BUSINESS LOAN AGREEMENT
This Agreement dated as of December 9, 1996, is among Bank of America National
Trust and Savings Association (the "Bank"), Xxxxxxxx, Inc. ("AI"), Xxxxxxxx
Store I, Inc.
("AS-I"), Xxxxxxxx Store II, Inc. ("AS-II"), Xxxxxxxx International, Inc.
("AII"), and
Xxxxxxxx U.K., Ltd. ("AUK") (AI, AS-I, AS-II, AII, and AUK are
sometimes referred to collectively as the "Borrowers" and individually as the
"Borrower").
1. [FACILITY NO. 1: ]LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
(a) During the availability period described below, the Bank will provide a
line
of credit (the "Facility No. 1") to the Borrowers. The amount of the line of
credit
(the "[Facility No. 1 ]Commitment") is Twenty Million Dollars
($20,000,000).
(b) This is a revolving line of credit[ with a within line facilit[y] for
[letters of credit]. During the availability period, the Borrowers may repay
principal amounts and reborrow them.
(c) Each advance must be for at least Five Thousand Dollars ($5,000), or
for the
amount of the remaining available line
of credit, if less.
(d) The Borrowers agree not to permit the outstanding principal balance of
the line of credit[ plus the outstanding amounts of any [letters of credit,
including amounts drawn on letters of credit and not yet reimbursed,] to
exceed the
[Facility No. 1 ]Commitment.
1.2 Availability Period.The line of credit is available between the date of this
Agreement and March 1, 1999 (the
"Facility No. 1 Expiration Date") unless any Borrower is in default.
1.3 Interest Rate.
(a) [Unless the Borrowers elect an optional interest rate as described
below, the] interest rate is the Bank's Reference Rate.
(b) The Reference Rate is the rate of interest publicly announced from time to
time by the Bank in San Francisco,
California, as its Reference Rate. The Reference Rate is set by the Bank based
on various factors, including the
Bank's costs and desired return, general economic conditions and other
factors, and is used as a reference point for
pricing some loans. The Bank may price loans to its customers at, above, or
below the Reference Rate. Any change in the Reference Rate shall take effect at
the opening of business on the day specified in the public announcement of
a change in the Bank's Reference Rate.
1.4 Repayment Terms.
(a) The Borrowers will pay interest on January 1, 1997, and then monthly
thereafter until payment in full of any
principal outstanding under this line of credit.
(b) The Borrowers will repay in full all principal and any unpaid interest
or other charges outstanding under this line of
credit no later than the Facility No. 1 Expiration Date. [Any amount bearing
interest at an optional interest rate (as described below) may be repaid at the
end of the applicable interest period, which
shall be no later than the Facility
No. 1 Expiration Date.]
1.5 Optional Interest Rates. Instead of the interest rate based on the Bank's
Reference Rate, the Borrowers may elect
to have all or portions of the line of credit (during the availability period)
bear
interest at the rate(s) described below during
an interest period agreed to by the Bank and the Borrowers. Each interest rate
is a rate per year. Interest will be paid on the [first] day of every [month]
and on the last day of each interest period, and on the first day of each
[month] during the interest period. At the end of any interest period, the
interest rate will revert to the rate based on the Reference Rate, unless the
Borrowers have designated another optional interest rate for the portion. Upon
the occurrence of an event of default under this Agreement, the Bank may
terminate the availability of optional interest rates for interest periods
commencing after the default occurs.
1.6 Short Term Fixed Rate. The Borrowers may elect to have all or portions of
the principal balance of the [line of credit] bear interest at the Short Term
Fixed Rate, subject to the following requirements:
(a) The "Short Term Fixed Rate" means the Short Term Base Rate plus 1.625
percentage points.
(b) The "Short Term Base Rate" means the fixed interest rate per annum,
determined solely by the Bank on the first
day of the applicable interest period for the Short Term Fixed Rate portion, as
the rate at which the Bank would be
able to borrow funds in the Money Market in the amount of the Short Term Fixed
Rate portion and with an interest
and principal payment schedule equal to the Short Term Fixed Rate portion and
for a term equal to the applicable
interest period. The Short Term Base Rate shall include adjustments for reserve
requirements, federal deposit
insurance, and any other similar adjustment which the Bank deems appropriate.
The Short Term Base Rate is the
Bank's estimate only and the Bank is under no obligation to actually
purchase or match funds for any transaction.
(c) "Money Market" means one or more wholesale funding markets available to the
Bank, including domestic negotiable certificates of deposit, eurodollar
deposits, bank deposit notes or other appropriate money market instruments
selected by the Bank.
(d) The interest period during which the Short Term Fixed Rate will be in
effect will be no shorter than 30[ ]days and no
longer than [one year].
(e) Each Short Term Fixed Rate portion will be for an amount not less than
Five Hundred Thousand Dollars
($500,000).
(f) Any portion of the principal balance of the [line of credit] already
bearing interest at the Short Term Fixed Rate will
not be converted to a different rate during its interest period.
(g) Each prepayment of a Short Term Fixed Rate portion, whether voluntary, by
reason of acceleration or otherwise,
will be accompanied by the amount of accrued interest on the amount prepaid, and
a prepayment fee equal to the
amount (if any) by which:
(i) the additional interest which would have been payable on the amount
prepaid had it not been
prepaid, exceeds
(ii) the interest which would have been recoverable by the Bank by placing
the amount prepaid on deposit in the Money Market for a period starting on the
date on which it was prepaid and ending on the
last day of the interest period for such portion (or the scheduled payment
date for the amount prepaid, if earlier).
