1
EXHIBIT 10.8
================================================================================
=======================================
LOAN AND SECURITY AGREEMENT
=======================================
BANKBOSTON RETAIL FINANCE INC.
AGENT FOR
THE LENDERS REFERENCED HEREIN
XXXXXXX, INC.
THE BORROWER
=======================================
March 3, 1999
================================================================================
2
TABLE OF CONTENTS
3
EXHIBITS
2-7 : Revolving Credit Note
4-2 : Related Entities
4-3 : Trade Names
4-6 : Locations, Leases, and Landlords
4-7 : Encumbrances
4-7(b) : Consigned Inventory
4-8 : Indebtedness
4-9 : Insurance Policies
4-11 : Capital Leases
4-14 : Taxes
4-17(a)(ii) : Hazardous Sites
4-18 : Litigation
5-4 : Borrowing Base Certificate
6-4(c) : List of Bonds
7-1 : DDA's.
7-2 : Credit Card Arrangements
4
LOAN AND SECURITY AGREEMENT BANKBOSTON RETAIL FINANCE INC.
AGENT
March ___, 1999
THIS AGREEMENT is made between
BankBoston Retail Finance Inc. (in such capacity, herein the
"AGENT"), a Delaware corporation with offices at 00 Xxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000, as agent for the ratable benefit of the
"LENDERS", who are, at present, those financial institutions identified
on the signature pages of this Agreement and who in the future are
those Persons (if any) who become "Lenders" in accordance with the
provisions of Section 2-21, below,
and
Xxxxxxx, Inc. (hereinafter, "Agent Borrower" and a
"Borrower"), an Ohio corporation with its principal executive offices
at 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxx, Xxxx 00000-0000 in consideration
of the mutual covenants contained herein and benefits to be derived
herefrom,
WITNESSETH:
ARTICLE I - DEFINITIONS:
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
"ACCEPTABLE FEDERAL TAX REFUND": Such portion of the Federal Tax Refund
as the Agent in its sole discretion from time to time
determines to be acceptable for borrowing, as to which Federal
Tax Refund, the Agent has a perfected security interest which
is prior and superior to all security interests, claims, and
all other Encumbrances other than Permitted Encumbrances.
"ACCEPTABLE INVENTORY": Such of the Borrower's Inventory, at such
locations, and of such types, character, qualities and
quantities, as the Agent in its sole discretion from time to
time determines to be acceptable for borrowing, as to which
Inventory, the Agent has a perfected security interest which
is prior and superior to all security interests, claims, and
all Encumbrances other than Permitted Encumbrances.
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
"accounts" as defined in the UCC, and also all: accounts,
accounts receivable, credit card receivables, notes, drafts,
acceptances, and other forms of obligations and receivables
and rights to payment for credit extended and for goods sold
or leased, or services rendered, whether or not yet earned by
performance; all "contract rights" as formerly defined in the
UCC; all Inventory which gave rise thereto, and all rights
associated with such Inventory, including the right of
stoppage in transit; all reclaimed, returned, rejected or
repossessed Inventory (if any) the sale of which gave rise to
any Account.
"ACH": Automated clearing house.
"ACCOUNT DEBTOR": Has the meaning given that term in the UCC.
"AFFILIATE": With respect to any two Persons, a relationship in which
(a) one holds, directly or indi-
3
5
rectly, not less than Twenty Five Percent (25%) of the capital
stock, beneficial interests, partnership interests, or other
equity interests of the other; or (b) one has, directly or
indirectly, the right, under ordinary circumstances, to vote
for the election of a majority of the directors (or other body
or Person who has those powers customarily vested in a board
of directors of a corporation); or (c) not less than Twenty
Five Percent (25%) of their respective ownership is directly
or indirectly held by the same third Person.
"AGENT": Is defined in the Preamble.
"AGENT'S FEE": Is defined in Section 2-11.
"AGENT'S RIGHTS AND REMEDIES": Is defined in Section 11-6.
"AVAILABILITY": Is defined in Section 2-1(b)(i).
"AVAILABILITY RESERVES": Such reserves as the Agent from time to time
determines in the Agent's discretion as being appropriate to
reflect the impediments to the Agent's ability to realize upon
the Collateral. Without limiting the generality of the
foregoing, Availability Reserves may include (but are not
limited to) reserves based on the following:
(i) Rent (based upon past due rent
and/or whether or not Landlord's
Waiver, acceptable to the Agent ,
has been received by the Agent );
provided, however, that solely in
the case of Borrower's retail
locations, the reserve for rent will
not exceed three months rent under
the applicable Lease.
(ii) In store customer credits.
(iii) Gift Certificates.
(iv) Frequent Shopper Programs.
(v) Layaways and Customer Deposits
(vi) Taxes and other governmental
charges, including, ad valorem,
personal property, and other taxes
which might have priority over the
security interests of the Agent in
the Collateral.
(vii) Year 2000 compliance.
"BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.
"BASE": The Base Rate announced from time to time by BankBoston, N.A.
(or any successor in interest to BankBoston, N.A.). In the
event that said bank (or any such successor) ceases to
announce such a rate, "Base" shall refer to that rate or index
announced or published from time to time as the Agent, in good
faith, designates as the functional equivalent to said Base
Rate. Any change in "Base" shall be effective, for purposes of
the calculation of interest due hereunder, when such change is
made effective generally by the bank on whose rate or index
"Base" is being set. In all events, interest which is
determined by reference to Base (or any successor to Base)
shall be calculated on a 360 day year and actual days elapsed.
"BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest
at the Base Margin Rate.
"BASE MARGIN RATE": The aggregate of Base plus Zero Percent (0.0%) per
annum, subject to adjustment, from time to time, based upon
the Interest Rate Pricing Grid.
"BLOCKED ACCOUNT": Is defined in Section 7-3.
"BORROWER": Is defined in the Preamble.
"BORROWING BASE": Is defined in Section 2-1(b)(ii).
"BUSINESS DAY": Any day other than (a) a Saturday or Sunday; (b) any
day on which banks in Boston,
4
6
Massachusetts, generally are not open to the general public
for the purpose of conducting commercial banking business; or
(c) a day on which the Agent is not open to the general public
to conduct business.
"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
liabilities which may be capitalized in accordance with GAAP.
"CAPITAL LEASE": Any lease which may be capitalized in accordance with
GAAP.
"CHANGE IN CONTROL": The occurrence of any of the following:
(a) The acquisition subsequent to the date of this
Agreement of 30% or more of the Voting Stock of the Borrower,
by any group of persons (within the meaning of the Securities
Exchange Act of 1934, as amended) or by any Person, of
beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission) holding as of the date of
this Agreement less than 30% of the Voting Stock of the
Borrower.
(b) The acquisition subsequent to the date of this
Agreement of an additional 5% or more of the Voting Stock of
the Borrower, by any group of persons (within the meaning of
the Securities Exchange Act of 1934, as amended) or by any
Person, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission) holding as of
the date of this Agreement more than 30% of the Voting Stock
of the Borrower.
(c) More than half of the persons who were directors
of the Borrower on the first day of any period consisting of
Twelve (12) consecutive calendar months (the first of which
Twelve (12) month periods commencing with the first day of the
month during which this Agreement was executed), cease, for
any reason other than death or disability, to be directors of
the Borrower.
"CHATTEL PAPER": Has the meaning given that term in the UCC.
"COLLATERAL": Is defined in Section 8-1.
"COMMITMENT" and "COMMITMENT PERCENTAGE": Subject to 2-21, the
following amounts and percentages:
----------------------------------------------- ---------------------------- ----------------------------
Commitment Commitment
Lender Amount (Percentages)
----------------------------------------------- ---------------------------- ----------------------------
National City Commercial Finance, Inc. $10,000,000 33.33%
----------------------------------------------- ---------------------------- ----------------------------
BankBoston Retail Finance Inc. $20,000,000 66.67%
----------------------------------------------- ---------------------------- ----------------------------
"CONCENTRATION ACCOUNT": Is defined in Section 7-3.
"COST": The lower of
(a) the calculated cost of purchases, as determined
from invoices received by the Borrower, the Borrower's
purchase journal or stock ledger, based upon the Borrower's
accounting practices, known to the Lender, which practices are
in effect on the date on which this Agreement was executed; or
(b) the cost equivalent of the lowest ticketed or
promoted price at which the subject inventory is offered to
the public, after all xxxx-xxxxx (whether or not such price is
then reflected on the Borrower's accounting system), which
cost equivalent is determined in accordance with the retail
method of accounting, reflecting the Borrower's historic
business practices. "Cost" does not include inventory
capitalization costs or other non-purchase price charges (such
as freight) used in the Borrower's calculation of cost of
goods sold.
"COSTS OF COLLECTION": Includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred
by the Agent's and any Lender's attorneys, and all reasonable
costs incurred by the Agent or any Lender in the
administration of the Liabilities and/or the Loan Documents,
including, without limitation, reasonable costs and expenses
associated with travel on behalf
5
7
of the Agent or any Lender, which costs and expenses are
directly or indirectly related to or in respect of the Agent's
and any Lender's: administration and management of the
Liabilities; negotiation, documentation, and amendment of any
Loan Document; or efforts to preserve, protect, collect, or
enforce the Collateral, the Liabilities, and/or the Agent's
Rights and Remedies and/or any of the Agent's rights and
remedies against or in respect of any guarantor or other
person liable in respect of the Liabilities (whether or not
suit is instituted in connection with such efforts). The Costs
of Collection are Liabilities, and at the Agent's option may
bear interest at the highest post-default rate which the Agent
may charge the Borrower hereunder as if such had been lent,
advanced, and credited by the Agent to, or for the benefit of,
the Borrower.
"DDA": Any checking or other demand daily depository account maintained
by the Borrower.
"DEPOSIT ACCOUNT": Has the meaning given that term in the UCC.
"DOCUMENTS": Has the meaning given that term in the UCC.
"DOCUMENTS OF TITLE": Has the meaning given that term in the UCC.
"DOLLAR COMMITMENT": As provided in the Definition of "Commitment",
above.
"EARLY TERMINATION FEE": Is defined in Section 2-13.
"EBITDA": The Borrower's: (i) earnings before interest, taxes,
depreciation, and amortization, each as determined in
accordance with GAAP, applying a FIFO (first in, first out)
convention to determine cost of goods sold to, in turn,
calculate earnings, plus (ii) non-cash losses from the
disposition of fixed assets.
"EMPLOYEE BENEFIT PLAN": As defined in ERISA.
"ENCUMBRANCE": Each of the following:
(a) Any security interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind
(including any agreement to give any of the foregoing); the
interest of a lessor under a Capital Lease; conditional sale
or other title retention agreement; sale of accounts
receivable or chattel paper; or other arrangement pursuant to
which any Person is entitled to any preference or priority
with respect to the property or assets of another Person or
the income or profits of such other Person or which
constitutes an interest in property to secure an obligation;
each of the foregoing whether consensual or non-consensual and
whether arising by way of agreement, operation of law, legal
process or otherwise.
(b) The filing of any financing statement under the
UCC or comparable law of any jurisdiction.
"END DATE": The date upon which both (a) all Liabilities have been paid
in full and (b) all obligations of any Lender to make loans
and advances and to provide other financial accommodations to
the Borrower hereunder shall have been irrevocably terminated.
"ENVIRONMENTAL LAWS": All of the following:
(a) Any and all federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements which regulate or relate to, or impose
any standard of conduct or liability on account of or in
respect to environmental protection matters, including,
without limitation, Hazardous Materials, as are now or
hereafter in effect.
(b) The common law relating to damage to Persons or
property from Hazardous Materials.
"EQUIPMENT": Includes, without limitation, "equipment" as defined in
the UCC, and also all motor vehicles, rolling stock,
machinery, office equipment, plant equipment, tools, dies,
molds, store fixtures, office furniture, and other goods,
property, and assets which are used and/or were purchased for
use
6
8
in the operation or furtherance of the Borrower's business,
and any and all accessions or additions thereto, and
substitutions therefor.
