Exhibit 10.2
BUSINESS LOAN AGREEMENT WITH COVENANTS
THIS BUSINESS LOAN AGREEMENT WITH COVENANTS (this "Agreement") is made
this 12 day of August, at Cleveland, Ohio, by and among HOME RETAIL HOLDINGS,
INC. (formerly known as Xxxxxxx Companies, Inc., and the surviving entity of a
merger between Xxxxxxx Companies, Inc. and Home Retail Acquisition Corp.), a
Delaware Corporation, THE COOKSTORE, INC, an Ohio Corporation, and THE COOKSTORE
WORTHINGTON, INC., an Ohio Corporation, jointly and severally, (collectively,
the "Borrower", and each a "Borrower", unless the context otherwise requires),
with their principal place of business located at 0000 Xxxxxxx Xxxxx, Xxxxxxxx,
Xxxx 00000, and LIBERTY BIDCO INVESTMENT CORPORATION, a Michigan Corporation
("BIDCO"), at 00000 Xxxxxxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxxxxxx
00000-0000. This Agreement is intended to, and shall be, deemed effective as of
the Effective Date of the Reorganization Plan described below. Furthermore, this
Agreement and the financing described herein is intended by the parties hereto
to constitute the Exit Financing as that term is described in the Reorganization
Plan.
WHEREAS, the Borrowers filed for protection under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court, Southern
District of Ohio, Eastern Division, Case No. 97-60560, et seq. (the "Bankruptcy
Case"); and
WHEREAS, an Amended Plan of Reorganization Of Xxxxxxx Companies, Inc.,
The Cookstore, Inc., and The Cookstore Worthington, Inc., dated June 24, 1998,
As Modified (the "Reorganization Plan"), has been Confirmed on July 10, 1998 by
the Bankruptcy Court (the "Confirmation Order") in the Bankruptcy Cases,
enabling the Borrowers to emerge from the Bankruptcy Cases as viable going
businesses, provided that the Borrowers obtain appropriate exit financing;
WHEREAS, during the pendency of the Bankruptcy Cases, Fremont Financial
Corporation, a California Corporation ("Fremont") lent up to $1,500,000 to The
Cookstore, Inc. and The Cookstore Worthington, Inc. pursuant to a certain Loan
and Security Agreement, Promissory Notes, Guarantees and other loan documents
dated April 23, 1998 (collectively, the "Fremont Financing Agreement"); and
WHEREAS, the Borrowers and BIDCO desire to payout, terminate and
replace the Fremont Financing Agreement by and through this Agreement;
NOW, THEREFORE, in consideration of the terms, covenants and conditions
hereinafter set forth, the above recitals which are incorporated herein by
reference, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. EXIT FINANCING: BIDCO shall lend or otherwise make available to
Borrower, upon the satisfaction of the terms and conditions hereinafter
set forth, and Borrower may borrow from BIDCO, the aggregate principal
sum of One Million Three Hundred Thousand Dollars ($1,300,000.00) (the
"Exit Financing") together with interest thereon calculated on the
basis of a 360 day year, counting the actual number of days elapsed, at
the rate of:
three (3) percentage points above the rate published by the
Wall Street Journal for the first business day of every month
as the "prime" rate per annum (the "Note Rate"), until
maturity. The "prime" rate published for the first business
day of each month will change the Note Rate effective for that
month and shall be used to calculate the payment due (whether
interest only or principal and interest, as set forth below)
on the last business day of that month. The "prime" rate may
not necessarily be the lowest interest rate at which BIDCO is
willing to extend its credit facilities, nor is it necessarily
the interest rate used by BIDCO for its most credit-worthy
customers. After maturity hereof, the interest rate on all
principal or interest outstanding, whether by acceleration or
otherwise, shall be eleven (11) percentage points above such
"prime" rate.
Any and all advances for the Exit Financing shall be evidenced by a
Promissory Note (the "$1,300,000 Note").
The funding of the Exit Financing is expressly subject to the following
criteria being met to the sole satisfaction of BIDCO: favorable
findings upon completion of due diligence by BIDCO; subordination of
officer and shareholder debt to the obligations owed to BIDCO; the
execution and delivery of a valid and binding definitive acquisition
agreement between Home Retail Holdings, Inc and Aropi, Incorporated
upon terms acceptable to BIDCO.