1.7 Offshore Rate. The Borrowers may elect to have all or portions of the
principal balance of the line of credit bear
interest at the Offshore Rate [plus 1.625 percentage points.]
Designation of an Offshore Rate portion is subject to the following
requirements:
(a) The interest period during which the Offshore Rate will be in effect
will be no shorter than 30 days and no longer
than [one year].[Offices may choose a time period less than one year] The
last day of the interest period will be determined by the Bank using the
practices of the offshore
dollar inter-bank market.
(b) Each Offshore Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000).
(c) The "Offshore Rate" means the interest rate determined by the following
formula, rounded upward to the nearest
1/100 of one percent. (All amounts in the calculation will be determined by the
Bank as of the first day of the
interest period.)
Offshore Rate = Grand Cayman Rate
(1.00 - Reserve Percentage)
Where,
(i) "Grand Cayman Rate" means the interest rate (rounded upward to the
nearest 1/16th of one
percent) at which the Bank's Grand Cayman Branch, Grand Cayman, British West
Indies, would offer U.S.
dollar deposits for the applicable interest period to other major banks in
the offshore dollar inter-bank
market.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the
reserves to be maintained by member banks of the Federal Reserve System for
Eurocurrency Liabilities, as
defined in the Federal Reserve Board Regulation D, rounded upward to
the nearest 1/100 of one percent.
The percentage will be expressed as a decimal, and will include, but not be
limited to, marginal,
emergency, supplemental, special, and other reserve percentages.
(d) The Borrowers may not elect an Offshore Rate with respect to any
portion of the principal balance of the line of
credit which is scheduled to be repaid before the last day of the applicable
interest period.
(e) Any portion of the principal balance of the line of credit already
bearing interest at the Offshore Rate will not be
converted to a different rate during its interest period.
(f) Each prepayment of an Offshore Rate portion, whether voluntary, by
reason of acceleration or otherwise, will be
accompanied by the amount of accrued interest on the amount prepaid, and a
prepayment fee equal to the amount (if
any) by which
(i) the additional interest which would have been payable on the amount
prepaid had it not been paid
until the last day of the interest period, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on
deposit in the offshore dollar market for a period starting on the date on
which it was prepaid and ending on
the last day of the interest period for such portion.
(g) The Bank will have no obligation to accept an election for an Offshore
Rate portion if any of the following described
events has occurred and is continuing:
(i) Dollar deposits in the principal amount, and for periods equal to
the interest period, of an Offshore
Rate portion are not available in the offshore dollar inter-bank market; or
(ii) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
1.8 Letters of Credit. This line of credit may be used for financing:
(i) commercial letter[s] of credit with a maximum maturity of 365 days
but not to extend beyond the
Facility No. 1 Expiration Date. [Each] commercial letter of credit will
require drafts payable at sight.
(ii)standby letter[s] of credit with a maximum maturity of [365 days
but not to extend beyond the
Facility No. 1 Expiration Date.]
[(iii) The amount of letter[s] of credit outstanding at any one time,
(including amounts drawn on letters of
credit and not yet reimbursed), may not exceed Five Million Dollars
($5,000,000).]
Each Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of the Bank,
be added to the principal amount outstanding
under this Agreement. The amount will bear interest and be due as described
elsewhere in this Agreement.
(b) if there is a default under this Agreement, to immediately prepay and
make the Bank whole for any outstanding
letters of credit.
(c) The issuance of any letter of credit and any amendment to a letter of
credit is subject to the Bank's written approval
and must be in form and content satisfactory to the Bank and in favor of a
beneficiary acceptable to the Bank.
Without limiting the foregoing, no letter of credit may be issued to support
any obligation of the Borrowers in
connection with workers' compensation laws.
(d) to sign the Bank's form[ Application and Agreement for Commercial
Letter of Credit][ or][ Application and Agreement
for Standby Letter of Credit].
(e) to pay any issuance and/or other fees that the Bank notifies the
Borrowers will be charged for issuing and processing
letters of credit for the Borrowers.
(f) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
2. [FACILITY NO. 2: ]FOREIGN EXCHANGE FACILITY
(a) During the availability period, the Bank at its discretion may enter
into spot and forward foreign exchange
contracts with AI. The foreign exchange contract limit will be Two Million Five
Hundred Thousand U.S. Dollars
(U.S. $2,500,000). The "foreign exchange contract limit" is the maximum limit
on the net difference between the
total foreign exchange contracts outstanding less the total foreign exchange
contracts for which the Borrower has
already compensated the Bank. The availability period is from the date of this
Agreement through March 1, 1999
(the "Facility No. 2 Expiration Date").
(b) The Bank shall not be required to make any U.S. Dollar or foreign
currency settlement payment to the Borrower
until the Bank receives evidence satisfactory to it that the Borrower has paid
the Bank at least 2 Banking Days
prior to the settlement date all of the Borrower's U.S. Dollar and foreign
currency settlement payments. The Bank
shall not be liable for interest or other damages caused by any such failure to
pay or deliver or any such delay in
payment or delivery.
(c) The Borrower will pay the Bank on demand the Bank's then standard
foreign exchange contract fees for each contract.
(d) Foreign exchange contracts will be in form and substance satisfactory
to the Bank.
(e) No foreign exchange contracts will mature no later than 180 days
beyond the
[Facility No. 2] Expiration Date[, and in
addition no foreign exchange contract shall have a tenor longer than 240
days].
