC Investigation: Service Merchandise Company, Inc. is currently subject to an informal, non-public inquiry by the Enforcement Division of the SEC. The SEC has asked for information regarding the Borrower's 1997 restructuring plan. SMC has been and will continue to be fully cooperative with the inquiry until concluded. In Re: RDM Sports Group, Inc., William G. Hays, Jr., as Chapter 11 Trustee for Sports Group, Inc. v. Service Merchandise Company, Inc., United States Bankruptcy Court, Northern District of Georgia, Case No. 98-1125-WHD. The Chapter 11 Trustee for Sports Group, Inc. ("SG"), filed a Complaint to Enforce Settlement Agreement. SG was a vendor of Service Merchandise Company, Inc. ("SMC") selling exercise equipment. As the result of several months of negotiating between the parties, SG agreed to accept $1.35 million for total settlement of its account. However, because SMC elected to utilize its thirty (30) day grace period and delay making the interest payment under its 9% Senior Subordinated Debentures, and during that 30 day period evaluate its strategic alternatives, the SG settlement has not been paid. The basis of Plaintiff's suit is that the Court had granted authority to the Trustee to settle the claim on behalf of the estate, and SMC has failed to forward the check. (The Borrower believes the $1.35 million dollar settlement is still enforceable). In Re: L. Luria & Son, Inc., The Official Committee of Unsecured Creditors of L. Luria & Son, Inc. v. Service Merchandise Company, Inc., United States Bankruptcy Court Southern District of Florida Miami Division, Case No. 97-16731-BKC-RAM. In November 1995, L. Luria & Son, Inc. ("Luria") obtained a jury verdict against Service Merchandise Company, Inc. ("SMC") in the amount of $13.8 million in Luria & Son, Inc. v. Service Mills Limited Partnership of Service Merchandise Company, Inc., Case No. 93-15792(21) in the Circuit court for the Seventeenth Judicial Circuit in and for Broward County, Florida. SMC appealed the decision citing numerous 125 errors at the trial court level. While the case was on appeal, SMC and Luria settled the case for $1.85 million in consideration of a release of all claims, and the dismissal of the Appeal. It is the Unsecured Creditors Committee's ("Committee") position that the Settlement Agreement "effected a transfer of Luria's property for which it received less than reasonably equivalent value," thereby resulting in a fraudulent transfer (no fraud is alleged on the part of SMC). The Committee is seeking to void the Settlement Agreement and reinstitute the Judgment. SMC filed a Motion to Dismiss and is awaiting the Court's ruling. TJR & Associates v. SMC. TJR has filed an action against SMC alleging copyright and trademark infringement with regard to certain jewelry produced and sold by SMC. The case is in early stages and no demand has been made. Borrower has received threats from vendors indicating their intention to file a Petition of Involuntary Bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. To date, to the Borrower's knowledge, no vendor has actually filed such a petition. 126 Schedule 5.7 TO CREDIT AGREEMENT DEFAULT 1. The Borrower is currently in default with respect to obligations owed to its trade and consignment vendors, factors and related entities, [real estate and equipment lessors] and other vendors, including, but not limited to, printers and technology vendors, with regard to terms and/or debt. 127 Schedule 5.8 TO CREDIT AGREEMENT BURDENSOME RESTRICTIONS None. 128 Schedule 5.13 TO CREDIT AGREEMENT SUBSIDIARIES
INITIAL SUBSIDIARY STATE OF GUARANTORS INCORPORATION OWNERSHIP and INTEREST - ------------------------------------------------------------------------------------------------------- B.A. Pargh Co., Inc. TN Service Merchandise Company, Inc. 100% common shares H.J. Wilson Co., Inc. LA Service Merchandise Company, Inc. 100% common shares H.J. Wilson Co. Realty, Inc. TX Service Merchandise Company, Inc. 100% common shares Homeowners Warehouse, Inc. FL Service Merchandise Company, Inc. 100% common shares Service Merchandise Co. Broad, Inc. TN Service Merchandise Company, Inc. 100% common shares Service Merchandise Co. No. 30, Inc. TN Service Merchandise Company, Inc. 100% common shares Service Merchandise Co. No. 34, Inc. TN Service Merchandise Company, Inc. 100% common shares Service Merchandise Co. No. 35, Inc. TN Service Merchandise Company, Inc. 100% common shares Service Merchandise Co. No. 51, Inc. IL Service Merchandise Company, Inc. 100% common shares Service Merchandise Co. No. 93, Inc. TN Service Merchandise Company, Inc. 100% common shares Service Merchandise Co. No. 99, Inc. NV Service Merchandise Company No. 51, Inc. 100% common shares Service Merchandise Co. of Iowa, Inc. TN Service Merchandise Company, Inc. 100% common shares Service Merchandise Co. of Kansas, TN Service Merchandise Company, Inc. Inc. 100% common shares Service Merchandise Financial Co., TN Service Merchandise Company, Inc. Inc. 100% common shares Service Merchandise Indiana Partners N/A Service Merchandise Co. No. 34, Inc. 61% partnership interest Service Merchandise Co. No. 35, Inc. 39% partnership interest
129
INITIAL SUBSIDIARY STATE OF GUARANTORS INCORPORATION OWNERSHIP and INTEREST - ------------------------------------------------------------------------------------------------------- Service Merchandise of Tennessee DE Service Merchandise Company, Inc. Limited Partnership 1% General Partnership interest Service Merchandise Co. No. 99, Inc. Shareholders 99% Limited Partnership interest Service Merchandise of Texas Limited DE Service Merchandise Company, Inc. Partnership 1% General Partnership interest Service Merchandise of Kansas, Inc. 99% Limited Partnership interest SMC-HC, Inc. DE Service Merchandise Company, Inc. 100% common shares The Toy Store, Inc. TN Service Merchandise Company, Inc. 100% common shares Wholesale Supply Company, Inc. TN Service Merchandise Company, Inc. 100% common shares
130
SUBSIDIARIES WHICH ARE NOT STATE OF SUBSIDIARY GUARANTORS INCORPORATION OWNERSHIP and INTEREST - ------------------------------------------------------------------------------------------------------- Ser Plus Assurance Co. Limited (Bermuda) Service Merchandise Company, Inc. 100% common shares Service Credit Corp. TN Service Merchandise Company, Inc. 100% common shares A.F.S. Marketing Services, Inc. TN Service Merchandise Company, Inc. 100% common shares Service Merchandise Company of New TN Service Merchandise Company, Inc. York, Inc. 100% common shares Service Merchandise Office Supply, TN B.A. Pargh Company, Inc. Inc. 100% common shares Service Merchandise Showrooms, Inc. TN Service Merchandise Company, Inc. 100% common shares Service Merchandise RM, Inc. TN H.J. Wilson Co., Inc. (formerly, The Lingerie Store, Inc.) 100% common shares SMC-SPE-1, Inc. DE SMC-HC, Inc. 100% common shares SMC-SPE-2, Inc. DE SMC-HC, Inc. 100% common shares The McNally Supply Company TN Service Merchandise Company, Inc. 100% common shares Travel Management Consultants, Inc. TN Service Merchandise Company, Inc. 100% common shares Promotables, Inc. TN Service Merchandise Company, Inc. 100% common shares SMC Aviaton, Inc. NH Service Merchandise Company, Inc. Articles of Dissolution have been filed. 100% common shares Once tax clearance is given, this Subsidiary will be officially dissolved.
131 Schedule 5.14 TO CREDIT AGREEMENT ENVIRONMENTAL MATTERS None. 132 Schedule 5.15 TO CREDIT AGREEMENT FILING JURISDICTIONS AND CHIEF EXECUTIVE OFFICES
DEBTOR NAME AND LOCATION OF CHIEF FILING LOCATION FOR UCC-3 ASSIGNMENTS EXECUTIVE OFFICE - ------------------------------------------------------------------------------------------------------ B.A. Pargh Co., Inc. Central Filing Office in: Tennessee 245 Great Circle Road Nashville, TN 37228 Tax I.D. Number: 62-1042714 H.J. Wilson Co., Inc. Central Filing Offices in: Alabama, Arkansas, 7100 Service Merchandise Drive Colorado, Connecticut, Florida, Kansas, Brentwood, TN 37027 Kentucky, Louisiana, Maine, Massachusetts, Tax I.D. Number: 72-0591801 Michigan, Mississippi, Missouri, New Hampshire, New Mexico, New York, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Vermont Arkansas County Clerks of: Sebastian County, Pulaski County, Washington County Georgia County Clerks of: Bibb County, Chatham County, Clayton County, Cobb County, DeKalb County, Fulton County, Gwinett County, Muscogee County, Richmond County Kentucky County Clerks of: Jefferson County, Fayette County, Franklin County, Warren County, Boone County, Davies County, McCracken County Louisiana Parish Clerks of: Bossier Parish, Caddo Parish, Calcasieu Parish, East Baton Rouge Parish, Jefferson Parish, Lafayette Parish, Orleans Parish, Ouachita Parish, Rapides Parish, St. Tammany Parish, Terrebonne Parish, West Baton Rouge Parish
133
DEBTOR NAME AND LOCATION OF CHIEF FILING LOCATION FOR UCC-3 ASSIGNMENTS EXECUTIVE OFFICE - ------------------------------------------------------------------------------------------------------ H.J. Wilson Co., Inc., cont. Massachusetts Town Clerks of: Tewksbury, Somerville, Burlington, Natick, Lanesborough, Holyoke, Auburn, Saugus, Stoughton Mississippi County Clerks of: Hinds County, Lauderdale County, Lamar County, Harrison County Missouri County Clerks of: St. Louis County, Jackson County, Greene County, St Charles County New Hampshire Town Clerks of: Nashua, Manchester, Dover, Salem, Plastow New York County Clerks of; Suffolk County, Saratoga County, Nassau County, Rockland County, Westchester County, Albany County, Broome County, Dutchess County, Monroe County, Orange County, Queens County, Clinton County, Oneida County, New York County North Carolina County Clerks of: Cumberland County, Gaston County, Mecklenburg County, Guilford County H.J. Wilson Co. Realty, Inc. Central Filing Offices in: Louisiana, Tennessee 7100 Service Merchandise Drive and Texas Brentwood, TN 37027 Tax I.D. Number: 62-1705760 The Recorder of Mortgages of Orleans Parish, Louisiana
134
DEBTOR NAME AND LOCATION OF CHIEF FILING LOCATION FOR UCC-3 ASSIGNMENTS EXECUTIVE OFFICE - ------------------------------------------------------------------------------------------------------ Homeowners Warehouse, Inc. Central Filing Offices in: Florida, Illinois, Ohio, 7100 Service Merchandise Drive Tennessee and Virginia Brentwood, TN 37027 Tax I.D. Number: 62-1168492 Ohio County Clerks of: Franklin County, Lucas County, Allen County, Clark County, Richland County, Hamilton County, Clermont County, Summit County, Stark County Virginia County Clerks of: Virginia Beach County, Fairfax County, Henrico County, Chesterfield County, Chesapeake County, Spotsylvania County, Prince William County, Hampton County Service Merchandise Co. Broad, Inc. Central Filing Office in: Tennessee 7100 Service Merchandise Drive Brentwood, TN 37027 Tax I.D. Number: 62-0614149 Service Merchandise Co. No. 30, Inc. Central Filing Offices in: Michigan and 7100 Service Merchandise Drive Tennessee Brentwood, TN 37027 Tax I.D. Number: 62-1047501 Service Merchandise Co. No. 34, Inc. Central Filing Office in: Tennessee 7100 Service Merchandise Drive Brentwood, TN 37027 Tax I.D. Number: 35-1283066 Service Merchandise Co. No. 35, Inc. Central Filing Office in: Tennessee 7100 Service Merchandise Drive Brentwood, TN 37027 Tax I.D. Number: 62-0881214 Service Merchandise Co. No. 51, Inc. Central Filing Offices in: Illinois and Tennessee 7100 Service Merchandise Drive Brentwood, TN 37027 Tax I.D. Number: 36-2773085 Service Merchandise Co. No. 93, Inc. Central Filing Offices in: New Jersey and 7100 Service Merchandise Drive Tennessee Brentwood, TN 37027 Tax I.D. Number: 62-1039007
135
DEBTOR NAME AND LOCATION OF CHIEF FILING LOCATION FOR UCC-3 ASSIGNMENTS EXECUTIVE OFFICE - ------------------------------------------------------------------------------------------------------ Service Merchandise Co. No. 99, Inc. Central Filing Offices in: Nevada and 1325 Air Motive Way Tennessee Suite 130 Reno, NV 89502 Tax I.D. Number: 88-0351194 Service Merchandise Company, Inc. Central Filing Offices in: Alabama, Arizona, 7100 Service Merchandise Drive Arkansas, California, Colorado, Connecticut, Brentwood, TN 37027 Delaware, Florida, Illinois, Indiana, Iowa, Tax I.D. Number: 62-0816060 Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Vermont, Virginia and Washington Arkansas County Clerks of: Sebastian County, Pulaski County, Washington County Georgia County Clerks of: Chatham County, Cobb County, DeKalb County, Fulton County, Richmond County Kentucky County Clerks of: Jefferson County, Franklin County The Recorder of Mortgages of Orleans Parish, Louisiana Massachusetts Town Clerks of: Tewksbury, Somerville, Burlington, Natick, Lanesborough, Holyoke, Auburn, Saugus, Stoughton Mississippi County Clerks of: Hinds County, Lauderdale County, Lamar County, Harrison County
136
DEBTOR NAME AND LOCATION OF CHIEF FILING LOCATION FOR UCC-3 ASSIGNMENTS EXECUTIVE OFFICE - ------------------------------------------------------------------------------------------------------ Service Merchandise Company, Inc. cont. Missouri County Clerks of: St. Louis County, Jackson County, Greene County, St. Charles County New Hampshire Town Clerks of: Nashua, Manchester, Dover, Salem, Plastow New York County Clerks of: Suffolk County, Saratoga County, Nassau County, Rockland County, Westchester County, Albany County, Broome County, Dutchess County, Monroe County, Orange County, Queens County, Clinton County, Oneida County, New York County North Carolina County Clerks of: Cumberland County, Gaston County, Mecklenburg County, Durham County, Guilford County Ohio County Clerks of: Franklin County, Lucas County, Allen County, Clark County, Richland County, Hamilton County, Clermont County, Summit County, Stark County Pennsylvania County Clerks of: Allegheny County, Lehigh County, Westmoreland County, Delaware County, Philadelphia County, Dauphin County, Luzerne County, Lancaster County, Berks County, Lackawana County Virginia County Clerks of: Virginia Beach County, Fairfax County, Henrico County, Chesterfield County, Chesapeake County, Spotsylvania County, Prince William County, Hampton County
137
DEBTOR NAME AND LOCATION OF CHIEF FILING LOCATION FOR UCC-3 ASSIGNMENTS EXECUTIVE OFFICE - ------------------------------------------------------------------------------------------------------ Service Merchandise Company of Kansas, Central Filing Offices in: Alabama, Kansas, Inc. Pennsylvania and Tennessee 7100 Service Merchandise Drive Brentwood, TN 37027 Pennsylvania County Clerks of: Allegheny Tax I.D. Number: 62-1115398 County, Lehigh County, Westmoreland County, Delaware County, Philadelphia County, Dauphin County, Luzerne County, Lancaster County, Berks County, Lackawana County Service Merchandise Company of Iowa, Inc. Central Filing Offices in: Iowa and Tennessee 7100 Service Merchandise Drive Brentwood, TN 37027 Tax I.D. Number: 62-1092777 Service Merchandise Financial, Co., Inc. Central Filing Office in: Tennessee 7100 Service Merchandise Drive Brentwood, TN 37027 Tax I.D. Number: 62-1483325 Service Merchandise Indiana Partners Central Filing Offices in: Indiana and 7100 Service Merchandise Drive Tennessee Brentwood, TN 37027 Tax I.D. Number: 35-1872944 Service Merchandise of Tennessee Limited Central Filing Office in: Tennessee Partnership 7100 Service Merchandise Drive Brentwood, TN 37027 Tax I.D. Number: 88-0351195 Service Merchandise of Texas Limited Central Filing Offices in: Tennessee and Texas Partnership 7100 Service Merchandise Drive Brentwood, TN 37027 Tax I.D. Number: 62-1551569 SMC-HC, Inc. Central Filing Office in: Tennessee 7100 Service Merchandise Drive Brentwood, TN 37027 Tax I.D. Number: 62-1652313
138
DEBTOR NAME AND LOCATION OF CHIEF FILING LOCATION FOR UCC-3 ASSIGNMENTS EXECUTIVE OFFICE - ------------------------------------------------------------------------------------------------------ The Toy Store, Inc. Central Filing Offices in: Kentucky and 7100 Service Merchandise Drive Tennessee Brentwood, TN 37027 Tax I.D. Number: 62-1117558 County Clerk of Jefferson County, Kentucky Wholesale Supply Company, Inc. Central Filing Offices in: California, Florida, 7100 Service Merchandise Drive Kentucky, New York, South Carolina, Brentwood, TN 37027 Tennessee, Texas and Washington Tax I.D. Number: 62-6031083 Clerk of the Superior Court of Chatham County, Georgia
139 Schedule 5.17 TO CREDIT AGREEMENT INTELLECTUAL PROPERTY MATTERS None. 140 Schedule 5.19 TO CREDIT AGREEMENT MATERIAL REAL PROPERTY I. MORTGAGED PROPERTIES
STATE STORE LOCATION HOLDING OWNER - ----- ----- -------- ------- ----- NH 26 DOVER GROUND LEASE Service Merchandise Co., Inc. NC 28 CHARLOTTE GROUND LEASE Service Merchandise Co., Inc. PA 82 SCRANTON FEE Service Merchandise Co., Inc. PA 129 WILKES-BARRE FEE Service Merchandise Co., Inc. TN 163 CHATTANOOGA FEE Service Merchandise Co., Inc. AZ 169 MESA FEE Service Merchandise Co., Inc. AZ 170 GLENDALE FEE Service Merchandise Co., Inc. TN 186 ANTIOCH FEE Service Merchandise Co., Inc. TX 197 LEWISVILLE FEE Service Merchandise Co., Inc. PA 198 HARRISBURG FEE Service Merchandise Co., Inc. TX 205 LAREDO GROUND LEASE Service Merchandise Co., Inc. NY 206 HENTRIETTA GROUND LEASE Service Merchandise Co., Inc. MD 231 SALISBURY GROUND LEASE Service Merchandise Co., Inc. MO 246 CRESTWOOD FEE Service Merchandise Co., Inc. GA 251 SMYRNA FEE H.J. Wilson Co., Inc. FL 262 TAMPA FEE Service Merchandise Co., Inc. AZ 274 MESA FEE Service Merchandise Co., Inc. GA 278 ALPHARETTA FEE H. J. Wilson Co., Inc. FL 295 ORLANDO FEE Service Merchandise Co., Inc. FL 303 ALTAMONTE GROUND LEASE Service Merchandise Co., Inc. SPRINGS SC 308 CHARLESTON FEE Service Merchandise Co., Inc. IL 310 CRYSTAL LAKE FEE Service Merchandise Co., Inc. CT 340 MANCHESTER GROUND LEASE H. J. Wilson Co., Inc. FL 347 CORAL GABLES GROUND LEASE H. J. Wilson Co., Inc. DE 351 WILMINGTON GROUND LEASE Service Merchandise Co., Inc. IL 355 SCHAUMBURG GROUND LEASE Service Merchandise Co., Inc. TX 369 HOUSTON GROUND LEASE Service Merchandise Co., Inc. TX 370 HOUSTON FEE H. J. Wilson Co., Inc. TX 381 SOUTH GROUND LEASE H. J. Wilson Co., Inc. ARLINGTON FL 388 MIAMI GROUND LEASE Service Merchandise Co., Inc. FL 390 SUNRISE FEE Homeowners Warehouse, Inc. IL 402 NORTHLAKE FEE Service Merchandise Co., Inc. LA 416 HARVEY FEE H. J. Wilson Co., Inc. TX 469 MESQUITE FEE H. J. Wilson Co., Inc. MI 533 NOVI GROUND LEASE Service Merchandise Co., Inc. TN 980 NASHVILLE FEE Service Merchandise Co., Inc. SC 152 CHARLESTON GROUND LEASE Service Merchandise Co., Inc. MS 342 JACKSON GROUND LEASE H. J. Wilson Co., Inc. PA 779 WEST MIFFLIN GROUND LEASE Service Merchandise Co., Inc. PA 786 GREENSBURG GROUND LEASE Service Merchandise Co., Inc. KY 160 OWENSBORO FEE Service Merchandise Co., Inc. AL 185 HUNTSVILLE FEE Service Merchandise Co., Inc.