"ERISA": The Employee Retirement Security Act of 1974, as amended.
"ERISA AFFILIATE": Any Person which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is
part of a group which includes the Borrower and which would be
treated as a single employer under Section 414 of the Internal
Revenue Code of 1986, as amended.
"EVENTS OF DEFAULT": Is defined in Article 10.
"FEDERAL FUNDS EFFECTIVE RATE": For any day, a fluctuating per annum
interest rate equal to the weighted average of the rates on
overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as
published on that date (or on the then next succeeding
Business Day, if not one) by the Federal Reserve Bank of New
York, provided that if such a rate is not so published for a
day which is a Business Day, Federal Funds Effective Rate
shall be the average of quotations for such day on such
transactions received by the Agent from three federal funds
brokers of recognized standing selected by the Agent.
"FEDERAL TAX REFUND": The federal tax refund applied for by the
Borrowers with the IRS based upon the Borrower's 1998 federal
tax return in the amount of $2,201,633.00
"FEE LETTER": That letter, styled the "Fee Letter" between the Borrower
and the Agent, as such letter may from time to time be
amended.
"FIXED CHARGE COVERAGE RATIO": The decimal equivalent of a fraction,
the numerator of which is EBITDA and the denominator of which
is the aggregate of interest expense and cash payments of
principal, capital leases and income taxes, all as determined
on a rolling/trailing twelve (12) month basis.
"FIXTURES": Has the meaning given to that term under the laws of the
Commonwealth of Massachusetts.
"FUNDED DEBT": The principal of all Indebtedness for borrowed money
and Capital Lease obligations, whether secured or unsecured,
excluding Indebtedness the payment of which are subordinated
(on terms and conditions acceptable to Agent in its sole
discretion) to Indebtedness of Borrower due to the Agent.
"GAAP": Principles which are consistent with those promulgated or
adopted by the Financial Accounting Standards Board and its
predecessors (or successors) in effect and applicable to that
accounting period in respect of which reference to GAAP is
being made, provided, however, in the event of a Material
Accounting Change, then unless otherwise specifically agreed
to by the Agent, (a) the Borrower's compliance with the
financial performance covenants imposed pursuant to Section
5-12 shall be determined as if such Material Accounting Change
had not taken place and (b) the Borrower shall include, with
its monthly, quarterly, and annual financial statements a
schedule, certified by the Borrower's chief financial officer,
on which the effect of such Material Accounting Change to the
statement with which provided shall be described.
"GENERAL INTANGIBLES": Includes, without limitation, "general
intangibles" as defined in the UCC; and also all: rights to
payment for credit extended; deposits; amounts due to the
Borrower; credit memoranda in favor of the Borrower; warranty
claims; tax refunds and abatements; insurance refunds and
premium rebates; all means and vehicles of investment or
hedging, including, without limitation, options, warrants, and
futures contracts; records; customer lists; telephone numbers;
goodwill; causes of action; judgments; payments under any
settlement or other agreement; literary rights; rights to
performance; royalties; license and/or franchise fees; rights
of admission; licenses; franchises; license agreements,
including all rights of the Borrower to enforce same; permits,
certificates of con-
7
9
venience and necessity, and similar rights granted by any
governmental authority; patents, patent applications, patents
pending, and other intellectual property; Internet addresses
and domain names; developmental ideas and concepts;
proprietary processes; blueprints, drawings, designs,
diagrams, plans, reports, and charts; catalogs; manuals;
technical data; computer software programs (including the
source and object codes therefor), computer records, computer
software, rights of access to computer record service bureaus,
service bureau computer contracts, and computer data; tapes,
disks, semi-conductors chips and printouts; trade secrets
rights, copyrights, mask work rights and interests, and
derivative works and interests; user, technical reference, and
other manuals and materials; trade names, trademarks, service
marks, and all goodwill relating thereto; applications for
registration of the foregoing; and all other general
intangible property of the Borrower in the nature of
intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts
or ideas, and any matter related to, or connected with, the
design, development, manufacture, sale, marketing, leasing, or
use of any or all property produced, sold, or leased, by the
Borrower or credit extended or services performed, by the
Borrower, whether intended for an individual customer or the
general business of the Borrower, or used or useful in
connection with research by the Borrower.
"GOODS": Has the meaning given that term in the UCC.
"GROSS MARGIN": With respect to the subject accounting period for which
being calculated, the decimal equivalent of the following
(determined in accordance with the retail method of
accounting):
Sales (Minus) Cost Of Goods Sold
--------------------------------
Sales
"HAZARDOUS MATERIALS": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances, petroleum products, which (as
to any of the foregoing) are defined or regulated as a
hazardous material in or under any Environmental Law and (b)
oil in any physical state.
"INDEBTEDNESS": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
(a) In respect of money borrowed (including any
indebtedness which is non-recourse to the credit of such
Person but which is secured by an Encumbrance on any asset of
such Person) whether or not evidenced by a promissory note,
bond, debenture or other written obligation to pay money.
(b) In connection with any letter of credit or
acceptance transaction (including, without limitation, the
face amount of all letters of credit and acceptances issued
for the account of such Person or reimbursement on account of
which such Person would be obligated).
(c) In connection with the sale or discount of
accounts receivable or chattel paper of such Person.
(d) On account of deposits or advances.
(e) As lessee under Capital Leases. "Indebtedness"
also includes:
(x) Indebtedness of others secured by an
Encumbrance on any asset of such Person, whether or
not such Indebtedness is assumed by such Person.
(y) Any guaranty, endorsement, suretyship or
other undertaking pursuant to which that Person may
be liable on account of any obligation of any third
party.
(z) The Indebtedness of a partnership or
joint venture in which such Person is a general
partner or joint venturer.
"INDEMNIFIED PERSON": Is defined in Section 14-11.
"INSTRUMENTS": Has the meaning given that term in the UCC.
"INTEREST PAYMENT DATE": With reference to:
Each Libor Loan: The last day of each month; the last
day of the Interest Period relating thereto; the Termination
Date; and the End Date.
8
10
Each Base Margin Loan: the first day of each month;
the Termination Date; and the End Date.
"INTEREST PERIOD":
(a) With respect to each Libor Loan: Subject to
Subsection (c), below, the period commencing on the date of
the making or continuation of, or conversion to, the subject
Libor Loan and ending one, two, or three months thereafter, as
the Borrower may elect by notice (pursuant to Section 2-4(a))
to the Agent.
(b) With respect to each Base Margin Loan: Subject to
Subsection (c), below, the period commencing on the date of
the making or continuation of or conversion to such Base
Margin Loan and ending on that date (i) as of which the
subject Base Margin Loan is converted to a Libor Loan, as the
Borrower may elect by notice (pursuant to Section 2-4(a)) to
the Agent, or (ii) on which the subject Base Margin Loan is
paid by the Borrower.
(c) The setting of Interest Periods is in all
instances subject to the following:
(i) Any Interest Period for a Base Margin
Loan which would otherwise end on a day which is not
a Business Day shall be extended to the next
succeeding Business Day.
(ii) Any Interest Period for a Libor Loan
which would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding
Business Day, unless that succeeding Business Day is
in the next calendar month, in which event such
Interest Period shall end on the last Business Day of
the month during which the Interest Period ends.
(iii) Subject to Subsection (iv), below, any
Interest Period applicable to a Libor Loan, which
Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month
during which such Interest Period ends, shall end on
the last Business Day of the month during which that
Interest Period ends.
(iv) Any Interest Period which would
otherwise end after the Termination Date shall end on
the Termination Date.
(v) The number of Interest Periods in effect
at any one time is subject to Section 2-9(d) hereof.
"INTEREST RATE PRICING GRID": Commencing with the first day of any
fiscal quarter after the Agent's receipt of the Borrower's
audited financial statement for the Borrower's fiscal year
ending in December of 1999, the Libor Margin and Base Margin
shall be reset quarterly for loans initiated on or after the
date when so reset, and shall be based upon the following
pricing grid:
----------- ------------------------------- ------------------------------------------ -------------- ---------------
TIER FIXED CHARGE RATIO ROLLING 12 MONTH AVERAGE EXCESS BASE MARGIN LIBOR MARGIN
AVAILABILITY (Basis (Basis Points)
Points)
----------- ------------------------------- ------------------------------------------ -------------- ---------------
I Equal to or greater than 2.3 Equal to or greater than $7,500,000 -0- 175
----------- ------------------------------- ------------------------------------------ -------------- ---------------
II Equal to or greater than 2.3 Less than $7,500,000 -0- 200
----------- ------------------------------- ------------------------------------------ -------------- ---------------
III Equal to or greater than 1.8 N/A -0- 225
but less than 2.3
----------- ------------------------------- ------------------------------------------ -------------- ---------------
IV Less than 1.8 N/A 25 250
----------- ------------------------------- ------------------------------------------ -------------- ---------------
"INVENTORY": Includes, without limitation, "inventory" as defined in
the UCC and also all: packaging, advertising, and shipping
materials related to any of the foregoing, and all names or
marks affixed or to be affixed thereto for identifying or
selling the same; Goods held for sale or lease or furnished or
to be furnished under a contract or contracts of sale or
service by the Borrower, or used or consumed or to be used or
consumed in the Borrower's business; Goods of said description
in transit: returned, repossessed and rejected Goods of said
description; and all documents (whether or not negotiable)
which represent any of the foregoing.
9
11
"IRS": Internal Revenue Service.
"INVENTORY ADVANCE RATE": For each year of the Revolving Credit, the
following percentages during the periods indicated:
----------------------------------------------------------- ---------------------------------------------------------
Period Percentage
----------------------------------------------------------- ---------------------------------------------------------
February 1 through and including April 30 65%
----------------------------------------------------------- ---------------------------------------------------------
May 1 through and including June 30 67%
----------------------------------------------------------- ---------------------------------------------------------
July 1 through and including September 30 65%
----------------------------------------------------------- ---------------------------------------------------------
October 1 through and including January 31 68%
----------------------------------------------------------- ---------------------------------------------------------
"INVENTORY RESERVES": Such Reserves as may be established from time to
time by the Agent in the Agent's discretion with respect to
the determination of the saleability, at retail, of the
Acceptable Inventory or which reflect such other factors as
affect the market value of the Acceptable Inventory. Without
limiting the generality of the foregoing, Inventory Reserves
may include (but are not limited to) reserves based on the
following:
(i) Obsolescence (determined based upon
Inventory on hand beyond a given
number of days).
(ii) Shrinkage.
(iii) Change in Inventory character as
existing as of the date of this
Agreement.
(iv) Change in Inventory composition as
existing as of the date of this
Agreement.
(v) Change in Inventory mix as existing
as of the date of this Agreement.
(vi) Markdowns (both permanent and point
of sale)
(vii) Retail markons and markups
inconsistent with prior period
practice and performance; industry
standards; current business plans;
or advertising calendar and planned
advertising events.
(viii) Return to vendors (RTVs), damages,
and repairs.
(ix) Inventory upon which customer
deposits have been received.
"INVESTMENT PROPERTY": Has the meaning given that term in the UCC.
"IRS": Internal Revenue Service.
"ISSUER": The issuer of any L/C.
"L/C": Any letter of credit, the issuance of which is procured by the
Agent for the account of the Borrower and any acceptance made
on account of such letter of credit.
"L/C LANDING COSTS": To the extent not included in the Stated Amount of
an L/C, customs, duty, freight, and other out-of-pocket costs
and expenses which will be expended to "land" the Inventory,
the purchase of which is supported by such L/C.
"LEASE": Any lease or other agreement, no matter how styled or
structured, pursuant to which the Borrower is entitled to the
use or occupancy of any space.
"LEASEHOLD INTEREST": Any interest of the Borrower as lessee under any
Lease.
"LENDERS": Defined in the Preamble to this Agreement
"LIABILITIES" (in the singular, "Liability"): Includes, without
limitation, all and each of the following, whether now
existing or hereafter arising:
10
12
(a) Any and all direct and indirect liabilities,
debts, and obligations of the Borrower to the Agent or any
Lender, each of every kind, nature, and description.