(f) The Borrower understands the risks of, and is financially able to
bear any
losses resulting from, entering into
foreign exchange contracts. The Bank shall not be liable for any loss suffered
by the Borrower as a result of the
Borrower's foreign exchange trading. The Borrower will enter into each foreign
exchange contract in reliance only
upon the Borrower's own judgment. The Borrower acknowledges that in entering
into foreign exchange contracts
with the Borrower, the Bank is not acting as a fiduciary. The Borrower
understands that neither the Bank nor the
Borrower has any obligation to enter into any particular foreign exchange
contract with the other.
(g) The Borrower hereby requests the Bank to rely upon and execute the
Borrower's telephonic instructions regarding
foreign exchange contracts, and the Borrower agrees that the Bank shall incur no
liability for its acts or omissions
which result from interruption of communications, misunderstood communications
or instructions from
unauthorized persons, unless caused by the wilful misconduct of the Bank or its
officers or employees. The
Borrower agrees to protect the Bank and hold it harmless from any and all
loss, damage, claim, expense (including
the reasonable fees of outside counsel and the allocated costs of staff counsel)
or inconvenience, however arising,
which the Bank suffers or incurs or might suffer or incur, based on or
arising out of said acts or omissions.
(h) The Borrower agrees to promptly review all confirmations sent to the
Borrower by the Bank. The Borrower
understands that these confirmations are not legal contracts but only evidence
of the valid and binding oral contract
which the Borrower has already entered into with the Bank. The Borrower agrees
to promptly execute and return
to the Bank confirmations which accurately reflect the terms of a foreign
exchange contract, and immediately
contact the Bank if the Borrower believes a confirmation is not accurate. In
the event of a conflict, inconsistency or
ambiguity between the provisions of this Agreement and the provisions of a
confirmation, the provisions of this
Agreement will prevail.
(i) The Borrower agrees that the Bank may electronically record all
telephonic
conversations with the Borrower
relating to foreign exchange contracts and that such tape recordings may be
submitted in evidence to any court or
in any other proceedings relating to such contracts. The Borrower agrees that
in the event of a conflict,
inconsistency or ambiguity between the terms of a foreign exchange contract as
reflected in a tape recording and
the terms stated on a confirmation, the terms reflected in the tape recording
shall control.
(j) Any sum owed to the Bank under a foreign exchange contract may, at the
option of the Bank, be added to the
principal amount outstanding under Facility No. 1 of this Agreement. The amount
will bear interest and be due as
described elsewhere in this Agreement. The Borrower hereby authorizes the Bank
to debit the Borrower's account
with the Bank for payments due from the Borrower's to the Bank with respect
to any foreign exchange contract.
[The Borrower acknowledges that any collateral pledged to secure the
Borrower's performance of its obligations
under this Agreement secures its obligations under foreign exchange contracts
with the Bank.]
(k) In addition to any other rights or remedies which the Bank may have
under this Agreement or otherwise, upon the
occurrence of an event of default under this Agreement, [or if the
Borrower's aggregate realized or unrealized xxxx-to-market losses on foreign
exchange contracts exceed Three Hundred Seventy Five Thousand Dollars ($375,000)
(the "Revaluation Limit"),] the Bank may:
(1) Suspend performance of its obligations to the Borrower under any
foreign exchange contract;
(2) Declare all foreign exchange contracts, interest and any other
amounts which are payable by the
Borrower to the Bank immediately due and payable; and
(3) Without notice to the Borrower, close out any or all foreign
exchange contracts or positions of
the Borrower with the Bank.
The Bank shall not be under any obligation to exercise any such rights
or remedies or to exercise them at a time or
in a manner beneficial to the Borrower. The Borrower shall be liable for any
amounts owing to the Bank after
exercise of any such rights and remedies.
(l) The Borrower and the Bank are also parties to an International Foreign
Exchange Master Agreement dated DECEMBER 9, 1996, (as amended, modified or
renewed, the "IFEMA"). All foreign
exchange transactions entered into between the Borrower and the Bank shall be
subject to the provisions of this
Agreement and the IFEMA. In the event of any conflict or inconsistency between
the provisions of this Agreement
and the provisions of the IFEMA, the provisions of the IFEMA shall control. The
occurrence of an Event of
Default under the IFEMA shall also constitute a default under this Agreement.]
3. [FEES AND ]EXPENSES
3.1 Unused Commitment Fee (Facility No. 1). The Borrowers agree to pay a fee
on any difference between the [Facility No. 1]Commitment and the amount of
credit the Borrowers actually use, determined by the
weighted average loan balance
maintained during the specified period. The fee will be calculated at 0.25%
per year.
The fee will be calculated [on a
calendar quarter basis. ]The fee is due [10] days from the Bank's billing
date for
each such period. []
3.2 Expenses.
(a) The Borrowers agree to immediately repay the Bank for expenses that
include, but are not limited to, filing,
recording and search fees, appraisal fees, and documentation fees.
(b) The Borrowers agree to reimburse the Bank for any expenses it incurs
in the
preparation of this Agreement and any
agreement or instrument required by this Agreement. Expenses include, but
are not limited to, reasonable attorneys'
fees, including any allocated costs of the Bank's in-house counsel.
(c) The Borrowers agree to reimburse the Bank for the cost of periodic
[audits and] appraisals of the[ personal] property
collateral securing this Agreement, at such intervals as the Bank may reasonably
require. The[ audits and] appraisals
may be performed by employees of the Bank or by independent appraisers.
4. COLLATERAL
4.1 Personal Property. The Borrowers' obligations to the Bank under [this
Agreement] will be secured by personal property AI, AS-I, and AS-II now own or
will own in the future as listed below. The collateral is further defined in
security agreement(s) executed by such Borrowers. [In addition, all personal
property collateral securing [this Agreement] shall also secure all other
present and future obligations of the Borrowers or any one of them to the Bank
(excluding any consumer credit covered by the federal Truth in Lending law,
unless the Borrowers have otherwise agreed in writing). All personal property
collateral securing any other present or future obligations of the Borrowers or
any one of them to the Bank shall also secure [this Agreement.]