Borrower acknowledges that the Exit Financing shall be funded in the
following manner, and for the following purposes:
(i) $1,053,373.69 has been simultaneously herewith paid via wire
transfer to Fremont being an amount equal to the total
principal and accrued interest then owed by the Borrowers to
Fremont (and to any and all participants in the Fremont
Financing Agreement); and
(ii) The remaining balance of $246,626.31 shall be wire transferred
to such account or accounts as shall be designated by
Borrowers in a separate written Draw Instruction, to be used
for the working capital of the Borrowers to enable them to
cause the Reorganization Plan to become effective and the
Borrowers emerge as viable going businesses from the
Bankruptcy Cases.
2. EXIT FINANCING WARRANTS: Effective on even date herewith, Home Retail
Holdings, Inc. shall execute and deliver to BIDCO Warrants for the
purchase of five percent (5%) of Home Retail Holdings, Inc.'s Common
Stock and Class B Common Stock on a fully diluted basis as of August
11, 1998 upon such terms and at an exercise price of $.01 as adjusted
pursuant to the Warrant of even date, as are acceptable to BIDCO in
accordance with the Letter of Understanding (Revised) dated August 5,
1998, between BIDCO and Home Retail Holdings, Inc. Such Warrants shall
have registration rights that provide BIDCO the right to have
twenty-five percent (25%) of the Borrower's stock sold as a part of the
first following securities registration conducted by the Borrower, and
any remaining portion sold pursuant to subsequent securities
registrations.
3. PAYMENT: Commencing on the last business day of the month in which the
Closing occurs, Borrower shall pay the outstanding obligations as
follows:
FIRST SIX MONTHS: Payment of interest only, based on the Note
Rate, due on the last business day of each month, commencing
on August 31, 1998 through and including January 31, 1999.
PAYMENT UPON PUBLIC OFFERING OR PRIVATE PLACEMENT: Home Retail
Holdings, Inc. will make every reasonable effort to accomplish
and complete a public offering of additional capital stock to
be traded on the NASDAQ or a recognized stock market in
October, 1998. In such public offering, Home Retail Holdings,
Inc. will cause sufficient shares of its Class A Common Stock
to be included in the registration statement such that up to
twenty-five percent (25%) of the shares received by BIDCO upon
the exercise of its Warrant shall be sold pursuant to such
public offering. Furthermore, Home Retail Holdings, Inc. will
make every reasonable effort to accomplish similar and
additional public offerings in order that any remaining
portion of shares shall be registered in such subsequent
offerings, which render such shares freely tradeable by BIDCO
or its assignee. Furthermore, Home Retail Holdings, Inc. shall
reserve and make available such shares necessary until the
exercise of the Warrant. In the event due to market conditions
or other business factors Home Retail Holdings, Inc. does not
conduct the public offering of additional capital stock, it
has agreed that it shall conduct a private placement offering
of additional capital stock (Borrower shall use its best
efforts to sell all of the stock offered through the private
placement offering, although Home Retail Holdings, Inc. nor
any other Borrower can guaranty or assure BIDCO that such
stock so offered will be fully subscribed). The Exit
Financing, as evidenced by this Agreement and the $1,300,000
Note, shall be paid in full with the proceeds of the public
offering or private placement offering, whichever occurs
first.
MATURITY: In all events, payment in full of the obligations
hereunder shall be due January 31, 1999 (the "Maturity Date"),
at which time the entire balance of principal of the Exit
Financing, as evidenced by this Agreement, and the $1,300,000
Note, together with all accrued but unpaid interest, shall be
due and immediately payable.
Each payment received by BIDCO shall be applied first to all
outstanding fees and expenses due to BIDCO, then to accrued but unpaid
interest, then to principal. All payments shall be made to BIDCO at the
address set forth above or as otherwise directed in writing to
Borrower. It is understood and agreed that the amortization of the loan
will result in a "balloon payment" on the Maturity Date and there has
been no agreement by BIDCO to refinance such balloon payment.
In the event any payment is not received by BIDCO on or before the date
when due, a late fee in the amount of five percent (5%) of the past-due
payment shall be immediately payable by Borrower to BIDCO.
4. PREPAYMENT: The $1,300,000 Note may be prepaid at any time and to the
extent such Prepayment occurs, Borrower shall pay to BIDCO a prepayment
penalty in an amount equal to twenty percent (20%) of the amount so
prepaid, which shall be due at the time of such Prepayment. The term
"Prepayment" shall include any payment or reduction of the balance due
under the $1,300,000 Note, regardless of whether such payment or other
reduction, (a) is voluntary or involuntary; (b) is occasioned by
BIDCO's acceleration of the $1,300,000 Note; (c) is made by Borrower or
by a third party; (d) results from BIDCO's receipt or collection of
proceeds of its collateral, including condemnation awards; (e) results
from BIDCO's exercise of its right of setoff; and/or (f) is made during
a bankruptcy, reorganization or other proceeding, or is made pursuant
to any plan of reorganization or liquidation; provided, however, the
term "Prepayment" shall not include (1) payment of the $1,300,000 Note
from the proceeds of the public stock offering or private placement
stock offering described in Section 3 above, or (2) an amendment or
restructuring of the Loan and Note Agreement whereby BIDCO hereafter
extends additional or substitute financing or refinancing to Borrowers.