(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrower to the Agent or any Lender
(including all future advances whether or not made pursuant to
a commitment by the Agent or any Lender), whether or not any
of such are liquidated, unliquidated, primary, secondary,
secured, unsecured, direct, indirect, absolute, contingent, or
of any other type, nature, or description, or by reason of any
cause of action which the Agent or any Lender may hold against
the Borrower.
(c) All notes and other obligations of the Borrower
now or hereafter assigned to or held by the Agent or any
Lender, each of every kind, nature, and description.
(d) All interest, fees, and charges and other amounts
which may be charged by the Agent or any Lender to the
Borrower and/or which may be due from the Borrower to the
Agent or any Lender from time to time.
(e) All costs and expenses incurred or paid by the
Agent or any Lender in respect of any agreement between the
Borrower and Agent or any the Lender or instrument furnished
by the Borrower to the Agent or any Lender (including, without
limitation, Costs of Collection, attorneys' reasonable fees,
and all court and litigation costs and expenses).
(f) Any and all covenants of the Borrower to or with
the Agent or any Lender and any and all obligations of the
Borrower to act or to refrain from acting in accordance with
any agreement between the Borrower and the Agent or any Lender
or instrument furnished by the Borrower to the Agent or any
Lender.
(g) Each of the foregoing as if each reference to the
"Agent and each Lender" therein were to each Affiliate of
the Agent or any Lender.
"LIBOR BUSINESS DAY": Any day which is both a Business Day and a day on
which the principal interbank market for Libor deposits in
London in which BankBoston, N.A. participates is open for
dealings in United States Dollar deposits.
"LIBOR LOAN": Any Revolving Credit Loan which bears interest at a Libor
Rate.
"LIBOR OFFER RATE": That rate of interest (rounded upwards, if
necessary, to the next 1/100 of 1%) determined by the Agent to
be the highest prevailing rate per annum at which deposits on
U.S. Dollars are offered to BankBoston, N.A., by first-class
banks in the London interbank market in which BankBoston, N.A.
participates at or about 10:00 A.M. (Boston Time) Two (2)
Libor Business Days before the first day of the Interest
Period for the subject Libor Loan, for a deposit approximately
in the amount of the subject loan for a period of time
approximately equal to such Interest Period.
"LIBOR MARGIN": 225 basis points, subject to adjustment based upon the
Interest Rate Pricing Grid.
"LIBOR RATE": That per annum rate (calculated on a 360 day year and
actual days elapsed) which is the aggregate of the Libor Offer
Rate plus the Libor Margin except that, in the event that it
is determined by the Agent that any Lender may be subject to
the Reserve Percentage, the "Libor Rate" shall mean, with
respect to any Libor Loans then outstanding (from the date on
which that Reserve Percentage first became applicable to such
loans), and with respect to all Libor Loans thereafter made,
an interest rate per annum equal the sum of (a) plus (b),
where:
(a) is the decimal equivalent of the following
fraction:
Libor Offer Rate
----------------
1 minus Reserve Percentage
(b) the applicable Libor Margin.
"LINE (UNUSED) FEE": Is defined in Section 2-12.
"LOAN ACCOUNT": Is defined in Section 2-6.
11
13
"LOAN CEILING": Thirty Million Dollars ($30,000,000), or such lesser
amount as Agent may establish following the occurrence of an
Event of Default.
"LOAN DOCUMENTS": This Agreement, each instrument and document executed
and/or delivered as contemplated by Article 3, below, and each
other instrument or document from time to time executed and/or
delivered in connection with the arrangements contemplated
hereby or in connection with any transaction with the Agent or
any Lender or any Affiliate of the Agent or any Lender,
including, without limitation, any transaction which arises
out of any cash management, depository, investment, letter of
credit, interest rate protection, or equipment leasing
services provided by the Agent or any Lender or any Affiliate
of the Agent or any Lender, as each may be amended from time
to time.
"LOCAL DDA": A depository account maintained by the Borrower, the only
contents of which may be transfers from the Operating Account
and actually used solely (i) for xxxxx cash purposes; or (ii)
for payroll.
"MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to
accounting periods subsequent to the Borrower's fiscal year
most recently completed prior to the execution of this
Agreement, which change has a material effect on the
Borrower's financial condition or operating results, as
reflected on financial statements and reports prepared by or
for the Borrower, when compared with such condition or results
as if such change had not taken place or where preparation of
the Borrower's statements and reports in compliance with such
change results in the breach of a financial performance
covenant imposed pursuant to Section 5-12 where such a breach
would not have occurred if such change had not taken place or
visa versa.
"MATURITY DATE": March 3, 2004.
"OPERATING ACCOUNT": Is defined in Section 7-3.
"PARTICIPANT": Is defined in Section 14-14, hereof.
"PERMITTED ENCUMBRANCES": Those Encumbrances permitted as provided in
Section 4-7(a) hereof.
"PERSON": Any natural person, and any corporation, limited liability
company, trust, partnership, joint venture, or other
enterprise or entity.
"PROCEEDS": Includes, without limitation, "Proceeds" as defined in the
UCC (defined below), and each type of property described in
Section 8-1 hereof.
"RECEIPTS": All cash, cash equivalents, checks, and credit card slips
and receipts as arise out of the sale of the Collateral.
"RECEIVABLES COLLATERAL": That portion of the Collateral which consists
of the Borrower's Accounts, Accounts Receivable, General
Intangibles, Chattel Paper, Instruments, Documents of Title,
Documents, Investment Property, letters of credit for the
benefit of the Borrower, and bankers' acceptances held by the
Borrower, and any rights to payment.
"REFUND ADVANCE RATE": (a) For the period from the date the Borrower
files the last document necessary to complete its application
for its Federal Tax Refund through and including the earlier
of (i) payment by the IRS of the Federal Tax Refund or (ii)
August 31, 1999, Sixty Percent (60%), and (b) for all other
periods, Zero Percent (0%).
"RELATED ENTITY": (a) Any corporation, limited liability company,
trust, partnership, joint venture, or other enterprise which:
is a parent, brother-sister, subsidiary, or affiliate, of the
Borrower; could have such enterprise's tax returns or
financial statements consolidated with the Borrower's; could
be a member of the same controlled group of corporations
(within the meaning of
12
14
Section 1563(a)(1), (2) and (3) of the Internal Revenue Code
of 1986, as amended from time to time) of which the Borrower
is a member; controls or is controlled by the Borrower or by
any Affiliate of the Borrower.
(b) Any Affiliate.
"REQUIREMENT OF LAW": As to any Person:
(a)(i) All statutes, rules, regulations, orders, or
other requirements having the force of law and (ii) all court
orders and injunctions, arbitrator's decisions, and/or similar
rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims
jurisdiction over such Person, or any property of such Person,
or of any other Person for whose conduct such Person would be
responsible.
(b) That Person's charter, certificate of
incorporation, articles of organization, and/or other
organizational documents, as applicable; and (c) that Person's
by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"RESERVE PERCENTAGE": The decimal equivalent of that rate applicable to
a Lender under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement of that Lender
with respect to "Eurocurrency liabilities" as defined in such
regulations. The Reserve Percentage applicable to a particular
Eurodollar Loan shall be based upon that in effect during the
subject Interest Period, with changes in the Reserve
Percentage which take effect during such Interest Period to
take effect (and to consequently change any interest rate
determined with reference to the Reserve Percentage) if and
when such change is applicable to such loans.
"RESERVES": All (if any) Availability Reserves and Inventory Reserves.
"REVOLVING CREDIT": Is defined in Section 2-1.
"REVOLVING CREDIT NOTE": Is defined in Section 2-7.
"REVOLVING CREDIT LOAN": A term of convenience which refers to so much
of the unpaid principal balance of the Loan Account as bears
the same rate of interest for the same Interest Period. (See
Section 2-9(c)).
"STATED AMOUNT": The maximum amount for which an L/C may be honored.
"SUSPENSION EVENT": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) would become an Event
of Default if any requisite notice were given and/or any
requisite period of time were to run and such occurrence,
circumstance, or state of facts were not absolutely cured
within any applicable grace period.
"TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10-11 hereof; or
(c) date set by notice by the Agent to the Borrower, which
notice sets the Termination Date on account of the occurrence
of any Event of Default other than as described in Section
10-11 hereof.
"TRIPARTY AGREEMENT": That certain Triparty Federal Tax Refund
Agreement dated as of March 3, 1999 by and among the Borrower,
the Lender, and Deloitte & Touche LLP as same may be amended
from time to time.
"UCC": The Uniform Commercial Code as presently in effect in
Massachusetts (Mass. Gen. Laws, Ch. 106).
"UPFRONT FEE": Is defined in Section 2-10.
"VOTING STOCK": Any issued and outstanding capital stock of the
Borrower having the right, under ordinary
13
15
circumstances, to vote for the election of directors of the
Borrower.
"YEAR 2000 COMPLIANT": Computer applications, imbedded microchips, and
other systems and subsystems which properly recognize and
perform their intended function without any adverse effect on
account of their respective inability to recognize certain
dates prior to, on, and after December 31, 1999 or on account
of their treating any date prior to, on, or after December 31,
1999 other than as the specific date in question.
ARTICLE II - THE REVOLVING CREDIT:
2.1. ESTABLISHMENT OF REVOLVING CREDIT.
(a) The Lenders hereby establish a revolving line of credit
(the "REVOLVING CREDIT") in the Borrower's favor pursuant to which each Lender,
subject to, and in accordance with, this Agreement, acting through the Agent,
shall make loans and advances and otherwise provide financial accommodations to
and for the account of the Borrower as provided herein, in each instance equal
to that Lender's Commitment Percentage of Availability, up to the maximum amount
of that Lender's Dollar Commitment. The amount available for borrowing under the
Revolving Credit shall be determined by the Agent by reference to Availability,
as determined by the Agent from time to time.
(b) As used herein, the following terms have the following
meanings:
(i) "AVAILABILITY" refers at any time to
the result of the following:
(A) Borrowing Base.
Minus
(B) The then unpaid principal
balance of the Loan Account.
Minus
(C) The then Stated Amount of all
L/C's.
(ii) "BORROWING BASE" refers at any time
to the lesser of 2-1(b)(ii)(A) or
2-1(b)(ii)(B), where:
(A) is the Loan Ceiling.
(B) is the result of the following:
(I) The Inventory
Advance Rate of
the Cost of
Acceptable
Inventory (net of
Inventory
Reserves).
Plus
(II) The Refund Advance
Rate of the
Acceptable Federal
Tax Refund up to a
maximum of One
Million Three
Hundred and Eighty
Thousand Dollars
($1,380,000) (net
of any offsets,
settlements, or
future taxes due
to the IRS);
provided however,
the Triparty
Agreement is and
remains
enforceable and
there does not
exist a continuing
event of default
thereunder.
Minus
(III) The then aggregate
of the Availability
Reserves.
(c) Availability shall be based upon Borrowing Base
Certificates furnished as provided in Section 5-4 hereof.
(d) The proceeds of borrowings under the Revolving Credit
shall be used solely in accordance with the Borrower's BUSINESS PLAN provided to
the Lender and for working capital purposes of the Borrower, to pay off the
Borrower's existing credit facility extended by Bank One, N.A., and for its
Capital Expenditures, all solely to the extent permitted by this Agreement.
(e) Availability based upon the Federal Tax Refund is further
subject to Agent's determination that (i) Borrower has, in the sole
determination of Agent, satisfactorily settled disputes with the IRS related to
disputed tax liability amounts for years prior to the 1998 fiscal year of the
Borrower, (ii) Deloitte & Touche LLP or another accounting firm acceptable to
Agent has prepared and signed the 1998 federal tax return giving rise to the
Federal Tax Refund and (iii) Agent shall be otherwise satisfied, in its sole
determination, as to the actual amounts of the Federal Tax Refund.