(a) Machinery and equipment.
(b) Inventory.
(c) Receivables.
(d) Xxxxxxxx name trademark.
5. DISBURSEMENTS, PAYMENTS AND COSTS
5.1 Requests for Credit. Each request for an extension of credit will be made in
writing in a manner acceptable to the Bank, or by another means acceptable to
the Bank.
5.2 Disbursements and Payments. Each disbursement by the Bank and each payment
by the Borrowers will be:
(a) made at the Bank's branch (or other location) selected by the Bank
from time to time;
(b) made for the account of the Bank's branch selected by the Bank from
time to time;
(c) made in immediately available funds, or such other type of funds
selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may,
at its discretion, require the Borrowers to sign
one or more promissory notes.
5.3 Telephone Authorization.
(a) The Bank may honor telephone instructions for advances or repayments
[or for the designation of optional interest rates] given by any one
of the individual signer(s) of this Agreement or a person
or persons authorized[ in writing] by
any one of the signer(s) of the Agreement.
(b) Advances will be deposited in and repayments will be withdrawn from
[Borrower
1's][ account number 14503-50974,
or such other] accounts with the Bank as designated in writing by the Borrowers.
(c) The Borrowers indemnify and excuse the Bank (including its officers,
employees, and agents) from all liability, loss,
and costs in connection with any act resulting from telephone instructions
it reasonably believes are made by any
individual authorized by the Borrowers to give such instructions.
This indemnity and excuse will survive this Agreement's termination.
5.4 Direct Debit (Pre-Billing).
(a) The Borrowers agree that the Bank will debit [Borrower 1's] deposit
account number 14503-50974, or such other]
accounts with the Bank as designated in writing by the Borrowers (the
"Designated Account") on the date each payment of[ principal and]
interest[ and any fees] from the Borrowers becomes due
(the "Due Date"). If the Due Date
is not a banking day, the Designated Account will be debited on the next banking
day.
(b) Approximately 10 days prior to each Due Date, the Bank will mail to the
Borrowers a statement of the amounts that
will be due on that Due Date (the "Billed Amount"). The calculation will be made
on the assumption that no new
extensions of credit or payments will be made between the date of the billing
statement and the Due Date, and that
there will be no changes in the applicable interest rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless
of the actual amount due on that
date (the "Accrued Amount"). If the Billed Amount debited to the Designated
Account differs from the Accrued
Amount, the discrepancy will be treated as follows:
(i) If the Billed Amount is less than the Accrued Amount, the Billed Amount
for the following Due
Date will be increased by the amount of the discrepancy. The Borrowers will
not be in default by reason of
any such discrepancy.
(ii) If the Billed Amount is more than the Accrued Amount, the Billed
Amount for the following Due
Date will be decreased by the amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue based
on the actual amount of principal
utstanding without compounding. The Bank will not pay the Borrowers interest on
any overpayment.
(d) The Borrowers will maintain sufficient funds in the Designated Account
to cover each debit. If there are
sufficient funds in the Designated Account on the date the Bank enters any debit
authorized by this Agreement,
the debit will be reversed.
5.5 Banking Days. Unless otherwise provided in this Agreement, a banking day is
a day other than a Saturday or a Sunday on which the Bank is open for business
in California.[ For amounts bearing interest at an offshore rate (if any), a
banking day is a day other than a Saturday or a Sunday on which the Bank is open
for business in California and dealing in offshore dollars.] All payments and
disbursements which would be due on a day which is not a banking day will be due
on the next banking day. All payments received on a day which is not a banking
day will be applied to the credit on the next banking day.
5.6 Taxes. The Borrowers will not deduct any taxes from any payments they make
to the Bank. If any government
authority imposes any taxes on any payments made by the Borrowers, the
Borrowers will pay the taxes and will also pay to
the Bank, at the time interest is paid, any additional amount which the Bank
specifies as necessary to preserve the after-tax yield the Bank would have
received if such taxes had not been imposed. Upon request by the Bank, the
Borrowers will confirm that it has paid the taxes by giving the Bank official
tax receipts (or notarized copies) within 30 days after the due date. However,
the Borrowers will not pay the Bank's net income taxes.
5.7 Additional Costs. The Borrowers will pay the Bank, on demand, for the Bank's
costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks. The costs and losses will be allocated to the
loan in a manner determined by the Bank, using any reasonable method. The costs
include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments
for credit.
5.8 Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed
on the basis of a [360-day year and the actual number of days elapsed. This
results
in more interest or a higher fee than if a
365-day year is used.]
5.9 Interest on Late Payments. At the Bank's sole option in each instance, any
amount not paid when due under this Agreement (including interest) shall bear
interest from the due date at the Bank's Reference Rate plus [1.00 percentage
point]. This may result in compounding of interest.
5.10 Default Rate. Upon the occurrence and during the continuation of any
default under this Agreement, advances under this Agreement will at the option
of the Bank bear interest at a rate per annum which is 2.00 percentage point[s]
higher than the rate of interest otherwise provided under this Agreement. This
will not constitute a waiver of any event of default.
6. CONDITIONS
[The Bank must receive the following items, in form and content acceptable to
the Bank, before it is required to extend any credit to the Borrowers under this
Agreement:]
6.1 Authorizations. Evidence that the execution, delivery and performance by
each Borrower (and each guarantor) of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
6.2 Security Agreements. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest),[] which the Bank requires.
6.3 Evidence of Priority. Evidence that security interests and liens in favor
of the Bank are valid, enforceable, and
prior to all others' rights and interests, except those the Bank consents to in
writing.[]
6.4 Insurance. Evidence of insurance coverage, as required in the "Covenants"
section
of this Agreement.