Notwithstanding any prepayment of the $1,300,000 Note, the Warrant,
executed and delivered by Borrower on even date herewith, shall remain
in full force and effect in accordance with the terms thereof.
5. SECURITY: To secure the payment of the $1,300,000 Note, this Agreement,
and any other present or future liability of Borrower to BIDCO, whether
several, joint, or joint and several, Borrower hereby pledges and
grants to BIDCO a first continuing security interest in all of
Borrower's accounts, chattel paper, instruments and general
intangibles, machinery and equipment, inventory and supplies, all
furniture and fixtures and interest in joint ventures or other
entities, as more fully defined in the Security Agreement, of even
date, and all additions, accessions, replacements, substitutions,
increments, proceeds and products thereof and thereto, whether now
owned or hereafter acquired ("Collateral").
6. REPRESENTATIONS AND WARRANTIES: Borrower represents that:
6.1 Home Retail Holdings, Inc. is a corporation duly organized and
validly existing under the laws of the State of Delaware, in
good standing, and duly licensed or qualified as a foreign
corporation in all states wherein the nature of its property
owned or business transacted by it makes such licensing or
qualification necessary;
6.2 The Cookstore, Inc. is a corporation duly organized and
validly existing under the laws of the State of Ohio, in good
standing, and duly licensed or qualified as a foreign
corporation in all states wherein the nature of its property
owned or business transacted by it makes such licensing or
qualification necessary;
6.3 The Cookstore Worthington, Inc. is a corporation duly
organized and validly existing under the laws of the State of
Ohio, in good standing, and duly licensed or qualified as a
foreign corporation in all states wherein the nature of its
property owned or business transacted by it makes such
licensing or qualification necessary;
6.4 All necessary corporate proceedings of each Borrower have been
duly taken to authorize the execution, delivery and
performance of the Loan Documents by Borrower and the
consummation of the loan transaction;
6.5 The execution and delivery of this Agreement, the $1,300,000
Note, the Security Agreement, and the Warrant (collectively,
the "Loan Documents") to which Borrower is a party are within
the power and authority of Borrower. The Loan Documents to
which Borrower is a party will be a legal, valid and binding
obligation of Borrower, enforceable against Borrower in
accordance with their respective terms except to the extent
that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of
creditor's rights generally and subject to general principles
of equity. The obligation of Borrower to pay the principal of
the $1,300,000 Note, together with all interest accrued
thereon and other charges, is absolute and unconditional, and
there exists no right of setoff or recoupment, counterclaim,
cross-claim or defense of any nature whatsoever to payment of
the Obligations;
6.6 Neither the execution nor delivery of this Agreement, the
other Loan Documents, or the consummation of the loan
transaction contemplated hereby, will conflict with or result
in a breach of, or constitute a default under, any of the
terms, obligations, covenants, conditions or provisions of:
(1) the governing documents (the Articles of Incorporation,
By-Laws or Code of Regulations) of Borrower, or any other
corporate restriction, or (2) any contract, indenture,
mortgage, deed of trust, pledge, bank loan or credit agreement
or instrument to which Borrower is now a party, or by which
its properties may be bound or affected, or (3) the
Reorganization Plan and/or Confirmation Order, or (4) any
judgment, order, writ, injunction, decree or demand of any
court, arbitrator, grand jury, or any governmental agency, or
result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or
asset of Borrower (except in the favor of BIDCO) under the
terms or provisions of any of the foregoing. Borrower is not
in default of the performance, observance or fulfillment of
any of the terms, obligations, covenants, conditions or
provisions contained in the Reorganization Plan;
6.7 The balance sheets, profits and loss statements, and
statements of income and retained earnings and statement of
cash flows of Borrower, previously furnished to BIDCO, are
true and correct in all material respects and fairly represent
the financial condition of Borrower as at the dates of said
financial statements and the results of their operations for
the periods ending on said dates. Borrower does not have any
material contingent obligations, liabilities for taxes,
long-term leases, or unusual forward or long-term commitments
not disclosed by, or reserved against in, said balance sheets
or the notes thereto; and at the present time there are no
material unrealized or anticipated losses from any unfavorable
commitments of Borrower. Said financial statements were
prepared in accordance with generally accepted accounting
procedures consistently applied ("GAAP"). Since the date of
the latest of such statements there has been no material
adverse change in the financial condition of Borrower from
that set forth in said balance sheets as at that date.