2.2. ADVANCES IN EXCESS OF BORROWING BASE. No Lender has any obligation
to make any loan or advance, or otherwise to provide any credit for the benefit
of the Borrower such that the balance of the Loan Account exceeds the Borrowing
Base. The making of loans, advances, and credits and the providing of financial
accommodations in excess of the Borrowing Base is for the benefit of the
Borrower and does not affect the obligations of the Bor-
14
16
rower hereunder; such loans, advances, credits, and financial accommodations
constitute Liabilities. The making of any such loans, advances, and credits and
the providing of financial accommodations, on any one occasion such that the
Borrowing Base is exceeded shall not obligate any Lender to make any such loans,
credits, or advances or to provide any financial accommodation on any other
occasion nor to permit such loans, credits, or advances to remain outstanding.
2.3. RISKS OF VALUE OF COLLATERAL. The Agent's reference to a given
asset in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit and/or the
monitoring of compliance with the provisions hereof shall not be deemed a
determination by the Agent or any Lender relative to the actual value of the
asset in question. All risks concerning the saleability of the Borrower's
Inventory are and remain upon the Borrower. All Collateral secures the prompt,
punctual, and faithful performance of the Liabilities whether or not relied upon
by the Agent or by any Lender in connection with the making of loans, credits,
and advances and the providing of financial accommodations under the Revolving
Credit.
2.4 LOAN REQUESTS.
(a) Subject to the provisions of this Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Borrower
shall be made pursuant hereto, provided that:
(i) Borrowing Base will not be exceeded; and
(ii) The Revolving Credit has not been suspended as
provided in Section 2-4(i).
(b) Requests for loans and advances under the Revolving Credit
may be requested by the Borrower in such manner as may from time to time be
acceptable to the Agent.
(c) Subject to the provisions of this Agreement, the Borrower
may request a Revolving Credit Loan and elect an interest rate and Interest
Period to be applicable to that Revolving Credit Loan by giving the Agent notice
no later than the following:
(i) If such Revolving Credit Loan is or is to be
converted to a Base Margin Loan: By 11:30 A.M. on the Business Day on
which the subject Revolving Credit Loan is to be made or is to be so
converted. Base Margin Loans requested by the Borrower, other than
those resulting from the conversion of a Libor Loan, shall not be less
than $10,000.00.
(ii) If such Revolving Credit Loan is, or is to be
continued as, or converted to, a Libor Loan: By 1:00 P.M. Three (3)
Libor Business Days before the end of the then applicable Interest
Period. Libor Loans and conversions to Libor Loans shall each be not
less than $1,000,000 and in increments of $100,000 in excess of such
minimum.
(iii) Any Libor Loan which matures while a Suspension
Event is extant shall be converted, at the option of the Agent to a
Base Margin Loan notwithstanding any notice from the Borrower that such
Loan is to be continued as a Libor Loan.
(d) Any request for a Revolving Credit Loan or for the
conversion of a Revolving Credit Loan which is made after the applicable
deadline therefor, as set forth above, shall be deemed to have been made at the
opening of business on the then next Business Day or Libor Business Day, as
applicable. Each request for a Revolving Credit Loan or for the conversion of a
Revolving Credit Loan shall be made in such manner as may from time to time be
acceptable to the Agent
(e) If, during the thirty (30) days immediately preceding the
day on which a loan request is made there has been no unpaid principal balance
in the Loan Account on account of loans and advances under the Revolving Credit,
the loan so requested shall be made (subject to all other provisions of this
Agreement) no later than the Third Business Day after (and not counting) the day
on which the loan otherwise would have been made as provided above.
(f) The Borrower may request that the Agent cause the issuance
of L/C's for the account of the Borrower as provided in Section 2-16.
(g) The Agent may rely on any request for a loan or advance,
or other financial accommodation under the Revolving Credit which the Agent, in
good faith, believes to have been made by a Person duly authorized to act on
behalf of the Borrower and may decline to make any such requested loan or
advance, or issuance, or to provide any such financial accommodation pending the
Agent's being furnished with such documentation concerning that Person's
authority to act as may be satisfactory to the Agent.
(h) A request by the Borrower for loan or advance, or other
financial accommodation under the Revolving Credit shall be irrevocable and
shall constitute certification by the Borrower that as of the date of such
request, each of the following is true and correct:
(i) There has been no material adverse change in the
Borrower's financial condition
15
17
from the most recent financial information furnished Agent or any
Lender pursuant to this Agreement.
(ii) The Borrower is in compliance with, and has not
breached any of, its covenants contained in this Agreement.
(iii) All or a portion of any loan or advance so
requested will be set aside by the Borrower to cover all of the
Borrower's obligations for sales tax on account of sales since the then
most recent borrowing pursuant to the Revolving Credit.
(iv) Each representation which is made herein or in
any of the Loan Documents (defined below) is then true and complete as
of and as if made on the date of such request.
(v) No Suspension Event is then extant.
(i) Upon the occurrence from time to time of any Suspension
Event:
(i) The Agent may suspend the Revolving Credit
immediately.
(ii) Neither the Agent nor any Lender shall be
obligated, during such suspension, to make any loans or advance, or to
provide any financial accommodation hereunder or to seek the issuance
of any L/C.
(iii) The Agent may suspend the right of the Borrower
to request any Libor Loan or to convert any Base Margin Loan to a Libor
Loan.
2.5 MAKING OF LOANS UNDER REVOLVING CREDIT.
(a) A loan or advance under the Revolving Credit shall be made
by the transfer of the proceeds of such loan or advance to the Operating Account
or as otherwise instructed by the Borrower.
(b) A loan or advance shall be deemed to have been made under
the Revolving Credit (and the Borrower shall be indebted to the Agent for the
amount thereof immediately) at the following:
(i) The Agent's initiation of the transfer of the
proceeds of such loan or advance in accordance with the Borrower's
instructions (if such loan or advance is of funds requested by the
Borrower).
(ii) The charging of the amount of such loan to the
Loan Account (in all other circumstances).
(c) There shall not be any recourse to or liability of the
Agent or any Lender, on account of:
(i) Any delay in the making of any loan or advance
requested under the Revolving Credit.
(ii) Any delay in the proceeds of any such loan or
advance constituting collected funds.
(iii) Any delay in the receipt, and/or any loss, of
funds which constitute a loan or advance under the Revolving Credit,
the wire transfer of which was properly initiated by the Agent in
accordance with wire instructions provided to the Agent by the
Borrower.
2.6 THE LOAN ACCOUNT.
(a) An account ("LOAN ACCOUNT") shall be opened on the books
of the Agent. A record may be kept in the Loan Account of all loans made under
or pursuant to this Agreement and of all payments thereon.
(b) The Agent may also keep a record (either in the Loan
Account or elsewhere, as the Agent may from time to time elect) of all interest,
fees, service charges, costs, expenses, and other debits owed the Agent and each
Lender on account of the Liabilities and of all credits against such amounts so
owed.
(c) All credits against the Liabilities shall be conditional
upon final payment to the Agent for the Account of each Lender of the items
giving rise to such credits. The amount of any item credited against the
Liabilities which is charged back against Agent or any Lender for any reason or
is not so paid shall be a Liability and shall be added to the Loan Account,
whether or not the item so charged back or not so paid is returned.
(d) Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrower is obligated hereunder are
payable on demand. In the determination of Availability, the Agent may deem
fees, service charges, accrued interest, and other payments which will be due
and payable between the date of such determination and the first day of the then
next succeeding month as having been advanced under the Revolving Credit whether
or not such amounts are then due and payable.
(e) The Agent, without the request of the Borrower, may
advance under the Revolving Credit any interest, fee, service charge, or other
payment to which the Agent or any Lender is entitled from the Borrower pursuant
hereto and may charge the same to the Loan Account notwithstanding that such
amount so advanced may result in Borrowing Base's being exceeded. Such action on
the part of the Agent shall not constitute a waiver of the Agent's rights and
Borrower's obligations under Section 2-8(b). Any amount which is added to the
principal balance of the Loan Account as provided in this Section 2-6(e) shall
bear interest , subject to Section 2-9(f), at the Base Mar-
16
18
gin Rate.
(f) Any statement rendered by the Agent or any Lender to the
Borrower concerning the Liabilities shall be considered correct and accepted by
the Borrower and shall be conclusively binding upon the Borrower unless the
Borrower provides the Agent with written objection thereto within twenty (20)
days from the mailing of such statement, which written objection shall indicate,
with particularity, the reason for such objection. The Loan Account and the
Agent's books and records concerning the loan arrangement contemplated herein
and the Liabilities shall be prima facie evidence and proof of the items
described therein.
2.7 THE REVOLVING CREDIT NOTES. The obligation to repay loans and
advances under the Revolving Credit, with interest as provided herein, shall be
evidenced by Notes (each, a "REVOLVING CREDIT NOTE") in the form of EXHIBIT 2-7,
annexed hereto, executed by the Borrower, one payable to each Lender. Neither
the original nor a copy of any Revolving Credit Note shall be required, however,
to establish or prove any Liability. In the event that any Revolving Credit Note
is ever lost, mutilated, or destroyed, the Borrower shall execute a replacement
thereof and deliver such replacement to the Agent.
2.8 PAYMENT OF THE LOAN ACCOUNT.
(a) The Borrower may repay all or any portion of the principal
balance of the Loan Account from time to time until the Termination Date. Such
payments shall be applied first to Base Margin Loans and only then to Libor
Loans
(b) The Borrower, without notice or demand from the Agent or
any Lender, shall pay the Agent that amount, from time to time, which is
necessary so that the unpaid balance of the Loan Account does not exceed the
Borrowing Base. Such payments shall be applied first to Base Margin Loans and
only then to Libor Loans
(c) The Agent shall endeavor to cause those application of
payments (if any), pursuant to Sections 2-8(a) and 2-8(b) against Libor Loans
then outstanding in such manner as results in the least cost to the Borrower,
but shall not have any affirmative obligation to do so nor liability on account
of the Agent's failure to have done so. In no event shall action or inaction
taken by the Agent excuse the Borrower from any indemnification obligation under
Section 2-8(e).
(d) The Borrower shall repay the then entire unpaid balance of
the Loan Account and all other Liabilities on the Termination Date.
(e) The Borrower shall indemnify each Lender and hold each
Lender harmless from and against any loss, cost or expense (including loss of
anticipated profits) which such Lender may sustain or incur (including, without
limitation, by virtue of acceleration after the occurrence of any Event of
Default) as a consequence of the following:
(i) Default by the Borrower in payment of the
principal amount of or any interest on any Libor Loan as and when due
and payable, including any such loss or expense arising from interest
or fees payable by such Lender to lenders of funds obtained by it in
order to maintain its Libor Loans
(ii) Default by the Borrower in making a borrowing or
conversion after the Borrower has given (or is deemed to have given) a
request for a Revolving Credit Loan or a request to convert a Revolving
Credit Loan from one applicable interest rate to another.
(iii) The making of any payment on a Libor Loan or
the making of any conversion of any such Loan to a Base Margin Loan on
a day that is not the last day of the applicable Interest Period with
respect thereto, including interest or fees payable by such Lender to
lenders of funds obtained by it in order to maintain any such Loans as
"breakage fees" (so-called).
2.9 INTEREST RATES.
(a) Each Revolving Credit Loan shall bear interest at the Base
Margin Rate unless timely notice is given (as provided in Section 2-4(a)) that
the subject Revolving Credit Loan (or a portion thereof) is, or is to be
converted to, a Libor Loan.
(b) Each Revolving Credit Loan which consists of a Libor Loan
shall bear interest at the applicable Libor Rate.
(c) Subject to the provisions hereof, the Borrower, by notice
to the Agent, may cause all or a part of the unpaid principal balance of the
Loan Account to bear interest at the Base Margin Rate or the Libor Rate as
specified from time to time by the Borrower. For ease of reference and
administration, each part of the Loan Account which bears interest at the same
interest and for the same Interest Period is referred to herein as if it were a
separate "Revolving Credit Loan".
(d) The Borrower shall not select, renew, or convert any
interest rate for a Revolving Credit
17
19
Loan such that, in addition to interest at the Base Margin Rate, there are more
than Five (5) Libor Rates applicable to the Revolving Credit Loans at any one
time.