141
STATE STORE LOCATION HOLDING OWNER - ----- ----- -------- ------- ----- KY 177 PADUCAH FEE Service Merchandise Co., Inc. TN 777 FRANKLIN FEE Service Merchandise Co., Inc. TN 99K2 BRENTWOOD FEE Service Merchandise Co., Inc. (excluding 6 acres of out-parcel)
II. EXCLUDED PROPERTIES See Schedule 7.10(b). 142 Schedule 5.23 TO CREDIT AGREEMENT DEPOSITARY ACCOUNTS Account Name: Service Merchandise Co., Inc. Consolidated:
BANK/NAME ACCOUNT ADDRESS CITY STATE POSTAL/CODE - --------- ------- ------- ---- ----- ----------- AmSouth 946818 601 Market Street Chattanooga TN 37102 ABM-AMRO Bank 106032121 One EAB Plaza Uniondale NY 11555-2667 Bank of America CA 1235002185 1230 Peachtree Street, Atlanta GA 30309 Suite 3600 Bank of Boston MA 51137175 100 Federal Street, Boston MA 02110 Mail Stop 01-07-08 Bank of Boston CT 67417305 100 Federal Street Boston MA 02110 Mail Stop 01-07-08 Bank of Oklahoma 207904778 P. O. Box 2300 Tulsa OK 74192 Bank One LA 2101348590 451 Florida Street, Baton Rouge LA 70821-1511 P. O. Box 1511 Chase Manhattan Bank 323514790 270 Park Avenue New York NY 10017 Chase Texas 101395961 P. O. Box 2558 Houston TX 77252-8087 Comerica Bank 1840081622 100 Renaissance Center Detroit MI 48243 Deposit Guaranty 5002938694 1 Deposit Guaranty Jackson MS 39215 Plaza, P. O. Box 1200 Fifth Third Bank 99937660 Fifth Third Center Cincinnati OH 45263 First American National 1569847 315 Union Street - 3rd Nashville TN 37237-0310 Bank Floor Wells Fargo Bank 4159528785 100 South Wacker Drive, Chicago IL 60606 Suite 400 First National Bank of 17199044 25 South Charles Street Baltimore MD 21201 Maryland First Union National Bank 2020000176239 150 Fourth Ave, North Nashville TN 37219 Fleet Bank 9384700997 One Stamford Plaza, Stamford CT 06901-3236 283 Treaser Blvd. Harris Trust & Savings 4065223 111 West Monroe Street, Chicago IL 60690 Bank P. O. Box 755 Key Bank OH 700394698 2025 Ontario Road, Mail Cleveland OH 44114 Code OH-01-00-0409 Merchantile Bank 4331409286 P. O. Box 15008 Little Rock AR 72231-5008 NationsBank 1290149138 One Nations Plaza Nashville TN 37239-1697 TN1-100-05-07 NBD Bank 715001255143 One Summit Square Fort Wayne IN 46801-2345 Norwest Bank 1019132720 1700 Broadway Denver CO 80274-8613 PNC Bank 300158269 580 West Jefferson Street Louisville KY 40202-2851
143 Schedule 5.23 TO CREDIT AGREEMENT (Continued) DEPOSITARY ACCOUNTS Account Name: Service Merchandise Co., Inc. Non-consolidated:
BANK/NAME ACCOUNT ADDRESS CITY STATE POSTAL/CODE - --------- ------- ------- ---- ----- ----------- Chase-San Angelo Branch 06300280569 Sunset Mall San Angelo TX 76904 Citizens Bank & Trust 0336335 333 Broadway, Paducah KY 42001 P. O. Box 2400 Crestar 202219542 Ric 7694, Richmond VA 23260-6150 First Bank Southwest 03600189193 P. O. Box 32552 Amarillo TX 79120-2552 Hancock Bank 070332908 P. O. Box 1029 Pacagoula MS 39567 Laredo National Bank 0253518 5400 McPherson Road Laredo TX 78041 NBD Bank MI 1520603 611 Woodward Avenue Detroit MI 48226 Permanent Federal 581636117 P. O. Box 1277 Evansville IN 47706 Savings Rapides Bank & Trust 000024066 P. O. Box 31 Alexandria LA 71309 Regions 3700335207 P. O. Box 2392 Longview TX 75606 Terre Haute First National 2509288 Springhill Branch, Terre Haute IN 47802 Bank 4500 Dixie Bee Road Texas Gulf Bank 1000708255 P. O. Drawer H Freeport TX 77566
CASH COLLATERAL ACCOUNTS: See Schedule 8.3(f) item 14 which is incorporated herein by reference. 144 Schedule 5.25 TO CREDIT AGREEMENT Y2K COMPLIANCE EXCEPTIONS (a) Completed (b) A non-software based testing methodology of mission-critical corporate/non-store business systems ("Corporate/Non-store Systems") and core retail/store systems ("Store systems") has been implemented by Borrower. (c) At this time, Borrower has reviewed and tested a significant portion of its material Corporate/Non-store Systems for Y2K compliance. Testing of Store Systems for Y2K Compliance has been scheduled, but has not been undertaken at this time. (Store Systems known to be non-compliant are not scheduled for testing.) All scheduled Store System testing is projected to be completed in the first half of 1999. System testing and Y2K modifications are being conducted simultaneously by Borrower and as a result, Borrower is approximately eighty-seven percent (87%) complete with all testing and modifications for Y2K Compliance for Corporate/Non-store Systems. (d) Borrower has completed an extensive plan of action, as generally described below, Borrower has identified and plans to implement the following changes and modifications to the Store Systems for Y2K Compliance: 1. Hardware/Operating System - (1) replace all primary store servers with new Intel-based servers; and (2) eliminate use of all CDOS-based store platforms and replace with a Y2K compliant Windows NT 4.0 platform. 2. Business Applications - Transfer CDOS-based applications to Visual Basic applications, functioning in a Windows NT 4.0 environment. 3. Software - Related Software Development will also be required to achieve Y2K Compliance. The above plan of action will require a project capital expenditure of approximately $3,300,000.00. (e) See response to 5.25(d) above. (f) Through joint participation with other national retailers and the National Retail Federation ("NRF"), Borrower is in the process of completing a general survey for Corporate/Non-store Systems and Store Systems of its major merchandise and expense vendors/suppliers (the "NRF Survey"), Borrower is awaiting the results of this survey. 145 (g) Once the NRF Survey results are obtained and tabulated, appropriate testing will be conducted. (h) Change implementation will be undertaken by Borrower and a written contingency plan will be developed in the near future by Borrower. (i) All Y2K Compliance changes, modifications and corrections to Borrower's mission critical Corporate/Non-store Systems, which are known by Borrower to be necessary for Y2K compliance, are projected to be completed in the first half of 1999. Significant progress has also been accomplished by Borrower in making required program changes and software upgrades to the Store Systems in order to achieve Y2K Compliance, including pilot testing of new Hardware and Operating Systems which is underway at this time. 146 Schedule 5.25 TO CREDIT AGREEMENT (ATTACHMENT) [SERVICE MERCHANDISE LETTERHEAD] STORE SYSTEMS REVIEW JANUARY 13, 1999 147 Store System Summary Current State of Store System Store Server - - Motorola 68040 - - Last Manufactured in 1994 - - Motorola Unix (R3V6) operating system is no longer supported Store Equipment - Registers and Peripherals - - Mix of Registers - Perry 9310 (6,989) last manufactured in 1986. Failure rate - 46.5%. Parts no longer available. - Perry 9380 (1,437) last manufactured in 1989. Failure rate 84.9%. Parts no longer available. - Merit (1,983) last manufactured in 1995. Failure rate 12.9%. - Ultimate Technology (725) still manufactured. PC based register. - - Microbilt payment processing equipment (credit, signature capture, and check) is no longer manufactured. Most replacement parts are no longer available. - - Radio Frequency Network - Symbol Spectrum 24, Strong RF network using current technology. Business Applications - CDS Business Basic (CDOS) - - The majority of applications have been developed in house over the last twenty years. - - CDOS is not Year 2000 compliant. - - CDOS has very limited support. SMC is primary user of CDOS. Developer/architect of CDOS is no longer alive. - - SMC uses packaged software for printing of tags and signs and labor scheduling. Neither of these packages are Y2K compliant. Business Risks with Store System - - Motorola server is no longer supported by the manufacturer. Motorola UNIX is no longer supported by software or database vendors. - - High failure rate of obsolete hardware increases cost of ownership. SMC maintains a dedicated staff just to repair obsolete registers and Microbilt equipment. Parts must be salvaged from old equipment. - - CDOS is a proprietary language with minimal, if any, support. - - Layaways will not be able to calculate final layaway payment date after April 30, 1999. Average layaway sales in excess of $5 million / month. Purchase orders and publications that have a term date in 2000 can not be processed by the Store System. - - Software packages for labor scheduling and printing of tags are not Y2K compliant. No alternative in the Motorola UNIX environment is available that is Y2K compliant. 2 148 - - No outside contract help is available for the current work environment. SMC resources are limited to what SMC can hire and train. - - Staff retention in the current environment is challenging. Coupled with the company's financial problems, staff turnover will be very high. The technical staff is holding on to gain the experience gained by working on current technology. - - Point of sale system lacks flexibility and is too complex. - - No system redundancy to protect against system down time. - - Customer service is adversely affected by slow and broken equipment. Current Direction for Store Systems Store Server - - Dual server strategy leveraging the Administration Workstation as the backup server, Manual fall over protection for system failures. - - Hardware evaluation completed. Dell has been selected as the provider of the store server. Dell's final quote was over $6,000 per store cheaper than Compaq, IBM or NCR. Store Equipment - Registered Peripherals - - The Perry registers are planned to be replaced in 1999 through 2001. - - Replacement for the Microbilt equipment is planned for 1999 and 2000. SMC is working with Checkmate, Verifone and Penware on the replacement solution. Business Applications - CDS Business Basic (CDOS) - - CDOS applications have been "ported" to Visual Basic for a Windows NT environment. Currently installed at the Hickory Hollow (#186) store. - - NCR has been selected to stage and install a new store server, backup server and Jewelry Receiving in the stores. A contract has been signed with NCR. - - Installation of the new hardware and "ported" software is scheduled to be completed by the end of March. We are behind due to the recent transition. Orders need to be placed and installation schedules need to be finalized this week. - - ELT has provided SMC with a Y2K upgrade for the NT server for printing of tags and signs. - - Final negotiations have been completed on a current version of labor scheduling software. This software runs on the NT. Contract needs to be signed by the end of this week. - - POS software will be either re-written or replaced to simplify the business process and take advantage of current technology. 3 149 Cost of Store Technology Conversion Projection for 210 Stores
This Week 30 Days Remaining 1999 2000 140 Stores 70 Stores - -------------------------------------------------------------------------------------------------------------------------- Servers/Installation $2,182,600 $1,091,300 $15,590 / add. store Quick Staff $85,000 Registers $460,000 $8,120,000 Microbilt Replacement $137,300 $2,746,000 Software/Services $1,100,000 $2,500,000 Total Investment $2,247,600 $1,091,300 $1,697,300 $13,366,000 Plus Additional Stores
Year 2000 Summary Current State Hardware - - Motorola servers are Y2K compliant. Tests have been performed to ensure the hardware will boot in the Year 2000. - - POS Perry registers are dumb ASCII terminals with no imbedded chips. These terminals only run an ADM1A terminal emulation. No dates are stored or calculated on these devices. - - Merit POS registers are a 386 PC based register that only emulates the ADM1A terminal. - - Ultimate POS registers are 486 PC based registers. Operating System: - - Motorola UNIX will boot for the year 2000. No extensive tests have been performed on date calculations in the UNIX environment. - - CDOS is an operating system that resides on top of UNIX and is responsible for the running the Business Applications. CDOS is NOT Y2K compliant. Date storage and date calculations are not handled correctly for the new millennium. Business Applications: - - Business applications are NOT Y2K compliant under the CDOS operating system. Layaways, Special Orders, Purchase Orders, Sale Publications and Communications are date sensitive. 4 150 Plan of Action Service Merchandise's plan to address Y2K for the store system has been made on the premise that the store server will be replaced with an Intel based server, the business applications will be ported to Visual Basic and packaged software will be upgraded to a current Y2K compliant package. The application port has been completed and has been in pilot in one store since November 11. Y2K compliance testing with the new port applications is still in process scheduled to be completed by 3/1/99. Hardware/ Operating System: - - Replace the Motorola as the primary server with a new Intel based server. The Motorola will be used only as a "terminal server". No business applications will reside on the Motorola. - - Merit and Ultimate registers will be tested for Y2K compliance. - - Port to the Windows NT 4.0 platform. Eliminate all use of CDOS. Business Applications: - - Ported CDOS applications to Visual Basic running in a Windows NT 4.0 environment. - - Program changes have been completed in the Visual Basic applications to handle Y2K date calculations and storage. - - Software for printing tags and labor scheduling have been upgraded to the Windows NT version that is Y2K compliant. Testing: - - Nine resources are committed to testing Y2K. Testing will be complete by 3/1/99. - - Interfaces between store system and corporate systems are incorporated into the text scripts. - - Over 2000 detail test scripts of 160 key store system applications will be executed. Capital Projection to complete Y2K compliance - $3.3 M Store System Contracts Active Contracts: NCR Store Reconfiguration - Development contract for the project to port CDOS applications to Visual Basic. Contract covers a term through April 1999. NCR Staging and Installation (New Servers) - Service contract signed in December to provide staging and installation services for the new store servers, workstations and "ported" software. Cronus Interactive - Maintenance contract for automated testing tool. 5 151 Symbol Maintenance Agreement - Maintenance contract for all Symbol radio frequency equipment and Comtec printers. ELT - Maintenance contract for the packaged software used in the stores to print signs, display tags and tickets. Pending Contracts: Dell Computers - Hardware purchase contract for new store servers and workstation. Federated Quick Staff - Maintenance contract extending Service Merchandise the rights to Quick Staff labor scheduling software. Store System Staffing Support - 11 resources - - Daily phone support for the stores - - Support for Mail Order, Protection Services, Warehouse and Corporate Time Clocks and Technical Services - - Problem resolution - - Small development - - Software turnover and distribution Development - 16 resources - - Major project development - - Y2K testing for store system - - Y2K development for Mail Order Warehouse, Warehouse and Corporate time clocks, Protection Services and Technical Services Store System's Key Projects 1998 Key Initiatives - - Store Reconfiguration Project - worked with NCR to "port" the store system applications from CDOS to Visual Basic. A pilot store was installed on November 11. 15,000 hour project. - - Interim Store Format - Major changes were implemented to accommodate the transition to a bulked out format rather than the traditional Catalog Showroom format. Changes were made primarily to inventory management and replenishment. 6 152 - - Physical Inventory - The Physical Inventory process was re-written to take advantage of the radio frequency infra-structure that has been put in place. Rather than using the registers strapped to a buggy, PI was completed using the RF equipment. 1999 Key Initiatives - - Store Server Rollout - Installation and support of the new "ported" system and store servers. Estimated completion date - mid-April. - - Year 2000 - This project includes compliance testing for the store system. - - "Port" from CDOS to Visual Basic and make Y2K changes for: Technical Services, Mail Order Warehouse System, Protection Service (Loss Prevention) and the corporate and warehouse time keeping systems. - - Implement replacement for Microbilt equipment. - - POS enhancements for processing of coupons (tax and customer service implications) and transaction discounting. - - Begin writing new POS system to take simplify the checkout process and leverage PC technology in new PC registers. 7 153 Y2K STATUS 01/08/99 SYTEMS COMPLETED
Original Actual Percent Hour Hours Hours Completion Systems Estimate Total Used Date - ------- -------- ----- ---- ---- M2 Millenium Rel. 3.0 (DBS) 500 763 153% 11/1/96 FA Fixed Assets (DBS) 600 667 115% 11/8/96 AP Accounts Payable 244 68 28% 6/2/97 FB Flash Payroll Budget 738 1396 189% 8/29/97 DE Data Entry 538 14 3% 8/11/97 HA Honeywell to Andahl 36 13 36% 8/19/97 FC Financial Collections 170 0 0% 8/19/97 AA Advertising Accrual 65 0 0% 8/19/97 VF Vendor Freight 108 133 123% 9/26/97 VC Vendor Control 1268 2030 160% 10/17/97 VE Vendor ED 440 455 103% 10/17/97 VI Vendor Invoices 948 1110 117% 10/17/97 AH Huron to DMS 54 70 130% 11/7/97 CC Credit Cards 259 381 147% 11/21/97 CU Corporate Systems 381 246 65% 1/2/98 SE Special Events 704 67 10% 1/16/98 GR Gift Registry 1308 595 45% 3/6/98 LP Loss Prevention 646 15 2% 4/7/98 AO Associate Scheduling 1076 1044 97% 4/8/98 FS Financial Systems 59 14.5 25% 4/8/98 GL General Ledger (DBS) 1300 1376 106% 4/13/98 GL General Ledger 67 0 0% 4/13/98 RA Return Authorization 0 10 0% 5/15/98 MENU Online Menu 16 5 31% 5/15/98 TP Transaction Processing 117 10 9% 5/15/98 BC BAP Inventory Control 48 0 0% 5/21/98 BP BAP ADT System 508 398 78% 5/21/98 BR BAP Accounts Pauable 160 149.5 93% 5/21/98 BX BAP System 101 8 8% 5/21/98 SL Credit Slips 737 172.5 23% 5/21/98
8 154
Original Actual Percent Hour Hours Hours Completion Systems Estimate Total Used Date - ------- -------- ----- ---- ---- SS New Store Sales 71 129 182% 5/21/98 OM Order Management 959.0 651.0 68% 6/1/98 AD Associate Discount 615.0 34.0 6% 6/3/98 AT Arthur Planning 28 0 0% 6/5/98 CM Cash Management 37.0 67.5 182% 6/2/98 OH Online Household 318.0 0.0 0% 6/4/98 LC Layered Cost 220.0 48.0 22% 6/11/98 HH Household 2542.0 1940.0 75% 6/17/98 FR Customer Friendly Rel. 1952.0 778.0 40% 6/25/98 MA Media Accounting 1139.0 962.0 84% 7/20/98 SA Sales Accounting 388.0 593.5 153% 7/15/98 AC Award Certificate 1245.0 152.0 12% 8/18/98 NY New York Pilot 537.0 516.0 96% 9/30/98 FLFB Flash 194.0 1627.0 839% 9/30/98 BY Buyer Menu 16.0 12 75% 10/31/98 CD Competitive Pricing 28.0 58.5 209% 10/31/98 ST Store Reporting 34.0 25 74% 10/31/98 CG Companion Item 16 12 75% 11/6/98 DF Defective Management 40 12 30% 11/6/98 DP Departmentals 16 10 63% 11/8/98 HR/PN Human Resources/PCN 2153.0 2207.0 103% 11/4/98 DT Display Tags/Tickets 40 20 50% 11/13/98 MP Merchandise Reporting 104 52 50% 11/25/98 PC Product Class 40 42 105% 11/25/98 RE Reports Parameters 16 6 38% 11/25/98 PB Publications 152 57.5 38% 12/9/98 CR Cashier Exception Rpt. 43 57 133% 12/18/98 NS Supplies Purchasing 9 94 1044% 12/14/98 FP Replenishment 140 283 202% 12/30/98 SH Sales History 28 9 32% 12/30/98 CU Common Systems 192 39 20% 12/30/98 EX Employee Commission 81 17 21% 12/30/98 SU System Utilities 96 0 0% 12/30/98
9 155
Original Actual Percent Hour Hours Hours Completion Systems Estimate Total Used Date - ------- -------- ----- ---- ---- IS Imports 0 0 0% 12/39/98 DW Data Warehouse 0 0 0% 12/30/98 DB Database Services 0 0 0% 12/30/98 EM Electronic Mail 0 0 0% 12/30/98 HS Security Administration 0 0 0% 12/30/98 HU Huron Software Data 0 0 0% 12/30/98 MR Market Research 0 0 0% 12/30/98 NC Netcom 0 0 0% 12/30/98 NE Netman-SYS Analysis 0 0 0% 12/30/98 ON Print Order Newspaper 20 0 0% 12/30/98 OP Computer Operation 0 0 0% 12/30/98 RM Risk Management 0 0 0% 12/30/98 SC Schedule and Control 0 0 0% 12/30/98 SP Sys.&Prog.(Purch) 157 0 0% 12/30/98 TA MIS Training Admin 0 0 0% 12/30/98 TM Tape Management 0 0 0% 12/30/98 MO Mail Order 702.0 998.0 142% 1/11/99 Total Complete 2756.6 22741.5 82%
10 156 Y2K STATUS 01/08/99 APPLICATIONS IN PROCESS OR REMAINING
Original Actual Estimated Hour Hours Hours Percent Completion System Lang. Estimate Total Remaining Completed Date Status ------ ----- -------- ----- --------- --------- ---- ------ IC Inventory Control Huron 118 303 20 94% 1/29/99 Testing IE Inventory Evaluation Huron 104 187 20 90% 1/29/99 Testing CO Customer Orders Huron 328 37 291 11% 1/29/99 Researching SO Special Orders Huron 256 80 176 31% 1/29/99 Researching SI Showroom Interface Cobol 52 0 52 0% 3/30/99 Not Started SF Store File Maintenance Huron 103 65.5 33.5 66% 3/30/99 Testing FM File Maintenance Huron 172 91.5 80.5 53% 1/29/99 Testing MT Manifest Training 10MS 631.0 2022.0 10.0 100% 1/29/99 Ready for Turnover PI Physical Inventory Huron 104 19 85 18% 1/29/99 Researching PO Purchase Order Suspense Huron 102 14 88 14% 1/29/99 Testing PV Purchase Orders Huron 208 18 190 9% 1/29/99 Testing VM Stock Balancing Huron 18 32.5 8 80% 1/29/99 Ready for Turnover AP/PO DBS Accounts Payable DBS 1688.0 1454.5 213.5 87% 2/7/99 Testing AR Accounts Receivable DBS 1576 230 1346 15% 6/30/99 Researching CA Capital Projects (DBS) DBS 196 0 196 0% 6/30/99 Not Started GC Gift Certificates DBS 94 0 94 0% 6/30/99 Not Started RV Records Verifications (DBS) DBS 32 0 32 0% 6/30/99 Not Started TC Telecommunication (DBS) DBS 20 0 20 0% 6/30/99 Not Started PS Personal Systems DBS-HR 32 0 32 0% 3/30/99 Not Started WM Warehouse Management Cobol 1400.0 5100.5 665.5 88% 2/26/99 Testing TS Tech Support Support 196 157 39 80% 6/30/99 In Process CV Culinet Operation System Support 24 0 24 0% 6/30/99 Not Started DS Data Security Support 76 0 76 0% 6/30/99 Not Started DY Dynaplan Utilities Support 0 0 0 0% 6/30/99 Not Started ED Electronic Data Interface Support 128 0 128 0% 6/30/99 Not Started FT FRT Traffic (Purch-DSI) Support 0 0 0 0% 6/30/99 Not Started G1 (Purchased Software) Support 117 0 117 0% 6/30/99 Not Started GW Gateway Systems Support 0 0 0 0% 6/30/99 Not Started
11 157
Original Actual Estimated Hour Hours Hours Percent Completion System Lang. Estimate Total Remaining Completed Date Status ------ ----- -------- ----- --------- --------- ---- ------ IN Internal Download Support 0 0 0 0% 6/30/99 Not Started LA Loss Prevention Support 0 0 0 0% 6/30/99 Not Started NT NT Systems Support 0 0 0 0% 6/30/99 Not Started TK Tech Services Doc. Support 0 0 0 0% 6/30/99 Not Started TL Tch Library Support Support 52 0 52 0% 6/30/99 Not Started WA Traffic (Purch Pkg) Support 0 0 0 0% 6/30/99 Not Started WE WMS Distribution Support 0 0 0 0% 6/30/99 Not Started Miscellaneous Systems 0.0 47.0 Complete Total In Process 7806.0 9658.6 4000.00 71% Project Management 8122.0 3053.6 1249.5 71% Total Complete 27556.0 22741.6 0.0 100% 41494.0 35853.6 5330.5 87% Total
12 158 Schedule 6.1(i) TO CREDIT AGREEMENT LOCAL COUNSEL JURISDICTIONS Florida Illinois New York Tennessee Texas 159 Schedule 6.1(j) TO CREDIT AGREEMENT UCC FILINGS DEBTOR: B.A. PARGH CO., INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/30/97 Tennessee #971-521235 Secretary of State DEBTOR: H. J. WILSON CO., INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 Alabama #97-37927 Secretary of State 9/12/97 Arkansas #1093226 Secretary of State 4/3/98 Sebastian County, #98-379 Arkansas 4/3/98 Pulaski County, #98 023977 Arkansas 4/3/98 Washington County, #9801058 Arkansas 9/11/97 Colorado #1997-2077309 Secretary of State 9/11/97 Connecticut #1800874 Secretary of State 5/6/97 Florida #97-0000098047 Secretary of State 9/10/97 Florida #97-0000204096 Secretary of State 160 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/15/97 Bibb County, #11-97-4839 Georgia 4/22/97 Chatham County, #025-97-002868 Georgia 4/7/97 Clayton County, #031-97-001930 Georgia 6/12/97 Clayton County #031-97-003507 Georgia 4/7/97 Cobb County, #033-97-004882 Georgia 6/12/97 Cobb County, #033-97-008511 Georgia 4/22/97 DeKalb County, #044-97-004027 Georgia 12/16/97 DeKalb County, #044-97-012647 Georgia 4/8/97 Fulton County, #060-97-006761 Georgia 6/13/97 Fulton County, #060-97-011583 Georgia 4/7/97 Gwinett County, #067-97-004102 Georgia 4/22/97 Muscogee County, #106-97-002110 Georgia 4/22/97 Richmond County, #121-97-001401 Georgia 9/11/97 Kansas #2386380 Secretary of State 9/11/97 Kentucky #153419 Secretary of State 161 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 10/31/97 Boone County, #257901 Kentucky 9/15/97 Davies County, #0-77229 Kentucky 10/31/97 Fayette County #97-003857 Kentucky 9/16/97 Jefferson County, #97-07806 Kentucky 9/16/97 McCracken County, #9707631 Kentucky 9/15/97 Warren County, #122373-00 Kentucky 3/18/98 Franklin County, #70809 Kentucky 4/23/97 Bossier Parish, #08-374409 Louisiana 4/11/97 Caddo Parish, #09-947633 Louisiana 6/27/97 Caddo Parish, #09-950607 Louisiana 4/23/97 Calcasieu Parish, #10-2341567 Louisiana 4/10/97 East Baton Rouge Parish, #17-1131350 Louisiana 4/8/97 Jefferson Parish, #26-214024 Louisiana 6/27/97 Jefferson Parish, #26-216047 Louisiana 4/23/97 Lafayette Parish, #28-373539 Louisiana 162 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 6/27/97 Lafayette Parish, #28-374061 Louisiana 4/8/97 Orleans Parish, #36-116516 Louisiana 9/11/97 Orleans Parish, #36-121352 Louisiana 9/11/97 The Recorder of Mortgages #121353 of Orleans Parish, Louisiana 4/8/97 Ouachita Parish, #37-65019 Louisiana 4/18/97 Rapides Parish, #40-031610 Louisiana 4/23/97 St. Tammany Parish, #52-12077 Louisiana 4/23/97 Terrebonne Parish, #52-996311 Louisiana 6/27/97 West Baton Rouge Parish, #61-1997000184 Louisiana 9/11/97 Maine #1236336 Secretary of State 9/11/97 Massachusetts #496279 Secretary of State 4/8/98 Town of Tewksbury, #109 Book 98 Massachusetts 4/8/98 Town of Somerville, #314 Massachusetts 4/8/97 Town of Burlington, #223 Massachusetts 4/8/98 Town of Natick, #141 Massachusetts 163 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 4/9/98 Town of Lanesborough, #28 drawer #3 Massachusetts 4/8/98 Town of Holyoke, #37588 Massachusetts 4/8/98 Town of Auburn, #84 Massachusetts 4/8/98 Town of Saugus, #26992 Massachusetts 4/8/98 Town of Stoughton, #18385 Massachusetts 9/10/97 Michigan #79057B Secretary of State 9/11/97 Mississippi #0-1140471 Secretary of State 4/6/98 Hinds County, #032105 Mississippi 4/21/98 Lauderdale County, #3642-98 Mississippi 4/20/98 Lamar County, #8-32083 Mississippi 4/3/98 Harrison County, #002698 Mississippi 9/11/97 Missouri #2828630 Secretary of State 4/8/98 St. Louis County, #4369 Missouri 4/9/98 Jackson County, Missouri #J395860 4/3/98 Greene County, Missouri #001439 164 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 4/8/98 St. Charles County, Missouri #01349 9/11/97 New Hampshire Secretary of #495258 State 4/8/98 Town of Nashua, New #077044 Hampshire 4/8/98 Town of Manchester, New #124,314 Hampshire 4/8/98 Town of Dover, New Hampshire #133 4/8/98 Town of Salem, New Hampshire #29901 4/8/98 Town of Plaistow, New #3283 Hampshire 9/11/97 New Mexico Secretary of State #97-0911034 9/10/97 New York Secretary of State #188463 4/8/98 Suffolk County, New York #98-06182 4/3/98 Saratoga County, New York #98978 4/6/98 Nassau County, New York #UC98005809 4/3/98 Rockland County, New York #1998-14136 4/3/98 Westchester County, New York #98-02744 4/9/98 Albany County, New York #98-02054 165 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 4/3/98 Broome County, New York #1199800828 4/8/98 Dutchess County, New York #98-1040 4/8/98 Monroe County, New York #98-2378 4/3/98 Orange County, New York #01448 4/9/98 Queens County, New York #98PQ06105 4/8/98 Clinton County, New York #98-0958 4/8/98 Oneida County, New York #981878 4/10/98 New York County, New York #98PN18102 9/11/97 North Carolina Secretary of #1499126 State 4/3/98 Cumberland County, North #002449 Carolina 4/6/98 Gaston County, North Carolina #98-588 4/3/98 Mecklenburg County, North #5064 Carolina 4/8/98 Durham County, North Carolina Book 98 Page 936 4/3/98 Guilford County, North Carolina #473456 9/12/97 Oklahoma Secretary of State #0-47305 166 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 South Carolina Secretary of State #113952A 9/30/97 Tennessee Secretary of State #971-521231 9/30/97 Texas Secretary of State #202015 9/22/97 Vermont Secretary of State #97-85333 167 DEBTOR: H.J. WILSON CO. REALTY, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 The Recorder of Mortgages of #121352 Orleans Parish, Louisiana 9/30/97 Tennessee Secretary of State #971-521236 12/18/98 Texas Secretary of State #9800249755 DEBTOR: HOMEOWNERS WAREHOUSE, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 5/6/97 Florida Secretary of State #970000098046 9/10/97 Florida Secretary of State #970000204086 9/10/97 Illinois Secretary of State #3738134 9/10/97, Ohio Secretary of State #AN94982 4/3/98 Franklin County, Ohio #199804030079811 4/3/98 Lucas County, Ohio #487959 4/3/98 Allen County, Ohio #0980828 4/3/98 Clark County, Ohio #9800001175 4/8/98 Richland County, Ohio #9800009287 168 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 4/15/98 Hamilton County, Ohio #98-63494 4/3/98 Clermont County, Ohio #000909 4/9/98 Summit County, Ohio #21015634 4/8/98 Stark County, Ohio #64136 9/30/97 Tennessee Secretary of State #971-521221 9/10/97 State Corporation Commission, #9709107063 Virginia 4/3/98 Virginia Beach County, Virginia #98-1100 4/3/98 Fairfax County, Virginia #98-002981 4/3/98 Henrico County, Virginia #98-577 4/3/98 Chesterfield County, Virginia #9800736 4/7/98 Chesapeake County, Virginia #60639 4/3/98 Spotsylvania County, Virginia #98-369 4/3/98 Prince William County, Virginia #55152 Book 0039 Page 1710 4/3/98 Hampton County, Virginia #84086 169 DEBTOR: SERVICE MERCHANDISE CO. BROAD, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/30/97 Tennessee Secretary of State #971521229 DEBTOR: SERVICE MERCHANDISE CO. NO. 30, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/10/97 Michigan Secretary of State #79059B 9/30/97 Tennessee Secretary of State 971-521234 DEBTOR: SERVICE MERCHANDISE CO. NO. 34, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/30/97 Tennessee Secretary of State #971-521233 DEBTOR: SERVICE MERCHANDISE CO. NO. 35, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/30/97 Tennessee Secretary of State #971-521216 170 DEBTOR: SERVICE MERCHANDISE CO. NO. 51, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/10/97 Illinois Secretary of State #3738133 9/30/97 Tennessee Secretary of State #971-521230 DEBTOR: SERVICE MERCHANDISE CO. NO. 93, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 New Jersey Secretary of State #1790875 9/30/97 Tennessee Secretary of State #971521217 DEBTOR: SERVICE MERCHANDISE CO. NO. 99, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 10/15/97 Nevada Secretary of State #9717431 9/30/97 Tennessee Secretary of State #971-521232 171 DEBTOR: SERVICE MERCHANDISE COMPANY OF IOWA, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 Iowa Secretary of State #K859671 9/30/97 Tennessee Secretary of State #971-521218 DEBTOR: SERVICE MERCHANDISE COMPANY OF KANSAS, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 Alabama Secretary of State #97-37926 9/11/97 Kansas Secretary of State #2386379 9/10/97 Pennsylvania Secretary of State #27081655 4/7/98 Allegheny County, Pennsylvania #98-2742 4/8/98 Lehigh County, Pennsylvania #98UC000542 4/3/98 Westmoreland County, #1998-799 Pennsylvania 4/3/98 Delaware County, Pennsylvania #98-200944 4/3/98 Philadelphia County, 98-1834 Pennsylvania 4/8/98 Dauphin County, Pennsylvania 627-ST-1998 172 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 4/3/98 Luzerne County, Pennsylvania #565-98 4/8/98 Lancaster County, Pennsylvania #C1-98-04062 4/3/98 Berks County, Pennsylvania #98-856ST 4/3/98 Lackawana County, #20476 Pennsylvania 9/30/97 Tennessee Secretary of State #971-521227 DEBTOR: SERVICE MERCHANDISE FINANCIAL CO., INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/30/97 Tennessee Secretary of State #971-521224 DEBTOR: SERVICE MERCHANDISE INDIANA PARTNERS Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/30/97 Indiana Secretary of State #2149206 9/30/97 Tennessee Secretary of State #971-521220 173 DEBTOR: SERVICE MERCHANDISE OF TEXAS LIMITED PARTNERSHIP Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/30/97 Tennessee Secretary of State #971-521219 9/10/97 Texas Secretary of State #187568 DEBTOR: SERVICE MERCHANDISE OF TENNESSEE LIMITED PARTNERSHIP Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/10/97 Tennessee Secretary of State #971-521225 DEBTOR: THE TOY STORE, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 Jefferson County, Kentucky #97-07804 9/11/97 Kentucky Secretary of State #153420 6/3/97 Tennessee Secretary of State #972-043017 174 DEBTOR: SERVICE MERCHANDISE COMPANY, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 Alabama Secretary of State #97-37929 9/11/97 Arizona Secretary of State #984212 9/12/97 Arkansas Secretary of State #1093227 4/3/98 Sebastian County, Arkansas 98-378 4/3/98 Pulaski County, Arkansas #98-023978 4/3/98 Washington County, Arkansas #9801057 10/1/97 California Secretary of State #97-27560661 9/11/97 Colorado Secretary of State 1997-2077314 9/11/97 Connecticut Secretary of State #1800871 9/11/97 Delaware Secretary of State #9730618 5/6/97 Florida Secretary of State #970000098045 9/10/97 Florida Secretary of State #970000204093 4/10/97 Chatham County, Georgia #025-97-002591 4/7/97 Cobb County, Georgia #033-97-004883 4/7/97 DeKalb County, Georgia #044-97-003391 175 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 4/8/97 Fulton County, Georgia #060-97-006760 9/10/97 Fulton County, Georgia #18765 4/7/97 Richmond County, Georgia #121-97-001257 4/7/97 Richmond County, Georgia #121-97-001257 9/10/97 Illinois Secretary of State #3738135 9/30/97 Indiana Secretary of State #2149207 9/11/97 Iowa Secretary of State #K859672 9/11/97 Kansas Secretary of State #2386378 9/11/97 Kentucky Secretary of State #153418 9/22/97 Franklin County, Kentucky #67331 3/2/98 Franklin County, Kentucky #70417 9/16/97 Jefferson County, Kentucky #9707805 9/11/97 The Recorder of Mortgages of #121374 Orleans Parish, Louisiana 9/11/97 Maine Secretary of State #1236337 9/12/97 Maryland Secretary of State #17-2588007 176 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 Massachusetts Secretary of State #496280 4/8/98 Town of Tewksbury, #110 Book 98 Massachusetts 4/8/98 Town of Somerville, #313 Massachusetts 4/8/98 Town of Burlington, #224 Massachusetts 4/8/98 Town of Natick, Massachusetts #142 4/9/98 Town of Lanesborough, #27 Drawer #3 Massachusetts 4/8/98 Town of Holyoke, Massachusetts #37587 4/8/98 Town of Auburn, Massachusetts #85 4/8/98 Town of Saugus, Massachusetts #26991 4/8/98 Town of Stoughton, #18386 Massachusetts 9/10/97 Michigan Secretary of State #79058B 9/11/97 Minnesota Secretary of State #1972101 9/11/97 Mississippi Secretary of State #0-1140472 4/6/98 Hinds County, Mississippi #032104 4/3/98 Lauderdale County, Mississippi #3081-98 177 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 4/3/98 Lamar County, Mississippi #8-31948 4/3/98 Harrison County, Mississippi #002699 9/11/97 Missouri Secretary of State #2328631 4/8/98 St. Louis County, Missouri #4368 4/8/98 Jackson County, Missouri #J395797 4/3/98 Greene County, Missouri #001438 4/8/98 St. Charles County, Missouri #01350 9/11/97 Nebraska Secretary of State #743936 10/15/97 Nevada Secretary of State #9717430 9/11/97 New Hampshire Secretary of #495257 State 4/8/98 Town of Nashua, New #077045 Hampshire 4/8/98 Town of Manchester, New #124,318 Hampshire 4/8/98 Town of Dover, New Hampshire #134 4/8/98 Town of Salem, New Hampshire #29902 4/15/98 Town of Plaistow, New #3291 Hampshire 178 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 New Jersey Secretary of State #1790875 9/11/97 New Mexico Secretary of State #97-0911033 9/10/97 New York Secretary of State #188464 4/8/98 Suffolk County, New York #98-06183 4/3/98 Saratoga County, New York #98979 4/6/98 Nassau County, New York #98005808 4/3/98 Rockland County, New York #1998-14134 4/3/98 Westchester County, New York #98-02743 4/9/98 Albany County, New York #98-02055 4/3/98 Broome County, New York #U11998000827 4/8/98 Dutchess County, New York #98 1039 4/8/98 Monroe County, New York #98-2377 4/3/98 Orange County, New York #01449 4/9/98 Queens County, New York #98PQ06106 4/8/98 Clinton County, New York 98 0957 179 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 4/8/98 Oneida County, New York #981877 4/10/98 New York County, New York #98PN18101 9/11/97 North Carolina Secretary of #1499127 State 4/3/98 Cumberland County, North #002448 Carolina 4/6/98 Gaston County, North Carolina #98-589 4/3/98 Mecklenburg County, North #5063 Carolina 4/8/98 Durham County, North Carolina #Bk. 98 Pg. 937 4/3/98 Guilford County, North Carolina #473455 9/10/97 Ohio Secretary of State #AN94983 4/3/98 Franklin County, Ohio #199804030079809 4/9/98 Lucas County, Ohio #467960 4/3/98 Allen County, Ohio #0980829 4/3/98 Clark County, Ohio #9800001176 4/8/98 Richland County, Ohio #9800009286 4/15/98 Hamilton County, Ohio #98-63495 OFF7624 643 180 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 4/3/98 Clermont County, Ohio #000910 4/9/98 Summit County, Ohio #21015633 4/8/98 Stark County, Ohio #64135 9/12/97 Oklahoma Secretary of State #0-47304 9/10/97 Pennsylvania Secretary of State #27081651 4/7/98 Allegheny County, Pennsylvania #98-2743 4/8/98 Lehigh County, Pennsylvania #98UC000541 4/3/98 Westmoreland County, #1998-800 Pennsylvania 4/3/98 Delaware County, Pennsylvania #98-200945 4/3/98 Philadelphia County, #98-1835 Pennsylvania 4/8/98 Dauphin County, Pennsylvania #626-ST-1998 4/3/98 Luzerne County, Pennsylvania #564-98 4/8/98 Lancaster County, Pennsylvania #C1-98-04061 4/3/98 Berks County, Pennsylvania #98-855ST 4/3/98 Lackawana County, #20477 Pennsylvania 181 Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/11/97 South Carolina Secretary of State #114026A 9/30/97 Tennessee Secretary of State #971-521228 9/10/97 Texas Secretary of State #187566 9/22/97 Vermont Secretary of State #97-85334 9/10/97 Virginia Secretary of State #97-09-10-7062 4/3/98 Virginia Beach County, Virginia #98-1101 4/3/98 Fairfax County, Virginia #98-002982 4/3/98 Henrico County, Virginia #98-0576 4/3/98 Chesterfield County, Virginia #9800737 4/3/98 Chesapeake County, Virginia #60619 4/3/98 Spotsylvania County, Virginia #98-370 4/3/98 Prince William County, Virginia #55153 book 0039 page 1714 4/3/98 Hampton County, Virginia #84085 9/11/97 Washington Secretary of State #97-254-0254 182 DEBTOR: WHOLESALE SUPPLY COMPANY, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 10/1/97 California Secretary of State #9727560521 9/11/97 Kentucky Secretary of State #153421 9/10/97 Florida Secretary of State #970000204095 9/10/97 Chatham County, Georgia #025199706613 9/10/97 New York Secretary of State #188461 9/11/97 South Carolina Secretary of State #114056A 9/30/97 Tennessee Secretary of State #971-521223 9/10/97 Texas Secretary of State #187567 9/11/97 Department of Licensing #97-254-0255 Washington DEBTOR: SMC-HC, INC. Filing Date and Filing Number of Financing Statement Jurisdiction Assigned - -------------------------------------------------------------------------------- 9/30/97 Tennessee Secretary of State #971-521222 183 Schedule 6.1(1) TO CREDIT AGREEMENT UCC LIEN SEARCHES
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) A.F.S. Marketing TNS-S/S UCC n/a Services, Inc. TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County B.A. Pargh Company, TN-S/S UCC Bringdown 8/1/97 Inc. TN-Davidson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Davidson Judgment Bringdown 8/1/97 County H.J. Wilson Co., Inc. AL-S/S UCC Bringdown 8/1/97 AR-S/S UCC Bringdown 8/1/97 CT-S/S UCC Bringdown 8/1/97 CO- Central Index UCC Bringdown 7/1/97 CO-S/S UCC Bringdown 8/1/97 FL-S/S UCC Bringdown 8/1/97 GA-Central Index UCC Bringdown 8/1/97 GA-Bibb County UCC Bringdown 8/1/97 KS-S/S UCC Bringdown 8/1/97 KY-S/S UCC Bringdown 8/1/97 LA-Central Index UCC Bringdown 8/1/97 LA-Orleans Parish UCC Bringdown 8/1/97 MA-S/S UCC Bringdown 8/1/97
184
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) ME-S/S UCC Bringdown 8/1/97 MI-S/S UCC Bringdown 8/1/97 MO-S/S UCC Bringdown 8/1/97 MS-S/S UCC Bringdown 8/1/97 NH-S/S UCC Bringdown 8/1/97 NM-S/S UCC Bringdown 8/1/97 NY-S/S UCC Bringdown 8/1/97 NC-S/S UCC Bringdown 7/1/97 OK-Oklahoma County UCC Bringdown 8/1/97 SC-S/S UCC Bringdown 8/1/97 TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County TX-S/S UCC Bringdown 8/1/97 VT-S/S UCC Bringdown 8/1/97 H. J. Wilson (Co.) TN-S/S UCC Bringdown 8/1/97 Realty, Inc. TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County TX-S/S UCC Bringdown 8/1/97 Homeowners FL-S/S UCC Bringdown 8/1/97 Warehouse, Inc. IL-S/S UCC Bringdown 8/1/97 OH-S/S UCC Bringdown 7/1/97
185
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Williamson County Judgment Bringdown 8/1/97 VA-S/S UCC Bringdown 8/1/97 Service Credit Corp. TN-S/S UCC n/a TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County Service Merchandise AL-S/S UCC Bringdown 8/1/97 (Co./Company), Inc. AZ-S/S UCC Bringdown 8/1/97 AR-S/S UCC Bringdown 8/1/97 CA-S/S UCC Bringdown 8/1/97 CO-Central Index UCC Bringdown 7/1/97 CO-S/S UCC Bringdown 8/1/97 CT-S/S UCC Bringdown 8/1/97 DE-S/S UCC Bringdown 8/1/97 FL-S/S UCC Bringdown 8/1/97 GA-Central Index UCC Bringdown 8/1/97 GA-Fulton County UCC Bringdown 8/1/97 IL-S/S UCC Bringdown 8/1/97 IN-S/S UCC Bringdown 8/1/97 IA-S/S UCC Bringdown 8/1/97 KS-S/S UCC Bringdown 8/1/97 KY-S/S UCC Bringdown 7/1/97 LA-Central Index UCC Bringdown 8/1/97
186
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) LA-Orleans Parish UCC Bringdown 8/1/97 ME-S/S UCC Bringdown 8/1/97 MD-Dept. of Assessments UCC Bringdown 8/1/97 and Taxation MA-S/S UCC Bringdown 8/1/97 MI-S/S UCC Bringdown 8/1/97 MN-S/S UCC Bringdown 8/1/97 MS-S/S UCC Bringdown 8/1/97 MO-S/S UCC Bringdown 8/1/97 NE-S/S UCC Bringdown 8/1/97 NV-S/S UCC Bringdown 7/1/97 NH-S/S UCC Bringdown 8/1/97 NJ-S/S (Brentwood) UCC Bringdown 8/1/97 NM-S/S UCC Bringdown 7/1/97 NY-S/S UCC Bringdown 8/1/97 NC-S/S UCC Bringdown 7/1/97 OH-S/S UCC Bringdown 7/1/97 OK-Oklahoma County UCC Bringdown 8/1/97 PA-S/S UCC Bringdown 8/1/97 RI-S/S UCC n/a SC-S/S UCC Bringdown 8/1/97 TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 UCC Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County TX-S/S UCC Bringdown 8/1/97
187
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) UT-Division of Corp. and UCC n/a Comm. Code VA-S/S UCC Bringdown 8/1/97 Service Merchandise VT-S/S UCC Bringdown 8/1/97 Company (Inc.) WA-S/S UCC Bringdown 8/1/97 Service Merchandise TN-S/S UCC Bringdown 8/1/97 Company Broad, Inc. TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise MI-S/S UCC Bringdown 8/1/97 Company No. 30, Inc. TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise IN-S/S UCC n/a Company No. 34, Inc. TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise IN-S/S UCC n/a Company No. 35, Inc. TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown
188
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise IL-S/S UCC Bringdown 8/1/97 Company No. 51, Inc. IL-S/S Federal Tax Lien 8/1/97 Bringdown IL-Circuit Court, DuPage Judgment Bringdown 8/1/97 County TN-S/S UCC Bringdown 8/1/97 Service Merchandise TN-S/S UCC n/a Co. No. 80, Inc. TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County Service Merchandise NJ-S/S (Brentwood) UCC Bringdown 8/1/97 Company No. 93, Inc. TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise NV-S/S UCC Bringdown 7/1/97 Company No. 99, Inc. NV-S/S Federal Tax Lien 8/1/97 Bringdown NV-District Court Washoe Judgment Bringdown 8/1/97 County TN-S/S UCC Bringdown 8/1/97 Service Merchandise AL-S/S UCC Bringdown 8/1/97 Company of Kansas, Inc.
189
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) KS-S/S UCC Bringdown 8/1/97 PA-S/S UCC Bringdown 8/1/97 TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise IA-S/S UCC Bringdown 8/1/97 Company of Iowa, Inc. TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise TN-S/S UCC n/a Company of New York, Inc. TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County Service Merchandise TN-S/S UCC Bringdown 8/1/97 Company of Texas Limited Partnership TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County TX-S/S UCC Bringdown 8/1/97 Service Merchandise IN-S/S UCC n/a Financial Co., Inc. MN-S/S UCC n/a
190
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise IN-S/S UCC Bringdown 8/1/97 Indiana Partners TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise of TN-S/S UCC Bringdown 8/1/97 Tennessee Limited Partners TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Service Merchandise TN-S/S UCC n/a Office Supply, Inc. TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County Service Merchandise TN-S/S UCC n/a Showrooms, Inc. TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County Service Merchandise TN-S/S UCC n/a RM, Inc.
191
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County SMC Aviation, Inc. NH-S/S UCC Bringdown 8/1/97 NH-S/S Federal Tax Lien 8/1/97 Bringdown NH-Superior Court, Judgment Bringdown 8/1/97 Rockingham County NH-Town Clerk of Salem UCC Bringdown 8/1/97 TN-S/S UCC Bringdown 8/1/97 SMC-HC, Inc. DE-S/S UCC n/a TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County SMC-SPE-I, Inc. CT-S/S UCC n/a DE-S/S UCC n/a DE-S/S Federal Tax Lien n/a FL-S/S UCC n/a GA-Central Index UCC n/a GA-Fulton County UCC n/a IN-S/S UCC n/a LA-Central Index UCC n/a LA-Orleans Parish UCC n/a MD-S/S UCC n/a MI-S/S UCC n/a NY-S/S UCC n/a
192
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) NC-S/S UCC n/a OK-Oklahoma County UCC n/a TN-S/S UCC n/a TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County TX-S/S UCC n/a VA UCC n/a SMC-SPE-2, Inc. CT-S/S UCC n/a DE-S/S UCC n/a DE-S/S Federal Tax Lien n/a FL-S/S UCC n/a GA-Central Index UCC n/a GA-Fulton County UCC n/a IN-S/S UCC n/a LA-Central Index UCC n/a LA-Orleans Parish UCC n/a MD-S/S UCC n/a MI-S/S UCC n/a NY-S/S UCC n/a NC-S/S UCC n/a OK-Oklahoma County UCC n/a TN-S/S UCC n/a TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County
193
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) TX-S/S UCC n/a VA UCC n/a The Lingerie Store, TN-S/S UCC n/a Inc. TN-Williamson County Federal Tax Lien n/a TX-Circuit Court, Williamson Judgment n/a County The McNally Supply TN-S/S UCC n/a Company TN-Williamson County Federal Tax Lien n/a TX-Circuit Court, Williamson Judgment n/a County The Toy Store, Inc. AL-S/S UCC n/a IN-S/S UCC n/a NC-S/S UCC n/a KY-S/S UCC Bringdown 8/1/97 TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County Travel Management TN-S/S UCC n/a Consultants, Inc. TN-Williamson County Federal Tax Lien n/a TN-Circuit Court, Williamson Judgment n/a County Wholesale Supply CA-S/S UCC Bringdown 8/1/97 Company, Inc. FL-S/S UCC Bringdown 8/1/97
194
Loss Party Jurisdiction-Filing Office Type of Search Bringdown Date ---------- -------------------------- -------------- -------------- (if applicable) GA-Central Index UCC Bringdown 8/1/97 GA-Chatham County UCC Bringdown 8/1/97 KY-S/S UCC Bringdown 8/1/97 NY-S/S UCC Bringdown 8/1/97 SC-S/S UCC Bringdown 8/1/97 TN-S/S UCC Bringdown 8/1/97 TN-Williamson County Federal Tax Lien 8/1/97 Bringdown TN-Circuit Court, Williamson Judgment Bringdown 8/1/97 County TX-S/S UCC Bringdown 8/1/97 WA UCC Bringdown 8/1/97
195 Schedule 7.3 TO CREDIT AGREEMENT The Borrower may seek concessions from its trade and consignment vendors, real estate and equipment lessors and other vendors, including, but not limited to, printers and technology vendors, with regard to payment and other terms and/or forgiveness of debt and alternative means of settlement of rent and/or other costs and/or fees at a reduced amount, as applicable. In connection with such concessions, the Borrower is considering not making full payment as due (1) to its trade and consignment vendors; (2) on its real estate leases for stores closed or to be closed; (3) on its equipment leases; and (4) to its other vendors, including, but not limited to, printers and technology vendors, which may have an interest in property of the Borrower. 196 Schedule 7.4 TO CREDIT AGREEMENT None 197 Schedule 7.10(b) TO CREDIT AGREEMENT EXCLUDED PROPERTIES
STATE STORE LOCATION HOLDING OWNER ----- ----- -------- ------- ----- TN 11 NASHVILLE FEE Service Merchandise Co., Inc. IL 98 BLOOMINGDALE GROUND LEASE Service Merchandise Co., Inc. TN 99K2 BRENTWOOD (6 acres FEE Service Merchandise Co., Inc. out of parcel) MA 188 SWANSEA GROUND LEASE Service Merchandise Co., Inc. ME 201 AUBURN GROUND LEASE Service Merchandise Co., Inc. CA 203 VALLEJO GROUND LEASE Service Merchandise Co., Inc. AZ 204 SCOTTSDALE GROUND LEASE Service Merchandise Co., Inc. NC 220+ CARY FEE Service Merchandise Co., Inc. TN 314+ BELLEVUE FEE Service Merchandise Co., Inc. TX 324 SUGARLAND GROUND LEASE Service Merchandise Co., Inc. NE 352 LINCOLN FEE Service Merchandise Co., Inc. MD 434 WHITEMARSH FEE Service Merchandise Co., Inc. KS 450 WICHITA FEE H.J. Wilson Co., Inc. TN 466 MALL OF MEMPHIS FEE H.J. Wilson Co., Inc. CA 537 OCEANSIDE GROUND LEASE Service Merchandise Co., Inc. IL 548 WAUKEGAN FEE Service Merchandise Co., Inc. PA 114 PITTSBURGH GROUND LEASE Service Merchandise Co., Inc. CO 146 AURORA GROUND LEASE Service Merchandise Co., Inc. SC 153 COLUMBIA GROUND LEASE Service Merchandise Co., Inc. TN 240 CHATTANOOGA GROUND LEASE Service Merchandise Co., Inc. VA 315 FREDERICKSBURG GROUND LEASE Service Merchandise Co., Inc. VA 318 CHESAPEAKE GROUND LEASE Service Merchandise Co., Inc. MS 366* HATTIESBURG FEE Service Merchandise Co., Inc. SC 455 SUMTER FEE H.J. Wilson Co., Inc. TX 472 WACO FEE H.J. Wilson Co., Inc.
198 Schedule 7.10(c) TO CREDIT AGREEMENT POST CLOSING REAL ESTATE REQUIREMENTS 1. Delivery of all original mortgagee's title policies insuring the lien of the Mortgages together with (a) endorsements endorsing such policies to the Administrative Agent and (b) date-down endorsements to the title policies insuring title on the same terms and conditions as such title policies were initially issued 2. Payment of all title premiums, and evidence of same 3. Delivery of as-built ALTA surveys of the sites of the Material Real Property encumbered by the Mortgages certified to the Administrative Agent in a manner reasonably satisfactory to Administrative Agent and dated a date reasonably satisfactory to the Administrative Agent 4. Amendments to the Mortgages in the form executed in connection with the Existing Credit Agreement 5. Payment of all applicable mortgage recording, documentary stamps and/or intangible taxes in connection with the assignment and amendment of the Mortgages 6. Delivery of Phase I environmental reports with respect to parcels of Material Real Property encumbered by a Mortgage or as required by the Credit Agreement 7. Payment of any reasonable legal fees of Administrative Agent and local counsel fees in connection with the foregoing. 199 Schedule 8.2(b) TO CREDIT AGREEMENT EXISTING GUARANTEE OBLIGATIONS A. Private Label Credit Card Program The obligations of Service Merchandise Company, Inc. contained in the Private Label Credit Card Program Agreement among World Financial Network National Bank, Service Merchandise Company, Inc. and Service Credit Corp. (formerly Service Merchandise Co. No. 80, Inc.), dated as of January 28, 1997. B. See Schedule 5.1, item 4, Interest Rate Swaps, which is hereby incorporated by reference. C. See lists of Letters of Credit attached to Schedule 8.7(f) which are hereby incorporated by reference. 200 Schedule 8.3(f) TO CREDIT AGREEMENT EXISTING LIENS 1. Liens on specific equipment in connection with the financing thereof included on UCC search results attached hereto and hereby incorporated by reference. 2. Liens held by The Bank of New York, as successor trustee to Sovran Bank/Central South, on the following properties (and assets related thereto) securing the mortgage financing, among others, with The Long-Term Credit Bank of Japan Limited:
State Store Location Holding Owner - ----- ----- -------- ------- ----- FL 19 Stuart Ground Lease Service Merchandise Co., Inc. AL 24 Huntsville Fee Service Merchandise Co., Inc. TN 94 Madison Fee Service Merchandise Co., Inc. OH 95 Toledo Fee Service Merchandise Co., Inc. IL 98 Bloomingdale Ground Lease Service Merchandise Co., Inc. KY 171 Louisville Fee Service Merchandise Co., Inc. MD 225 Waldorf Ground Lease Service Merchandise Co., Inc. OH 226 Columbus Ground Lease Service Merchandise Co., Inc. GA 250 Morrow Fee H.J. Wilson Co., Inc. TX 257 Midland Fee Service Merchandise Co., Inc. TN 258 Memphis Fee Service Merchandise Co., Inc. IL 265 Lansing Fee Service Merchandise Co., Inc. FL 280 Leesburg Fee Service Merchandise Co., Inc. FL 281 Gainesville Fee Service Merchandise Co., Inc. OH 283 Toledo Fee Service Merchandise Co., Inc. IL 287 Orland Park Ground Lease Service Merchandise Co., Inc. IL 291 Joliet Ground Lease Service Merchandise Co., Inc. LA 405 Lafayette Fee H.J. Wilson Co., Inc. FL 409 St. Petersburg Fee H.J. Wilson Co., Inc. LA 417 Shreveport Fee H.J. Wilson Co., Inc. MS 446 Gautier Fee H.J. Wilson Co., Inc. KS 450 Wichita Fee H.J. Wilson Co., Inc. TX 461 Baytown Fee H.J. Wilson Co., Inc. TN 466 Memphis Fee H.J. Wilson Co., Inc. IL 549 Mundelein Fee Service Merchandise Co., Inc. VA 677 Virginia Beach Fee Service Merchandise Co., Inc. PA 785 Allentown Fee Service Merchandise Co., Inc. TN 985 Nashville Fee Service Merchandise Co., Inc.
201 3. Liens held by each existing lienholder on the real property (and assets related thereto) described below:
State Store City Holding Existing Lienholder Owner ----- ----- ---- ------- ------------------- ----- NC 155 Fayetteville Fee Prudential Life Insurance Service Merchandise Company Company, Inc. GA 156 Augusta Ground Lease Union Mutual Life Insurance Service Merchandise Company Company, Inc. FL 213 Orlando Fee MetLife Capital Service Merchandise Company, Inc. FL 230 Jacksonville Fee Aegon USA Realty Corporation Service Merchandise Company, Inc. NY 275 Greece Fee Key Bank of New York Service Merchandise Company, Inc. NC 332 Pineville Fee National Western Life Insurance H.J. Wilson Co., Inc. Company FL 337 Brandon Fee Harvest Life Insurance Company H.J. Wilson Co., Inc. TX 341 Abilene Fee Redwood Funding Corporation H.J. Wilson Co., Inc. FL 364 Pembroke Pines Fee Federal Home Life Insurance H.J. Wilson Co., Inc. Company LA 403 Baton Rouge Gr/Lease/SLB Redwood Funding Corporation H.J. Wilson Co., Inc. OK 439 Norman Ground Lease Pacific Mutual Life Insurance H.J. Wilson Co., Inc. Company TX 468 Austin Fee American Income Life Insurance H.J. Wilson Co., Inc. Company
202 4. Liens granted on real property and assets related thereto, pursuant to the mortgage financing arrangement with First Union National Bank of North Carolina described below:
State Store Location Holding Owner - ----- ----- -------- ------- ----- TX 440 Richardson Fee SMC-SPE-1, INC. TX 359 Dallas Fee SMC-SPE-1, INC. OK 190 Warr Acres Fee SMC-SPE-1, INC. TN 259 Knoxville Fee SMC-SPE-1, INC. MI 532 Westland Fee SMC-SPE-1, INC. TX 353 Houston Fee SMC-SPE-1, INC. TX 276 Mcallen Fee SMC-SPE-1, INC. TX 277 San Antonio Fee SMC-SPE-1, INC. TX 42 Houston Fee SMC-SPE-1, INC. LA 214 Houma Fee SMC-SPE-1, INC. NC 389 Raleigh Fee SMC-SPE-1, INC. FL 452 Daytona Beach Fee SMC-SPE-1, INC. CT 316 Newington Fee SMC-SPE-1, INC. IN 343 Bloomington Fee SMC-SPE-1, INC. IN 441 Mishawaka Fee SMC-SPE-1, INC. IN 309 Ft. Wayne Fee SMC-SPE-1, INC. VA 348 Midlothian Fee SMC-SPE-1, INC. DE 202 Dover Fee SMC-SPE-1, INC. VA 360 Glen Allen Fee SMC-SPE-1, INC. MD 349 Columbia Fee SMC-SPE-2, INC. NY 344 Buffalo Fee SMC-SPE-2, INC. GA 249 Duluth Fee SMC-SPE-2, INC. GA 252 Tucker Fee SMC-SPE-2, INC. LA 408 Metairie Fee SMC-SPE-2, INC. TX 410 Houston Fee SMC-SPE-2, INC.