6.5 Subordination Agreements. Uniform Commercial Code Subordination Agreements
in favor of the Bank signed by AI.
6.6 Other Items. Any other items that the Bank reasonably requires.
7. REPRESENTATIONS AND WARRANTIES
When the Borrowers sign this Agreement, and until the Bank is repaid in full,
each Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewed representation:
7.1 Organization of Borrowers. Each Borrower [is a corporation] duly formed and
existing under the laws of the state where organized.
7.2 Authorization. This Agreement, and any instrument or agreement required
hereunder, are within each Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers.
7.3 Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of each Borrower, enforceable against each Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.
7.4 Good Standing. In each state in which each Borrower does business, it is
properly licensed, in good standing, and,
where required, in compliance with fictitious name statutes.
7.5 No Conflicts. This Agreement does not conflict with any law, agreement, or
obligation by which any Borrower is
bound.
7.6 Financial Information. All financial and other information that has been or
will be supplied to the Bank, including the Borrowers' consolidated financial
statement dated as of September 30, 1996, is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrowers'(and any guarantor's) financial
condition.
(b) in form and content required by the Bank.
(c) in compliance with all government regulations that apply.
[Since the date of the financial statement(s) specified above, there has been no
material adverse change in the assets or the financial condition of any Borrower
(or any guarantor).]
7.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against any Borrower, which, if lost, would impair the Borrowers' or
any Borrower's financial condition or that of any Borrower's business, or would
impair any Borrower's ability to repay the loan, except as have been disclosed
in writing to the Bank.
7.8 Collateral. All collateral required in this Agreement is owned by the
grantor of the security interest free of any title defects or any liens or
interests of others[, except those which have been approved by the Bank in
writing].
7.9 Permits, Franchises. Each Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.
7.10 Other Obligations. No Borrower is in default on any obligation for borrowed
money, any purchase money
obligation or any other material lease, commitment, contract, instrument or
obligation.
7.11 Income Tax Returns. No Borrower has any knowledge of any pending
assessments or adjustments of its income
tax for any year.
7.12 No Event of Default. There is no event which is, or with notice or
lapse of time or both would be, a default under
this Agreement.
7.13 Location of Borrowers. Each Borrower's place of business (or, if any
Borrower has more than one place of business, its chief executive office) is
located at [the address listed under the Borrowers' signature on this
Agreement].
8. COVENANTS
The Borrowers agree, so long as credit is available under this Agreement and
until the Bank is repaid in full:
8.1 Use of Proceeds (Facility No. 1). To use the proceeds of the Facility No.
1 only for general corporate purposes and
financing of letters of credit.
8.2 Financial Information. To provide the following financial information and
statements and such additional
information as requested by the Bank from time to time:
(a) Within 90 days of [the Borrowers'] fiscal year end, [the Borrowers']
annual financial statements.[ These financial
statements must be [audited][ (with an unqualified opinion)] by a Certified
Public Accountant ("CPA") acceptable to
the Bank together with a management letter.][ The statements shall be prepared
on a [consolidated ][and ][consolidating] basis.]
(b) Within 60 days of the Borrowers' fiscal year end, the Borrowers' annual
projections on a consolidated and
consolidating basis.
(c) Within 45 days of the period's end, [the Borrowers' ][quarterly]
financial statements.[ These financial statements may be
Borrower prepared.][ The statements shall be prepared on a [consolidated ][and
][consolidating] basis.]
(d) Within 45 days after each quarter end, a compliance certificate in form
and content acceptable to the Bank signed by
a Borrower's Chief Financial Officer or designated officer.
(e) Copies of [each Borrower's] Form l0-K Annual Report and Form l0-Q
Quarterly Report within 15 days after the date
of filing with the Securities and Exchange Commission.
(f) Within 45 days after the end of each quarter, (i) statements
showing an aging[] of each Borrower's accounts
receivable, (ii) statements showing an aging of each Borrower's accounts
payable,
and (iii) each Borrower's
inventory listing, which must include a description of the inventory, its
location
and cost, and such other
information as the Bank may require.
8.3 Quick Ratio. [With respect to the Borrowers on a consolidated basis, ]
to maintain
a ratio of quick assets to current
liabilities of at least [the amounts indicated for each period specified below:
Period Ratio
During the period November 1 0.60:1.00
through January 31 of each fiscal year
During the period February 1 1.00:1.00
through October 31 of each fiscal year
"Quick assets" means cash, short-term cash investments, net trade receivables
and marketable securities not classified as long-term investments.
8.4 Tangible Net Worth. [With respect to the Borrowers on a consolidated
basis, ]to
maintain tangible net worth equal
to at least the sum of the following:
(a) Thirty Eight Million Dollars ($38,000,000); plus
(b) the sum of 50% of net income after income taxes (without subtracting
losses)
earned in each quarterly accounting
period commencing the fiscal period ending January 31, 1997; plus
(c) the net proceeds from any equity securities issued after the date of
this
Agreement; plus
(d) any increase in stockholders' equity resulting from the conversion of
debt securities to equity securities after the date
of this Agreement.
"Tangible net worth" means the gross book value of [the Borrowers'] assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles[, and
monies due from affiliates, officers, directors or shareholders of [the
Borrowers]) less total liabilities, including but not limited to accrued and
deferred income taxes, and any reserves against assets.