(e) The Borrower shall pay accrued and unpaid
interest on each Revolving Credit Loan in arrears as follows:
(i) On the applicable Interest Payment Date
for that Revolving Credit Loan.
(ii) On the Termination Date and on the End
Date.
(iii) Following the occurrence of any Event
of Default, with such frequency as may be determined
by the Agent.
(f) Following the occurrence of any Event of Default
(and whether or not the Agent exercises the Agent's rights on
account thereof), all Revolving Credit Loans shall bear
interest, at the option of the Agent at rate which is the
aggregate of the Base Margin Rate plus Two Percent (2%) per
annum.
2.10 UPFRONT FEE. As compensation for the commitment of the Agent to
the Borrower to make loans and advances to the Borrower and as compensation for
its maintenance of sufficient funds for such purpose, the Agent has earned an
Upfront Fee (so referred to herein) at the times and in the amounts as set forth
in the Fee Letter.
2.11 INTENTIONALLY DELETED.
2.12 LINE (UNUSED) FEE. In addition to any other fee by the Borrower on
account of the Revolving Credit, the Borrower shall pay the Agent a LINE
(UNUSED) FEE (so referred to herein) in arrears, on the first day of each
quarter (and on the Termination Date). The Line (Unused) Fee shall be equal to
one quarter of one percent (0.25%) per annum of the average difference, during
the quarter just ended (or relevant period with respect to the payment being
made on the Termination Date) between the Loan Ceiling and the unpaid principal
balance of the Loan Account.
2.13 EARLY TERMINATION FEE.
(a) In the event that the Termination Date occurs, for any
reason, prior to the Maturity Date, the Borrower shall pay the Agent, for the
benefit of the Lenders, the EARLY TERMINATION FEE (so referred to herein)
determined and payable as follows:
(b) In the event that (i) the Termination Date occurs prior to
the Maturity Date for any reason, or (ii) the Borrower elects to prepay all
Liabilities in full and terminate this Agreement, or (iii) the Liabilities are
not paid in full on the Maturity Date (any such event being a "Termination
Event"), the Borrower shall pay the Agent, for the benefit of the Lenders, the
EARLY TERMINATION FEE (so referred to herein) determined and payable as follows,
(c) (i) if a Termination Event occurs prior to February 16,
2000, the Borrower shall pay to the Agent an Early Termination Fee equal to 1.0%
of the Loan Ceiling in effect on the date of this Agreement; and (ii) if the
Termination Event thereafter occurs, the Borrower shall pay to the Agent an
Early Termination Fee equal to 0.5% of the Loan Ceiling in effect on the date of
this Agreement.
(d) No Early Termination Fee shall be payable if such
termination is in concert with the establishment of a replacement senior secured
working capital facility provided or agented by BankBoston Retail Finance Inc.
or any of the affiliates (it being understood and agreed that the foregoing does
not constitute the commitment or agreement of BankBoston Retail Finance Inc. or
any of its affiliates to so refinance the Liabilities).
2.14 CONCERNING FEES.
(a) In addition to any other right to which the Agent is then
entitled on account thereof, the Agent may assess an additional fee payable by
the Borrower on account of the accommodation, from time to time, by the Agent to
the Borrower's request that the Agent depart or dispense with one or more of the
administrative provisions of this Agreement and/or the Borrower's failure to
comply with any of such provisions.
(i) By way of non-exclusive example, the
Agent may assess a fee on account of any of the
following:
(A) The Borrower's failure to pay that
amount which is necessary so that the principal balance of the
Loan Account does not exceed Borrowing Base (as required under
Section 2-8(b) hereof).
(B) The providing of a loan or advance under
the Revolving Credit or charging of the Loan Account such that
the Borrowing Base would be exceeded.
(C) The foreshortening of any of the time
frames with respect to the making of Revolving Credit Loans as
set forth in Section 2-4(a).
18
20
(D) The Borrower's failure to provide a
financial statement or report within the applicable timeframe
provided for such report under Article 5 hereof.
(ii) The inclusion of the foregoing right on the part
of the Agent to assess a fee does not constitute an obligation, on the
part of the Agent, to waive any provision of this Agreement under any
circumstances. The assessment of any such fee in any particular
circumstance shall not constitute the Agent's waiver of any breach of
this Agreement on account of which such fee was assessed nor a course
of action on which the Borrower may rely.
(b) The Borrower shall not be entitled to any credit, rebate
or repayment of the Upfront Fee, Line (Unused) Fee, Early Termination Fee, or
other fee previously earned by the Agent or any Lender pursuant to this
Agreement notwithstanding any termination of this Agreement or suspension or
termination of the Agent's and any Lender's respective obligation to make loans
and advances hereunder.
2.15 AGENT'S AND LENDERS' DISCRETION.
(a) Each reference in the Loan Documents to the exercise of
discretion or the like by the Agent or any Lender shall be to that Person's
exercise of its judgment, in good faith (which shall be presumed), based upon
that Person's consideration of any such factor as the Agent or that Lender,
taking into account information of which that Person then has actual knowledge,
believes:
(i) Will or reasonably could be expected to affect
the value of the Collateral, the enforceability of the Agent's security
and collateral interests therein, or the amount which the Agent would
likely realize therefrom (taking into account delays which may possibly
be encountered in the Lender's realizing upon the Collateral and likely
Costs of Collection).
(ii) Indicates that any report or financial
information delivered to the Agent or any Lender by or on behalf of the
Borrower is incomplete, inaccurate, or misleading in any material
manner or was not prepared in accordance with the requirements of this
Agreement.
(iii) Constitutes a Suspension Event.
(b) In the exercise of such judgment, the Agent and each
Lender also may take into account any of the following factors:
(i) Those included in, or tested by, the definitions
of "Acceptable Inventory," "Retail," and "Cost".
(ii) Material changes in or to the mix, character or
composition of the Borrower's Inventory.
(iii) Seasonality with respect to the Borrower's
Inventory and patterns of retail sales.
(iv) Such other factors as the Agent and each Lender
determines as having a material bearing on credit risks associated with
the providing of loans and financial accommodations to the Borrower.
(c) The burden of establishing the failure of the Agent or any
Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrower's.
2.16 PROCEDURES FOR ISSUANCE OF L/C'S.
(a) The Borrower may request that the Agent cause the issuance
of L/C's for the account of the Borrower. Each such request shall be in such
manner as may from time to time be acceptable to the Agent.
(b) The Agent will endeavor to cause the issuance of any L/C
so requested by the Borrower, provided that, at the time that the request is
made, the Revolving Credit has not been suspended as provided in Section 2-4(i)
and if so issued:
(i) The aggregate Stated Amount of all L/C's then
outstanding, does not exceed Three Million Dollars ($3,000,000).
(ii) The expiry of the L/C is not later than the
earlier of Thirty (30) days prior to the Maturity Date or the
following:
(A) Standby's: One (1) year from initial
issuance.
(B) Documentary's: Sixty (60) days
from issuance.
(iii) Borrowing Base would not be exceeded.
(c) The Borrower shall execute such documentation to apply for
and support the issuance of an L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability of, the
Agent or any Lender on account of
(i) Any delay or refusal by an Issuer to issue an
L/C;
(ii) Any action or inaction of an Issuer on account
of or in respect to, any L/C.
(e) The Borrower shall reimburse the Issuer for the amount of
any honoring of a drawing un-
19
21
der an L/C on the same day on which such honoring takes place. The Agent,
without the request of the Borrower, may advance under the Revolving Credit (and
charge to the Loan Account) the amount of any honoring of any L/C and other
amount for which the Borrower, the Issuer, or the Lenders become obligated on
account of, or in respect to, any L/C. Such advance shall be made whether or not
a Suspension Event is then extant or such advance would result in Borrowing
Base's being exceeded. Such action shall not constitute a waiver of the Agent's
rights under Section 2-8(b) hereof.
2.17 FEES FOR L/C'S.
(a) The Borrower shall pay to the Agent a fee, on account of
L/C's, the issuance of which had been procured by the Agent, monthly in arrears,
and on the Termination Date and on the End Date, equal to 1.75% per annum of the
weighted average Stated Amount of all L/C's outstanding during the period in
respect of which such fee is being paid.
(b) In addition to the fee to be paid as provided in
Subsection 2-17(a), above, the Borrower shall pay to the Agent (or to the
Issuer, if so requested by Agent), on demand, all issuance, processing,
negotiation, amendment, and administrative fees and other amounts charged by the
Issuer on account of, or in respect to, any L/C.
2.18 CONCERNING L/C'S.
(a) None of the Issuer, the Issuer's correspondents, or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:
(i) The performance by any beneficiary under any L/C
of that beneficiary's obligations to the Borrower.
(ii) The form, sufficiency, correctness, genuineness,
authority of any person signing; falsification; or the legal effect of;
any documents called for under any L/C if (with respect to the
foregoing) such documents on their face appear to be in order.
(b) The Issuer may honor, as complying with the terms of any
L/C and of any drawing thereunder, any drafts or other documents otherwise in
order, but signed or issued by an administrator, executor, conservator, trustee
in bankruptcy, debtor in possession, assignee for the benefit of creditors,
liquidator, receiver, or other legal representative of the party authorized
under such L/C to draw or issue such drafts or other documents.
(c) Unless otherwise agreed to, in the particular instance,
the Borrower hereby authorizes any Issuer to:
(i) Select an advising bank, if any.
(ii) Select a paying bank, if any.
(iii) Select a negotiating bank.
(d) All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrower. The Issuer shall have
discharged the Issuer's obligations under any L/C which, or the drawing under
which, includes payment instructions, by the initiation of the method of payment
called for in, and in accordance with, such instructions (or by any other
commercially reasonable and comparable method). None of the Agent, any Lender,
nor the Issuer shall have any responsibility for any inaccuracy, interruption,
error, or delay in transmission or delivery by post, telegraph or cable, or for
any inaccuracy of translation.
(e) The Agent's, each Lender's, and the Issuer's rights,
powers, privileges and immunities specified in or arising under this Agreement
are in addition to any heretofore or at any time hereafter otherwise created or
arising, whether by statute or rule of law or contract.
(f) Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Borrower, the L/C will
be governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof.
(g) If any change in any law, executive order or regulation,
or any directive of any administrative or governmental authority (whether or not
having the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, shall either:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirements against letters of credit
heretofore or hereafter issued by any Issuer or with respect to which
the Agent, any or any Issuer has an obligation to lend to fund drawings
under any L/C; or
(ii) impose on any Issuer any other condition or
requirements relating to any such letters of credit;
and the result of any event referred to in Section 2-18(g)(i) or 2-18(g)(ii),
above, shall be to increase the cost to any Issuer of issuing or maintaining any
L/C (which increase in cost shall be the result of such Issuer's reasonable
allocation among that Issuer's letter of credit customers of the aggregate of
such cost increases resulting from such events),
20
22
then, upon demand by the Agent and delivery by the Agent to the Borrower of a
certificate of an officer of the subject Issuer describing such change in law,
executive order, regulation, directive, or interpretation thereof, its effect on
such Issuer, and the basis for determining such increased costs and their
allocation, the Borrower shall immediately pay to the Agent, from time to time
as specified by the Agent, such amounts as shall be sufficient to compensate
such Issuer for such increased cost. Any Issuer's determination of costs
incurred under Section 2-18(g)(i) or 2-18(g)(ii), above, and the allocation, if
any, of such costs among the Borrower and other letter of credit customers of
such Issuer, if done in good faith and made on an equitable basis and in
accordance with such officer's certificate, shall be conclusive and binding on
the Borrower.
(h) The obligations of the Borrower under this Agreement with
respect to L/C's are absolute, unconditional, and irrevocable and shall be
performed strictly in accordance with the terms hereof under all circumstances,
whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of this Agreement,
any L/C, or any other agreement or instrument relating thereto.
(ii) Any amendment or waiver of, or consent to the
departure from, any L/C.
(iii) The existence of any claim, set-off, defense,
or other right which the Borrower may have at any time against the
beneficiary of any L/C.