5. Liens disclosed on any title reports or title insurance delivered to Chase in connection with the Existing Credit Agreement. 6. Liens on the following property (and assets relating thereto) securing, among other things, the obligations of the Borrower and the Guarantors under the CIBC Letter of Credit Facility: a. Floating Rate Monthly Demand Industrial Development Revenue Bonds (Service Merchandise Company, Inc. Project) Series 1984 issued by The City of Thornton, Colorado. b. Floating Rate Monthly Demand Industrial Development Revenue Bonds (Service Merchandise Company, Inc. Project) Series 1984 issued by The Town of Montgomery (New York) Industrial Development Agency. 203 c. Floating Rate Monthly Demand Industrial Development Revenue Bonds (Service Merchandise Company, Inc. Project) Series 1984 issued by The Economic Development Corporation of the Charter Township of Meridian, Michigan. d. Floating Rate Monthly Demand Industrial Development Revenue Bonds (Service Merchandise Company, Inc. Project) Series 1983 issued by The Industrial Development Bonds of the County of Knox, Tennessee. e. Floating Rate Monthly Demand Bonds (Service Merchandise Company, Inc. Project) Series 1984 of the City of Burbank, Illinois. f. Floating Rate Monthly Demand Industrial Development Revenue Bonds (Service Merchandise Company, Inc. Project) Series 1984 issued by the City of Naperville, Illinois. 7. Liens on the following property (and assets relating thereto) securing, among other things, the obligations of the Borrower and the Guarantors under the CIBC Letter of Credit Facility: State Store Location Holding ----- ----- -------- ------- CO 139 Thornton Fee MI 147 Lansing Fee TN 174 Knoxville Ground Lease IL 181 Naperville Fee IL 191 Burbank Fee NY 967 Montgomery Lease 8. Liens granted pursuant to the Security Agreement dated as of July 15, 1984 by Service Merchandise Company, Inc. in favor of The Chase Manhattan Bank, N.A., as Trustee, and Barclays Bank International Limited, or its successors on machinery and equipment (and assets related thereto), relating to the $1,400,000 The Economic Development Corporation of the Charter Township of Meridian Rate Monthly Demand Limited Obligation Revenue Bonds (Service Merchandise Company, Inc. Project), Series 1984 and financed by the proceeds of such bonds. 9. Liens granted pursuant to the Security Agreement dated as of September 15, 1984 by Service Merchandise Company, Inc. in favor of The Chase Manhattan Bank, N.A., as Trustee, and Pittsburgh National Bank, or its successors on machinery and equipment (and assets related thereto), relating to the $5,500,000 City of Burbank Floating Rate Monthly Demand Industrial Building Revenue Bonds (Service Merchandise Company, Inc. Project), Series 1984 and financed by the proceeds of such bonds. 10. Liens granted pursuant to the Security Agreement dated as of July 15, 1984 by Service Merchandise Company, Inc. in favor of The Chase Manhattan Bank, N.A., as Trustee, and Barclays Bank International Limited, or its successors on machinery and equipment (and assets related thereto), relating to the $1,300,000 The City of Thornton Floating Rate 204 Monthly Demand Industrial Development Revenue Bonds (Service Merchandise Company, Inc. Project), Series 1984 and financed by the proceeds of such bonds. 11. Liens pursuant to the Security Agreement dated as of June 28, 1990 between Service Merchandise Company, Inc. and The Bank of New York (as successor to Sovran Bank/Central South), as Trustee. 12. Liens pursuant to the Security Agreement dated as of June 28, 1990 between H.J. Wilson Co., Inc. and The Bank of New York (as successor to Sovran Bank/Central South), as Trustee. 13. Liens granted in favor of World Financial Network National Bank ("WFNNB") by Borrower on credit card receivables (and assets related thereto) pursuant to the Private Label Credit Card Program Agreement dated as of January 28, 1997 among WFNNB, the Borrower and Service Merchandise Co. No. 80, Inc. 14. Cash collateral account of $4,000,000 (including investments credited to such account) granted in favor of First American National Bank ("FANB"), and Liens granted in favor of FANB on inventory financed with outstanding letters of credit issued by FANB and not yet received at the Borrower's warehouses. 205 Schedule 8.7(f) TO CREDIT AGREEMENT INDEBTEDNESS 1. Indebtedness in connection with that certain Indenture dated as of June 28, 1990, as amended, among Service Merchandise Company, Inc., H. J. Wilson Co., Inc., The Bank of New York (as successor trustee to Sovran Bank/Central South), as Trustee, and the Long Term Credit Bank of Japan, Limited, New York Branch as Administrative Agent relating to $90 Million First and Second Mortgage Secured Notes. Outstanding amount as of 1/3/99; $69,589,000. 2. Indebtedness in connection with that certain Indenture dated as of February 15, 1993, as amended, between Service merchandise Company, Inc., as Issuer, and First American National Bank, as Trustee relating to $300 Million 9% Senior Subordinated Debentures due 2004. Outstanding amount as of 1/3/99; $300,000,000; 3. Indebtedness in connection with that certain Indenture dated as of October 15, 1993, as amended, between Service Merchandise Company, Inc., as Issuer, and State Street Bank and Trust Company, as Trustee relating to 8 3/8% Senior Notes. Outstanding amount as of 1/3/99; $13,799,000. 4. Indebtedness in connection with certain Loan Agreements dated as of October 4, 1996, as amended, between SMC-SPE-1, Inc. and SMC-SPE-2, Inc., as borrowers, and First Union National Bank of North Carolina, as lender. Outstanding amount as of 11/22/98; $69,500,000. 5. Indebtedness in connection with certain separate Mortgage Facilities as described below: a. Service Merchandise Company, Inc., as borrower, and Prudential Life Insurance Company, as lender relating to Store 155; b. Service Merchandise Company, Inc., as borrower, and Union Mutual Life Insurance Company, as lender to Store 156; c. Service Merchandise Company, Inc., as borrower, and MetLife Capital, as lender relating to Store 213; d. Service Merchandise Company, Inc., as borrower, and Aegon USA Realty Corporation, as lender relating to Store 230; e. Service Merchandise Company, Inc., as borrower, and Key Bank of New York, as lender relating to Store 275; f. H.J. Wilson Co., Inc., as borrower, and National Western Life Insurance Company, as lender relating to Store 332; 206 g. H.J. Wilson Co., Inc., as borrower, and Harvest Life Insurance Company, as lender relating to Store 337; h. H.J. Wilson Co., Inc., as borrower, and Redwood Funding Corporation, as lender relating to Store 341; i. H.J. Wilson Co., Inc., as borrower, and Federal Home Life Insurance Company,, as lender relating to Store 364; j. H.J. Wilson Co., Inc., as borrower, and Redwood Funding Corporation, as lender relating to Store 403; k. H.J. Wilson Co., Inc., as borrower, and Pacific Mutual Life Insurance Company, as lender relating to Store 439; l. H.J. Wilson Co., Inc., as borrower, and American Income Life Insurance Company, as lender relating to Store 468; Outstanding amount as of 11/22/98 for the consolidated Mortgage Facilities: $21,386,000. 6. Indebtedness is connection with that certain Trade Letter of Credit Facility, as amended, entered into with First American National Bank (See attached Chart A which is hereby incorporated by reference). Outstanding amount as of 1/3/99: $40,126,000. 7. Indebtedness in connection with that certain Amended and Restated Reimbursement Agreement dated as of October 25, 1994, as amended, among Service Merchandise Company, Inc. Homeowners Warehouse, Inc. and H.J. Wilson Co., Inc. as borrowers, Canadian Imperial Bank of Commerce, New York Agency and The Mitsubishi Bank Limited, New York Branch, as lenders and Canadian Imperial Bank of Commerce, New York Agency, as agent (See attached Chart C which is hereby incorporated by reference). Outstanding amount as of 1/3/99: $25,208,000. 8. Indebtedness in connection with certain Industrial Revenue Bonds (See Schedule 8.3(f), items 6, 7, 8, 9, 10, which are hereby incorporated by reference. 207 Schedule 8.7(f) TO CREDIT AGREEMENT CHART A FIRST AMERICAN LETTERS OF CREDIT OUTSTANDING BALANCE See attached 208
BENEFICIARY ADESPO S.R.L. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003117 ITL 46,019,730 46,019,730 26,369.00 28,532.23 01/20/1999 0 0.00 1 0.00 Totals 26,369.00 BENEFICIARY BELDARE ENTERPRISED LTD (TW) LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 002970 USD 415,356 62,365 62,365.80 62,365.80 01/22/1999 0 0.00 0 0.00 Totals 62,365.80 BENEFICIARY BELDARE ENTERPRISES LTD LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 002996 USD 241,534 53,227 53,227.23 53,227.23 01/30/1999 1 45,876.60 0 0.00 003048 USD 250,942 250,942 250,942.65 250,942.65 02/05/1999 0 0.00 0 0.00 003074 USD 442,408 1,764 1,764.01 54,180.01 01/22/1999 0 0.00 0 0.00 003086 USD 38,246 8,727 8,727.09 8,727.09 02/20/1999 0 0.00 0 0.00 003097 USD 328,842 328,842 328,842.19 304,287.69 03/04/1999 0 0.00 1 0.00
209
BENEFICIARY BELDARE ENTERPRISES LTD LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003121 USD 1,201,151 1,201,151 1,201,151.45 1,201,151.45 02/05/1999 2 323,400.00 1 0.00 003138 USD 95,064 95,064 95,064.99 95,064.99 02/15/1999 2 51,392.96 0 0.00 003165 JPY 3,388,875 3,388.875 28,683.44 28,683.44 02/20/1999 0 0.00 0 0.00 003166 USD 174,430 174,430 174,430.91 174,430.91 02/22/1999 0 0.00 0 0.00 Totals 2,276,116.76 BENEFICIARY BELDARE ENTERPRISES LTD (TW) LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003020 USD 453,007 124,842 124,842.18 152,984.50 02/06/1999 2 118,897.00 0 0.00 003041 USD 658,536 199,400.23 199,400.23 199,400.23 01/20/1999 1 189,904.99 0 0.00 003147 USD 82,156 82,156 82,156.10 86,986.10 02/22/1999 0 0.00 0 0.00 003176 USD 58,153 58,153 58,153.10 58,153.10 03/08/1999 0 0.00 0 0.00 Totals 464,551.61 BENEFICIARY BELDARE ENTERPRISES LTD (TW) LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003019 USD 199,011 24,760 24,760.26 24,760.26 01/22/1999 1 24,428.40 0 0.00 003063 USD 595,463 53,982 53,982.60 53,982.60 01/15/1999 1 37,716.00 0 0.00 003080 USD 85,431 51,810 51,810.15 149,050.65 01/21/1999 3 49,343.00 0 0.00 003087 USD 372,712 138,230 138,230.92 138,230.92 01/21/1999 3 131,648.48 0 0.00
210 003088 USD 167,225 111,133 111,133.02 111,133.02 02/20/1999 1 38,314.80 0 0.00 003113 USD 686,254 635,783 635,783.71 635,783.71 02/05/1999 2 238,971.95 0 0.00 003130 USD 733,515 76,195 76,195.68 76,195.68 01/22/1999 2 53,879.76 0 0.00 003142 USD 225,245 184,775 184,775.51 184,775.51 01/22/1999 5 164,173.24 0 0.00 003149 USD 232,344 232,344 232,344.19 232,344.119 02/26/1999 0 0.00 0 0.00 003164 USD 458,471 458,471 458,471.30 458,471.30 02/22/1999 0 0.00 0 0.00 003173 USD 167,209 167,209 167,209.81 167,209.81 02/08/1999 0 0.00 0 0.00 Totals 2,134,697.15 BENEFICIARY BERKELEY (TIANJIN) FURNITURE IND. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003159 USD 1,313,187 1,313,187 1,313,187.250 1,313,187.25 02/22/1999 0 0.00 0 0.00 Totals 1,313,187.25 BENEFICIARY BERKELEY (TIANJIN) FURNITURE IND. COR LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003094 USD 2,349,600 1,163,794 1,163,794 1,163,794.85 02/05/1999 3 300,598.91 0 0.00 Totals 1,163,794.85
211
BENEFICIARY CASUAL LIVING WORLDWIDE LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003036 USD 894,055 468,109 468,109.07 468,109.07 02/05/1999 2 254,285.29 0 0.00 Totals 468,109.07 BENEFICIARY COMPEX INTERNATIONAL CO. LTD. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003115 USD 2,005,826 1,960,515 1,960,515.79 1,960,515.79 02/05/1999 0 0.00 0 0.00 003128 USD 2,098,417 572,241 572,241.07 572,241.07 01/22/1999 1 48,422.16 0 0.00 003140 USD 321,826 321,826 321,826.64 321,826.64 02/05/1999 0 0.00 0 0.00 Totals 2,854,583.50 BENEFICIARY CREATIVE CERAMICS LTD LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003013 USD 482,336 81 81.52 81.52 01/15/1999 0 0.00 0 0.00 Totals 81.52
212
BENEFICIARY DIVERSIFIED INVESTMENTS CORP. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003067 USD 107,4420 62,925 62,925.00 107,625.00 01/22/1999 0 0.00 0 0.00 Totals 62,925.000 BENEFICIARY EMESS LIGHTING LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003177 USD 124,858 124,858 124,858.20 124,858.20 03/08/1999 0 0.00 0 0.00 Totals 124,858.20 BENEFICIARY EXCEL IMPORTING CORP. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003188 USD 232,600 232,600 232,600.00 232,600.00 01/15/1999 0 0.00 0 0.00 Totals 232,600.00 BENEFICIARY G.E. CAPITAL FIRST FACTORS CORP. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003095 USD 1,803,817 1,377,063 1,377,063.95 1,377,063.95 02/05/1999 2 148,192.08 0 0.00 Totals 1,377,063.95
213
BENEFICIARY GREAT AMERICAN FUN HK LTD. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003132 USD 190,616 190,616 190,616.00 190,616.00 01/27/1999 0 0.00 0 0.00 Totals 190,616.00 BENEFICIARY GROTON INDUSTRIES LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 002994 USD 76,789 38,084 38,084.52 38,084.52 01/30/1999 0 0.00 0 0.00 003161 USD 126,499 126,499 126,499.30 126,499.30 03/08/1999 0 0.00 0 0.00 003167 &SD 117,671 117,671 117,671.25 117,671.25 02/22/1999 0 0.00 1 0.00 Totals 282,255.07 BENEFICIARY HENSON HOLDINGS LIMITED LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003001 USD 92,708 92,708 92,708.00 92,708.00 02/15/1999 0 0.00 0 0.00 Totals 92,708.00
214
BENEFICIARY HIMARK ENTERPRISES, INC. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003157 USD 38,642 15,120 15,120.00 0.00 01/20/1999 1 15,120.00 0 0.00 Totals 15,120.00 BENEFICIARY INTERNATIONAL FURNITURE DESIGNS LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 002999 USD 687,187 253,091 253,091.85 253,091.85 01/20/1999 0 0.00 0 0.00 Totals 253,091.85 BENEFICIARY INTL FURNITURE DESIGNS (HK) LTD. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003009 USD 396,524 396,524 396,524.66 396,524.66 02/05/1999 1 79,490.25 0 0.00 003038 USD 966,206 748,80 748,808.25 748,808.25 03/08/1999 1 277,609.50 0 0.00 003145 USD 342,467 342,467 342,467.36 342,467.36 02/21/1999 0 0.00 0 0.00 Totals 1,487,800.27 BENEFICIARY J AND H INTERNATIONAL, LTD LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003154 USD 60,930 60,930 60,930.00 60,930.00 01/20/1999 0 0.00 0 0.00 Totals 60,930.00
215
BENEFICIARY JASMINE ENTERPRISES LTD LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 002985 USD 39,353 39,353 39,353.00 39,353.00 01/16/1999 1 39,353.00 0 0.00 003044 USD 74,025 74,025 74,025.00 74,025.00 01/16/1999 0 0.00 0 0.00 Totals 113,378.00 BENEFICIARY KENROY INTERNATIONAL LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003016 USD 136,932 80,000 80,000.00 80,000.00 02/05/1999 0 0.00 0 0.00 Totals 80,000.00 BENEFICIARY KIND LIGHT INDUSTRIES CORP LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003134 UD 43,874 43,874 43,874.80 43,874.80 03/08/1999 0 0.00 0 0.00 Totals 43,874.80
216
BENEFICIARY L POWELL COMPANY LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003053 USD 352,576 28,241 28,241.25 28,241.25 02/05/1999 0 0.00 0 0.00 003085 USD 2,207,438 2,095.146 2,095,146.56 2,095,146.56 01/27/1999 1 46,635.06 0 0.00 003124 USD 983,507 983,507 983,507.46 983,507.46 02/07/1999 1 26,724.50 0 0.00 003153 USD 129,820 129,820 129,820.98 129,820.92 02/05/1999 2 129,820.98 0 0.00 003163 USD 239,458 239,458 239,458.90 239,458.90 02/20/1999 0 0.00 0 0.00 003180 USD 215,878 215,878 215,878.80 215,878.80 02/22/1999 0 0.00 0 0.00 Totals 3,692,053.95 BENEFICIARY LARAMI COMPANY LTD. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003076 USD 258,270 28,575 28,575.00 28,575.00 02/05/1999 0 0.00 0 0.00 003184 USD 161,737 161,737 161,737.20 161,737.20 02/20/1999 0 0.00 0 0.00 Totals 190,312.20 BENEFICIARY LIMAX INTERNATIONAL INC. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003175 USD 238,025 238,025 238,025.00 238,025.00 02/20/1999 0 0.00 0 0.00 Totals 238,025.00
217
BENEFICIARY LINOW HOME DECOR PRODUCTS LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003049 USD 1,279,512 152,733 152,733.00 152,733.00 01/27/1999 0 0.00 0 0.00 003050 USD 1,031,115 292,140 292,140.00 638,220.00 02/20/1999 0 0.00 0 0.00 003127 USD 97,305 299 299.40 299.40 02/05/1999 0 0.00 0 0.00 003158 USD 389,520 389,520 389,520.00 389,520.00 03/18/1999 0 0.00 1 0.00 Totals 834,692.40 BENEFICIARY M.Z. BERGER & CO., INC.-HX BRANCH LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003043 USD 37,619 16,952 16,952.52 16,952.52 02/05/1999 0 0.00 1 0.00 Totals 16,952.52 BENEFICIARY MARKPEAK LTD. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 002946 USD 222,517 172,496 172,496.24 172,496.24 02/05/1999 0 0.00 1 0.00 Totals 172,496.24
218
BENEFICIARY MASTERPIECE INDUSTRY CO. LTD LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003075 USD 127,168 127,168 127,168.92 127,168.92 01/21/1999 0 0.00 1 0.00 003144 USD 13,674 13,674 13,674.15 13,674.15 02/12/1999 0 0.00 0 0.00 Totals 140,843.07 BENEFICIARY MONARCH LUGGAGE CO., INC. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003129 USD 29,735 23,057 23,057.50 23,057.50 02/01/1999 0 0.00 0 0.00 Totals 23,057.50 BENEFICIARY MUTUAL BENEFIT MFG. & EXP. CO., LTD. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003168 USD 123,714 123,714 123,714.00 123,714.00 02/22/1999 0 0.00 0 0.00 Totals 123,714.00 BENEFICIARY PACIFIC MARKETING INTL (HK) LTD. HL LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003133 USD 473,088 363,156 363,156.71 363,156.71 02/22/1999 1 31,262.00 0 0.00 Totals 363,156.71
219
BENEFICIARY PACIFIC MARKETING INTL CO., LTD FJ LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003084 USD 184,231 91,068 91,068.52 91,068.52 02/13/1999 0 0.00 0 0.00 003104 USD 46,581 46,581 46,581.56 46,581.56 02/13/1999 0 0.00 0 0.00 Totals 137,650.08 BENEFICIARY PACIFIC PRODUCTS, LTD. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003089 USD 246,042 81,250 81,250.00 81,250.00 01/31/1999 0 0.00 0 0.00 003160 USD 55,440 55,440 55,440.00 55,440.00 02/22/1999 0 0.00 0 0.00 Totals 136,690.00 BENEFICIARY RACING CHAMPIONS, LTD. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003118 USD 230,909 230,909 230,909.52 269,242.92 01/26/1999 1 231,051.72 0 0.00 Totals 230,909.52 BENEFICIARY RGA INDUSTRIES INC. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003092 USD 25,986 19,890 19,890.00 19,890.00 01/15/1999 0 0.00 0 0.00 003106 USD 256,309 256,309 256,309.80 256,309.80 02/22/1999 1 133,426.80 0 0.00 Totals 276,199.80
220
BENEFICIARY SAXTON/MAXIM HOUSEARES, INC. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003120 USD 208,448 208,448 208,448.68 208,448.68 02/14/1999 0 0.00 0 0.00 003181 USD 400,511 400,511 400,511.20 400,511.20 03/03/1999 0 0.00 0 0.00 Totals 608,959.88 BENEFICIARY SANGO OF AMERICA, INC. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003012 USD 918,471 918,471 918,471.00 918,471.00 02/05/1999 5 359,571.00 0 0.00 Totals 918,471.00 BENEFICIARY SHIAN INDUSTRY CO., LTD. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003119 USD 1,980,606 1,980,606 1,980,606.70 1,980,606.70 03/07/1999 0 0.00 0 0.00 Totals 1,980,606.70
221
BENEFICIARY SOSKIN & GORDON LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 002990 USD 185,312 28,822 28,822.00 11,502.00 01/20/1999 1 28,822.00 0 0.00 003054 USD 60,233 12,006 12,006.00 12,006.00 02/22/1999 0 0.00 0 0.00 Totals 40,828.00 BENEFICIARY SPRINGFIELD PRECISION COMPANY LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003186 USD 35,918 35,918 35,918.50 35,918.50 02/22/1999 0 0.00 1 0.00 Totals 35,918.50 BENEFICIARY SUN ISLE INC. LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003042 USD 1,084,470 134,268 134,268.11 281,313.60 01/22/1999 0 0.00 0 0.00 003122 USD 472,486 472,486 472,486.72 472,486.72 02/05/1999 0 0.00 0 0.00 Totals 606,754.83 BENEFICIARY TAI'S INTERNATIONAL CORPORATION LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003136 USD 82,197 82,197 82,197.92 82,197.92 02/05/1999 1 52,821.68 0 0.00 Totals 82,197.92
222
BENEFICIARY TEASECO INCORPORATED LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003114 USD 94,833 36,900 36,900.00 36,900.00 01/20/1999 0 0.00 0 0.00 Totals 36,900.00 BENEFICIARY TENSOR CORPORATION LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 031250 USD 42,325 42,325.00 42,325.00 42,325.00 02/12/99 0 0.00 0 0.00 Totals 42,325.00 BENEFICIARY TREND LIGHTING LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003126 USD 30,510 30,510 30,510.00 30,510.00 02/6/1999 0 0.00 0 0.00 Totals 30,510.00 BENEFICIARY WANG'S INTERNATIONAL LC# CRNOY FACE VALUE FGN BAL U.S. DOL AMT BANK BALANCE EXP DATE NUM TOT AMT NUM TOT AMT - ------------------------------------------------------------------------------------------------------------------------------------ 003083 USD 46,130 16,879 16,879.50 16,879.50 01/27/1999 0 0.00 0 0.00 Totals 16,879.50
223 TOTAL LC'S NOT EXPIRED 94 ============= TOTAL LC'S EXPIRED 2617 ============= TOTAL LC'S APPROVED BUT NOT ISSUED 0 ============= TOTAL NEGOTIATIONS APPROVED BUT NOT PAID 52 ============= TOTAL AMENDMENTS APPROVED BUT NOT PAID 9 ============= TOTAL U.S. BALANCE 26,158,181.97 ============= TOTAL U.S. BANK BALANCE 26,862,318.41 ============= 224 Schedule 8.7(f) TO CREDIT AGREEMENT CHART B BANK OF AMERICA LETTER OF CREDIT OUTSTANDING BALANCE 225 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- ALL-ALUMINUM PRODUCTS, INC. 990017 USD 166,623 166,623 166,623.90 166,623.90 02/22/1999 0 0.00 0 0.00 Totals 166,623.90 ARC INTERNATIONAL 990050 USD 97,752 97,752 97,752.01 01/21/1999 0 0.00 0 0.00 Totals 97,752.01 ARCO TOYS, LTD 990058 USD 10,975 10,975 10,975.20 10,975.20 02/05/1999 0 0.00 0 0.00 Totals 10,975.20 ARTMARK FAR EAST LTD. 990122 USD 13,094 13,094 13,094.40 13,094.00 02/05/1999 0 0.00 1 0.00 Totals 13,094.40
226 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- AT HOME INTERNATIONAL 990081 USD 504,641 504,641 504,641.44 504,641.44 02/10/1999 0 0.00 1 65,277.44 Totals 504,641.44 BEAKIE LEE & CO., LTD. 990089 USD 156,300 156,300 156,300.00 156,300.00 03/03/1999 0 0.00 1 112,590.00 Total 156,300.00 BELDARE ENTERPRISES, LTD (TW) 990077 USD 105,512 105,512 105,512.00 105,512.00 02/17/1999 0 0.00 1 0.00 990091 USD 19,139 19,139 19,139.40 19,139.40 03/31/1999 0 0.00 0 0.00 Totals 124,651.40 BELDARE ENTERPRISES, LTD. 990030 USD 163,207 163,207 163,207.80 163,207.80 03/27/1999 0 0.00 0 0.00 990032 USD 705,248 705,248 705,248.99 705,248.99 04/05/1999 0 0.00 0 0.00 990048 USD 250,798 250,798 250,798.85 250,798.85 02/06/1999 0 0.00 0 0.00 990055 USD 1,938,860 1,938,860 1,938,860.39 1,938,860.39 03/21/1999 0 0.00 1 0.00 990066 USD 2,716,139 2,716,139 2,716,139.00 2,716,139.37 07/06/1999 0 0.00 0 0.00
227 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- 990078 USD 1,001,328 1,001,328 1,001,328.31 1,001,328.31 07/19/1999 0 0.00 0 0.00 990079 USD 199,598 199,598 199,598.70 177,565.70 10/10/1999 0 0.00 2 0.00 990110 JPY 3,297,000 3,297,000 25,452.53 25,452.53 04/05/1999 0 0.00 0 0.00 Totals 7,000,634.57 BELDARE ENTERPRISES LTD (TW) 990037 USD 738,644 786,644 786,644.63 786,644.64 03/08/1999 0 0.00 0 0.00 990052 USD 787,575 787,575 787,575.33 787,575.33 02/23/1999 0 0.00 0 0.00 990087 USD 232,242 232,242 232,242.17 232,242.17 04/05/1999 0 0.00 1 0.00 990109 USD 674,203 674,203 674,203.12 674,203.12 04/05/1999 0 0.00 1 0.00 990127 usd 90,153 90,153 90,153.00 90,153.00 03/08/1999 0 0.00 1 163,475.78 Totals 2,570,818.25 BELDARE ENTERPRISES LTD (TW) 990024 USD 447,026 447,026 447,026.77 447,026.77 02/05/1999 0 0.00 0 0.00 990036 USD 583,249 583,249 583,249.28 583,249.28 03/08/1999 0 0.00 0 0.00 990071 USD 507,559 507,559 507,559.17 507,559.17 03/22/1999 0 0.00 0 0.00 990072 USD 284,862 284,862 284,862.38 284,862.38 03/08/1999 0 0.00 0 0.00 990108 USD 360,714 360,714 360,714.90 360,714.90 04/05/1999 0 0.00 0 0.00
228 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- 990111 USD 185,111 185,111 185,111.18 185,111.18 04/05/1999 0 0.00 0 0.00 Totals 2,368,523.68 BERKELEY (TIANJIN) FURNITURE IND. 990068 USD 1,284,709 1,284,709 1,284,709.78 1,284,709.78 03/22/1999 0 0.00 0 0.00 Totals 1,284,709.78 CARDINAL, INC. 990033 USD 166,776 166,766 166,766.26 166,766.26 02/20/1999 0 0.00 0 0.00 990096 USD 87,683 87,683 87,683.28 87,683.28 03/08/1999 0 0.00 0 0.00 Totals 254,449.54 CASUAL LIVING WORLDWIDE 990040 USD 377,107 377,107 377,107.57 377,107.57 03/08/1999 0 0.00 1 457,996.57 Totals 377,107.57 CERTIFIED INTERNATIONAL CORP. 990090 USD 76,517 76,517 76,517.00 76,517.00 02/20/1999 0 0.00 0 0.00 Totals 76,517.00
229 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- CHU HUNG WOOD CO., LTD. 990063 USD 184,676 184,676 184,676.00 184,676.00 02/12/1999 0 0.00 0 0.00 990099 USD 332,540 332,540 332,540.00 332,540.00 03/22/1999 0 0.00 0 0.00 Totals 517,216.00 COLUMBIA FRAME, INC. 990075 USD 74,000 74,000 74,000.00 74,000.00 03/08/1999 0 0.00 0 0.00 Totals 74,000.00 COMPEX INTERNATIONAL CO., INC. 990043 USD 2,517,483 2,517,483 2,517,483.50 2,517,483.50 03/08/1999 0 0.00 0 0.00 990098 USD 1,811,042 1,811,042 1,811,042.51 1,811,042.51 04/05/1999 0 0.00 0 0.00 Totals 4,328,526.01 CUDDLE WIT LTD. 990018 USD 46,035 46,035 46,035.00 46,035.00 01/27/1999 0 0.00 0 0.00 Totals 46,035.00
230 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- DRAGON OCEAN TRADING CO. 990084 USD 60,780 60,780 60,780.00 60,780.00 02/05/1999 0 0.00 0 0.00 Totals 60,780.00 EMESS LIGHTING 990113 USD 173,893 173,893 173,893.50 173,893.50 04/07/1999 0 0.00 1 78,750.00 Totals 173,893.50 ENTERTAINMENT PRODUCTS LTD. 990126 USD 50,616 50,616 50,616.00 50,616.00 02/21/1999 0 0.00 1 0.00 Totals 50,616.00 EXCEL IMPORTING CORP. 990074 USD 130,000 130,000 130,000.00 130,000.00 02/26/1999 0 0.00 0 0.00 Totals 130,000.00 EXEC'S PRODUCTS, INC. 990051 USD 20,400 20,400 20,400.00 20,400.00 03/08/1999 0 0.00 0 0.00 Totals 20,400.00
231 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- EXIM BUSINESS CO., LTD. 990044 USD 68,226 68,226 68,226.00 68,226.00 01/20/1999 0 0.00 0 0.00 990114 USD 47,974 47,974 47,974.00 47,974.00 04/05/1999 0 0.00 1 0.00 Totals 116,200.00 EXIM BUSINESS INC. 990034 USD 37,720 37,720 37,720.00 37,720.00 04/05/1999 0 0.00 0 0.00 Totals 37,720.00 FISHER-PRICE, INC. 990049 USD 21,327 21,327 21,327.00 21,327.00 01/22/1999 0 0.00 0 0.00 Totals 21,327.00 GEM OFFICE PRODUCTS, INC. 990027 USD 120,585 120,585 120,585.90 120,585.90 01/20/1999 0 0.00 0 0.00 Totals 120,585.90
232 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- GLOBAL HORIZONS CO. 990026 USD 177,184 177,184 177,184.32 177,184.32 02/15/1999 0 0.00 0 0.00 Totals 177,184.32 GROTON INDUSTRIES 990123 USD 110,747 110,747 110,747.15 110,747.15 04/07/1999 0 0.00 0 0.00 Totals 110,747.15 HASBRO TOY GROUP DIRECT IMPORTS 990083 USD 105,003 105,003 105,003.72 105,003.72 02/27/1999 0 0.00 0 0.00 Totals 105,003.72 HAUSENWARE 990061 USD 53,872 53,872 53,872.00 53,872.00 01/20/1999 0 0.00 0 0.00 Totals 53,872.00
233 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- RIMARK ENTERPRISES, INC. 990029 USD 192,034 192,034 192,034.30 192,034.30 02/26/1999 0 0.00 0 0.00 990069 USD 9,072 9,072 9,072.0 9,072.00 03/21/1999 0 0.00 0 0.00 Totals 201,106.30 HOLMES PRODUCTS (FAR EAST) LTD. 990013 USD 54,264 54,264 54,264.95 54,264.95 03/08/1999 0 0.00 1 0.00 990104 USD 24,987 24,987 24,987.45 24,987.45 04/05/1999 0 0.00 1 0.00 Totals 79,252.40 HONEYWELL CONSUMER PRODUCTS HK LTD. 990088 USD 229,827 229,827 229,827.25 229,827.25 04/07/1999 0 0.00 0 0.00 Totals 229,827.25 INNOVA HEARTH AND HOME, INC. 990023 USD 51,844 51,844 51,844.00 51,844.00 02/05/1999 0 0.00 0 0.00 990116 USD 25,922 25,922 25,922.00 25,922.00 04/05/1999 0 0.00 0 0.00 Totals 77,766.00
234 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- INTL FURNITURE DESIGNS (HK) LTD. 990046 USD 800,503 800,503 800,503.04 800,503.04 03/03/1999 0 0.00 0 0.00 990100 USD 57,432 57,432 57,432.90 57,432.90 04/05/1999 0 0.00 1 261,448.32 Totals 857,935.94 JAKKS HK LIMITED 909073 USD 13,650 13,650 13,650.00 13,650.00 02/20/1999 0 0.00 0 0.00 Totals 13,650.00 13,650.00 JASMINE ENTERPRISES, LTD. 990086 USD 72,135 72,135 72,135.00 72,135.00 03/20/1999 0 0.00 0 0.00 Totals 72,135.00 KENROY INTERNATIONAL 990106 USD 20,813 20,813 20,813.00 20,813.00 04/05/1999 0 0.00 0 0.00 Totals 20,813.00
235 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- KURT S. ADLER, INC. 990019 USD 74,453 74,453 74,453.94 74,453.94 01/27/1999 0 0.00 0 0.00 Totals 74,453.94 L. POWELL COMPANY 990039 USD 1,059,256 1,059,256 1,059,256.14 1,059,256.14 02/21/1999 0 0.00 0 0.00 Totals 1,059,256.14 LARAMI COMPANY LTD. 990103 USD 221,440 221,440 221,440.60 221,440.60 04/05/1999 0 0.00 0 0.00 Totals 221,440.60 LAVITA INDUSTRIES, INC. 990060 USD 172,972 172,972 172,972.80 172,972.80 02/12/1999 0 0.00 0 0.00 Totals 172,972.80 LIMAX INTERNATIONAL, INC. 990082 USD 185,250 185,250 185,250.00 185,250.00 03/08/1999 0 0.00 0 0.00 Totals 185,250.00
236 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- LINON HOME DECOR PRODUCTS 990095 USD 443,385 443,385 443,385.00 443,385.00 02/05/1999 0 0.00 0 0.00 990119 USD 291,915 291,915 291,915.00 291,915.00 04/05/1999 0 0.00 0 0.00 Totals 735,300.00 M.Z. BERGER & CO., INC. - HK BRANCH 990053 USD 20,298 20,298 20,298.15 20,723.70 02/15/1999 0 0.00 0 0.00 Totals 20,298.15 MARKPEAK, LTD. 990059 USD 385,741 385,741 385,741.44 385,741.44 03/21/1999 0 0.00 0 0.00 Totals 385,741.44 MASTERPIECE INDUSTRY CO., INC. 990041 USD 48,743 48,743 48,743.50 48,743.50 03/08/1999 0 0.00 0 0.00 Totals 48,743.50
237 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- MONARCH LUGGAGE CO., INC. 990094 USD 20,803 20,803 20,803.00 20,803.00 04/04/1999 0 0.00 1 6,678.00 Totals 20,803.00 MUTUAL BENEFIT MFG & EXP. CO., LTD. 990028 USD 120,897 120,897 120,897.00 120,897.00 01/26/1999 0 0.00 0 0.00 Totals 120,897.00 NUMARK INDUSTRIES 990056 USD 103,320 103,320 103,320.00 103,220.00 02/20/1999 0 0.00 0 0.00 Totals 103,320.00 HODDZON/CAP TOYS FAR EAST SERVICES 990062 USD 33,012 33,012 33,012.00 33,012.00 01/26/1999 0 0.00 0 0.00 Totals 33,012.00 PACIFIC MARKETING INTL (HK) LTD. HL 990105 USD 161,609 161,609 161,609.28 161,609.28 04/05/1999 0 0.00 0 0.00 Totals 161,609.28
238 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- PACIFIC PRODUCTS, LTD. 990054 USD 129,308 129,308 129,308.40 129,308.40 03/03/1999 0 0.00 0 0.00 990101 USD 45,678 45,678 45,678.00 45,678.00 04/05/1999 0 0.00 0 0.00 Totals 174,986.40 PARADISA ENTERPRISES CO., LTD. WHSE 990035 USD 45,637 45,637 45,637.20 45,637.20 03/08/1999 0 0.00 0 0.00 Totals 45,637.20 PEACHTREE PLAYTHINGS (HK) LTD. 990080 USD 9,216 9,216 9,216.00 9,216.00 01/31/1999 0 0.00 0 0.00 Totals 9,216.00 PRECIDIO INC. 990007 USD 91,848 91,848 91,848.00 91,848.00 01/31/1999 0 0.00 0 0.00 Totals 91,848.00
239 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- PROGRESSIVE INTERNATIONAL CORP. 990067 USD 67,344 67,344 67,344.00 67,344.00 03/13/1999 0 0.00 0 0.00 Totals 67,344.00 PROMOTION PLUS INTERNATIONAL LTD. 990085 USD 14,700 14,700 14,700.00 14,700.00 02/20/1999 0 0.00 0 0.00 Totals 14,700.00 RACING CHAMPIONS, LTD. 990025 USD 51,420 51,420 51,420.90 51,420.90 02/16/1999 0 0.00 0 0.00 Totals 51,420.90 ROVENTA-HENEX 990057 CHF 540,450 540,450 540,450.00 540,450.00 10/21/1999 0 0.00 0 0.00 Totals 540,450.00 SALTON/MAXIM HOUSEWARES, INC. 990070 USD 204,352 204,352 204,352.14 204,352.14 01/14/1999 0 0.00 0 0.00 Totals 204,352.14
240 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- SANGO OF AMERICA, INC. 990031 USD 194,400 194,400 194,400.00 194,400.00 02/20/1999 0 0.00 0 0.00 990102 USD 338,400 338,400 338,400.00 338,400.00 03/22/1999 0 0.00 0 0.00 Totals 532,800.00 SHIAN INDUSTRY CO., LTD 990092 USD 1,718,655 1,718,655 1,718,655.14 1,718,655.14 03/31/1999 0 0.00 0 0.00 Totals 1,718,655.14 SOSKIN & GORDON 990107 USD 53,813 53,813 53,813.70 53,813.70 04/05/1999 0 0.00 0 0.00 Totals 53,813.70 SUN ISLE INC. 990042 USD 970,068 970,068 970,068.92 970,068.92 03/31/1999 0 0.00 0 0.00 Totals 970,068.92