6.8 Borrower has good and marketable title to all of its
properties and assets, including those which constitute the
Collateral, free and clear of any liens, charges, encumbrances
or other adverse claims, whether legal or equitable, except
for the first security interest of BIDCO upon the Collateral
as of the date first set forth above.
6.9 There are no actions or proceedings pending (including,
without limitation, any adversary proceedings in the
Bankruptcy Case) by or against a Borrower before any court or
administrative agency, and Borrower has no knowledge or notice
of any pending, threatened or imminent litigation,
governmental investigations, or claims, complaints, actions or
prosecutions involving a Borrower, except for the Bankruptcy
Case and such ongoing collection matters in which the Borrower
is the plaintiff.
6.10 Borrower has filed all federal, state and local tax returns
(including, but not limited to, sales taxes, personal property
taxes, franchise taxes and income taxes) together with all
other reports which it is required by law to file. Borrower
has paid all taxes, assessments and other similar charges that
are due and payable prior to such taxes becoming a delinquency
or lien against the Borrower's property (except for any such
state and local taxes, assessments or charges, in an amount
not in excess of $92,000 in the aggregate, which are due and
payable with respect to periods prior to the Petition Date of
the Bankruptcy Case, which taxes shall be duly paid in
accordance with the terms of the Reorganization Plan).
6.11 Each Borrower is solvent and able to pay all of its debts
(including trade debts) as they come due. No transfer of
property is being made by a Borrower, and no obligation is
being incurred by a Borrower in connection with the
transactions contemplated by this Agreement or the other Loan
Documents with the intent to hinder, delay or defraud either
present or future creditors of Borrower.
6.12 Borrower is in compliance in all material respects with the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"). No Reportable Event or Prohibited Transaction has
occurred or is continuing with respect to any Plan; no
circumstances exist which would entitle the PBGC to institute
proceedings to terminate or appoint a trustee to administer a
Plan; the PBGC has instituted no such proceedings; neither
Borrower nor any Commonly Controlled Entity has completely or
partially withdrawn from a Multiemployer Plan; Borrower and
each Commonly Controlled Entity have met their respective
minimum funding requirements under ERISA with respect to all
of their Plans, and the present value of all vested benefits
under each Plan does not exceed the fair market value of all
Plan assets allocable to such benefits, as determined on the
most recent valuation date of the Plan in accordance with
ERISA; and neither Borrower nor any Commonly Controlled Entity
has incurred any liability to the PBGC.
6.13 Borrower is in compliance and conformity, in all material
respects, with all laws (including without limitation all
applicable foreign, federal, state and local laws, including
environmental laws, safety laws, pension laws and employment
or labor laws), ordinances, rules, regulations and all other
legal requirements, the violation of which would have a
material adverse effect on Borrower's business, operations,
properties, assets or financial condition. Borrower has not
received any notice or order of any violation or claim of
violation of any such law, ordinance, rule, regulation, or
requirement from any governmental authority wherein the effect
of any such violation or violations in the aggregate may have
a material adverse effect on the business, properties,
operations, or financial condition of Borrower.
7. AFFIRMATIVE COVENANTS: So long as the $1,300,000 Note remains
outstanding, as regards its business operations, Borrower shall:
7.1 Maintain insurance with financially sound and reputable
insurers covering its properties and business against those
casualties and contingencies and in the types and amounts as
shall be in accordance with sound business practices and
industry standards. All such policies shall name BIDCO as a
loss payee, as its interests may appear, and must provide for
not less than thirty (30) days prior written notice to BIDCO
of any cancellation, change or modification of any term,
condition or amount of protection therein. Such insurance
policy shall be issued by insurance carriers and BIDCO may
reject any insurance carrier with a "Best Insurance Report"
rating of less than A, and a financial size category of less
than Class X.
7.2 Maintain its existence and business operations as presently in
effect in accordance with all applicable laws and regulations,
pay its debts and perform all of its obligations when due
under normal terms (including, but not limited to all debts
and obligations set forth in the Loan Documents), and pay all
taxes, assessments, fees and other governmental monetary
obligations on or before the date they are last payable
without penalty, except as they may be contested in good faith
if they have been properly reflected on its books and, at
BIDCO's request, adequate funds or security has been pledged,
escrowed or reserved to insure payment.