(iv) Any good faith honoring of a drawing under any
L/C, which drawing possibly could have been dishonored based upon a
strict construction of the terms of the L/C.
2.19 CHANGED CIRCUMSTANCES.
(a) The Agent may give the Borrower notice of the occurrence
of the following:
(i) The Agent shall have determined in good faith
(which determination shall be final and conclusive) on any day on which
the rate for a Libor Loan would otherwise be set, that adequate and
fair means do not exist for ascertaining such rate.
(ii) The Agent shall have determined in good faith
(which determination shall be final and conclusive) that:
(A) The continuation of or conversion of any
Revolving Credit Loan to a Libor Loan has been made
impracticable or unlawful by the occurrence of a contingency
that materially and adversely affects the applicable market or
compliance by the Agent or any Lender in good faith with any
applicable law or governmental regulation, guideline or order
or interpretation or change thereof by any governmental
authority charged with the interpretation or administration
thereof or with any request or directive of any such
governmental authority (whether or not having the force of
law).
(B) The indices on which the interest rates
for Libor Loans are based shall no longer represent the
effective cost to the Agent or any Lender for U.S. dollar
deposits in the interbank market for deposits in which it
regularly participates.
(b) In the event that the Agent gives the Borrower notice of
an occurrence described in Section 2-19(a), then, until the Agent notifies the
Borrower that the circumstances giving rise to such notice no longer apply:
(i) The obligation of the Agent and of each Lender to
make Libor Loans of the type affected by such changed circumstances or
to permit the Borrower to select the affected interest rate as
otherwise applicable to any Revolving Credit Loans shall be suspended.
(ii) Any notice which the Borrower had given the
Agent with respect to any Libor Loan, the time for action with respect
to which has not occurred prior to the Agent's having given notice
pursuant to Section 2-19(a), shall be deemed at the option of the Agent
to not having been given.
2.20 INCREASED COSTS. If, as a result of any requirement of law, or of
the interpretation or application thereof by any court or by any governmental or
other authority or entity charged with the administration thereof, whether or
not having the force of law, which:
(a) subjects any Lender to any taxes or changes the basis of
taxation, or increases any existing taxes, on payments of principal, interest or
other amounts payable by the Borrower to the Agent or any Lender under this
Agreement (except for taxes on the Agent or any Lender's overall net income or
capital imposed by the jurisdiction in which the Agent or that Lender's
principal or lending offices are located);
(b) imposes, modifies or deems applicable any reserve, cash
margin, special deposit or similar requirements against assets held by, or
deposits in or for the account of or loans by or any other acquisition of funds
by the relevant funding office of any Lender;
21
23
(c) imposes on any Lender any other condition with respect to
any Loan Document; or
(d) imposes on any Lender a requirement to maintain or
allocate capital in relation to the Liabilities;
and the result of any of the foregoing, in the such Lender's reasonable opinion,
is to increase the cost to that Lender of making or maintaining any loan,
advance or financial accommodation or to reduce the income receivable by such
Lender in respect of any loan, advance or financial accommodation by an amount
which the such Lender deems to be material, then upon the Agent's giving written
notice thereof, from time to time, to the Borrower (such notice to set out in
reasonable detail the facts giving rise to and a summary calculation of such
increased cost or reduced income), the Borrower shall forthwith pay to the
Agent, for the benefit of the subject Lender, upon receipt of such notice,
that amount which shall compensate the subject Lender for such additional cost
or reduction in income.
2.21 LENDERS' COMMITMENTS.
(a) The obligations of each Lender are several and not joint.
No Lender shall have any obligation to make any loan or advance under the
Revolving Credit in excess of the lesser of
(i) that Lender's Commitment Percentage of the
subject loan or advance or of Availability; or
(ii) that Lender's Dollar Commitment,
(b) No Lender shall have any liability to the Borrower on
account of the failure of any other Lender to provide any loan or advance under
the Revolving Credit nor any obligation to make up any shortfall which may be
created by such failure.
(c) The Dollar Commitments, Commitment Percentages, and
identities of the Lenders (but not the overall Commitment) may be changed, from
time to time by the reallocation or assignment of Dollar Commitments and
Commitment Percentages amongst the Lenders or with other Persons who determine
to become "Lenders", provided, however,
(i) Unless an Event of Default has occurred (in which
event, no consent of the Borrower is required) any assignment to a
Person not then a Lender shall be subject to the prior consent of the
Borrower (not to be unreasonably withheld), which consent will be
deemed given unless the Borrower provides the Agent with written
objection, not more than Five (5) Business Days after the Agent shall
have given the Borrower written notice of a proposed assignment).
(ii) Any such assignment or reallocation shall be on
a pro-rata basis such that each reallocated or assigned Dollar
Commitment to any Person remains the same percentage of the overall
Commitment (in terms of dollars) as the reallocated Commitment
Percentage is to such Person.
(d) Upon written notice given the Borrower from time to time
by the Agent, of any assignment or allocation referenced in Section 2-21(c):
(i) The Borrower shall execute replacement one or
more Revolving Credit Notes to reflect such changed Dollar Commitments,
Commitment Percentages, and identities and shall deliver such
replacement Revolving Credit Notes to the Agent (which promptly
thereafter shall deliver to the Borrower the Revolving Credit Notes so
replaced) provided however, in the event that a Revolving Credit Note
is to be exchanged following its acceleration or the entry of an order
for relief under the Bankruptcy Code with respect to the Borrower, the
Agent, in lieu of causing the Borrower to execute one or more new
Revolving Credit Notes, may issue the Agent's Certificate confirming
the resulting Commitments and Commitment Percentages.
(ii) Such change shall be effective from the
effective date specified in such written notice and any Person added as
a Lender shall have all rights and privileges of a Lender hereunder
thereafter as if such Person had been a signatory to this Agreement and
any other Loan Document to which a Lender is a signatory and any person
removed as a Lender shall be relieved of any obligations or
responsibilities of a Lender hereunder thereafter.
(e) The Borrower recognizes that the Agent's exercise of any
discretion accorded to the Agent herein and of its rights, remedies, powers,
privileges, and discretions with respect to the Borrower is subject to a certain
Agency Agreement amongst the Agent and the Lenders.
ARTICLE III - CONDITIONS PRECEDENT:
As a condition to the effectiveness of this Agreement, the
establishment of the Revolving Credit, and the making of the first loan under
the Revolving Credit, each of the documents respectively described in Sections
3-1 through and including 3-5, and 3-11 (each in form and substance satisfactory
to the Agent) shall have been delivered to the Agent, and the conditions
respectively described in Sections 3-6 through and including 3-10, shall have
been
22
24
satisfied:
3.1. CORPORATE DUE DILIGENCE.
(a) A Certificate of corporate good standing issued by the
Secretary of State of Ohio, Indiana, Florida and Georgia.
(b) Certificates of due qualification, in good standing,
issued by the Secretary(ies) of State of each State in which the nature of the
Borrower's business conducted or assets owned could require such qualification.
(c) A Certificate of the Borrower's Secretary of the due
adoption, continued effectiveness, and setting forth the texts of, each
corporate resolution adopted in connection with the establishment of the loan
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.
3.2. OPINION. An opinion of counsel to the Borrower in form and
substance reasonably satisfactory to the Agent.
3.3. LANDLORD WAIVERS. The delivery to the Agent of Landlord Waivers
(each in form satisfactory to the Agent) for all warehouses and locations owned
by Affiliates or Related Entities of the Borrower.
3.4. ADDITIONAL DOCUMENTS. Such additional instruments and documents as
the Agent or its counsel reasonably may require or request, including but not
limited to the Triparty Agreement executed by the parties thereto.
3.5. OFFICERS' CERTIFICATES. Certificates executed by the President and
the Chief Financial Officer of the Borrower and stating that the representations
and warranties made by the Borrower to the Agent and the Lenders in the Loan
Documents are true and complete as of the date of such Certificate, and that no
event has occurred which is or which, solely with the giving of notice or
passage of time (or both) would be an Event of Default.
3.6. REPRESENTATIONS AND WARRANTIES. Each of the representations made
by or on behalf of the Borrower in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by or
on behalf of the Borrower shall be true and complete as of the date as of which
such representation or warranty was made.
3.7. MINIMUM EXCESS AVAILABILITY. The Borrowing Base, after giving
effect to the first funding under the Revolving Credit; all then held checks (if
any); accounts payable which are beyond credit terms then accorded the Borrower;
overdrafts; (excluding checks not yet presented to the bank) any charges to the
Loan Account made in connection with the establishment of the credit facility
contemplated hereby; and L/C's to be issued at, or immediately subsequent to,
such establishment, is not less than Three Million Five Hundred Thousand Dollars
($3,500,000.00).
3.8. ALL FEES AND EXPENSES PAID. All fees due at or immediately after
the first funding under the Revolving Credit and all costs and expenses incurred
by the Agent in connection with the establishment of the credit facility
contemplated hereby (including the fees and expenses of counsel to the Agent)
shall have been paid.
3.9. NO SUSPENSION EVENT. No Suspension Event shall then exist.
3.10. NO ADVERSE CHANGE. No event shall have occurred or failed to
occur, which occurrence or failure is or could have a materially adverse effect
upon the Borrower's financial condition when compared with the Borrower's
projections dated January 28, 1999 or from the Borrower's unaudited financial
statements at, and for the period closing at the end of, December 31, 1998.
3.11. GUARANTEE PLEDGE. A guarantee of Roberd Insurance Agency, Inc. in
favor of the Agent and pledge of all of the shares of stock of Roberd Insurance
Agency, Inc. from the Borrower to the Agent, in form and substance satisfactory
to the Agent.
No document shall be deemed delivered to the Agent or any Lender until received
and accepted by the Agent at its head offices in Boston, Massachusetts. Under no
circumstances will this Agreement take effect until executed and accepted by the
Agent at said head office.
23
25
ARTICLE IV - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit (each of which loans shall be deemed to have been
made in reliance thereupon) the Borrower, in addition to all other
representations, warranties, and covenants made by the Borrower in any other
Loan Document, makes those representations, warranties, and covenants included
in this Agreement.
4.1. PAYMENT AND PERFORMANCE OF LIABILITIES. The Borrower shall pay
each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.
4.2. DUE ORGANIZATION - CORPORATE AUTHORIZATION - NO CONFLICTS.
(a) The Borrower presently is and shall hereafter remain in
good standing as an Ohio corporation and is and shall hereafter remain duly
qualified and in good standing in every other State in which, by reason of the
nature or location of the Borrower's assets or operation of the Borrower's
business, such qualification may be necessary.
(b) Each Related Entity is listed on EXHIBIT 4-2, annexed
hereto. Each Related Entity is and shall hereafter remain in good standing in
the State in which incorporated and is and shall hereafter remain duly qualified
in which other State in which, by reason of that entity's assets or the
operation of such entity's business, such qualification may be necessary. The
Borrower shall provide the Agent with prior written notice of any entity's
becoming or ceasing to be a Related Entity.
(c) The Borrower shall not change its State of incorporation
nor its taxpayer identification number.
(d) The Borrower has all requisite corporate power and
authority to execute and deliver all Loan Documents to which the Borrower is a
party and has and will hereafter retain all requisite corporate power to perform
all Liabilities.
(e) The execution and delivery by the Borrower of each Loan
Document to which it is a party; the Borrower's consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of security interests by the Borrower as contemplated hereby); the Borrower's
performance under those of the Loan Documents to which it is a party; the
borrowings hereunder; and the use of the proceeds thereof:
(i) Have been duly authorized by all necessary
corporate action.
(ii) Do not, and will not, contravene in any material
respect any provision of any Requirement of Law or obligation of the
Borrower.
(iii) Will not result in the creation or imposition
of, or the obligation to create or impose, any Encumbrance upon any
assets of the Borrower pursuant to any Requirement of Law or
obligation, except pursuant to the Loan Documents.
(f) The Loan Documents have been duly executed and delivered
by the Borrower and are the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms.