241 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- SYRATECH (HK) LTD. 990045 USD 194,851 194,851 194,851.25 197,737.00 02/20/1999 0 0.00 0 0.00 Totals 194,851.27 TAIPRO CO., LTD. C/O TAIPRO CO. LTD. 990065 USD 430,814 430,814 430,814.04 430,814.04 02/22/1999 0 0.00 0 0.00 Totals 430,814.04 TIGER ELECTRONICS FAR EAST 990076 USD 86,160 86,160 86,160.00 86,160.00 03/09/1999 0 0.00 0 0.00 Totals 86,160.00 TOASTMASTER, INC. 990021 USD 84,878 84,878 84,878.57 84,878.57 02/05/1999 0 0.00 2 0.00 Totals 84,878.57 TREND LIGHTING 990047 USD 50,850 50,850 50,850.00 50,850.00 03/08/1999 0 0.00 0 0.00 Totals 50,850.00
242 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- WEATHERWORKS, INC. 990097 USD 141,704 141,704 141,704.64 141,704.64 03/22/1999 0 0.00 0 0.00 Totals 141,704.64 WORLD HOUSEWARE PRODUCING CO., INC. 990010 USD 64,038 64,038 64,038.24 64,038.24 01/20/1999 0 0.00 0 0.00 Totals 64,038.24 YU SHAN WOODEN WORK CO., LTD. 990064 USD 8,820 8,820 8,820.00 8,820.00 02/12/1999 0 0.00 0 0.00 990093 USD 21,072 21,072 21,072.00 21,072.00 04/03/1999 0 0.00 0 0.00 Totals 29,892.00
243 S.M.C. Program INTERNATIONAL DEPARTMENT LETTER OF CREDIT OUTSTANDING BALANCE ===============================================================================
Negs Not Paid Amds Not Insuerd ---------------- ----------------- LC # Crncy Face Value Fgn Bal U.S. Dol Amt Bank Bal Exp Date Num Tot Amt Num Tot Amt ---- ----- ---------- ------- ------------ -------- -------- --- ------- --- ------- Total LC's Not Expired 103 Total LC's Expired 31 Total LC's Approved But Not Issued 105 Total Negotiations Approved But Not Paid 0 Total Amendments Approved But Not Issued 20 Total U.S. Balance 31,604,970.21 * Total U.S. Bank Balance 31,586,148.29
244 BANK OF AMERICA: CORRECTIONS TO REPORT AND/OR WORK IN THE PIPELINE NOT ON REPORT:
CORRECTIONS BENEFICIARY LC# AMOUNT EXPIRY ARC 990050 537,763.81 BELDARE 990066 13,923.00 BRINNS 990015 142,356.25 2/5/99 CHOSUN 990014 158,894.90 1/26/99 INTL FURNITURE 990046 440,841.00 OGGI 990015 27,750.00 1/31/99 KURT ADLER 990018 18,949.00 SHIAN 990092 893,878.00 WORK IN PROGRESS LETTER OF CREDIT J&H INTER 990132 49,246.98 3/22/99 THESE NOT ACTUALLY SENT TO BANK YET SYRATECH 990137 53,095.88 4/14/99 THESE NOT ACTUALLY SENT TO BANK YET TRENDMASTER 990138 49,862.98 3/13/99 THESE NOT ACTUALLY SENT TO BANK YET SUPREME TOYS 990139 28,800.00 2/15/99 THESE NOT ACTUALLY SENT TO BANK YET PARAWIND 990140 118,735.34 3/8/99 THESE NOT ACTUALLY SENT TO BANK YET MERITUS NONE 10,200.00 LC NOT PROCESSED; BUT WILL BE TMR BELDARE 990112 110,180.01 4/5/99 NUMARK IND 990115 68,880.00 4/5/99 SPRINGFIELD 990117 17,843.30 4/5/99 DALE TIFFANY 990118 52,511.25 4/5/99 HERITAGE 990120 17,775.00 4/5/99 BELDARE 990121 108,842.35 4/8/99 TENSOR 990124 7,125.00 4/7/99 GROTON 990125 36,161.75 4/7/99 RACING CHAMP 990128 78,551.40 3/26/99 BELDARE 990128 282,072.85 4/12/99 LAVITA 990130 48,420.30 4/11/99 MUTUAL BENE 990131 22,161.60 1/12/99 BELDARE 990133 145,824.74 4/5/99 GLOBAL HORIZ 990134 65,550.00 3/3/99 3K MOBEL 990135 138,240.00 2/15/99 BELDARE 990136 25,458.00 3/18/99 AMENDMENTS BELDARE 990087 5,279.40 INTL FURNITURE 990100 261,448.32 4/18/99 MONARCH 990084 8,678.00 4/5/99 EMESS 990113 78,750.00 BELDARE 990079 9,607.00 DALE TIFFANY 990115 121,788.70
245 BEAKIE LEE 990088 148,790.00 BELDARE 990127 163,475.78 4/5/99 AT HOME 990081 387,183.00 2/15/99 NOT SENT TO BANK YET CASUAL LIVING 990040 457,996.67 03/31/99 NOT SENT TO BANK YET HOLMES 990013 132,585.25 3/22/99 NOT SENT TO BANK YET PAYMENTS IN PROCESS TAIPRO 990065 (151,232.70) EXIM 990044 (55,228.00) TOTAL ADJUSTMENTS 5,340,435.27 ADD PRIOR O/S 31,504,970.21 TOTAL OUTSTANDING L/C 36,945,406.48
246 Schedule 8.7(f) TO CREDIT AGREEMENT CHART C STANDBY LETTERS OF CREDIT OUTSTANDING BALANCE 247 SERVICE MERCHANDISE COMPANY, INC. STANDBY LETTERS OF CREDIT FOR PERIOD ENDING 1/03/98 FACILITY LETTERS OF CREDIT OUTSTANDING:
L/C LIST# LOCATION LCBANK EXPIRES FEE L/C AMOUNT L/C NUMBER PURPOSE (1) 8710120 FIRST UNION CHASE 10/3/99 2.250% $1,175,000.00 T-265731 SPE-1 (2) 8710120 FIRST UNION CHASE 10/3/99 2.250% $ 404,410.00 T-265732 SPE-2 (3) 8710120 ARGONAUT COMPANY CHASE 3/1/99 2.250% $1,100,000.00 P271805 COLLATERALIZES GENERAL LIABILITY & WORKERS COMP LOSSES (4) 8710120 RELIANCE INSURANCE CHASE 3/1/99 2.250% $1,100,000.00 P271803 COLLATERALIZES WORKERS COMP LOSSES 1991 (5) 8710120 NATIONAL UNION (AIG) CHASE 3/1/99 2.250% $4,221,500.00 P271801 COLLATERALIZES WORKERS COMP LOSSES 1993-1994 (6) 8710120 CIGNA INSURANCE CHASE 8/1/99 2.250% $7,700,269.00 P271880 COLLATERALIZES WORKERS COMP LOSSES (7) 8710120 INTERNATIONAL GOLD CHASE 8/1/99 2.250% $2,500,000.00 P271889 SECURES GOLD SHIPMENT FROM INTERNATIONAL VENDOR (8) 8710120 ST. PAUL SURETY GROUP CHASE 11/30/99 2.250% $4,078,000.00 P284133 COLLATERALIZES SURETY BONDS (9) 8710120 WASHINGTON CHASE 12/30/99 2.250% $1,500,000.00 COLLATERALIZES BONDS INTERNATIONAL INS. CO. (10) TOTAL FACILITY LETTERS OF $23,771,179.00 CREDIT NON-FACILITY LETTERS OF CREDIT OUTSTANDING: INDUSTRIAL REVENUE BONDS (11) 139 THORTNON CO. CIBC 12/31/99 2.150% $1,348,801.37 SYN9410017 BACKS INDUSTRIAL REVENUE BOND (12) 147 LANSING, MI CIBC 12/31/99 2.150% $1,452,363.02 SYN9410015 BACKS INDUSTRIAL BOND (13) 174 KNOXVILLE, TN CIBC 12/31/99 2.150% $2,697,682,74 SYN9410013 BACKS INDUSTRIAL BOND (14) 135 NAPERVILLE, IL CIBC 12/31/99 2.150% $3,632,160.00 SYN9510013 BACKS INDUSTRIAL BOND (15) 191 BURBANK, IL CIBC 12/31/99 2.150% $5,695,890.00 SYN9410011 BACKS INDUSTRIAL BOND (16) 967 MONTGOMERY, NY CIBC 12/31/99 2.150% $10,381,164.38 SYN9410016 BACKS INDUSTRIAL BOND (17) TOTAL NON-FACILITY LETTERS OF $25,207,981.51 CREDIT (18) TOTAL STANDBY LETTERS OF $48,379,168.51 CREDIT
248 Schedule 8.8 TO CREDIT AGREEMENT INVESTMENTS Overnight money market accounts valued as of January 12, 1999 at $51,600.00. See attached Chart "A" following, incorporated herein by reference. 249 Schedule 8.8 TO CREDIT AGREEMENT CHART A SERVICE MERCHANDISE INVESTMENT PORTFOLIO 250 SERVICE MERCHANDISE INVESTMENT PORTFOLIO
CREDIT MONEY MKT INVEST MATURE INVESTMENT AVG DAILY RATING MUTUAL FUNDS BROKER DATE DATE NO DAY PRINCIPAL INT RATE INTEREST INTEREST - ------------------------------------------------------------------------------------------------------------------------------------ NR PRIME OBLIGATIONS GOLDMAN 01/13 01/14 1 27,300,000.00 5.130% 3,836.96 3,836.96 SACHS AAA/aaa PRIME OBLIGATIONS FEDERATED 01/13 01/14 1 24,300,000.00 5.120% 3,408.86 3,408.66 TOTAL MONEY MARKET 51,600,000.00 5.125% 7,245.62 7,245.62 CREDIT COMMERCIAL INVEST MATURE INVESTMENT AVG DAILY RATING PAPER BROKER DATE DATE NO DAY PRINCIPAL INT RATE INTEREST INTEREST - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL COMMERCIAL PAPER 0.00 0.0000% 0.00 0.00 CREDIT TAX-EXEMPT INVEST MATURE INVESTMENT TAX-EXEMPT AVG DAILY RATING SECURITIES BROKER DATE DATE NO DAY PRINCIPAL YIELD INTEREST INTEREST - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL TAX-EXEMPTS 0.00 0.000% 0.00 0.00 TOTAL SMC MANAGED 51,600,000.00 5.125% 7,245.62 7,245.62 PORTFOLIO
251 Schedule 8.10 TO CREDIT AGREEMENT TRANSACTIONS WITH AFFILIATES 1. The Borrower is involved in a joint venture with Raymond Zimmerman whereby it shares rent with regard to property located on Broadway in Nashville, Tennessee. The Borrower pays such Affiliate approximately $11,437.50 per month. 2. The Borrower is involved in a venture whereby it leases property from Raymond Zimmerman located on Nolensville Road in Nashville, Tennessee, for approximately $6,750.00 per month. 3. See Schedule 8.2(b), Existing Guarantee Obligations, which is hereby incorporated by reference relating, to the Borrower's Credit Card Program. 252 Schedule 11.2 TO CREDIT AGREEMENT ADDRESS OF OTHER PARTIES
====================================================================================================================== Name of Lender Address for Notices Contact ====================================================================================================================== Heller Financial, Inc. 150 East 42nd Street Attn: Tom Bukowski New York, NY 10017 Fax: (212) 880-7002 - ---------------------------------------------------------------------------------------------------------------------- National City Commercial Finance, Inc. 1965 East 6th Street Attn: Kevin Grogelny Suite 400 Fax: (770) 613-5349 Cleveland, Ohio 44114 - ---------------------------------------------------------------------------------------------------------------------- Foothill Income Trust, L.P. 11111 Santa Monica Blvd Attn: Mike Bohannon Suite 1500 Fax: (310) 479-0461 Los Angeles, CA 90025 - ---------------------------------------------------------------------------------------------------------------------- Foothill Capital Corporation 11111 Santa Monica Blvd Attn: Mike Baranowski Suite 1500 Fax: (310) 479-8952 Los Angeles, CA 90025 - ---------------------------------------------------------------------------------------------------------------------- Jackson National Life Insurance 225 West Wacker Drive Attn: Jeffrey J. Podwika Company Suite 1100 Fax: (312) 634-0815 c/o PPM Finance, Inc. Chicago, IL 60606 - ---------------------------------------------------------------------------------------------------------------------- ======================================================================================================================
EX-99.3 4 AMENDED AND RESTATED MASTER COLLATERAL AGREEMENT 1 EXHIBIT 99.3 ================================================================================ AMENDED AND RESTATED MASTER COLLATERAL AGREEMENT among SERVICE MERCHANDISE COMPANY, INC. THE SUBSIDIARIES OF SERVICE MERCHANDISE COMPANY, INC. PARTY HERETO and CITICORP USA, INC., as Administrative Agent Dated as of January 21, 1999 ================================================================================ 2 TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS...................................................... 2 1.1 Defined Terms.................................................... 2 1.2 Other Definitional Provisions.................................... 12 SECTION 2. REMEDIAL PROVISIONS.............................................. 12 2.1 Notice of Default; Notice of Acceleration........................ 12 2.2 General Authority of the Administrative Agent over the Collateral....................................................... 12 2.3 Right to Initiate Judicial Proceedings........................... 13 2.4 Right to Appoint a Receiver...................................... 13 2.5 Exercise of Powers; Instructions of Required Secured Parties..... 14 2.6 Remedies Not Exclusive........................................... 14 2.7 Waiver and Estoppel.............................................. 15 2.8 Limitation on Administrative Agent's Duty in Respect of Collateral....................................................... 16 2.9 Limitation by Law; Limitation by Contract........................ 16 2.10 Rights of Secured Parties under Secured Instruments.............. 17 2.11 Subordination of Intercompany Obligations........................ 17 2.12 Certain Provisions In Existing Mortgages......................... 18 2.13 Overdrafts....................................................... 22 SECTION 3. CASH DOMINION SYSTEM; COLLATERAL ACCOUNTS; DISTRIBUTIONS........................................................... 22 3.1 Cash Dominion System............................................. 22 3.2 The Collateral Account........................................... 23 3.3 Control of Collateral Account.................................... 24 3.4 Investment of Funds Deposited in Collateral Account.............. 24 3.5 Application of Moneys............................................ 24 3.6 Amounts Held for Contingent Secured Obligations.................. 26 3.7 Administrative Agent's Calculations.............................. 26 3.8 Pro Rata Sharing................................................. 27 SECTION 4. AGREEMENTS WITH THE ADMINISTRATIVE AGENT......................... 27 4.1 Information as to Secured Parties and Administrative Agent....... 27 4.2 Stamp and Other Similar Taxes.................................... 27 4.3 Filing Fees, Excise Taxes, Etc................................... 27 4.4 Indemnification.................................................. 28 4.5 Further Assurances............................................... 28
i 3 Page ---- SECTION 5. POSSESSION AND USE OF COLLATERAL; PARTIAL RELEASES............... 29 5.1 Use Prior to Notice of Acceleration.............................. 29 5.2 Releases......................................................... 29 5.3 Insurance and Condemnation Proceeds; Liquidating Dividends....... 30 SECTION 6. THE ADMINISTRATIVE AGENT......................................... 31 6.1 Exculpatory Provisions........................................... 31 6.2 Delegation of Duties............................................. 32 6.3 Reliance by Administrative Agent................................. 32 6.4 Limitations on Duties of the Administrative Agent................ 34 6.5 Resignation and Removal of the Administrative Agent.............. 34 6.6 Merger of the Administrative Agent............................... 34 6.7 Co-Collateral Agent; Separate Agents............................. 34 6.8 Treatment of Payee or Indorsee by Administrative Agent; Representatives of Secured Parties............................... 36 SECTION 7. MISCELLANEOUS.....................................................36 7.1 Notices.......................................................... 36 7.2 No Waivers....................................................... 37 7.3 Amendments, Supplements and Waivers.............................. 37 7.4 Headings......................................................... 38 7.5 Severability..................................................... 38 7.6 Successors and Assigns........................................... 38 7.7 Currency Conversions............................................. 38 7.8 GOVERNING LAW.................................................... 38 7.9 Counterparts..................................................... 38 7.10 Termination...................................................... 38 7.11 New Obligors..................................................... 39 7.12 Inspection by Regulatory Agencies................................ 39 7.13 Submission to Jurisdiction; Waivers.............................. 39 7.14 WAIVERS OF JURY TRIAL............................................ 40 7.15 Amendment and Restatement........................................ 40 Exhibits A Form of Security Agreement B Form of Mortgage C Form of Securities Pledge Agreement D Form of Assumption Agreement E Form of Blocked Account Agreement F Form of Lockbox Agreement G Form of Custody and Control Agreement
ii 4 AMENDED AND RESTATED MASTER COLLATERAL AGREEMENT, dated as of January 21, 1999, among SERVICE MERCHANDISE COMPANY, INC., a Tennessee corporation (the "Borrower"), the subsidiaries of the Borrower which are listed on the signature pages hereto under the heading "Initial Obligors" (together with the Borrower, the "Initial Obligors"), the other subsidiaries of the Borrower from time to time party hereto (the "New Obligors"), and CITICORP USA, INC. ("Citicorp"), as Administrative Agent (as defined below). W I T N E S S E T H: WHEREAS, in connection with the Amended and Restated Credit Agreement, dated as of September 10, 1997 (the "Existing Credit Agreement"), among the Borrower, the financial institutions party thereto, The Chase Manhattan Bank ("Chase"), as administrative agent and collateral agent for such financial institutions (in such capacity, the "Collateral Agent"), and Citicorp, as documentation agent thereunder, the Borrower, certain subsidiaries of the Borrower and The Chase Manhattan Bank, as collateral agent, entered into the Master Collateral Agreement, dated as of September 10, 1997 (the "Existing Agreement"); and WHEREAS, Citicorp has succeeded Chase as the Collateral Agent under the Existing Credit Agreement; and WHEREAS, in connection with the Second Amended and Restated Credit Agreement, dated as of January 20, 1999, among the Borrower, the several financial institutions and other entities from time to time party thereto (the "Lenders"), Citicorp, as collateral and administrative agent for the Lenders (in such capacity, the "Administrative Agent"), and BankBoston, N.A., as collateral monitoring agent and documentation agent for the Lenders (as amended, modified, supplemented, extended, renewed or refinanced from time to time, the "Credit Agreement"), the Initial Obligors and the Administrative Agent desire to amend and restate in its entirety the Existing Agreement, including the Security Documents referred to therein; and WHEREAS, it is the intent of the parties hereto that this Agreement amend and restate in its entirety the Existing Agreement, that this Agreement not constitute a novation and that from and after the date hereof, the Existing Agreement be of no force or effect except as to evidence the incurrence of each of the Obligors' obligations thereunder and the grant of Liens therein or pursuant thereto; and WHEREAS, it is a condition precedent to the effectiveness of the Credit Agreement that the Initial Obligors and the Administrative Agent shall have executed and delivered this Agreement; 5 NOW, THEREFORE, the Obligors and the Administrative Agent hereby agree that the Existing Agreement is hereby consolidated and amended and restated in its entirety to read as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the terms defined in the captions to this Agreement have the meanings set forth therein, terms defined in the Credit Agreement and used herein (unless otherwise defined herein) have the meanings assigned to such terms in the Credit Agreement, and the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Accounts" means, with respect to any Obligor, all "accounts" (as such term is defined in the Code) now owned or hereafter acquired by such Obligor and all Instruments and Chattel Paper now owned or hereafter acquired by such Obligor which evidence a right to payment for goods sold or leased or for services rendered, whether or not such right has been earned by performance. "Administrative Agent" has the meaning assigned to such term in the recitals to this Agreement. "Agreement" means this Amended and Restated Master Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Applicable Rate" has the meaning assigned to such term in subsection 2.12(f). "Average Available Revolving Amount" means, on any day, the average daily Available Revolving Amount for the thirty day period ended on such day. "Bankruptcy Code" means title 11 of the United States Code, as the same may be amended, supplemented or otherwise modified from time to time. "Bankruptcy Event" with respect to any Person means the commencement of any case, proceeding or other action (a) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (b) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the making of a general assignment for the benefit of its creditors. 2 6 "Blocked Account Agreement" means any Blocked Account Agreement (i) entered into among any Obligor, a Depositary Bank and the Collateral Agent pursuant to the Existing Agreement, substantially in the form of Exhibit E to the Existing Agreement, or (ii) entered into among any Obligor, a Depositary Bank and the Administrative Agent pursuant to subsection 3.1, substantially in the form of Exhibit E to this Agreement, with such changes as may be agreed upon by the relevant Obligor, the Administrative Agent and the relevant Depositary Bank, in each case as the same may be amended, modified, supplemented, extended or renewed from time to time. "Cash Dominion Notice" means a notice delivered by the Administrative Agent to the Borrower stating that a Cash Dominion Trigger Event has occurred and/or directing that funds be transferred to the account identified as follows: Citicorp USA, Inc. For the account of ABA # 021000089 Citicorp USA, Inc., as Administrative 399 Park Avenue Agent: Service Merchandise Company, Inc. New York, NY 10043 - Collateral Account Account #: 4978-5586 or such other account as may be designated by the Administrative Agent. "Cash Dominion System" has the meaning assigned to such term in subsection 3.1(a). "Cash Dominion Trigger Event" means the occurrence of the Effective Date. "Cash Equivalents" means (a) direct obligations of, or obligations guaranteed by, the United States of America or any agency thereof, (b) commercial paper issued in the United States of America and rated at least A-1 or P-1 by at least one nationally recognized rating organization, (c) certificates of deposit issued by or eurodollar deposits made with any Lender, any affiliate of any Lender, or any bank or trust company which has (or the parent of which has) capital, surplus and undivided profits aggregating at least $100,000,000 (or the equivalent amount in another currency), (d) loan participations in respect of loans made in the United States by any bank or trust company referred to in clause (c) above to borrowers which have short-term ratings of at least A-1 or P-1 by at least one nationally recognized rating organization, (e) drafts accepted by any bank or trust company referred to in clause (c) above or any other negotiable instrument guaranteed or endorsed with full recourse by any such bank or trust company, (f) repurchase agreements with respect to any of the foregoing types of securities described in clause (a), (b) and (d) above, (g) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (f) above, (h) obligations the 3 7 return with respect to which is excluded from gross income under Section 103 of the Internal Revenue Code of 1986, as amended from time to time (the "Tax Code") with a maturity of not more than six months or with the right of the holder to put such obligations for purchase at par upon not more than seven days' notice and which are rated A-l or higher by S&P or rated P-1 or higher by Moody's, (i) (A) tax free money market funds that invest solely in the securities described in clause (h) above or (B) money market preferred municipal bond funds which have a term of not more than seven days and which are rated at least AAA or the equivalent thereof by S&P or at least Aaa or the equivalent thereof by Moody's, and (j) any other securities reasonably acceptable to the Administrative Agent which are rated A-1 or higher by S&P or rated P-1 or higher by Moody's or which are of an equivalent credit quality in the reasonable judgment of the Administrative Agent, provided that (i) all such obligations, commercial paper, certificates of deposit, eurodollar deposits, loan participations, drafts, investments, instruments, securities and repurchase agreements are denominated in Dollars, (ii) each such obligation, commercial paper, certificate of deposit, draft, investment, security and instrument (including those subject to repurchase agreements) is evidenced by an instrument or a security (each as defined in the Code) of which (and of any confirmations related thereto) the Administrative Agent or its agents promptly take possession unless such items are Permitted Book-Entry Securities or, at the relevant Obligor's option, an Excepted Cash Equivalent (as defined in Section 3(f) of the Securities Pledge Agreement) or, in the case of eurodollar deposits or loan participations, are held in the name of the Administrative Agent or any agent therefor, and in the case of loan participations, are evidenced by facsimile or other written confirmation, (iii) each such obligation, certificate of deposit, draft, investment, security and instrument (including those subject to repurchase agreements) matures within six months after it is acquired by any Obligor and (iv) each item of such commercial paper (including those subject to repurchase agreements) matures within three months after it is acquired by any Obligor. "Cash Proceeds" means all Proceeds of Collateral consisting of cash, checks, credit card proceeds, money orders or commercial paper of any kind whatsoever. "Chattel Paper" means, with respect to any Obligor, all "chattel paper" (as such term is defined in the Code) now owned or hereafter acquired by such Obligor. "Code" means the Uniform Commercial Code as in effect in the State of New York from time to time. "Collateral" means, collectively, the Pledged Stock, all other Pledged Securities, the Mortgaged Property, the Mortgage Assignments, all Security, all Proceeds of the foregoing and all other property in which the Administrative Agent is granted a Lien from time to time hereunder or under any Security Document, subject to the limitations set forth in subsection 2.9. 4 8 "Collateral Account" has the meaning assigned to such term in subsection 3.2. "Concentration Account" means the Collateral Account. "Credit Agreement" has the meaning assigned to such term in the recitals to this Agreement. "Credit Agreement Obligations" means, at any time, the collective reference to the unpaid principal of and interest on the Loans and the Reimbursement Obligations and all other obligations and liabilities of the Borrower to the Administrative Agent or the Lenders (including interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans or Reimbursement Obligations and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, the Letters of Credit, the other Loan Documents or any other document made, delivered or given in connection therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower pursuant to the terms of the Credit Agreement or any other Loan Document). "Custody and Control Agreement" means (i) any Custody and Control Agreement entered into among any Obligor, an Intermediary (as therein defined) and the Collateral Agent pursuant to Section 9(e) of the Existing Pledge Agreement or (ii) any Custody and Control Agreement entered into among any Obligor, an Intermediary (as therein defined) and the Administrative Agent pursuant to Section 9(e) of the Securities Pledge Agreement, substantially in the form of Exhibit G to this Agreement with such changes as may be agreed upon by the relevant Obligor, the Administrative Agent and the Intermediary, in each case as the same may be amended, modified, supplemented, extended or renewed from time to time. "Depositary Account" has the meaning assigned to such term in subsection 3.1(a). "Depositary Bank" has the meaning assigned to such term in subsection 3.1(a). "Derivative Agreements" means any foreign exchange contracts, interest rate and currency swap agreements, floors, caps, collars, swaptions and similar derivative 5 9 contracts, in each case, between any Obligor and any Lender or any Affiliate of any Lender. "Distribution Date" means each date fixed by the Administrative Agent for a distribution to the Secured Parties of funds held in the Collateral Account. "Documents" means, with respect to any Obligor, all "documents" (as such term is defined in the Code) now or hereafter acquired by such Obligor. "Equipment" means, with respect to any Obligor, all equipment, machinery, chattels, tools, dies, jigs, molds, parts, machine tools, furniture, furnishings, fixtures and supplies, of every nature, now owned or hereafter acquired by such Obligor, wherever located, additions, accessories and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary for the operation and use of such personal property or fixtures, whether or not the same shall be deemed to be affixed to real property and in any event all "equipment" (as such term is defined in the Code), but excluding Inventory. "Existing Credit Agreement Mortgage" has the meaning assigned to such term in subsection 2.12(a). "Existing Pledge Agreement" has the meaning assigned to such term in the Securities Pledge Agreement. "General Intangibles" means, with respect to any Obligor, all general intangibles of every nature, whether presently existing or hereafter acquired or created by such Obligor, including all Records, claims, choses in action, judgments, United States patents, United States patent applications, United States trademarks, servicemarks, logos and tradenames, along with the goodwill of the business connected with the use of or symbolized by such trademarks, servicemarks, logos and tradenames, interests in mortgages, deeds of trust and other instruments encumbering real property, licensing agreements, royalty payments, United States copyrights, insurance policies, tax refunds and goodwill, and in any event all "general intangibles" (as such term is defined in the Code) and all rights to receive payment of money which rights are not Accounts and do not arise under Chattel Paper and are not Instruments. "Impositions" has the meaning assigned to such term in subsection 2.12(f). "Included Obligors" has the meaning assigned to such term in subsection 7.10(b). 6 10 "Initial Obligors" has the meaning assigned to such term in the preamble to this Agreement. "Instruments" means, with respect to any Obligor, any "instruments" (as such term is defined in the Code) now owned or hereafter acquired by such Obligor. "Insurance Policies" means all rights of the Obligors in, to and under insurance policies of every kind, now existing or hereafter acquired, under which any Collateral is insured, provided that (i) any such rights which constitute Proceeds shall be included in the meaning of the term "Proceeds" and excluded from the meaning of the term "Insurance Policies", and (ii) proceeds of such policies, whether or not "Proceeds", shall be governed by and applied pursuant to subsection 5.3. "Intercompany Debt" means, with respect to the Borrower, any Indebtedness of the Borrower to any other Obligor, and with respect to any Obligor other than the Borrower, any Indebtedness of such Obligor to the Borrower or any other Obligor, including all amounts payable in respect thereof whether in respect of principal, interest or otherwise. "Inventory" means, with respect to any Obligor, goods now owned or hereafter acquired by such Obligor held for sale or lease or to be furnished under contracts of service or so leased or furnished, and all raw materials, work in process or materials used or consumed in a business, and in any event including all "inventory" (as such term is defined in the Code) but excluding Equipment. "Investment Property" means all "investment property" (as such term is defined in the Code), including any security (as such term is defined in the Code), whether certificated or uncertificated, any security entitlement, any security account, any commodity contract and any commodity account. "Investment Securities" means all Instruments or "securities" (as such term is defined in the Code) now owned or hereafter acquired by any Obligor other than (a) Pledged Stock, (b) Capital Stock of any Subsidiary that is not expressly required to be pledged pursuant the Credit Agreement or the Securities Pledge Agreement, (c) Cash Equivalents and (d) any note, debenture, bond or other instrument evidencing any Indebtedness of the Borrower to any Subsidiary or of any Subsidiary to the Borrower or any other Subsidiary that does not constitute Intercompany Debt. "Lenders" has the meaning assigned to such term in the recitals to this Agreement. "Lockbox Agreement" means any Lockbox Agreement (i) entered into among any Obligor, a Depositary Bank and the Collateral Agent pursuant to the Existing 7 11 Agreement, in substantially the form of Exhibit F to the Existing Agreement, or (ii) entered into among any Obligor, a Depositary Bank and the Administrative Agent pursuant to subsection 3.1, in substantially the form of Exhibit F to this Agreement, with such changes as may be agreed upon by the relevant Obligor, the Administrative Agent and the Depositary Bank, in each case as the same may be amended, modified, supplemented, extended or renewed from time to time. "Moody's" means Moody's Investors Services, Inc. "Mortgage" means each fee and ground leasehold mortgage, deed of trust and any other similar document executed and delivered from time to time to the Administrative Agent pursuant to this Agreement, the Credit Agreement, the Existing Credit Agreement or any credit agreement amended and restated by the Existing Credit Agreement, in substantially the form of Exhibit B to this Agreement (other than in the case of a Mortgage delivered in connection with any credit agreement amended and restated by the Existing Credit Agreement), as appropriate, or, if such Exhibit is not appropriate under applicable law in the jurisdiction in which such real property is located, in such other form as shall be reasonably satisfactory to the Administrative Agent and the Borrower, as any of the same may be amended, modified, supplemented, extended or renewed from time to time. "Mortgage Assignment" means each assignment of mortgage (including any mortgage held by an Obligor as an assignee of any other person) executed and delivered from time to time to the Administrative Agent pursuant to this Agreement or the Credit Agreement, in a form reasonably satisfactory to the Administrative Agent and the Borrower and as appropriate under applicable law in the jurisdiction in which such real property is located, as any of the same may be amended, modified, supplemented, extended or renewed from time to time. "Mortgaged Property" means all property in which the Administrative Agent is granted a lien or security interest pursuant to the Mortgages. "New Obligors" has the meaning assigned to such term in the preamble to this Agreement. "Notice of Acceleration" means a notice delivered by the Administrative Agent to the Borrower stating that the Administrative Agent has declared the Loans and other amounts owing under the Credit Agreement to be due and payable and has terminated the Commitments pursuant to Section 9 of the Credit Agreement and stating that such notice is a "Notice of Acceleration" for the purposes of this Agreement. 