7.3 Maintain proper books, records and accounts in accordance with
GAAP, consistent with financial statements previously
submitted to BIDCO.
7.4 Furnish to BIDCO whatever information, books and records BIDCO
may reasonably request, including at a minimum:
A. Within thirty (30) days after each month, a balance
sheet as of the end of that month, and a statement of
profit and loss and surplus (including a comparison
to previously submitted budgets), for that month and
from the beginning of that fiscal year to the end of
that month.
B. Within ninety (90) days after, and as of the end of
each of its fiscal years, detailed financial and
operating statements, including a balance sheet and a
statement of profit and loss and surplus. The
statements shall be audited by an independent
certified public accounting firm reasonably
acceptable to BIDCO.
C. As soon as they become available, Borrower's Form
10-Q , 10-K or 8-K, and any other filings made by
Borrower with the Securities Exchange Commission.
All financial and operating statements submitted to BIDCO
shall be prepared in accordance with GAAP, applied on a
consistent basis, and shall be accompanied by a Certificate of
Compliance, in the form attached as Exhibit A, executed by an
officer of Borrower.
From time to time upon request by BIDCO, and as BIDCO may
reasonably require, such further information regarding the
business affairs and financial condition of Borrower,
including, but not limited to, accounts payable and accounts
receivable agings, accounting and management recommendations
and a statement from Borrower certified by Borrower's
Secretary or Assistant Secretary affirming Borrower's
compliance with all terms and conditions of this Agreement and
that no Event of Default or unmatured default exists (the
"No-Default Certificates")
7.5 Furnish to BIDCO a written and detailed, forecasted annual
operating budget for each fiscal year during the Term not less
than sixty (60) days prior to the beginning of the subject
fiscal year.
7.6 Furnish BIDCO with copies of all of Borrower's material
correspondence, if any, with Borrower's shareholders,
directors, executive committees and the financial community.
7.7 Hold Board of Directors meetings no less than once each
quarter annum and invite BIDCO to send a representative to
each Directors meeting.
7.8 Notify BIDCO in the event that Borrower is or reasonably
expects to be in default of any of the provisions hereof.
7.9 Borrower will execute such other and further documents and
instruments as BIDCO may request to implement the provisions
of this Agreement and to perfect and protect the security
interests to BIDCO contemplated herein.
7.10 Home Retail Holdings, Inc. will make every reasonable effort
to accomplish and complete a public offering of additional
capital stock to be traded on the NASDAQ or a recognized stock
market in October, 1998. In such public offering, Home Retail
Holdings, Inc. will cause sufficient shares of its Class A
Common Stock to be included in the registration statement such
that up to twenty-five percent (25%) of the shares received by
BIDCO upon the exercise of its Warrant shall be sold pursuant
to such public offering. Furthermore, Home Retail Holdings,
Inc. will make every reasonable effort to accomplish similar
and additional public offerings in order that any remaining
portion of shares shall be registered in such subsequent
offerings, which render such shares freely tradeable by BIDCO
or its assignee. Furthermore, Home Retail Holdings, Inc. shall
reserve and make available such shares necessary until the
exercise of the Warrant. In the event due to market conditions
or other business factors Home Retail Holdings, Inc. does not
conduct the public offering of additional capital stock, it
has agreed that it shall conduct a private placement offering
of additional capital stock (Borrower shall use its best
efforts to sell all of the stock offered through the private
placement offering, although Home Retail Holdings, Inc. nor
any other Borrower can guaranty or assure BIDCO that such
stock so offered will be fully subscribed). The proceeds
sought from such public and/or private financing will be
sufficient to pay in full the Exit Financing, and the actual
proceeds (after payment of the expenses of such offering)
shall be first used to pay in full the $1,300,000 Note,
together with any accrued but unpaid interest.
8. NEGATIVE COVENANTS: So long as the $1,300,000 Note remains outstanding,
as regards its business operations, Borrower will not without the
written consent of BIDCO:
8.1 Permit the ratio of its current assets to its current
liabilities at any time to be less than:
1.25:1.00
The above ratio of current assets to current liabilities shall
be computed on a basis consistent with financial statements
previously submitted to BIDCO and in conformance with GAAP.
8.2 Permit its net worth at any time to be less than:
($600,000.00) through 11/30/98, and $500,000.00 by
12/31/98 and thereafter.