(g) Borrower has no Affiliates other than Roberd Insurance
Agency, Inc., and will not at any time hereafter acquire any other Affiliates.
4.3. TRADE NAMES.
(a) EXHIBIT 4-3, annexed hereto, is a listing of:
(i) All names under which the Borrower ever conducted
its business.
(ii) All entities and/or persons with whom the
Borrower ever consolidated or merged, or from whom the Borrower ever
acquired in a single transaction or in a series of related transactions
substantially all of such entity's or person's assets.
(b) The Borrower will not change its name or conduct its
business under any name not listed on EXHIBIT 4-3 except (i) upon not less than
twenty-one (21) days prior written notice (with reasonable particularity) to the
Agent and (ii) in compliance with all other provisions of this Agreement.
4.4. INFRASTRUCTURE.
(a) The Borrower has and will maintain a sufficient
infrastructure to conduct its business as presently conducted and as
contemplated to be conducted as described in the BUSINESS PLAN.
(b) To the Borrower's best knowledge and belief, the Borrower
owns and possesses, or has the right to use (and will hereafter own, possess, or
have such right to use) all patents, industrial designs, trademarks,
24
26
trade names, trade styles, brand names, service marks, logos, copyrights, trade
secrets, know-how, confidential information, and other intellectual or
proprietary property of any third Person necessary for the Borrower's conduct of
the Borrower's business.
(c) To the Borrower's best knowledge and belief, the conduct
by the Borrower of the Borrower's business does not presently infringe (nor will
the Borrower conduct its business in the future so as to infringe) the patents,
industrial designs, trademarks, trade names, trade styles, brand names, service
marks, logos, copyrights, trade secrets, know-how, confidential information, or
other intellectual or proprietary property of any third Person.
4.5. YEAR 2000 COMPLIANCE. On or before September 30,
1999, the Borrower shall remedy all Year 2000 Problem deficiencies it may have
with existing computer applications that could have a material adverse effect on
the Borrower's business operations, to the Agent's reasonable satisfaction. The
Borrower will not employ any computer application hereafter unless the Borrower
shall have first made a diligent inquiry to assure that no Year 2000 Problem
will arise on account of the use of such application.
4.6. LOCATIONS.
(a) The Collateral, and the books, records, and papers of the
Borrower pertaining thereto, are kept and maintained solely at the Borrower's
chief executive offices at
(i) 1000 and 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxx, Xxxx;
and
(ii) those locations which are listed on EXHIBIT 4-6,
annexed hereto, which EXHIBIT includes, with respect to each such
location, the name and address of the landlord on the Lease which
covers such location (or an indication that the Borrower owns the
subject location) and of all service bureaus with which any such
records are maintained and the names and addresses of each of the
Borrower's landlords.
(b) The Borrower shall not remove any of the Collateral from
said chief executive office or those locations listed on EXHIBIT 4-6 except to:
(i) accomplish sales of Inventory in the ordinary
course of business; or
(ii) move Inventory from one such location to another
such location; or
(iii) utilize such of the Collateral as is removed
from such locations in the ordinary course of business (such as motor
vehicles).
(iv) The Borrower will not commit to, or open or
close any location at which the Borrower maintains, offers for sales,
or stores any of the Collateral.
(v) The Borrower may execute, alter, modify, or amend
any Lease, provided that, any such new Lease or alteration,
modification, or amendment to an existing Lease reflects commercially
reasonable and fair market terms that would have been negotiated in an
arms-length Lease.
(c) Except as otherwise disclosed pursuant to, or permitted
by, this Section 4-6, no tangible personal property of the Borrower is in the
care or custody of any third party or stored or entrusted with a bailee or other
third party and none shall hereafter be placed under such care, custody,
storage, or entrustment.
4.7. TITLE TO ASSETS.
(a) The Borrower is, and shall hereafter remain, the owner of
the Collateral free and clear of all Encumbrances with the exceptions of the
following (the "PERMITTED ENCUMBRANCES"):
(i) Encumbrances in favor of the Agent.
(ii) Those Encumbrances (if any) listed on
EXHIBIT 4-7, annexed hereto.
(b) The Borrower does not and shall not have possession of any
property on consignment to the Borrower, except for as provided on EXHIBIT
4.7(b), which consigned property shall not exceed $1 million valued at Cost.
(c) The Borrower shall not acquire or obtain the right to use
any Equipment, the acquisition or right to use of which Equipment is otherwise
permitted by this Agreement, in which Equipment any third party has an interest,
except for:
(i) Equipment which is merely incidental to the
conduct of the Borrower's business.
(ii) Equipment, the acquisition or right to use of
which has been consented to by the Agent, which consent may be
conditioned upon the Agent's receipt of such agreement with the third
party which has an interest in such Equipment as is satisfactory to the
Agent.
4.8. INDEBTEDNESS. The Borrower does not and shall not hereafter have
any Indebtedness with the exceptions of:
25
27
(a) Any Indebtedness to the Lenders.
(b) The Indebtedness (if any) listed on EXHIBIT 4-8, annexed
hereto.
(c) Funded Debt other than amounts due on account of the
Revolving Credit, incurred in connection with Equipment leasing or purchase
money Indebtedness for the acquisition of Equipment, up to a maximum aggregate
amount of Sixty Million Dollars ($60,000,000) outstanding at any one time.
4.9. INSURANCE POLICIES.
(a) EXHIBIT 4-9, annexed hereto, is a schedule of all
insurance policies owned by the Borrower or under which the Borrower is the
named insured. Each of such policies is in full force and effect. Neither the
issuer of any such policy nor the Borrower is in default or violation of any
such policy.
(b) The Borrower shall have and maintain at all times
insurance covering such risks, in such amounts, containing such terms, in such
form, for such periods, and written by such companies as may be reasonably
satisfactory to the Agent. The coverage reflected on EXHIBIT 4-9 presently
satisfies the foregoing requirements, it being recognized by the Borrower,
however, that such requirements may change hereafter to reflect changing
circumstances. All insurance carried by the Borrower shall provide for a minimum
of Sixty (60) days' written notice of cancellation to the Agent and all such
insurance which covers the Collateral shall include an endorsement in favor of
the Agent, which endorsement shall provide that the insurance, to the extent of
the Agent's interest therein, shall not be impaired or invalidated, in whole or
in part, by reason of any act or neglect of the Borrower or by the failure of
the Borrower to comply with any warranty or condition of the policy. In the
event of the failure by the Borrower to maintain insurance as required herein,
the Agent, at its option, may obtain such insurance, provided, however, the
Agent's obtaining of such insurance shall not constitute a cure or waiver of any
Event of Default occasioned by the Borrower's failure to have maintained such
insurance. The Borrower shall furnish to the Agent certificates or other
evidence satisfactory to the Agent regarding compliance by the Borrower with the
foregoing insurance provisions.
(c) The Borrower shall advise the Agent of each claim in
excess of $100,000 made by the Borrower under any policy of insurance which
covers the Collateral and will permit the Agent, at the Agent's option in each
instance, to the exclusion of the Borrower, to conduct the adjustment of each
such claim (and of all claims following the occurrence of any Suspension Event).
The Borrower hereby appoints the Agent as the Borrower's attorney in fact to
obtain, adjust, settle, and cancel any insurance described in this section and
to endorse in favor of the Agent any and all drafts and other instruments with
respect to such insurance. The within appointment, being coupled with an
interest, is irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Agent. The Agent shall
not be liable on account of any exercise pursuant to said power except for any
exercise in actual willful misconduct and bad faith. The Agent will apply any
proceeds of such insurance against the Liabilities, whether or not such have
matured, in such order of application as the Agent may determine.
4.10. LICENSES. Each license, distributorship, franchise, and similar
agreement issued to, or to which the Borrower is a party is in full force and
effect. No party to any such license or agreement is in default or violation
thereof. The Borrower has not received any notice or threat of cancellation of
any such license or agreement.
4.11. LEASES. EXHIBIT 4-11, annexed hereto, is a schedule of all
presently effective Capital Leases. Exhibit 4-6 includes a list of all other
presently effective Leases. Each of such Leases and Capital Leases is in full
force and effect. No party to any such Lease or Capital Lease is in default or
violation of any such Lease or Capital Lease and the Borrower has not received
any notice or threat of cancellation of any such Lease or Capital Lease. The
Borrower hereby authorizes the Agent at any time and from time to time to
contact any of the Borrower's landlords in order to confirm the Borrower's
continued compliance with the terms and conditions of the Lease(s) between the
Borrower and that landlord and to discuss such issues, concerning the Borrower's
occupancy under such Lease(s), as the Agent may determine following the
occurrence and during the continuance of an Event of Default or upon Lender
learning that Borrower is and continues to be past due with any landlord.
4.12. REQUIREMENTS OF LAW. The Borrower is in compliance with, and
shall hereafter comply with and use its assets in compliance with, all
Requirements of Law. The Borrower has not received any notice of any violation
of any Requirement of Law (whether or not such violation is material), which
violation has not been cured or otherwise remedied.
4.13. MAINTAIN PROPERTIES. The Borrower shall:
(a) Keep the Collateral in good order and repair (ordinary
reasonable wear and tear and insured casualty excepted).
26
28
(b) Not suffer or cause the waste or destruction of any
material part of the Collateral.
(c) Not use any of the Collateral in violation of any policy
of insurance thereon.
(d) Not sell, lease, or otherwise dispose of any of the
Collateral, other than the following:
(i) The sale of Inventory in compliance with this
Agreement.
(ii) The disposal of Equipment which is obsolete,
worn out, or damaged beyond repair, which Equipment is replaced to the
extent necessary to preserve or improve the operating efficiency of the
Borrower.
(iii) The turning over to the Agent of all Receipts
as provided herein.
4.14. PAY TAXES.
(a) The Borrower has received written notice from the Internal
Revenue Service that the Internal Revenue Service has completed its examination
of the Borrower's federal income tax returns for all tax years through and
including the Borrower's taxable year referenced on EXHIBIT 4-14, annexed
hereto, and that all deficiencies, assessments, and other amounts asserted as a
result of such examinations have been fully paid or settled. No agreement is
extant which waives or extends any statute of limitations applicable to the
right of the Internal Revenue Service to assert a deficiency or make any other
claim for or in respect to federal income taxes. The Borrower is not aware of
any issues which have been raised in any such examination which, by application
of similar principles, reasonably could be expected to result in the assertion
of a deficiency for any fiscal year open for examination, assessment, or claim
by the Internal Revenue Service, which is not reflected in the Borrower's
financial statements.
(b) The Borrower has received written notice from the
respective state and local taxing authorities to which the Borrower is subject
that such authorities have completed their respective examination of the
Borrower's returns for all state and local income, excise, sales, and other
taxes for which the Borrower is liable for the respective tax years referenced
on EXHIBIT 4-14, annexed hereto, and that all deficiencies, assessments, and
other amounts asserted as a result of such examinations have been fully paid or
settled. No agreement is extant which waives or extends any statute of
limitations applicable to the right of any state taxing authority to assert a
deficiency or make any other claim for or in respect to any such state taxes. No
issue has been raised in any such examination which, by application of similar
principles, reasonably could be expected to result in the assertion of a
deficiency for any fiscal year open for examination, assessment, or claim by any
state or local taxing authority.
(c) Except as disclosed on said EXHIBIT 4-14, there are no
examinations of or with respect to the Borrower presently being conducted by the
Internal Revenue Service or any other taxing authority.
(d) The Borrower has, and hereafter shall: pay, as they become
due and payable, all taxes and unemployment contributions and other charges of
any kind or nature levied, assessed or claimed against the Borrower or the
Collateral by any person or entity whose claim could result in an Encumbrance
upon any asset of the Borrower or by any governmental authority except for such
taxes as the Borrower disputes in good faith and for which it has established
adequate reserves; properly exercise any trust responsibilities imposed upon the
Borrower by reason of withholding from employees' pay or by reason of the
Borrower's receipt of sales tax or other funds for the account of any third
party; timely make all contributions and other payments as may be required
pursuant to any Employee Benefit Plan now or hereafter established by the
Borrower; and timely file all tax and other returns and other reports with each
governmental authority to whom the Borrower is obligated to so file.