8 12 "Notice of Default" means a notice delivered by the Administrative Agent to the Borrower stating that an Event of Default has occurred and is continuing and stating that such notice is a "Notice of Default" for the purposes of this Agreement. "Obligors" means the Initial Obligors and the New Obligors. "Opinion of Counsel" means an opinion in writing signed by legal counsel satisfactory to the Administrative Agent, who may, but need not, be an employee of any of the Obligors or counsel regularly retained by the Borrower or the Administrative Agent. "Original Mortgage" has the meaning assigned to such term in subsection 2.12(a). "Overdraft" means, at any time, the amount by which the aggregate amount debited from any deposit, concentration, operating or disbursement account maintained by the Borrower or any other Obligor with any Lender or any Affiliate of any Lender, as a result of processing of payment orders issued by the Borrower or such Obligor or otherwise, exceeds the aggregate funds on deposit in such account. "Permitted Book-Entry Securities" means securities which conform in all respects to the requirements set forth in the definition of Cash Equivalents except that such securities are not evidenced by an instrument and the Administrative Agent or its agent does not have possession thereof, provided that with respect to any security of which the Administrative Agent or its agent does not have physical possession, the Administrative Agent shall have acquired a perfected first priority security interest therein or in the security entitlement with respect thereto in the manner provided by the Code. "Pledged Securities" has the meaning assigned to such term in Section 2(a) of the Securities Pledge Agreement. "Pledged Stock" has the meaning assigned to such term in clause (i) of Section 2(a) of the Securities Pledge Agreement. "Post-petition Inventory Proceeds" means, with respect to any Obligor, Proceeds of Inventory of such Obligor arising after the commencement of a case or proceeding under the Bankruptcy Code by or against such Obligor. "Proceeds" has the meaning assigned to such term in the Code. "Records" means, with respect to any Obligor, all books, correspondence, credit files, records and other documents of such Obligor, whether presently existing 9 13 or hereafter acquired or created, including all computer programs, computer tapes, cards, and other papers and documents in its possession or control or in the possession or control of any affiliate or computer service bureau. "Related General Intangibles" means, with respect to any Obligor, all Related Patents and Trademarks and all inventions, processes, production methods, proprietary information, know-how, trade secrets and United States copyrights owned by such Obligor. "Related Patents and Trademarks" means, with respect to any Obligor, (a) all United States trademarks and service marks and all applications and registrations in respect thereof (and any renewals thereof) listed on Schedule A to the Security Agreement and any and all future United States trademarks and service marks hereafter acquired by such Obligor, together with the goodwill of the business connected with the use of, and symbolized by, such trademarks and service marks, (b) all United States patents and applications for United States letters patent, owned by such Obligor, including those listed on Schedule B to the Security Agreement, (c) all re-issues, divisions, continuations, extensions and continuations-in-part of the items referred to in clause (b) above, and (d) the right to sue for past, present and future infringements of the foregoing. "Restricted Jurisdiction" means with respect to any Mortgage or Mortgage Assignment, any jurisdiction outside the United States of America in which the recordation of such Mortgage or Mortgage Assignment would result in the payment of a material mortgage recording tax. "S&P" means Standard & Poor's Ratings Group. "Secured Instruments" means at any time the Credit Agreement and any other agreements or instruments evidencing Secured Obligations. "Secured Obligations" means all of the following, in each case whether now existing or hereafter incurred or created, except to the extent otherwise expressly provided in the agreements or instruments relating thereto: (i) the Credit Agreement Obligations; (ii) all sums payable by the Obligors under this Agreement or any Security Document; (iii) all sums payable by Obligors which are Subsidiary Guarantors under the Subsidiaries Guarantee; 10 14 (iv) liabilities of any Obligor for Overdrafts; (v) liabilities and obligations of any Obligor under Derivative Agreements; and (vi) obligations of any Obligor under subsections 4.10, 4.11, 10.7, 11.5 and 11.20 of the Existing Credit Agreement. When used in this Agreement with respect to any of the Secured Obligations that constitute the obligations of any Obligor in respect of a letter of credit issued on behalf of any Obligor or under any Derivative Agreement or any similar obligation, the term "outstanding" shall include, at any time, without duplication, the aggregate of the principal, interest and other amounts then outstanding that are the subject of such letter of credit or similar obligation that have not then been reimbursed by the relevant Obligor and the amount then available to be drawn or demanded under such letter of credit or similar obligation (assuming compliance with all conditions to drawing) or the termination liabilities, if any, of the Obligor under such Derivative Agreement. "Secured Parties" means at any time the holders of the Secured Obligations. "Securities Account" has the meaning assigned to such term in Section 9(a) of the Securities Pledge Agreement. "Securities Pledge Agreement" means the Second Amended and Restated Securities Pledge Agreement, made by certain of the Obligors in favor of the Administrative Agent, substantially in the form of Exhibit C to this Agreement, as the same may be amended, modified, supplemented, extended or renewed from time to time. "Security" has the meaning assigned to such term in Section 2 of the Security Agreement. "Security Agreement" means the Second Amended and Restated Security Agreement and Collateral Assignment, made by the Obligors in favor of the Administrative Agent, substantially in the form of Exhibit A to this Agreement, as the same may be amended, modified, supplemented, extended or renewed from time to time. "Security Documents" means the collective reference to the Security Agreement, the Securities Pledge Agreement, the Blocked Account Agreements, the Custody and Control Agreements, the Lockbox Agreements, the Mortgages, the Mortgage Assignments and each agreement entered into pursuant to subsection 7.3(b). 11 15 1.2 Other Definitional Provisions. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and subsection references are to this Agreement unless otherwise specified. The word "including" means "including, without limitation" unless the context otherwise requires. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. REMEDIAL PROVISIONS 2.1 Notice of Default; Notice of Acceleration. (a) At any time after the occurrence and during the continuation of an Event of Default, the Administrative Agent may or, at the request of the Majority Lenders, shall deliver a Notice of Default to the Borrower. At any time after the Loans and other amounts owing under the Credit Agreement shall have been declared due and payable and the Commitments shall have been terminated pursuant to Section 9 of the Credit Agreement, the Administrative Agent may or, at the request of the Majority Lenders, shall deliver a Notice of Acceleration to the Borrower, provided that, in the event the Loans become due and payable and the Commitments terminate as a result of the occurrence of an Event of Default under clause (i) or (ii) of Section 9(f) of the Credit Agreement, a Notice of Acceleration shall automatically be deemed to have been delivered under this Agreement. (b) A Notice of Default and a Notice of Acceleration shall become effective upon delivery thereof to the Borrower. A Notice of Default and a Notice of Acceleration, once effective, shall remain in effect unless and until it is cancelled as provided in subsection 2.1(c) or, in the case of a Notice of Default only, the Event of Default giving rise to the delivery of the same has been waived or is otherwise no longer continuing. (c) The Administrative Agent shall be entitled, with the consent of the Majority Lenders, to cancel any Notice of Default or Notice of Acceleration by delivering a written notice of cancellation to the Borrower at any time. 2.2 General Authority of the Administrative Agent over the Collateral. Each Obligor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the name of such Obligor or in its or his own name, from time to time in the Administrative Agent's discretion, as long as any Notice of Default (and, to the extent required by this Agreement or any Security Document, a Notice of Acceleration) is in effect, to take any and all appropriate action and to execute any and all documents and instruments which may reasonably be necessary or desirable to carry out the terms of this Agreement and the Security Documents and accomplish the purposes hereof and thereof and, without limiting the generality of the foregoing, each Obligor hereby gives the 12 16 Administrative Agent the power and right on behalf of such Obligor, without notice to or further assent by such Obligor, as long as any Notice of Default (and, to the extent required by this Agreement or any Security Document, a Notice of Acceleration) is in effect, to do the following: (i) to exercise the rights of a secured creditor upon default under the Code, including the right to take possession of, and to sell, lease or otherwise dispose of, the Collateral, and to exercise its rights upon default under any Mortgage; (ii) to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due upon, or in connection with, the Collateral; (iii) to receive, take, endorse, assign and deliver any and all checks, notes, drafts, acceptances, documents and other negotiable and non-negotiable instruments taken or received by the Administrative Agent as, or in connection with, the Collateral; (iv) to commence, prosecute, defend, settle, compromise or adjust any claim, suit, action or proceeding with respect to, or in connection with, the Collateral; (v) as long as a Notice of Acceleration is in effect, to sell, transfer, assign or otherwise deal in or with the Collateral or any part thereof as fully and effectively as if the Administrative Agent were the absolute owner thereof; and (vi) to do, at its option and at the expense and for the account of the Obligors, at any time or from time to time, all acts and things which the Administrative Agent reasonably deems necessary to protect or preserve the Collateral (including obtaining insurance on the Collateral) and as long as a Notice of Acceleration is in effect, to realize upon the Collateral. 2.3 Right to Initiate Judicial Proceedings. The Administrative Agent, subject to the provisions of subsection 2.5(b) and Section 6, (a) as long as a Notice of Default (and, to the extent required by this Agreement or any Security Document, a Notice of Acceleration) is in effect, shall have the right and power to institute and maintain such suits and proceedings as it may deem appropriate to protect and enforce the rights vested in it by this Agreement and each Security Document and (b) as long as a Notice of Acceleration is in effect, may either after entry, or without entry, proceed by suit or suits at law or in equity to enforce such rights and to foreclose upon the Collateral and to sell all or, from time to time, any of the Collateral under the judgment or decree of a court of competent jurisdiction. 2.4 Right to Appoint a Receiver. As long as a Notice of Acceleration is in effect, upon the filing of a bill in equity or other commencement of judicial proceedings to enforce the rights of the Administrative Agent under this Agreement or any Security 13 17 Document, the Administrative Agent shall, to the extent permitted by law, with notice to the Borrower but without notice to any party claiming through the Obligors, without regard to the solvency or insolvency at the time of any Person then liable for the payment of any of the Secured Obligations, without regard to the then value of the Collateral, and without requiring any bond from any complainant in such proceedings, be entitled as a matter of right to the appointment of a receiver or receivers (who may be the Administrative Agent) of the Collateral, or any part thereof, and of the rents, issues, tolls, profits, royalties, revenues and other income thereof, pending such proceedings, with such powers as the court making such appointment shall confer, and to the entry of an order directing that the rents, issues, tolls, profits, royalties, revenues and other income of the property constituting the whole or any part of the Collateral be segregated, sequestered and impounded for the benefit of the Administrative Agent and the Secured Parties, and each Obligor irrevocably consents to the appointments of such receiver or receivers and to the entry of such order, provided that, notwithstanding the appointment of any receiver, the Administrative Agent shall be entitled to retain possession and control of all cash and Cash Equivalents held by or deposited with it pursuant to this Agreement or any Security Document. 2.5 Exercise of Powers; Instructions of Required Secured Parties. (a) All of the powers, remedies and rights of the Administrative Agent as set forth in this Agreement may be exercised by the Administrative Agent in respect of any Security Document as though set forth in full therein and all of the powers, remedies and rights of the Administrative Agent and the other Secured Parties as set forth in any Security Document may be exercised from time to time as herein and therein provided. (b) The Majority Lenders shall have the right, by one or more instruments in writing executed and delivered to the Administrative Agent, to direct the time, method and place of conducting any proceeding for any right or remedy available to the Administrative Agent, or of exercising any trust or power conferred on the Administrative Agent, or for the appointment of a receiver, or to direct the taking or the refraining from taking of any action authorized by this Agreement or any Security Document, provided that (i) such direction shall not conflict with the provisions of law, this Agreement, any Security Document or any other Loan Document and (ii) the Administrative Agent shall be adequately indemnified. Nothing in this subsection 2.5(b) shall impair the right of the Administrative Agent in its discretion to take any action which it deems proper and which is not inconsistent with such direction by the Majority Lenders. In the absence of such direction, the Administrative Agent shall have no duty to take or refrain from taking any action unless explicitly required herein. 2.6 Remedies Not Exclusive. (a) No remedy conferred upon or reserved to the Administrative Agent herein or in the Security Documents is intended to be exclusive of any other remedy or remedies, but every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or in any Security Document or now or hereafter existing at law or in equity or by statute. 14 18 (b) No delay or omission by the Administrative Agent to exercise any right, remedy or power hereunder or under any Security Document shall impair any such right, remedy or power or shall be construed to be a waiver thereof, and every right, power and remedy given by this Agreement or any Security Document to the Administrative Agent may be exercised from time to time and as often as may be deemed expedient by the Administrative Agent. (c) If the Administrative Agent shall have proceeded to enforce any right, remedy or power under this Agreement or any Security Document and the proceeding for the enforcement thereof shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Administrative Agent, then the Obligors, the Administrative Agent and the Secured Parties shall, subject to any determination in such proceeding, severally and respectively be restored to their former positions and rights hereunder or thereunder with respect to the Collateral and in all other respects, and thereafter all rights, remedies and powers of the Administrative Agent shall continue as though no such proceeding had been taken. (d) To the extent permitted by applicable law, all rights of action and of asserting claims upon or under this Agreement and the Security Documents may be enforced by the Administrative Agent without the possession of any Secured Instrument or instrument evidencing any Secured Obligation or the production thereof at any trial or other proceeding relative thereto, and any suit or proceeding instituted by the Administrative Agent shall be, subject to subsection 6.7(b)(ii), brought in its name as Administrative Agent and any recovery of judgment shall be held as part of the Collateral. 2.7 Waiver and Estoppel. (a) Each Obligor agrees, to the extent it may lawfully do so, that it will not at any time in any manner whatsoever claim or take the benefit or advantage of any appraisement, valuation, stay of execution, extension, moratorium, turnover or redemption law, or any law permitting it to direct the order in which the Collateral shall be sold, now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance or enforcement of this Agreement or any Security Document and hereby waives all benefit or advantage of all such laws and covenants that it will not hinder, delay or impede the execution of any power granted to the Administrative Agent in this Agreement or any Security Document but will suffer and permit the execution of every such power as though no such law were in force. (b) Each Obligor, to the extent it may lawfully do so, on behalf of itself and all who may claim through or under it, waives and releases all rights to demand or to have any marshalling of the Collateral upon any sale, whether made under any power of sale granted herein or in any Security Document or pursuant to judicial proceedings or upon any foreclosure or any enforcement of this Agreement or any Security Document and consents and agrees that all the Collateral may at any such sale be offered and sold as an entirety. 15 19 (c) Each Obligor waives, to the extent permitted by applicable law, presentment, demand, protest and any notice of any kind (except notices explicitly required hereunder or under the Credit Agreement or any Security Document) in connection with this Agreement and the Security Documents and any action taken by the Administrative Agent with respect to the Collateral. 2.8 Limitation on Administrative Agent's Duty in Respect of Collateral. Beyond its duties as to the custody thereof expressly provided herein or in any Security Document and to account to the Secured Parties and the Obligors for moneys and other property received by it hereunder or under any Security Document, the Administrative Agent shall not have any duty to the Obligors or to the Secured Parties as to any Collateral in its possession or control or in the possession or control of any of its agents or nominees, or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto except to treat such Collateral in its possession and control with the same degree of care as it accords its own property and as may be required by applicable law. Notwithstanding the foregoing, the Administrative Agent shall be responsible and accountable for damages occasioned by such taking of possession or control which are the direct result of the Administrative Agent's gross negligence or willful misconduct. 2.9 Limitation by Law; Limitation by Contract. (a) All rights, remedies and powers provided in this Agreement or any Security Document may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions hereof and of the Security Documents are intended to be subject to all applicable mandatory provisions of law which may be controlling and (subject to subsection 7.5) to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable in whole or in part or not entitled to be recorded, registered or filed under the provisions of any applicable law. In addition, and without limiting the generality of the foregoing, (x) if any applicable law restricts the granting of a security interest in any property or asset of an Obligor (which would otherwise be Collateral under any Security Document) unless one or more consents have been obtained or one or more conditions have been satisfied, then such property or asset shall not be subject to a security interest under the Security Documents and shall not constitute Collateral unless such consents have been obtained and such conditions have been satisfied, and (y) if any applicable law restricts the sale, assignment or other transfer of any interest of an Obligor in any Collateral unless one or more consents have been obtained or one or more conditions have been satisfied, then no such sale, assignment or other transfer of such interest shall be made hereunder or under any Security Document unless such consents have been obtained and such conditions have been satisfied. (b) The security interests granted under the Security Documents shall not extend to any property or asset of any Obligor to the extent, and only for as long as, such property is subject to another lien or security interest which restricts the granting of additional liens or security interests on such property and such property shall not constitute 16 20 Collateral, provided that (i) such lien or security interest is permitted pursuant to subsection 8.3(f), (g), (i), (j), (k), (m), (n), (o), (p), (q), (r), (s) or (u) of the Credit Agreement and (ii) the restriction on the granting of additional liens or security interests extends only to the property subject to such lien or security interest and the proceeds thereof. (c) If any contract expressly prohibits the granting of a security interest in such contract without consent or any contract would be voided or any Obligor would be in breach or default under any contract by virtue of the granting of a security interest therein, then unless such consent has been obtained, such contract, to the extent that such prohibition or avoidance is effective as a matter of law, shall not be subject to a security interest under the Security Documents and shall not constitute Collateral. 2.10 Rights of Secured Parties under Secured Instruments. Notwithstanding any other provision of this Agreement or any Security Document, the right of each Secured Party to receive payment of the Secured Obligations held by such Secured Party when due (whether at the stated maturity thereof, by acceleration or otherwise) as expressed in the related Secured Instrument or other instrument evidencing or agreement governing a Secured Obligation or to institute suit for the enforcement of such payment on or after such due date, and the obligation of the relevant Obligor to pay such Secured Obligation when due, shall not be impaired or affected without the consent of such Secured Party. Notwithstanding the foregoing, no Secured Party shall institute or commence any proceeding in the State of Alaska, Arizona, California, Nevada, Utah or Washington to collect any Secured Obligations owed to it or shall otherwise exercise any remedies against the Collateral with respect to the Secured Obligations owed to it or exercise any right of setoff unless such Secured Party shall have first obtained the consent of the Majority Lenders. 2.11 Subordination of Intercompany Obligations. (a) Each Obligor agrees that upon the occurrence of any Bankruptcy Event with respect to the Borrower or any of its Subsidiaries: (i) all Secured Obligations shall be paid in full before any payment or distribution is made with respect to any Intercompany Debt owed to such Obligor by the Borrower or any such Subsidiary, as the case may be; and (ii) until the Secured Obligations shall be paid in full in accordance with subsection 3.5, any payment or distribution of assets of the Borrower or any such Subsidiary, as the case may be, whether in cash, property or securities, to which such Obligor would be entitled except for the provisions hereof, shall be paid or delivered by the Borrower or such Subsidiary, as the case may be, or any receiver, trustee in bankruptcy, liquidating trustee, disbursing agent or other Person making such payment or distribution, directly to the Administrative Agent, to the extent necessary to pay in full all Secured Obligations in accordance with subsection 3.5, before any payment or distribution shall be made to such Obligor. 17 21 (b) Upon the occurrence of any Bankruptcy Event with respect to the Borrower or any of its Subsidiaries: (i) each Obligor irrevocably authorizes and empowers the Administrative Agent (A) to demand, sue for, collect and receive every payment or distribution on account of the Intercompany Debt payable or deliverable to such Obligor in connection with such event or proceeding and give acquittance therefor, and (B) to file claims and proofs of claim in any statutory or non-statutory proceeding and take such other actions, in its own name, or in the name of such Obligor or otherwise, as the Administrative Agent may deem necessary or advisable for the enforcement of the provisions of this Agreement provided that the foregoing authorization and empowerment imposes no obligation on the Administrative Agent to take any such action; (ii) such Obligor shall, to the extent permitted by applicable law, take such action, duly and promptly, as the Administrative Agent may request from time to time (A) to collect the Intercompany Debt payable to such Obligor for the account of the Secured Parties and (B) to file appropriate proofs of claim in respect of such Intercompany Debt; and (iii) such Obligor shall, to the extent permitted by applicable law, execute and deliver such powers of attorney, assignments or proofs of claim or other instruments as the Administrative Agent may request to enable the Administrative Agent to enforce any and all claims in respect of the Intercompany Debt payable to such Obligor and to collect and receive any and all payments and distributions which may be payable or deliverable at any time upon or in respect of such Intercompany Debt. (c) Until the Secured Obligations shall have been paid in full in accordance with subsection 3.5, if any payment or distribution, whether consisting of money, property or securities, be collected or received by any Obligor in respect of Intercompany Debt owed to it by the Borrower or any of its Subsidiaries after the occurrence of a Bankruptcy Event with respect to the Borrower or any such Subsidiary, as the case may be, such Obligor forthwith shall deliver the same to the Administrative Agent, in the form received, duly indorsed to the Administrative Agent, to the extent necessary to pay in full all of the Secured Obligations in accordance with subsection 3.5. Until so delivered, such payment or distribution shall be held in trust by such Obligor as the property of the Secured Parties, segregated from other funds and property held by such Obligor. 