The above ratio of net worth shall be computed on a basis
consistent with financial statements previously submitted to
BIDCO and in conformance with GAAP. For the purpose of this
calculation, net worth shall be reduced by loans to
stockholders and related party receivables.
8.3 Acquire, repurchase, redeem or retire any shares of any class
of its capital stock, or declare or pay dividends or make any
other distributions upon any shares of any class of its
capital stock, without the consent of BIDCO, which shall not
be unreasonably withheld.
8.4 Incur, or permit to remain outstanding, debt for borrowed
money or installment obligations, except debt to BIDCO,
unsecured debt incurred in the ordinary course of business,
debt disclosed in writing to BIDCO prior to the date hereof
(including all obligations pursuant to the Reorganization
Plan) (the "Permitted Debt"). For the purposes of this
covenant, the sale of Borrower's accounts receivable shall be
deemed the incurring of debt for borrowed money.
8.5 Create or permit to exist any lien on any of its property,
real or personal, except: liens to BIDCO; liens incurred in
the ordinary course of business securing current nondelinquent
liabilities for taxes, worker's compensation, unemployment
insurance, social security and pension liabilities, and liens
for taxes being contested in good faith.
8.6 Except in the ordinary course of business or with the consent
of BIDCO (which consent shall not be unreasonably withheld),
consolidate with or merge into any corporation or business
entity, or permit any corporation or business entity to merge
into it (provided, that The Cookstore, Inc. and/or The
Cookstore Worthington, Inc. may be merged into their parent,
Home Retail Holdings, Inc.); nor convey, lease or sell all or
a material portion of its assets or business, nor lease,
purchase or otherwise acquire all or a material portion of the
assets or business of any other person, corporation or
business entity.
8.7 Guarantee or otherwise become or remain secondarily liable on
the undertaking of another, except on endorsement for deposit
and collection in the ordinary course of business.
8.8 Purchase or acquire any securities of, or make any loans or
advances to, or investment in, any person, firm or
corporation, except obligations of the United States
Government, open market commercial paper rated one of the top
two ratings by a rating agency of recognized standing and/or
certificates of deposit in commercial banks; provided,
however, that so long as Borrower is not then in default
hereunder or the payment thereof would cause the Borrower to
be in default hereunder, Borrower may also pay the Advisory
Agreement payments as approved by the Reorganization Plan to
Cambridge Partners, LLC, such Advisory Agreement payments
being subordinated at all times to the indebtedness owed to
BIDCO hereunder.
8.9 Create any subsidiary or any other class of capital stock
other than the currently existing classes of Common Stock or
change its fiscal year.
8.10 Enter into any partnership or joint venture which shall be
related to the activities of Borrower.
8.11 Allow Home Retail Holdings, Inc. to sell, transfer or
otherwise dispose of any of their shares of Common Stock of
The Cookstore, Inc. or The Cookstore Worthington, Inc., to any
other person or entity.
8.12 Purchase or redeem any shares of any class of its capital
stock, except upon the exercise by BIDCO of the Put of the
Warrant.
9. EVENTS OF DEFAULT/ACCELERATION: There shall be a default of the
$1,300,000 Note and this Agreement, and the $1,300,000 Note and this
Agreement and all other liabilities of Borrower to BIDCO shall
immediately mature and be due and payable, without notice or demand,
unless BIDCO otherwise elects, upon the occurrence of any of the
following events:
9.1 Default in the payment of the $1,300,000 Note or any other
obligation owing to BIDCO or any other creditor, other than
unsecured debt incurred during the ordinary course of
business, and such default continues for a period of ten (10)
days without cure.
9.2 Default in the performance of any term or condition of this
Agreement or in any document given as security for the
$1,300,000 Note, or in any other agreement between Borrower
and any creditor, and such default continues without cure for
a period of ten (10) days.
9.3 Any warranty, representation, or statement made or furnished
to BIDCO by Borrower hereunder or otherwise is or becomes
untrue in any material respect.
9.4 If any "reportable event" as defined in ERISA occurs.
9.5 The dissolution, termination of existence, suspension of
business (including failure to open for business for more than
five (5) consecutive days), or insolvency of Borrower; or the
appointment of a receiver for any part of the property of
Borrower; or the making of an assignment for the benefit of
creditors by Borrower; or the commencement of bankruptcy or
insolvency proceedings by Borrower; or the commencement of
bankruptcy or insolvency proceedings against Borrower which
are not dismissed within thirty (30) days; or the inability of
Borrower generally to pay its debts as they mature; or death
of the President of Borrower (unless a reasonable replacement
is substituted within thirty (30) days).