8.5 Total Liabilities to Tangible Net Worth. [With respect to the Borrowers on
a consolidated basis, ]to maintain a
ratio of total liabilities to tangible net worth not exceeding [1.25:1.00.]
"Total liabilities" means the sum of current liabilities plus long term
liabilities.
8.6 Debt Service Coverage Ratio. [With respect to the Borrowers on a
consolidated
basis], to maintain a debt service
coverage ratio of at least [1.25:1.00.]
"Debt service coverage ratio" means the ratio of EBITDA to the sum of the
current portion of long term debt plus interest expense. "EBITDA" is defined as
net income from operations and investments, before taxes, plus interest expense,
depreciation, amortization and other non-cash charges.[ This ratio will be
calculated at the end of each fiscal quarter, using the results of that quarter
and each of the 3 immediately preceding quarters. The current portion of long
term debt will be measured as of the last day of the preceding fiscal year.]
8.7 Limitations on Losses. [With respect to the Borrowers on a consolidated
basis],
not to incur a net loss after taxes and
extraordinary items in any two (2) consecutive quarterly accounting periods.]
8.8 Other Debts. Not to have outstanding or incur any direct or contingent debts
(other than those to the Bank), or become liable for the debts of others without
the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts, lines of credit[ and leases] in existence on the date of this
Agreement disclosed in writing to the Bank.
(e) Additional debts[ and lease obligations] for the acquisition of fixed
or
capital assets, to the extent permitted elsewhere
in this Agreement.
(f) Additional debts[ and lease obligations] [of Borrowers] for the
acquisition
of real property for business purposes which[]
do not exceed a total principal amount of Ten Million Five Hundred Thousand
Dollars ($10,500,000) outstanding at
any one time.
8.9 Other Liens. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property any
Borrower now or later owns, except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing
to the
Bank.
(d) Additional purchase money security interests in fixed or capital assets
acquired [by the Borrowers or any one of
them], to the extent permitted elsewhere in this Agreement.
(e) Additional liens against real property of [the Borrowers or any one of
them]
which secure obligations in a total
principal amount not exceeding Ten Million Five Hundred Thousand Dollars
($10,500,000).
8.10 Capital Expenditures. [With respect to the Borrowers on a consolidated
basis], not to spend or incur obligations[
(including the total amount of any capital leases)] for more than Three Million
Five
Hundred Thousand Dollars ($3,500,000)
in any single fiscal year to acquire fixed or capital assets or spend more than
Fourteen Million Dollars ($14,000,000) in aggregate to acquire real estate (land
and building) for company use.
8.11 Dividends. (i) Not to declare or pay any dividends on any of [the
Borrowers'] shares except dividends payable in capital stock of [the Borrowers.]
(ii) Not to purchase, redeem or otherwise acquire for value any of [the
Borrowers'] shares, or create any sinking fund in relation thereto, for an
amount not to exceed Three Million Five Hundred Thousand Dollars ($3,500,000) in
aggregate during the tenor of this Agreement but in no event exceed an amount
equal to 50% of the Borrowers' consolidated net income after taxes, on a
cumulative basis, for each fiscal quarter during calendar year 1997.
8.12 Advance Limitation Period (Facility No. 1). Not to permit the total
principal
amount outstanding on Facility
No. 1 to exceed Five Million Dollars ($5,000,000) for a period of at least 30
consecutive days [in each fiscal year. For the
purposes of this paragraph, principal amount outstanding does not include
undrawn
amounts of outstanding letters of credit.]
8.13 Loans to Officers. Not to make any loans, advances or other extensions
of credit to any Borrower's executives,
officers, or directors or shareholders (or any relatives of any of the
foregoing) for
more than Five Hundred Thousand Dollars
($500,000) in any single fiscal year.
8.14 Notices to Bank. To promptly notify the Bank in writing of:
(a) any lawsuit over Five Hundred Thousand Dollars ($500,000) against
any one or more of the Borrowers in the
aggregate (or any guarantor).
(b) any substantial dispute between any Borrower (or any guarantor) and any
government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in any Borrower's (or any guarantor's)
financial
condition or operations.
(e) any change in any Borrower's name, legal structure, place of business,
or chief executive office if such Borrower has
more than one place of business;
(f) any reduction in or impairment of any Borrower's supply or projected
supply
of[ irrigation] water.
8.15 Books and Records. To maintain adequate books and records.
8.16 Audits. To allow the Bank and its agents to inspect the Borrowers'
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrowers' properties, books or records are in
the possession of a third party, the Borrowers authorize that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.
8.17 Compliance with Laws. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with authority
over each Borrower's business.
8.18 Preservation of Rights. To maintain and preserve all rights, privileges,
and
franchises each Borrower now has.
8.19 Maintenance of Properties. To make any repairs, renewals, or
replacements to
keep each Borrower's properties in
good working condition.
8.20 Perfection of Liens. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
8.21 Cooperation. To take any action requested by the Bank to carry out the
intent of this Agreement.
8.22 Insurance.
(a) Insurance Covering Collateral. To maintain all risk property damage
insurance policies covering the tangible
property comprising the collateral. Each insurance policy must be [in an amount
acceptable to the Bank.] The
insurance must be issued by an insurance company acceptable to the Bank and must
include a lender's loss payable
endorsement in favor of the Bank in a form acceptable to the Bank.
(b) General Business Insurance.[ To maintain insurance as is usual for the
business it is in.]
(c) Evidence of Insurance. Upon the request of the Bank, to deliver to
the Bank
a copy of each insurance policy, or, if permitted by the Bank,
a certificate of insurance listing all insurance in force.