2.12 Certain Provisions In Existing Mortgages. (a) All references, if any, in the Mortgages executed and delivered pursuant to the Existing Credit Agreement (each, an "Existing Credit Agreement Mortgage") or any credit agreement amended and restated by the Existing Credit Agreement (each, an "Original Mortgage"), after giving effect to the provisions of this subsection 2.12, to a particular provision of the Existing Credit Agreement 18 22 or any such credit agreement amended and restated by the Existing Credit Agreement shall be deemed to be amended to refer to the appropriate corresponding provision of the Credit Agreement; in the event that there shall be no such corresponding provision in the Credit Agreement, then the Existing Credit Agreement Mortgages and Original Mortgages shall be deemed to be amended by deleting the provisions thereof relating to the referenced provision of the Existing Credit Agreement or such credit agreement amended and restated by the Existing Credit Agreement, respectively. (b) The Original Mortgages are hereby amended by deleting the following Sections thereof in their entirety: 1.01, 1.02, 1.03, 1.04, 1.05, 1.06, 1.07 (other than paragraph (b) thereof), 1.08, 1.09, 1.10, 1.11, 1.12, 1.16, 1.17, 1.18, 1.20, 1.21, 1.24, 1.26 and 2.02. (c) The Original Mortgages are hereby further amended as follows: (i) the second sentence of Section 1.19 thereof is deleted; (ii) a period is inserted after the words "the granting clause hereof" in the first sentence of Section 1.25 thereof, and everything appearing thereafter in such section is deleted; (iii) the third, fourth, fifth, sixth, seventh and eighth sentences of Section 3.01 thereof are deleted; and (iv) the first and second sentences of Section 4.02 thereof are deleted. (d) Notwithstanding anything to the contrary contained in the Existing Credit Agreement Mortgages or Original Mortgages as modified hereby or otherwise: (i) the Administrative Agent shall not have or be entitled to exercise any of the rights, powers, or remedies described in Section 2.04, 3.01, 4.02, 4.03, 4.05 or 4.06 thereof (or, in the case of each Original Mortgage filed in the State of Michigan, Section 2.04, 3.01, 4.02, 4.03, 4.04, 4.06 or 4.07 thereof) at any time that a Notice of Acceleration is not in effect; (ii) only the delivery of a Notice of Default to the Borrower shall constitute an "Event of Default" under the Original Mortgages and the Existing Credit Agreement Mortgages, and, in furtherance thereof, all references in the Original Mortgages to the occurrence and continuance of an Event of Default (or words of similar import) shall be deemed to be deleted and replaced by a reference to a Notice of Default being in effect; (iii) the terms and provisions of this Agreement and the Credit Agreement shall govern and control the application of the Proceeds of any sale of any Mortgaged Property after payment of fees and expenses incurred in connection with such sale; (iv) the Original Mortgages and the Existing Credit Agreement Mortgages and the Liens created thereby shall be terminated and released in connection with the occurrence of a Collateral Release Event or a termination of the Credit Agreement, all as more fully set forth in subsection 7.10; (v) the Lien on any asset subject to an Original 19 23 Mortgage or an Existing Credit Agreement Mortgage that is sold or otherwise disposed of or on which a Lien securing Indebtedness other than the Loans is granted shall be released, all as more fully set forth in Section 5; and (vi) the Original Mortgages and Existing Credit Agreement Mortgages and the Liens created thereby shall not otherwise be released, terminated, discharged, satisfied, extinguished and assigned, as the case may be, except in accordance with the terms and provisions of this Agreement and the Credit Agreement. (e) If, after giving effect to the foregoing provisions of this subsection 2.12, any covenant, representation or other provision in any Existing Credit Agreement Mortgage or any Original Mortgage conflicts or is otherwise inconsistent with, or any such covenant, representation or other provision is more burdensome on the Obligors than, any similar covenant, representation or other provision contained in this Agreement or the Credit Agreement, the covenants, representations and other provisions in this Agreement and the Credit Agreement, as applicable, shall govern and control and such covenants, representations and other provisions in the Existing Credit Agreement Mortgages or Original Mortgages, as the case may be, shall be of no force and effect, except to the extent any such override of any covenant, representation or other provision in the Existing Credit Agreement Mortgages or Original Mortgages (i) would materially and adversely affect (A) the rights and remedies of the Administrative Agent in respect of the Mortgaged Properties, whether set forth in the Existing Credit Agreement Mortgages, the Original Mortgages, at law or in equity, or the exercise thereof, or (B) the Liens granted in favor of the Administrative Agent under the Existing Credit Agreement Mortgages or the Original Mortgages on the property subject thereto, or (ii) relates or is made with reference to, or otherwise arises out of, the law of the state in which the Mortgaged Property subject to an Existing Credit Agreement Mortgage or an Original Mortgage is located. (f) Nothing in the Existing Credit Agreement Mortgages, the Original Mortgages, the Credit Agreement or this Agreement shall affect any right or remedy of the Administrative Agent under any Existing Credit Agreement Mortgage, Original Mortgage or otherwise, without notice or demand to any Obligor, to pay any and all taxes of every kind and nature (including all real and personal property, income, franchise, withholding, transfer, gains, profits and gross receipts taxes), all charges for any easement or agreement maintained for the benefit of any of the Mortgaged Properties, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, vault taxes, and all other public charges even if unforeseen or extraordinary, imposed upon or assessed against or which may become a lien on any of the Mortgaged Properties, or arising in respect of the occupancy, use or possession thereof, or any mortgage recording, documentary stamp or intangible taxes which may have arisen or may arise in connection with the creation or preservation of the Lien of any Existing Credit Agreement Mortgage, Original Mortgage or other Mortgage, together with any penalties or interest on any of the foregoing (all of the foregoing are collectively referred to as the "Impositions") after the date such Imposition shall have become due, and to add to the Secured Obligations or any other sums secured by the Existing Credit Agreement Mortgage or Original Mortgage to which 20 24 such Mortgaged Property is subject the amount so paid, together with interest from the time of payment at the rate per annum applicable to overdue principal amounts of ABR Loans pursuant to subsection 4.4 of the Credit Agreement (the "Applicable Rate"). Any sums paid by the Administrative Agent in discharge of any Impositions shall be a charge on the Mortgaged Property to which they relate prior to any right or title to, interest in, or claim upon such Mortgaged Property subordinate to the lien of the applicable Existing Credit Agreement Mortgage or Original Mortgage together with interest at the Applicable Rate. (g) No Obligor shall claim, demand or be entitled to receive any credit or credits toward the satisfaction of any Existing Credit Agreement Mortgage or Original Mortgage to which it is a party or on any interest payable thereon for any taxes assessed against any Mortgaged Property subject thereto or any part thereof, and shall not claim, to the extent any such claim could materially affect the Lien of any Existing Credit Agreement Mortgage or Original Mortgage to which it is a party, any deduction from the taxable value of any Mortgaged Property subject thereto by reason of any Existing Credit Agreement Mortgage or Original Mortgage. (h) If the Borrower is in default of its obligations under the Credit Agreement to insure or deliver evidence of payment of any insurance policy or policies, then the Administrative Agent, at its option and without notice, may effect such insurance from year to year, and pay the premium or premiums therefor, and the Borrower shall pay to the Administrative Agent on demand such premium or premiums so paid by the Administrative Agent with interest from the time of payment at the Applicable Rate and the same shall be deemed to be secured by the Existing Credit Agreement Mortgage or Original Mortgage, as the case may be, on the Mortgaged Property in respect of which such premiums have been paid and shall be collectible in the same manner as the Secured Obligations secured by such Existing Credit Agreement Mortgage or Original Mortgage, respectively. The insurance may, but need not, protect the Borrower's interests, and the coverage purchased by the Administrative Agent may or may not pay any claim made against the Borrower in connection with the Collateral. The costs of the insurance may be more than the cost of insurance the Borrower is able to obtain on its own. (i) If a Notice of Default is then in effect, then each Obligor authorizes the Administrative Agent, at the Administrative Agent's option and in the Administrative Agent's sole discretion, as attorney-in-fact for the Obligors, to commence, appear in and prosecute, in the Administrative Agent's or the applicable Obligor's name, any action or proceeding relating to any condemnation of any Mortgaged Property, or any portion thereof, and to settle or compromise any claim in connection with such condemnation and if the Administrative Agent elects not to participate in such condemnation proceeding, then the applicable Obligor shall, at its expense, diligently prosecute any such proceeding and shall consult with the Administrative Agent, its attorneys and experts and cooperate with them in any defense of any such proceedings and the applicable Obligor agrees to execute any such assignments of all such awards as the Administrative Agent may reasonably request. 21 25 (j) Pursuant to the terms of the Credit Agreement, if the Borrower or an Obligor fails to perform any covenant or agreement of the Borrower or Obligor under the Credit Agreement and relating to any Mortgaged Property, the Administrative Agent may, at any time (but shall be under no obligation to) pay or perform the same, provided that (other than in the case of an emergency), the Administrative Agent shall have first given ten days' written notice to the Borrower of the Administrative Agent's intention to do so, and the amount or cost of any such payment or performance, with interest at the Applicable Rate. The Applicable Rate shall immediately be due from the Borrower to the Administrative Agent and shall be added to the Secured Obligations, and the same shall be secured by the Existing Credit Agreement Mortgage or Original Mortgage to which such Mortgaged Property is subject and shall be an encumbrance on such Mortgaged Property prior to any right, title to, interest in or claim upon such Mortgaged Property attaching subsequent to the lien of such Existing Credit Agreement Mortgage or Original Mortgage, respectively. 2.13 Overdrafts. Each Obligor agrees to repay any such Obligor's Overdrafts in accordance with the terms of the relevant Secured Instrument. SECTION 3. CASH DOMINION SYSTEM; COLLATERAL ACCOUNTS; DISTRIBUTIONS 3.1 Cash Dominion System. (a) Each Obligor, jointly and severally, represents and warrants to the Administrative Agent that it has established a system (the "Cash Dominion System") of depositary accounts (together with accounts opened from time to time pursuant to subsection 3.1(b), "Depositary Accounts") into which each such Obligor shall promptly deposit or cause to be deposited all Cash Proceeds other than Cash Proceeds in a Securities Account received by it or any other Person on its behalf. Each Obligor represents that Schedule 5.23 to the Credit Agreement contains a true and complete list of all depositary accounts maintained by such Obligor with any banks or financial institutions as of the Effective Date into which Cash Proceeds are deposited (collectively, the "Depositary Banks"), each of which has executed a Blocked Account Agreement or Lockbox Agreement, as appropriate. Each Obligor further agrees that (x) all amounts received by it from any Credit Card Subsidiary (whether as a dividend, loan or otherwise) shall be deposited directly into a Depositary Account and (y) it shall (and shall cause the relevant Credit Card Subsidiary to) execute and deliver such notices and agreements as the Administrative Agent may reasonably require (and which, in the case of the Credit Card Subsidiaries, do not violate the terms of the relevant Credit Card Program) with respect to such amounts. (b) Subject to subsection 3.1(f) below, each Obligor agrees that it shall not open a bank or similar account after the Effective Date into which Cash Proceeds are deposited unless the relevant Depositary Bank and such Obligor shall have executed and delivered a Blocked Account Agreement or Lockbox Agreement, as appropriate, with respect to such Depositary Account. 22 26 (c) Each Obligor represents and warrants that it has instructed all Account Debtors to make payments in respect of its such Accounts to one or more Depositary Accounts to be subject to the Lockbox Agreements executed and delivered pursuant to paragraph (a) or (b) above. (d) Without prejudice to paragraph (a), (b) or (c) above or paragraph (f) below, whether or not an Event of Default has occurred, any Cash Proceeds (including in payment of any Account or in payment for any Inventory or otherwise) that are not deposited directly into a Depositary Account, when collected by any Obligor, shall be promptly deposited by such Obligor in a Depositary Account, in precisely the form received, except for its endorsement when required, and until so turned over, shall be deemed to be held in trust by such Obligor for and as the Administrative Agent's property, and shall be held separately from such Obligor's other funds. (e) The Administrative Agent shall credit the proceeds of Depositary Accounts which have been received through the Cash Dominion System into the Collateral Account to be applied in accordance with subsection 3.5 hereof. (f) Notwithstanding anything to the contrary contained herein or in any other Loan Document, but subject to Section 8.8(b) of the Credit Agreement: (i) cash consisting of cash at stores or cash in transit in the ordinary course of business; and (ii) cash which is subject to a Lien or deposit arrangement permitted under subsection 8.3(s) of the Credit Agreement shall not be required to be subject to the Cash Dominion System. (g) Each Obligor authorizes, ratifies, confirms and approves the delivery by the Administrative Agent of a Cash Dominion Notice to each Depositary Bank and each Person appointed to establish and maintain a Securities Account pursuant to a Custody and Control Agreement. 3.2 The Collateral Account. On the Effective Date there shall be established and, at all times thereafter until repayment in full of all the Credit Agreement Obligations, there shall be maintained with the Administrative Agent at the office of the Administrative Agent located in New York an account which shall be entitled the "Citicorp USA, Inc. -- Collateral Account for Service Merchandise Facility" (the "Collateral Account"). All moneys which are required by this Agreement or any Security Document to be delivered to the Administrative Agent or which are received by the Administrative Agent or any agent or nominee of the Administrative Agent in respect of the Collateral, whether in connection with the exercise of the remedies provided in this Agreement or any Security Document or otherwise, shall be deposited in the Collateral Account and applied in accordance with the terms of this Agreement. 23 27 3.3 Control of Collateral Account. All right, title and interest in and to the Collateral Account shall vest in the Administrative Agent, and funds on deposit in the Collateral Account shall constitute part of the Collateral. 3.4 Investment of Funds Deposited in Collateral Account. The Administrative Agent shall invest and reinvest moneys on deposit in the Collateral Account at any time in any of the following: (i) marketable obligations of the United States having a maturity of not more than three months from the date of acquisition; (ii) marketable obligations directly and fully guaranteed by the United States having a maturity of not more than three months from the date of acquisition; (iii) bankers' acceptances and certificates of deposit and other interest-bearing obligations issued by Citibank N.A., or any bank organized under the laws of the United States or any state thereof with capital, surplus and undivided profits aggregating at least $125,000,000, in each case having a maturity of not more than three months from the date of acquisition; (iv) repurchase obligations with a term of not more than one day for underlying securities of the types described in clauses (i), (ii) and (iii) above entered into with Citibank N.A., or any bank meeting the qualifications specified in clause (iii) above; and (v) commercial paper (except commercial paper issued by the Borrower or its affiliates) rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody's and maturing within three months after the date of acquisition; provided that the aggregate amount invested in obligations of the types described in clauses (iii), (iv) and (v) above of any one issuer shall not exceed $50,000,000 at any time, and provided, further, that, unless a Notice of Acceleration is in effect, the Administrative Agent shall not make any such investment except at the direction of the Borrower. All such investments and the interest and income received thereon and the net proceeds realized on the sale or redemption thereof shall be held in the Collateral Account as part of the Collateral and shall be under the sole dominion and control of the Administrative Agent. 3.5 Application of Moneys. (a) Unless a Notice of Acceleration is in effect, all money held by the Administrative Agent in the Collateral Account shall be applied or disbursed as set forth in subsection 4.1 of the Credit Agreement. (b) While a Notice of Acceleration is in effect, all moneys held by the Administrative Agent in the Collateral Account or received by the Administrative Agent 24 28 shall, to the extent available for distribution (it being understood that the Administrative Agent may liquidate investments prior to maturity in order to make a distribution pursuant to this subsection 3.5), be distributed (subject to the provisions of subsections 3.6 and 3.7) by the Administrative Agent on each Distribution Date in the following order of priority: First: to the payment of all unpaid fees and expenses of the Agents payable under this Agreement, the Credit Agreement or any other Loan Document; Second: subject to subsection 3.6, to the Secured Parties in an amount equal to the unpaid principal or face amount of, and unpaid interest on, and premium or fees, if any, in respect of, the Secured Obligations then outstanding whether or not then due and payable, including the aggregate undrawn amounts available to be drawn (assuming compliance with all conditions to drawing) under all bonds, guarantees, letters of credit, acceptances, insurance, reimbursement and indemnity agreements or similar obligations with respect to which the Borrower or any other Obligor is obligated to reimburse the issuer thereof for any drawings thereunder, the aggregate estimated amount of payment liabilities of the Borrower and each other Obligor under Derivative Agreements assuming immediate termination of all such agreements, the outstanding amount of any Overdrafts, and, if such moneys shall be insufficient to pay such amounts in full, then ratably (without priority of any one over any other) to the Secured Parties in proportion to the unpaid amounts thereof on such Distribution Date; Third: to the Secured Parties, amounts equal to all other sums which constitute Secured Obligations, including the costs and expenses of the Secured Parties and their representatives which are due and payable under the relevant Secured Instruments and which constitute Secured Obligations as of such Distribution Date, and, if such moneys shall be insufficient to pay such sums in full, then ratably to the Secured Parties in proportion to such sums; and Fourth: any surplus then remaining shall be paid to the Obligors or their successors or assigns or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. (c) The term "unpaid" as used in clause Second of subsection 3.5(b) refers: (i) in the absence of a bankruptcy proceeding with respect to the relevant Obligor(s), to all amounts of Secured Obligations outstanding as of a Distribution Date, whether or not such amounts are fixed or contingent, and (ii) during the pendency of a bankruptcy proceeding with respect to the relevant Obligor(s), to all amounts allowed by the bankruptcy court in respect of 25 29 Secured Obligations as a basis for distribution (including estimated amounts, if any, allowed in respect of contingent claims), to the extent that prior distributions (whether actually distributed or set aside pursuant to subsection 3.6) have not been made in respect thereof. (d) The Administrative Agent shall make all payments and distributions under this subsection 3.5: (i) on account of Credit Agreement Obligations in accordance with the provisions of the Credit Agreement, (ii) on account of any other Secured Obligation (other than Overdrafts), to the relevant Secured Party based on the information supplied to the Administrative Agent by the Borrower pursuant to subsection 4.1, and (iii) on account of Overdrafts, to the relevant Lender based on information supplied to the Administrative Agent by such Lender. 3.6 Amounts Held for Contingent Secured Obligations. In the event any Secured Party shall be entitled to receive any moneys pursuant to clause Second of subsection 3.5(b) in respect of the unliquidated unmatured or contingent portion of the outstanding Secured Obligations (including obligations under then outstanding letters of credit, guarantees and termination liabilities with respect to Derivative Agreements and obligations which are not determinable or are unmatured), then the Administrative Agent shall invest such moneys in obligations of the kinds referred to in clauses (i) and (ii) of subsection 3.4 maturing within three months after they are acquired by the Administrative Agent and shall hold all such amounts so distributable, and all such investments and the net proceeds thereof, solely for such Secured Party and for no other purpose until (i) such Secured Party shall have notified the Administrative Agent that all or part of such unliquidated, unmatured or contingent claim shall have become matured or fixed, in which case the Administrative Agent shall distribute from such investments and the proceeds thereof an amount equal to such matured or fixed claim to such Secured Party for application to the payment of such matured or fixed claim, and shall promptly give notice thereof to the Borrower or (ii) all or part of such unliquidated unmatured or contingent claim shall have been extinguished, whether as the result of an expiration without drawing of any letter of credit, payment of amounts secured or covered by any letter of credit other than by drawing thereunder, payment of amounts covered by any guarantee or otherwise, in which case (x) such Secured Party shall, as soon as practicable thereafter, notify the Borrower and the Administrative Agent and (y) such investments, and the proceeds thereof, shall be held in the Collateral Account, in trust for all Secured Parties pending application in accordance with the provisions of subsection 3.5. 3.7 Administrative Agent's Calculations. In making the determinations and allocations required by subsection 3.5, the Administrative Agent may conclusively rely upon information supplied by the holder of any Secured Obligation or the Borrower as to the amounts payable with respect to any Secured Obligation, and the Administrative Agent shall have no liability to any of the Secured Parties for actions taken in reliance on any such information, provided, that nothing in this sentence shall prevent any Obligor from contesting 26 30 in good faith, subject to the terms of the relevant Security Instrument, any amounts claimed by any Secured Party in any information so supplied. All distributions made by the Administrative Agent pursuant to subsection 3.5 shall be (subject to any decree of any court of competent jurisdiction) final (absent manifest error), and the Administrative Agent shall have no duty to inquire as to the application by any Person of any amounts distributed to it. 3.8 Pro Rata Sharing. If, through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise, the Administrative Agent's security interest hereunder and under the Security Documents is enforced with respect to some, but not all, of the Secured Obligations then outstanding, the Administrative Agent shall nonetheless apply the proceeds of the Collateral for the benefit of the holders of all Secured Obligations in the proportions and subject to the priorities specified herein. To the extent that the Administrative Agent distributes Proceeds collected with respect to Secured Obligations held by one holder to or on behalf of Secured Obligations held by a second holder, the first holder shall be deemed to have purchased a participation in the Secured Obligations held by the second holder, or shall be subrogated to the rights of the second holder to receive any subsequent payments and distributions made with respect to the portion thereof paid or to be paid by the application of such Proceeds. SECTION 4. AGREEMENTS WITH THE ADMINISTRATIVE AGENT 4.1 Information as to Secured Parties and Administrative Agent. The Borrower shall deliver to the Administrative Agent from time to time while a Notice of Default is in effect, upon request of the Administrative Agent, a list setting forth as of a date not more than 30 days prior to the date of such delivery (i) the aggregate unpaid principal or face amount of Credit Agreement Obligations and (ii) the aggregate unpaid or notional amount of each other Secured Obligation (other than Overdrafts) and the name and address of each Secured Party thereunder. 4.2 Stamp and Other Similar Taxes. The Borrower agrees to indemnify and hold harmless the Administrative Agent and each Secured Party from any present or future claim for liability for any stamp or any other similar tax and any penalties or interest with respect thereto, which may be assessed, levied or collected by any jurisdiction in connection with this Agreement, any Security Document or any Collateral. The obligations of the Borrower under this subsection 4.2 shall survive the termination of the other provisions of this Agreement. 4.3 Filing Fees, Excise Taxes, Etc. The Borrower agrees to pay or to reimburse the Administrative Agent for any and all payments made by the Administrative Agent in respect of all filing, recording and registration fees, excise taxes and other similar imposts which may be payable or determined to be payable by the Administrative Agent in respect of the execution and delivery of this Agreement and each Security Document. The 27 31 obligations of the Borrower under this subsection 4.3 shall survive the termination of the other provisions of this Agreement. 4.4 Indemnification. The Borrower agrees to pay, indemnify, and hold the Administrative Agent harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits and reasonable out-of-pocket costs, expenses (including the reasonable fees of counsel) or disbursements of any kind or nature whatsoever with respect to the enforcement of this Agreement and the Security Documents, except to the extent arising from the gross negligence or willful misconduct of any indemnified party. The Borrower agrees to pay, indemnify, and hold the Administrative Agent harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits and reasonable out-of-pocket costs, expenses (including the reasonable fees of counsel and other professional advisors) or disbursements of any kind or nature whatsoever with respect to the violation by any Obligor of, noncompliance with or remediation obligations under any laws, rules or regulations regulating, relating to or imposing liabilities or standards of conduct concerning environmental protection matters directly relating to the Borrower or its real property (except to the extent that the same results from the gross negligence or willful misconduct of the Administrative Agent or its employees, officers or agents). The agreements in this subsection 4.4 shall survive the termination of the other provisions of this Agreement. 4.5 Further Assurances. At any time and from time to time, upon the written request of the Administrative Agent, and at the expense of the Obligors, each Obligor will promptly execute and deliver any and all such further instruments and documents and take such further action as is necessary or reasonably requested further to perfect, or to protect the perfection of, the liens and security interests granted under the Security Documents intended to be perfected under the terms of the Credit Agreement, including the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any applicable jurisdiction. In addition to the foregoing, at any time and from time to time, upon the written request of the Administrative Agent, and at the expense of the Obligors, each Obligor will promptly execute and deliver any and all such further instruments and documents and take such further action as is necessary or reasonably requested to obtain the full benefits of this Agreement and the Security Documents and of the rights and powers herein and therein granted (consistent with any exclusions or time periods provided for granting or perfection of liens and security interests contemplated by the Credit Agreement or the Security Documents), including the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the liens and security interests granted by the Security Documents (consistent with any exclusions or time periods provided for granting or perfection of liens and security interests contemplated by the Credit Agreement or the Security Documents). Each Obligor also hereby authorizes the Administrative Agent to sign and to file any such financing statements (if such Obligor fails to sign such financing statements within ten Business Days after being requested to do so) and continuation statements without the signature of such Obligor, in 28 32 each case to the extent permitted by applicable law. In the event that the Administrative Agent files any such financing or continuation statements, the Administrative Agent shall promptly provide copies thereof to the Borrower, provided, that the failure to provide such copies shall not affect the validity of such filings. Notwithstanding the foregoing, no financing statements with respect to fixtures shall be filed in any jurisdiction which is a Restricted Jurisdiction. SECTION 5. POSSESSION AND USE OF COLLATERAL; PARTIAL RELEASES 5.1 Use Prior to Notice of Acceleration. (a) As long as no Notice of Acceleration is in effect, the Obligors shall have the right: (i) to remain in possession and retain exclusive control of the Collateral (except the Pledged Securities and the Collateral Account and except as otherwise provided in subsection 3.1) with power freely and without hindrance on the part of the Administrative Agent or the Secured Parties to operate, manage, develop, use, apply, liquidate and enjoy the Collateral and to receive and use the rents, issues, tolls, profits, royalties, revenues and other income thereof; (ii) to sell or otherwise dispose of, free and clear of the lien and security interest created by the Security Documents, or encumber any Collateral if such sale or other disposition is not prohibited by the Credit Agreement or has been expressly approved in accordance with the terms of the Credit Agreement or if any Person is legally empowered to take any Collateral under the power of condemnation or eminent domain; and (iii) to require the release any Lien created pursuant to the Security Documents in connection with a transaction permitted under subsection 8.3 (k) or (q) of the Credit Agreement. The Administrative Agent consents and hereby subordinates each Mortgage to those matters permitted by subsection 8.3(e) of the Credit Agreement with respect to the related parcel of real property. The Administrative Agent shall have no duty to monitor the exercise by the Obligors of their rights under this subsection 5.1. (b) Cash Proceeds received by the Administrative Agent or any Obligor in connection with the sale or other disposition of Collateral shall be deposited in the Collateral Account. Any such Proceeds received by any Obligor shall be held by such Obligor in trust for the Administrative Agent, shall be segregated from other funds of such Obligor and shall, forthwith upon receipt by such Obligor, be turned over to the Administrative Agent, in the same form as received by such Obligor (duly indorsed to the Administrative Agent, if required) for deposit in the Collateral Account. 