9.6 The material loss, theft, damage or destruction, without
insurance, or the encumbrance to or of any material part or
all of the Collateral other than as permitted in Section 8.5.
9.7 The entry, placement or issuance of any judgment, levy, lien,
writ of attachment, writ of garnishment, writ of execution or
similar process, against Borrower or any of Borrower's
property unless they do not have a material adverse impact on
Borrower's financial condition.
9.8 The sale of a material part of Borrower's assets or business,
outside the ordinary course of business, without BIDCO's
written consent which shall not be unreasonably withheld.
9.9 BIDCO shall deem itself insecure in good faith believing that
the prospect of payment of liabilities or performance under
the $1,300,000 Note is materially impaired.
9.10 Any event which results in the acceleration of the maturity of
any material indebtedness of Borrower to BIDCO or to others
under any notice, indenture, agreement or undertaking.
9.11 So long as BIDCO holds the Warrant; failure to observe and
perform any of the material terms and conditions of the
Warrant, of even date, entered into by Borrower and BIDCO.
10. REMEDIES ON DEFAULT: If the $1,300,000 Note is not paid at maturity,
whether by acceleration or otherwise, BIDCO shall have all of the
rights and remedies provided by any applicable law or agreement.
Further, and without extending the maturity date thereof, or otherwise
limiting the scope or nature of remedies of BIDCO in the event of a
default hereunder, BIDCO shall have the right, but not the obligation,
upon notice to Borrower, to deem that any or all said due and unpaid
interest payments are to be converted to and included as unpaid
principal under the $1,300,000 Note, and payment of principal and
interest thereon shall become due and payable from the due date
according to the terms of such $1,300,000 Note. Any requirement of
reasonable notice shall be met if BIDCO sends the notice to Borrower at
least ten (10) days prior to the date of sale, disposition or other
event giving rise to the required notice. BIDCO is authorized to cause
all or any part of the Collateral to be transferred to or registered in
its name or in the name of any other person, firm or corporation, with
or without designation of the capacity of the nominee. Borrower shall
be liable for any deficiency remaining after disposition of any
Collateral.
11. AROPI, INC. - SUBORDINATED DEBT - FIRST RIGHT OF REFUSAL:
11.1 Home Retail Holdings, Inc. has entered into a written
agreement with Aropi, Incorporated (the "Stock Agreement"),
whereby Home Retail Holdings, Inc. shall purchase the
outstanding capital stock of Aropi, Incorporated. Borrower
hereby agrees and confirms that Borrower shall use its best
efforts to consummate the transaction upon the terms currently
in effect, that the terms of the Stock Purchase Agreement with
Aropi, Incorporated will not be changed without the prior
consent of BIDCO, and that Borrower shall not consummate the
Stock Purchase Agreement with Aropi, Incorporated through any
person or entity other than Borrower without BIDCO's prior
written consent. BIDCO shall have a first right of refusal, in
BIDCO's sole discretion, to extend a subordinated loan to
Borrower upon terms to be mutually agreed, in order to
partially finance the Aropi, Incorporate stock acquisition by
Borrower.
11.2 If at any time during the three (3) year period commencing
upon the earlier of (i) the date the $1,300,000 Note is repaid
in full, or (ii) January 31, 1999, the Borrower or any one or
more of the Borrowers desires to obtain financing by and
through a subordinated indebtedness note, debenture or other
such instrument from a third party creditor, then and in that
event BIDCO shall have a first right of refusal, in BIDCO's
sole discretion, to extend such a subordinated loan to
Borrower upon terms to be mutually agreed. Commencing upon the
earlier of (x) the prepayment of the $1,300,000 Note or (y)
January 31, 1999, Borrower shall pay a facility fee equal to
two percent (2%) of the average unused portion of BIDCO's
approved lending limit for such subordinated debt facility
less any advances to Borrower thereunder (measured as of the
end of each anniversary period therefor) unless BIDCO declines
to extend such a subordinated loan.
12. MISCELLANEOUS:
12.1 No delay on the part of BIDCO in the exercise of any right or
remedy shall operate as a waiver. No single or partial
exercise by BIDCO of any right or remedy shall preclude any
other future exercise of it or the exercise of any other right
or remedy. No waiver or indulgence by BIDCO of any default
shall be effective unless in writing and signed by BIDCO, nor
shall a waiver on one occasion be construed as a bar to or
waiver of any such right on any future occasion. Any election
to waive its right of acceleration shall not be construed as a
bar to or waiver of any right to elect acceleration on a
future occasion. An election by BIDCO to convert any unpaid
interest payment to principal shall not require BIDCO to make
a similar election in respect of subsequent unpaid interest
payments hereunder.