8.23 Additional Negative Covenants. Not to, without the Bank's written consent:
(a) engage in any business activities substantially different from
Borrowers' or any Borrower's present business.
(b) liquidate or dissolve Borrowers' or any Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination.
(d) lease, or dispose of all or a substantial part of Borrowers' or any
Borrower's business or the Borrowers' or any
Borrower's assets.
(e) acquire or purchase a business or its assets.
(f) sell or otherwise dispose of any assets for less than fair market value,
or enter into any sale and leaseback agreement
covering any of the Borrowers' or any Borrower's fixed or capital assets.
9. HAZARDOUS WASTE INDEMNIFICATION
The Borrowers will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrowers' or any Borrower's
property or operations or property leased to the Borrowers or any Borrower. The
indemnity includes but is not limited to attorneys' fees (including the
reasonable estimate of the allocated cost of in-house counsel and staff). The
indemnity extends to the Bank, its parent, subsidiaries and all of their
directors, officers, employees, agents, successors, attorneys and assigns.
"Hazardous substances" means any substance, material or waste that is or becomes
designated or regulated as "toxic," "hazardous," "pollutant," or "contaminant"
or a similar designation or regulation under any federal, state or local law
(whether under common law, statute, regulation or otherwise) or judicial or
administrative interpretation of such, including without limitation petroleum or
natural gas. This indemnity will survive repayment of the Borrower's obligations
to the Bank..
10. DEFAULT
If any of the following events occur, the Bank may do one or more of the
following: declare the Borrowers in default, stop making any additional credit
available to the Borrowers, and require the Borrowers to repay their entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to any Borrower, then the
entire debt outstanding under this Agreement will automatically become due
immediately.
10.1 Failure to Pay. Any Borrower fails to make a payment under this Agreement[
when due.]
10.2 Lien Priority. The Bank fails to have an enforceable first lien (except for
any prior liens to which the Bank has consented in writing) on or security
interest in any property given as security for this loan.
10.3 False Information. Any Borrower has given the Bank false or misleading
information or representations.
10.4 Bankruptcy. Any Borrower (or any guarantor) files a bankruptcy petition, a
bankruptcy petition is filed against any Borrower (or any guarantor), or any
Borrower (or any guarantor) makes a general assignment for the benefit of
creditors.
10.5 Receivers. A receiver or similar official is appointed for any Borrower's
(or any guarantor's) business, or the
business is terminated.
10.6 Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more trade
creditors against any one or more of Borrowers in an aggregate amount of Two
Hundred Fifty Thousand Dollars ($250,000) or more in excess of any insurance
coverage.
10.7 Judgments. Any judgments or arbitration awards are entered against any one
or more of Borrowers (or any guarantor), or any one or more of Borrowers (or any
guarantor) enters into any settlement agreements with respect to any litigation
or arbitration, in an aggregate amount of Two Hundred Fifty Thousand Dollars
($250,000) or more in excess of any insurance coverage.
10.8 Government Action. Any government authority takes action that the Bank
believes materially adversely affects any
Borrower's, (or any guarantor's) financial condition or ability to repay.
10.9 Material Adverse Change. A material adverse change occurs in any
Borrower's,
(or any guarantor's) financial
condition, properties or prospects, or ability to repay the loan.
10.10 Cross-default. Any default occurs under any agreement in connection with
any credit any Borrower (or any guarantor) has obtained from anyone else or
which any Borrower (or any guarantor) has guaranteed.
10.11 Default under Related Documents. Any guaranty, subordination agreement,
security agreement, or other
document required by this Agreement is violated or no longer in effect.
10.12 Other Bank Agreements. Any Borrower (or any guarantor) fails to meet the
conditions of, or fails to perform any obligation under any other agreement any
Borrower (or any guarantor) has with the Bank or any affiliate of the Bank.
10.13 Other Breach Under Agreement. Any Borrower fails to meet the
conditions of, or fails to perform any obligation
under, any term of this Agreement not specifically referred to in this Article.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
11.2 California Law. This Agreement is governed by California law.
11.3 Successors and Assigns. This Agreement is binding on the Borrowers' and the
Bank's successors and assignees. The Borrowers agree that they may not assign
this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrowers with actual or potential participants or assignees; provided
that such actual or potential participants or assignees shall agree to treat all
financial information exchanged as confidential]. If a participation is sold or
the loan is assigned, the purchaser will have the right of set-off against the
Borrowers.
11.4 Arbitration.
(a) This paragraph concerns the resolution of any controversies or claims
between any one or more of Borrowers and
the Bank, including but not limited to those that arise from:
(i) This Agreement (including any renewals, extensions or modifications of
this Agreement);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted between
any one or more of
Borrowers and the Bank, including claims for injury to persons,
property or business interests (torts).
(b) At the request of any Borrower or the Bank, any such controversies or
claims
will be settled by arbitration in
accordance with the United States Arbitration Act. The United States Arbitration
Act will apply even though this
Agreement provides that it is governed by California law.
(c) Arbitration proceedings will be administered by the American
Arbitration
Association and will be subject to its
commercial rules of arbitration.
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent of the
filing of a lawsuit, and any claim or controversy which may be arbitrated under
this paragraph
is subject to any applicable statute of limitations. The arbitrators will
have the authority to decide whether any such claim or controversy is barred by
the statute of limitations and, if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) The procedure described above will not apply if the controversy or
claim, at the time of the proposed submission toarbitration, arises from or
relates to an obligation to the Bank secured by real property located in
California. In this
case, both the Borrowers and the Bank must consent to submission of the
claim or controversy to arbitration. If both parties do not consent to
arbitration, the controversy or claim will be settled as follows:
(i) The Borrowers and the Bank will designate a referee (or a panel of
referees) selected under theauspices of the American Arbitration Association in
the same manner as arbitrators are selected in Association-sponsored
proceedings;
(ii) The designated referee (or the panel of referees) will be
appointed by a court as provided in California Code of Civil Procedure Section
638 and the following related sections;
(iii) The referee (or the presiding referee of the panel) will be an
active attorney or a retired judge; and
(iv) The award that results from the decision of the referee (or the
panel) will be entered as a judgmentin the court that appointed the referee, in
accordance with the provisions of California Code of Civil Procedure Sections
644 and 645.