5.2 Releases. (a) Releases of Collateral which is sold or otherwise disposed of as permitted by subsection 5.1 or Section 9(c) of the Securities Pledge Agreement and releases, consents and subordinations pursuant to subsection 5.1 shall be automatic and shall not require any affirmative action on the part of the Administrative Agent. Nevertheless, any Obligor may request that the Administrative Agent execute and deliver to it or any purchaser, transferee or assignee of Collateral or any such real property, or other affected party, a written consent, release, discharge, disclaimer, quitclaim or 29 33 subordination, as applicable, in recordable form if necessary, of the Administrative Agent's interest in any Collateral under the Security Documents, and such purchaser, transferee, assignee or other affected party shall be entitled to rely conclusively on such consent, release, discharge, disclaimer, quitclaim or subordination. Such request shall be in writing, shall describe the subject property in reasonable detail, and, except in the case of releases of funds pursuant to Section 9(c) of the Securities Pledge Agreement, shall state that such action is or will be in accordance with the Credit Agreement. Promptly following any such request, the Administrative Agent shall execute such requested documents, provided that the transaction giving rise to such request is permitted by subsection 5.1. (b) If any Collateral which is being sold or otherwise disposed of pursuant to this Section 5 is in the possession of the Administrative Agent or any agent or nominee thereof, the Administrative Agent or such agent or nominee shall promptly (and in any event within two Business Days after the request therefor) release such Collateral to the Obligor in connection with such sale or disposition. (c) The notices, statements, directions and certificates requested under or required by this subsection 5.2 (together with any required certificate of a Responsible Officer under subsection 6.3(e)) shall be full authority for the Administrative Agent to execute and deliver the releases, disclaimers, quitclaims and other instruments referred to in this subsection 5.2. The Administrative Agent in so doing shall have no liability to any Person. 5.3 Insurance and Condemnation Proceeds; Liquidating Dividends. Any insurance proceeds in respect of any Collateral, any Proceeds from the exercise of rights of eminent domain or condemnation in respect of any Collateral and any liquidating dividends paid in respect of Pledged Stock received by any of the Obligors or the Administrative Agent shall be deposited in the Collateral Account to be held therein and applied in accordance with Section 3. If for any reason any Obligor shall receive or hold any insurance proceeds, condemnation proceeds or liquidating dividends that are required to be held by the Administrative Agent pursuant to this subsection 5.3, such Obligor shall hold such proceeds or dividends in trust for the Administrative Agent and the Secured Parties and shall, as promptly as practicable, deliver such proceeds or dividends to the Administrative Agent to be held in accordance with the provisions of this subsection 5.3. 30 34 SECTION 6. THE ADMINISTRATIVE AGENT 6.1 Exculpatory Provisions. (a) The Administrative Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties herein, all of which are made solely by the Obligors. The Administrative Agent makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of the Obligors thereto or as to the security or perfection afforded by this Agreement or any Security Document, or as to the validity, execution (except its own execution), enforceability, legality or sufficiency of this Agreement, the Security Documents or the Secured Obligations, and the Administrative Agent shall incur no liability or responsibility in respect of any such matters. The Administrative Agent shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of liens upon the Collateral or otherwise as to the maintenance of the Collateral, except that if the Administrative Agent takes possession of any Collateral, the Administrative Agent shall use the care accorded its own assets in the preservation of the Collateral in its possession and as required by any applicable law. Notwithstanding the foregoing, the Administrative Agent shall be responsible and accountable for damages occasioned by such taking of possession or control which are the direct result of the Administrative Agent's gross negligence or willful misconduct. (b) The Administrative Agent shall not be required to ascertain or inquire as to the performance by the Obligors of any of the covenants or agreements contained herein or in any Security Document or Secured Instrument. Whenever it is necessary, or in the opinion of the Administrative Agent advisable, for the Administrative Agent to ascertain the amount of Secured Obligations then held by the Secured Parties, the Administrative Agent may conclusively rely on a certificate of any Secured Party, in the case of any Secured Obligations and, if any Secured Party shall not give such information to the Administrative Agent, such Person shall not be entitled to receive distributions hereunder (in which case distributions to those Persons who have supplied such information to the Administrative Agent shall be calculated by the Administrative Agent using, for those Persons who have not supplied such information, the list then most recently delivered by the Borrower pursuant to subsection 4.1), and the amount so calculated to be distributed to the Person who fails to give such information shall be held in trust for such Person until such Person does supply such information to the Administrative Agent, whereupon on the next Distribution Date the amount distributable to such Person shall be recalculated using such information and distributed to it. Nothing in the preceding sentence shall prevent any Obligor from contesting amounts claimed by any Secured Party in any certificate so supplied. (c) The Administrative Agent shall be under no obligation or duty to take any action under this Agreement or any Security Document if taking such action (i) would subject the Administrative Agent to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Administrative Agent to qualify to do business in any jurisdiction where it is not then so qualified, unless the Administrative Agent receives 31 35 security or indemnity satisfactory to it against such tax (or equivalent liability), or any liability resulting from such qualification, in each case as results solely from the taking of such action under this Agreement or any Security Document. (d) Notwithstanding any other provision of this Agreement (other than those relating to the care of the Collateral in its possession), the Administrative Agent shall not be personally liable for any action taken or omitted to be taken by it in accordance with this Agreement or the Security Documents except for its own gross negligence or willful misconduct. (e) The Administrative Agent shall have the same rights with respect to any Secured Obligation held by it as any other Secured Party and may exercise such rights as though it were not the Administrative Agent hereunder, and may accept deposits from, lend money to, and generally engage in any kind of banking or trust business with, any of the Obligors as if it were not the Administrative Agent. 6.2 Delegation of Duties. The Administrative Agent may execute any of the trusts or powers hereof and perform any duty hereunder either directly or by or through agents or attorneys-in-fact, who, subject to Sections 8 and 9(e) of the Securities Pledge Agreement, may include officers and employees of any of the Obligors. The Administrative Agent shall be entitled to advice of counsel concerning all matters pertaining to such trusts, powers and duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent may enter into agreements with such agents or attorneys-in-fact in such form as it may reasonably deem necessary or advisable, and shall be entitled to amend, modify, or waive the provisions of such agreements from time to time, provided that no amendment, modification or waiver to any bailment, custodial or similar agreement executed in connection herewith affecting the Borrower or any Obligor shall be effective unless consented to in writing by Borrower, which consent shall not be unreasonably withheld. 6.3 Reliance by Administrative Agent. (a) Whenever in the administration of this Agreement or the Security Documents the Administrative Agent shall deem it necessary or desirable that a factual matter be proved or established in connection with the Administrative Agent taking, suffering or omitting any action hereunder or thereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may be deemed to be conclusively proved or established by a certificate of a Responsible Officer delivered to the Administrative Agent, and such certificate shall be full warrant to the Administrative Agent for any action taken, suffered or omitted in reliance thereon, subject, however, to the provisions of subsection 6.4. 32 36 (b) The Administrative Agent may consult with counsel, and any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder or under any Security Document in accordance therewith. The Administrative Agent shall have the right at any time to seek instructions concerning the administration of this Agreement and the Security Documents from any court of competent jurisdiction. (c) The Administrative Agent may rely, and shall be fully protected in acting, upon any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, bond or other paper or document which it has no reason to believe to be other than genuine and to have been signed or presented by the proper party or parties or, in the case of cables, facsimiles and telexes, to have been sent by the proper party or parties. In the absence of its gross negligence or willful misconduct, the Administrative Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Administrative Agent and conforming to the requirements of this Agreement. (d) The Administrative Agent shall not be under any obligation to exercise any of the rights or powers vested in the Administrative Agent by this Agreement and the Security Documents, at the request or direction of the Majority Lenders pursuant to this Agreement or otherwise, unless the Administrative Agent shall have been provided adequate security and indemnity against the costs, expenses and liabilities which may be incurred by it in compliance with such request or direction, including such reasonable advances as may be requested by the Administrative Agent. (e) Upon any application or demand by any of the Obligors (except any such application or demand which is expressly permitted to be made orally) to the Administrative Agent to take or permit any action under any of the provisions of this Agreement or any Security Document, the Borrower shall furnish to the Administrative Agent a certificate of a Responsible Officer stating that all conditions precedent, if any, provided for in this Agreement, in any relevant Security Document or in the Credit Agreement relating to the proposed action have been or will be (in the case of application of proceeds from sales of assets) complied with, and in the case of any such application or demand as to which the furnishing of any document is specifically required by any provision of this Agreement or a Security Document relating to such particular application or demand, such additional document shall also be furnished. (f) Any Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate of a Responsible Officer or representations made by a Responsible Officer in a writing attached to such Opinion of Counsel or filed with the Administrative Agent. 33 37 6.4 Limitations on Duties of the Administrative Agent. (a) The Administrative Agent shall be obligated to perform such duties and only such duties as are specifically set forth in this Agreement and the Security Documents, and no implied covenants or obligations shall be read into this Agreement or any Security Document against the Administrative Agent except as may be required by applicable law. (b) No provision of this Agreement or of any Security Document shall be deemed to impose any duty or obligation on the Administrative Agent to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Administrative Agent shall be unqualified or incompetent, to perform any such act or acts or to exercise any such right, power, duty or obligation or if such performance or exercise would constitute doing business by the Administrative Agent in such jurisdiction or imposes a tax on the Administrative Agent by reason thereof. 6.5 Resignation and Removal of the Administrative Agent. The Administrative Agent may resign and a successor Administrative Agent may be appointed in accordance with the terms of the Credit Agreement applicable to resignations of the Administrative Agent. 6.6 Merger of the Administrative Agent. Any corporation into which the Administrative Agent may be merged, or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Administrative Agent shall be a party, shall be Administrative Agent under this Agreement and the Security Documents without the execution or filing of any paper or any further act on the part of the parties hereto. 6.7 Co-Collateral Agent; Separate Agents. (a) If at any time or times it shall be necessary or prudent in order to conform to any law of any jurisdiction in which any of the Collateral shall be located, or to avoid any violation of law or imposition on the Administrative Agent of taxes by such jurisdiction not otherwise imposed on the Administrative Agent, or the Administrative Agent shall be advised by counsel, satisfactory to it, that it is necessary or prudent in the interest of the Secured Parties, or the Administrative Agent shall reasonably deem it desirable for its own protection in the performance of its duties hereunder or under any Security Document, the Administrative Agent and each of the Obligors shall execute and deliver all instruments and agreements necessary or proper to constitute another bank or trust company, or one or more persons approved by the Administrative Agent and the Obligors, either to act as co-collateral agent or co-collateral agents of all or any of the Collateral under this Agreement or under any of the Security Documents, jointly with the Administrative Agent originally named herein or therein or any successor Administrative Agent, or to act as separate collateral agent or collateral agents of any of the Collateral. If any of the Obligors shall not have joined in the execution of such instruments and agreements within 20 Business Days (or, if a Notice of Default is in 34 38 effect, 10 Business Days) after it receives a written request from the Administrative Agent to do so, or if a Notice of Acceleration is in effect, the Administrative Agent may act under the foregoing provisions of this subsection 6.7(a) without the concurrence of such Obligors and execute and deliver such instruments and agreements on behalf of such Obligors. Each of the Obligors hereby appoints the Administrative Agent as its agent and attorney to act for it under the foregoing provisions of this subsection 6.7(a) in either of such contingencies. (b) Every separate collateral agent and every co-collateral agent, other than any successor Administrative Agent appointed pursuant to the Credit Agreement, shall, to the extent permitted by law, be appointed and act and be such, subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred upon the Administrative Agent in respect of the custody, control and management of moneys, papers, Chattel Paper, Instruments, or securities shall be exercised solely by the Administrative Agent or any agent appointed by the Administrative Agent; (ii) all rights, powers, duties and obligations conferred or imposed upon the Administrative Agent hereunder and under the relevant Security Document or Documents shall be conferred or imposed and exercised or performed by the Administrative Agent and such separate collateral agent or separate collateral agents or co-collateral agent or co-collateral agents, jointly, as shall be provided in the instrument appointing such separate collateral agent or separate collateral agents or co-collateral agent or co-collateral agents, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Administrative Agent shall be incompetent or unqualified to perform such act or acts, or unless the performance of such act or acts would result in the imposition of any tax on the Administrative Agent which would not be imposed absent such joint act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate collateral agent or separate collateral agents or co-collateral agent or co-collateral agents at the direction of the Administrative Agent; (iii) no power given hereby or by the relevant Security Documents to, or which it is provided herein or therein may be exercised by, any such co-collateral agent or co-collateral agents or separate collateral agent or separate collateral agents, shall be exercised hereunder or there by such co-collateral agent or co-collateral agents or separate collateral agent or separate collateral agents except jointly with, or with the consent or direction in writing of, the Administrative Agent anything contained herein to the contrary notwithstanding; (iv) no collateral agent hereunder shall be personally liable by reason of any act or omission of any other collateral agent hereunder, except in connection with its own gross negligence or willful misconduct; and 35 39 (v) the Borrower and the Administrative Agent, at any time by an instrument in writing executed by them jointly, may accept the resignation of or remove any such separate collateral agent or co-collateral agent and, in that case by an instrument in writing executed by them jointly, may appoint a successor to such separate collateral agent or co-collateral agent, as the case may be, anything contained herein to the contrary notwithstanding. If the Borrower shall not have joined in the execution of any such instrument within 20 Business Days (or, if a Notice of Default is in effect, 10 Business Days) after it receives a written request from the Administrative Agent to do so, or if a Notice of Acceleration is in effect, the Administrative Agent shall have the power to accept the resignation of or remove any such separate collateral agent or co-collateral agent and to appoint a successor without the concurrence of the Borrower, the Borrower hereby appointing the Administrative Agent its agent and attorney to act for it in such connection in such contingency. If the Administrative Agent shall have appointed a separate collateral agent or separate collateral agents or co-collateral agent or co-collateral agents as above provided, the Administrative Agent may at any time, by an instrument in writing, accept the resignation of or remove any such separate collateral agent or co-collateral agent and the successor to any such separate collateral agent or co-collateral agent shall be appointed by the Borrower and the Administrative Agent, or by the Administrative Agent alone pursuant to this subsection 6.7(b). 6.8 Treatment of Payee or Indorsee by Administrative Agent; Representatives of Secured Parties. (a) The Administrative Agent may treat the registered holder or, if none, the payee or indorsee of any promissory note or debenture evidencing a Secured Obligation as the absolute owner thereof for all purposes and shall not be affected by any notice to the contrary, whether such promissory note or debenture shall be past due or not. (b) Any Person (other than the Administrative Agent), which shall be designated as the duly authorized representative of one or more Secured Parties to act as such in connection with any matters pertaining to this Agreement or the Collateral shall present to the Administrative Agent such documents, including Opinions of Counsel, as the Administrative Agent may reasonably require, in order to demonstrate to the Administrative Agent the authority of such Person to act as the representative of such Secured Parties (it being understood that the holders of Credit Agreement Obligations are represented hereunder by the Administrative Agent). SECTION 7. MISCELLANEOUS 7.1 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made 36 40 (a) in the case of delivery by hand (including by overnight courier), when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows, or to such other address as may be hereafter notified by the respective parties hereto: (a) if to any Obligor or the Administrative Agent, to such party at its address specified on the signature pages hereof; or (b) if to any Secured Party, to it at its address specified in the list provided by the Borrower to the Administrative Agent pursuant to subsection 4.1; provided that any notice, request or demand to the Administrative Agent shall not be effective until received by the Administrative Agent. Whenever any party hereto sends a notice by mail, such party will use reasonable efforts to also send such notice by one of the other means of notice permitted hereunder, provided that the failure to do so shall not affect in any way the validity of any delivery by mail or otherwise result in any liability to such party. 7.2 No Waivers. No failure on the part of the Administrative Agent, any co-collateral agent, any separate collateral agent or any Secured Party to exercise, no course of dealing with respect to, and no delay in exercising, any right, power or privilege under this Agreement or any Security Document shall operate as a waiver thereof nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 7.3 Amendments, Supplements and Waivers. (a) Subject to subsection 11.1 of the Credit Agreement, the Administrative Agent and each of the Obligors may, from time to time, enter into written agreements supplemental hereto or to any Security Document for the purpose of adding to, or waiving any provisions of, this Agreement or any Security Document or changing in any manner the rights or obligations of the Administrative Agent, the Secured Parties or the Obligors hereunder or thereunder, provided that no such supplemental agreement shall (i) except as contemplated by subsection 4.1, amend, modify or waive any provision of subsection 3.5 or the definition of Secured Obligations without the written consent of each Secured Party whose rights would be adversely affected thereby or (ii) amend, modify or waive any provision of Section 4 or 6 or alter the duties, rights or obligations of the Administrative Agent hereunder or under the Security Documents without the written consent of the Administrative Agent. Any such supplemental agreement shall be binding upon the Obligors, the Administrative Agent and the Secured Parties and their respective successors and assigns. (b) Without the consent of any Secured Party, the Administrative Agent and any of the Obligors, at any time and from time to time, may enter into one or more 37 41 agreements supplemental hereto or to any Security Document, in form satisfactory to the Administrative Agent, to mortgage or pledge to the Administrative Agent, or grant a security interest in favor of the Administrative Agent in, any property or assets as additional security for the Secured Obligations. 7.4 Headings. The table of contents and the headings of Sections and subsections have been included herein and in the Security Documents for convenience only and should not be considered in interpreting this Agreement or the Security Documents. 7.5 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 7.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and shall inure to the benefit of each of the Secured Parties and their respective successors and assigns, and nothing herein is intended or shall be construed to give any other Person any right, remedy or claim under, to or in respect of this Agreement or any Collateral. 7.7 Currency Conversions. In calculating the amount of Secured Obligations for any purpose hereunder, including voting or distribution purposes, the amount of any Secured Obligation which is denominated in a currency other than Dollars shall be converted into Dollars at the spot rate for purchasing Dollars with such currency determined by the Administrative Agent (which determination shall be conclusive absent manifest error) to be in effect in the New York foreign exchange market at the close of business on the Business Day prior to the date on which such calculation is to be made. 7.8 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 7.9 Counterparts. This Agreement may be signed in any number of counterparts (including by facsimile transmission) with the same effect as if the signatures thereto and hereto were upon the same instrument. 7.10 Termination. (a) Upon the (i) release of the Liens on the Collateral in accordance with the Credit Agreement or (ii) the termination of the Credit Agreement in accordance with subsection 11.12 of the Credit Agreement, the Administrative Agent will promptly, at the Borrower's written request and expense, terminate all Lockbox Agreements and Blocked Account Agreements and (x) execute and deliver to the Obligors such documents and other instruments as the Borrower shall reasonably request to evidence the 38 42 release of Liens on the Collateral (including UCC-3 Termination Statements), (y) deliver or cause to be delivered to the Obligors all property of the Obligors then held by the Administrative Agent or any agent thereof and (z) transfer all amounts on deposit in the Collateral Account to an account designated by the Person lawfully entitled to receive the same. Concurrently with any such release or termination, this Agreement and each of the Security Documents shall automatically terminate. The provisions of this subsection 7.10(a) shall survive the termination of this Agreement. (b) Upon the sale of all or a portion of the Capital Stock of an Obligor to a third party in accordance with and as permitted under the Credit Agreement such that such Obligor ceases to be a Subsidiary, (i) such Obligor and each Subsidiary of such Obligor which is included in such sale (such Obligor and each such Subsidiary being referred to herein as "Included Obligors") shall cease to be an Obligor hereunder or a party to any Security Document and shall be released from its obligations pursuant hereto and thereto, (ii) the Liens created by the Security Documents entered into by such Included Obligors in all right, title and interest of such Included Obligors in the Collateral shall terminate, in each case only with respect to such Included Obligors, (iii) all right, title and interest of the Administrative Agent in and to the Collateral subject to such Liens shall revert to such Included Obligors, their successors and assigns and (iv) any obligations of such Included Obligors shall, unless otherwise expressly notified by the Borrower to the Administrative Agent in writing, cease to be Secured Obligations. Upon any such termination, the Administrative Agent will promptly, at the Borrower's written request, (x) execute and deliver to such Included Obligors such documents and other instruments as the Borrower shall reasonably request to evidence the release of the Liens on such Collateral (including UCC-3 Termination Statements) and (y) deliver or cause to be delivered to such Included Obligors all property of such Included Obligors then held by the Administrative Agent or any agent thereof. 7.11 New Obligors. During the term of this Agreement, one or more additional Subsidiaries may become a party to this Agreement by executing an assumption agreement, substantially in the form of Exhibit D to this Agreement, whereupon such Subsidiary shall become an Obligor for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement. 7.12 Inspection by Regulatory Agencies. The Administrative Agent shall make available, and shall cause each custodian and agent acting on its behalf in connection with this Agreement to make available, all Collateral in such Person's possession at all times for inspection by any regulatory agency having jurisdiction over an Obligor to the extent required by such regulatory agency in its discretion. 7.13 Submission to Jurisdiction; Waivers. Each Obligor hereby irrevocably and unconditionally: 39 43 (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Security Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) to the extent permitted by applicable law, consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Obligor at its address set forth in subsection 7.1 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other court of competent jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 7.14 WAIVERS OF JURY TRIAL. EACH OF THE OBLIGORS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER SECURITY DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 7.15 Amendment and Restatement. The parties hereto agree that, as set forth in the fourth recital to this Agreement, this Agreement amends and restates in its entirety the Existing Agreement, this Agreement does not constitute a novation and, from and after the date hereof, the Existing Agreement shall be of no force or effect except to evidence the incurrence of each of the Obligors' obligations thereunder and the grant of Liens therein or pursuant thereto. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 40 44 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed (by their respective authorized officers in the case of corporate parties) as of the day and year first written above. SERVICE MERCHANDISE COMPANY, INC. By: ----------------------------------------- Thomas L. Garrett, Jr. Treasurer INITIAL OBLIGORS B.A. PARGH CO., INC. H.J. WILSON CO., INC. H.J. WILSON CO. REALTY, INC. HOMEOWNERS WAREHOUSE, INC. SERVICE MERCHANDISE CO. BROAD, INC. SERVICE MERCHANDISE COMPANY OF IOWA, INC. SERVICE MERCHANDISE COMPANY OF KANSAS, INC. SERVICE MERCHANDISE CO. NO. 30, INC. SERVICE MERCHANDISE CO. NO. 34, INC. SERVICE MERCHANDISE CO. NO. 35, INC. SERVICE MERCHANDISE CO. NO. 51, INC. SERVICE MERCHANDISE CO. NO. 93, INC. SERVICE MERCHANDISE CO. NO. 99, INC. SERVICE MERCHANDISE FINANCIAL CO., INC. SERVICE MERCHANDISE INDIANA PARTNERS (by its Partners, Service Merchandise Co. No. 34, Inc. and Service Merchandise Co. No. 35, Inc.) SERVICE MERCHANDISE OF TENNESSEE LIMITED PARTNERSHIP (by its General Partner, Service Merchandise Company, Inc.) SERVICE MERCHANDISE OF TEXAS LIMITED PARTNERSHIP (by its General Partner, Service Merchandise Company, Inc.) SMC-HC, INC. THE TOY STORE, INC. WHOLESALE SUPPLY COMPANY, INC. By: --------------------------------------- Thomas L. Garrett, Jr. Treasurer 41 45 Address for Notices for Obligors: Service Merchandise Company, Inc. 7100 Service Merchandise Drive Brentwood, TN 37027 Attention: Chief Financial Officer Fax: (615) 660-3667 General Counsel Fax: (615) 660-3934 Treasurer: Fax: (615) 660-3667 CITICORP USA, INC., as Administrative Agent By: -------------------------------------- Keith R. Karako Attorney-in-Fact Address for Notices for The Administrative Agent: Citicorp USA, Inc. 399 Park Avenue 6th Floor New York, New York 10043 Attention: Keith R. Karako Fax: (212) 793-1290 42 -----END PRIVACY-ENHANCED MESSAGE-----