12.2 Any reference to BIDCO shall include any holder of the
$1,300,000 Note. The $1,300,000 Note is assignable and
transferrable individually or collectively upon written notice
to and consent of Borrower (such consent not to be
unreasonably withheld).
12.3 The $1,300,000 Note, and this Agreement are governed by Ohio
law. This Agreement is valid and binding upon the parties,
their respective successors, assigns, heirs and personal
representatives. This Agreement may only be amended in a
writing signed by all of the parties hereto.
12.4 Within thirty (30) days of Closing, Borrower shall obtain a
Landlord Waiver on terms reasonably acceptable to BIDCO with
respect to each current and future leased facility, store,
warehouse and/or office space.
12.5 Borrower shall pay a facility fee of $53,000 upon the funding
hereof of the Exit Financing. Borrower is liable to BIDCO for
all reasonable costs and expenses, of every kind, incurred in
the making or collection of the $1,300,000 Note, including,
without limitation, actual attorney fees and court costs.
These costs and expenses shall include, without limitation,
any costs or expenses incurred by BIDCO in any bankruptcy,
reorganization, insolvency or other similar proceeding.
12.6 All notices required or permitted under the $1,300,000 Note,
or this Agreement shall be in writing and personally
delivered, sent by certified mail, return receipt requested or
by a reliable overnight delivery service, to the respective
address above, or to any other address required by the
respective party, or by facsimile transmission with
confirmation of receipt, and notice shall be deemed given on
the earlier of: a) two (2) business days after notice is
mailed as set forth above; or b) upon actual receipt.
12.7 The parties agree to perform any further acts and to execute
and deliver any additional documents which may be reasonably
necessary to carry out the intent and provisions of this
Agreement.
12.8 WAIVER OF JURY TRIAL. BORROWER AND BIDCO EACH WAIVES ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN BIDCO AND
BORROWER ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THE TRANSACTION RELATED HERETO. This waiver shall
not in any way affect, waive, limit, amend or modify BIDCO's
ability to pursue remedies pursuant to any confession of
judgment or cognovit provision contained in the $1,300,000
Note, or any other instrument, document or agreement between
BIDCO and Borrower.
12.9 If any provision of this agreement is invalid, it shall be
ineffective only to the extent of its invalidity, and the
remaining provisions shall be valid and effective.
12.10 Borrower expressly waives presentment, demand, notice (other
than notice of an event of default if otherwise required by
this Agreement), protest, and all other demands and notices in
connection with the delivery, acceptance, performance, default
or enforcement of the $1,300,000 Note, or this Agreement.
12.11 At no time shall the interest payable hereunder be deemed to
exceed the maximum interest rate permitted to be paid by
Borrower or received by BIDCO with respect to the indebtedness
represented by the $1,300,000 Note, or this Agreement under
applicable law (the "Legal Rate"). In the event any interest
is charged or received by BIDCO in excess of the Legal Rate,
Borrower acknowledges that any such excess interest shall be
the result of an accidental and bona fide error, and such
excess shall first be applied to reduce the principal then
unpaid hereunder (in inverse order of their maturities if
principal amounts are due in installments); second, applied to
reduce any obligation for other indebtedness of Borrower to
BIDCO; and third, any remaining excess returned to Borrower.
12.12 The headings herein are for convenience only, and shall not be
used for interpreting this Agreement. Wherever the context
requires, the singular shall include the plural, and the
masculine shall include the feminine and neuter.
12.13 This Agreement may be signed in multiple counterparts, and by
facsimile transmission, all of which, taken together, shall
constitute an original Agreement.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first set forth above.
WITNESS: HOME RETAIL HOLDINGS, INC.,
a Delaware Corporation
By: /s/ XXXX XXXXXX
------------------------------ -------------------------------
Xxxx Xxxxxx, Secretary
THE COOKSTORE, INC.,
an Ohio Corporation,
By: /s/ XXXX XXXXXX
------------------------------ -------------------------------
Xxxx Xxxxxx, Secretary
THE COOKSTORE WORTHINGTON, INC.,
an Ohio Corporation
By: /s/ XXXX XXXXXX
------------------------------ -------------------------------
Xxxx Xxxxxx, Secretary
LIBERTY BIDCO INVESTMENT CORPORATION
By: /s/ XXXXX X. XXXXXXXX
------------------------------ -------------------------------
Xxxxx X. Xxxxxxxx, President