(h) This provision does not limit the right of the Borrowers or the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property collateral;
or
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not constitute a
waiver of the right of the Borrowers or the Bank, including the suing party, to
submit
the controversy or claim to arbitration if the other party contests the
lawsuit. However, if the controversy or claim arises from or relates to an
obligation to the Bank which is secured by real property located in California
at the time of the proposed submission to arbitration, this right is limited
according to the provision above requiring the consent of both the Borrowers and
the Bank to seek resolution through arbitration.
(j) If the Bank forecloses against any real property securing this
Agreement, the Bank has the option to exercise the power of sale under the deed
of trust or mortgage, or to proceed by judicial foreclosure.
11.5 Severability; Waivers. If any part of this Agreement is not
enforceable, the
rest of the Agreement may be enforced. The Bank retains all rights, even if it
makes a loan after default. If the Bank waives a default,
it may enforce a later default.
Any consent or waiver under this Agreement must be in writing.
11.6 Administration Costs. The Borrowers shall pay the Bank for all reasonable
costs incurred by the Bank in connection with administering this Agreement.
11.7 Attorneys' Fees. The Borrowers shall reimburse the Bank for any reasonable
costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and including
any amendment, waiver, "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or arbitrator. As
used in this paragraph, "attorneys' fees" includes the allocated costs of
in-house counsel.
11.8 Joint and Several Liability.
(a) Each Borrower agrees that it is jointly and severally liable to the Bank
for the payment of all obligations arising under this Agreement, and that such
liability is independent of the obligations of the other Borrower(s). The Bank
may bring an action against any Borrower, whether an action is brought against
the other Borrower(s).
(b) Each Borrower agrees that any release which may be given by the Bank to
the other Borrower(s) or any guarantor will not release such Borrower from its
obligations under this Agreement.
(c) Each Borrower waives any right to assert against the Bank any defense,
setoff, counterclaim, or claims which such Borrower may have against the other
Borrower(s) or any other party liable to the Bank for the obligations of the
Borrowers under this Agreement.
(d) Each Borrower agrees that it is solely responsible for keeping itself
informed as to the financial condition of the other Borrower(s) and of all
circumstances which bear upon the risk of nonpayment. Each Borrower waives any
right it may have to require the Bank to disclose to such Borrower any
information which the Bank may now or hereafter acquire concerning the financial
condition of the other Borrower(s).
(e) Each Borrower waives all rights to notices of default or nonperformance
by any other Borrower under this Agreement. Each Borrower further waives all
rights to notices of the existence or the creation of new indebtedness by any
other Borrower.
(f) The Borrowers represent and warrant to the Bank that each will derive
benefit, directly and indirectly, from the collective administration and
availability of credit under this Agreement. The Borrowers agree that the Bank
will not be required to inquire as to the disposition by any Borrower of funds
disbursed in accordance with the terms of this Agreement.
(g) Each Borrower waives any right of subrogation, reimbursement,
indemnification and contribution (contractual, statutory or otherwise),
including without limitation, any claim or right of subrogation under the
Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute, which such
Borrower may now or hereafter have against any
other Borrower with respect to the indebtedness incurred under this
Agreement. Each Borrower waives any right to enforce any remedy which the Bank
now has or may hereafter have against any other Borrower, and waives any benefit
of, and any right to participate in, any security now or hereafter held by the
Bank.
11.9 One Agreement. This Agreement and any related security or other agreements
required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the
Bank and
the Borrowers concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrowers concerning this credit; and
(c) are intended by the Bank and the Borrowers as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
11.10 Notices. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on the
signature page of this Agreement, or to such other addresses as the Bank and the
Borrowers may specify from time to time in writing.
11.11 Headings. Article and paragraph headings are for reference only and shall
not affect the interpretation or meaning of any provisions of this Agreement.
11.12 Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
11.13 Prior Agreement Superseded. This Agreement supersedes the Business Loan
Agreement (Receivables and Inventory) entered into as of March 18, 1996, between
the Bank and the Borrowers, and any credit outstanding thereunder shall be
deemed to be outstanding under this Agreement.
This Agreement is executed as of the date stated at the top of the first page.
Bank of America Xxxxxxxx, Inc.
National Trust and Savings Association
S/ Xxxxxxx Xxxxxxxx /s/ X. X. Xxxxxxx
by: Xxxxxxx Xxxxxxxx By:
Title: Vice President Title
Xxxxxxxx Store I, Inc.
x X. X. Xxxxxxx
Xxxxxxxx Store II, Inc.
X X. X. Xxxxxxx
Xxxxxxxx International, Inc.
X X. X. Xxxxxxx
Xxxxxxxx U.K., Ltd.
X X. X. Xxxxxxx
Address where notices to the Bank Address where notices to the Borrowers
are to be sent: are to be sent:
San Diego RCBO #1450 0000 Xxxxx Xxxxxx Xxxx 000 X Xxxxxx Xxxxx 000 Xxxxxxxx, XX
00000 Xxx Xxxxx, XX 00000
EXHIBIT 10(r)(2)