(e) At its option, the Agent may, but shall not be obligated
to, pay any taxes, unemployment contributions, and any and all other charges
levied or assessed upon the Borrower or the Collateral by any person or entity
or governmental authority, and make any contributions or other payments on
account of the Borrower's Employee Benefit Plan as the Agent, in the Agent's
discretion, may deem necessary or desirable, to protect, maintain, preserve,
collect, or realize upon any or all of the Collateral or the value thereof or
any right or remedy pertaining thereto, provided, however, the Agent's making of
any such payment shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrower's failure to have made such payment.
4.15. NO MARGIN STOCK. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations U, T, and X of the Board of Governors of the
Federal Reserve System of the United States). No part of the proceeds of any
borrowing hereunder will be used at any time to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
4.16. ERISA. Neither the Borrower nor any ERISA Affiliate ever has or
hereafter shall:
(a) Violate or fail to be in full compliance with the
Borrower's Employee Benefit Plan.
(b) Fail timely to file all reports and filings required by
ERISA to be filed by the Borrower.
27
29
(c) Engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA).
(d) Engage in, or commit, any act such that a tax or penalty
could be imposed upon the Borrower on account thereof pursuant to ERISA.
(e) Accumulate any material funding deficiency within the
meaning of ERISA.
(f) Terminate any Employee Benefit Plan such that a lien could
be asserted against any assets of the Borrower on account thereof pursuant to
ERISA.
(g) Be a member of, contribute to, or have any obligation
under any Employee Benefit Plan which is a multi-employer plan within the
meaning of Section 4001(a) of ERISA.
4.17. HAZARDOUS MATERIALS.
(a) The Borrower has never:
(i) Been legally responsible for any release or
threat of release of any Hazardous Material.
(ii) Received notification of any release or threat
of release of any Hazardous Material from any site or vessel occupied
or operated by the Borrower and/or of the incurrence of any expense or
loss in connection with the assessment, containment, or removal of any
release or threat of release of any Hazardous Material from any such
site or vessel, except as disclosed to Agent in EXHIBIT 4.17(a)(ii)
hereto.
(b) The Borrower shall:
(i) Dispose of any Hazardous Material only in
compliance with all Environmental Laws.
(ii) Not store on any site or vessel occupied or
operated by the Borrower and not transport or arrange for the transport
of any Hazardous Material, except if such storage or transport is in
the ordinary course of the Borrower's business and is in compliance
with all Environmental Laws.
(c) The Borrower shall provide the Agent with written notice
upon the Borrower's obtaining knowledge of any incurrence of any expense or loss
by any governmental authority or other Person in connection with the assessment,
containment, or removal of any Hazardous Material, for which expense or loss the
Borrower may be liable.
4.18. LITIGATION. Except as described in EXHIBIT 4-18, annexed hereto,
there is not presently pending or threatened by or against the Borrower any
suit, action, proceeding, or investigation which, if determined adversely to the
Borrower, would have a material adverse effect upon the Borrower's financial
condition or ability to conduct its business as such business is presently
conducted or is contemplated to be conducted in the foreseeable future.
4.19. DIVIDENDS OR INVESTMENTS. The Borrower shall not:
(a) Pay any cash dividend or make any other distribution in
respect of any class of the Borrower's capital stock.
(b) Own, redeem, retire, purchase, or acquire any of the
Borrower's capital stock.
(c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity.
(d) Merge or consolidate or be merged or consolidated with or
into any other corporation or other entity.
(e) Consolidate any of the Borrower's operations with those of
any other corporation or other entity.
(f) Organize or create any Related Entity.
(g) Subordinate any debts or obligations owed to the Borrower
by any third party to any other debts owed by such third party to any other
Person.
(h) Acquire any assets other than in the ordinary course and
conduct of the Borrower's business as conducted at the execution of this
Agreement.
4.20. LOANS. The Borrower shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, the foregoing does
not prohibit any of the following:
(a) Advance payments made to the Borrower's suppliers in the
ordinary course.
(b) Advances to the Borrower's officers, employees, and
salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrower, which
28
30
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrower.
(c) Advances to The Xxxxxxx, Inc. Health & Welfare Benefit
Trust in amounts not to exceed $1 million in the aggregate at any one time,
provided there does not exist a continuing Suspension Event or Event of Default.
4.21. PROTECTION OF ASSETS. The Agent, in the Agent's discretion, and
from time to time, may discharge any tax or Encumbrance on any of the
Collateral, or take any other action that the Agent may deem necessary or
desirable to repair, insure, maintain, preserve, collect, or realize upon any of
the Collateral. The Agent shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Agent has had an opportunity to be heard), from which finding no further appeal
is available, that the Agent had acted in actual bad faith or in a grossly
negligent manner. The Borrower shall pay to the Agent, on demand, or the Agent,
in its discretion, may add to the Loan Account, all amounts paid or incurred by
the Agent pursuant to this section. The obligation of the Borrower to pay such
amounts is a Liability.
4.22. LINE OF BUSINESS. The Borrower shall not engage in any business
other than the business in which it is currently engaged or a business
reasonably related thereto.
4.23. AFFILIATE TRANSACTIONS. The Borrower shall not make any payment,
nor give any value to any Related Entity except for goods and services actually
purchased by the Borrower from, or sold by the Borrower to, such Related Entity
for a price and on terms which shall
(a) be competitive and fully deductible as an "ordinary and
necessary business expense" and/or fully depreciable under the Internal Revenue
Code of 1986 and the Treasury Regulations, each as amended; and
(b) no be less favorable from those which would have been
charged in an arms length transaction.
4.24. ADDITIONAL ASSURANCES.
(a) The Borrower is not the owner of, nor has it any interest
in, any property or asset which, immediately upon the satisfaction of the
conditions precedent to the effectiveness of the credit facility contemplated
hereby (Article 3) will be not be subject to a perfected security or other
collateral interest in favor of the Agent (subject only to Permitted
Encumbrances) to secure the Liabilities.
(b) The Borrower will not hereafter acquire any asset or any
interest in property which is not, immediately upon such acquisition, subject to
such a perfected security or other collateral interest in favor of the Agent to
secure the Liabilities (subject only to Permitted Encumbrances).
(c) The Borrower shall execute and deliver to the Agent such
instruments, documents, and papers, and shall do all such things from time to
time hereafter as the Agent may request to carry into effect the provisions and
intent of this Agreement; to protect and perfect the Agent's security interests
in the Collateral; and to comply with all applicable statutes and laws, and
facilitate the collection of the Receivables Collateral and the Federal Tax
Refund. The Borrower shall execute all such instruments as may be required by
the Agent with respect to the recordation and/or perfection of the security
interests created herein and assignments made hereby.
(d) The Borrower hereby designates the Agent as and for the
Borrower's true and lawful attorney, with full power of substitution, to sign
and file any financing statements in order to perfect or protect the Agent's
security and other collateral interests in the Collateral.
(e) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 4-24 shall be sufficient for filing to perfect the security
interests granted herein.
4.25. ADEQUACY OF DISCLOSURE.
(a) All financial statements furnished to the Agent and each
Lender by the Borrower has been prepared in accordance with GAAP consistently
applied and present fairly the condition of the Borrower at the date(s) thereof
and the results of operations and cash flows for the period(s) covered. There
has been no change in the financial condition, results of operations, or cash
flows of the Borrower since the date(s) of such financial statements, other than
changes in the ordinary course of business, which changes have not been
materially adverse, either singularly or in the aggregate.
(b) The Borrower does not have any contingent obligations or
obligation under any Lease or
29
31
Capital Lease which is not noted in the Borrower's financial statements
furnished to the Agent and each Lender prior to the execution of this Agreement.
(c) No document, instrument, agreement, or paper now or
hereafter given the Agent or any Lender by or on behalf of the Borrower or any
guarantor of the Liabilities in connection with the execution of this Agreement
by the Agent and each Lender contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements therein not misleading. There is no fact known to the
Borrower which has, or which, in the foreseeable future could have, a material
adverse effect on the financial condition of the Borrower or any such guarantor
which has not been disclosed in writing to the Agent and each Lender.
4.26. OTHER COVENANTS. The Borrower shall not indirectly do or cause to
be done any act which, if done directly by the Borrower, would breach any
covenant contained in this Agreement.
ARTICLE V - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:
5.1. MAINTAIN RECORDS. The Borrower shall:
(a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Borrower's transactions,
all in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrower at the close of, and its results
of operations for, the periods in question.
(b) Timely provide the Agent with those financial reports,
statements, and schedules required by this Article 5 or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent applicable,
in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrower at the close of, and its results
of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
sales records of its Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) At all times, retain independent certified public
accountants who are reasonably satisfactory to the Agent and instruct such
accountants to fully cooperate with, and be available to, the Agent and each
Lender to discuss the Borrower's financial performance, financial condition,
operating results, controls, and such other matters, within the scope of the
retention of such accountants, as may be raised by the Agent or that Lender.
(e) Not change the Borrower's fiscal year.
5.2. ACCESS TO RECORDS.
(a) The Borrower shall accord the Agent and the Agent's
representatives with access from time to time as the Agent and such
representatives may require to all properties owned by or over which the
Borrower has control. The Agent and the Agent's representatives shall have the
right, and the Borrower will permit the Agent and such representatives from time
to time as the Agent and such representatives may request, to examine, inspect,
copy, and make extracts from any and all of the Borrower's books, records,
electronically stored data, papers, and files. The Borrower shall make all of
the Borrower's copying facilities available to the Agent.
(b) The Borrower hereby authorizes the Agent and the Agent's
representatives to:
(i) Inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all
computer or electronically stored information or data which relates to
the Borrower, or any service bureau, contractor, accountant, or other
person, and directs any such service bureau, contractor, accountant, or
other person fully to cooperate with the Agent and the Agent's
representatives with respect thereto.
(ii) Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the
Borrower's computer billing companies, collection agencies, and
accountants and to sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Collateral.
5.3. IMMEDIATE NOTICE TO AGENT.
(a) The Borrower shall provide the Agent with written notice
immediately upon the occurrence of any of the following events, which written
notice shall be with reasonable particularity as to the facts and circumstances
in respect of which such notice is being given:
(i) Any change in the Borrower's Chief Executive
Officer, President, Treasurer, or Chief Accounting Officer.
30
32
(ii) The completion of any physical count of the
Borrower's Inventory (together with a copy of the certified results
thereof).
(iii) Any ceasing of the Borrower's making of
payment, in the ordinary course, to any of its creditors (excluding the
ceasing of the making of such payments on account of a good faith
dispute with the subject creditor).
(iv) Any failure by the Borrower to pay rent at any
of the Borrower's locations, which failure continues for more than
Three (3) days following the day on which such rent first came due.
(v) Any material change in the business, operations,
or financial affairs of the Borrower.
(vi) The occurrence of any Suspension Event.
(vii) Any intention on the part of the Borrower to
discharge the Borrower's present independent accountants or any
withdrawal or resignation by such independent accountants from their
acting in such capacity (as to which, see Subsection 5-1(d)).
(viii) Any litigation which, if determined adversely
to the Borrower, might have a material adverse effect on the financial
condition of the Borrower.
(ix) Any delay in the Borrower's meeting the
timetable for its operations becoming Year 2000 Compliant as described
on EXHIBIT 4-5 or maintaining such operations as Year 2000 Compliant,
except where such delay or failure to so maintain will have no more
than a de minimus effect on the Borrower's operations.
(b) The Borrower shall:
(i) Provide the Agent, when so distributed, with
copies of any materials distributed to the shareholders of the Borrower
(qua such shareholders).
(ii) At the request of the Agent, from time to time,
provide the Agent with copies of all advertising (including copies of
all print advertising and duplicate tapes of all video and radio
advertising).
(iii) Provide the Agent, when received by the
Borrower, with a copy of any management letter or similar
communications from any accountant of the Borrower.
5.4. BORROWING BASE CERTIFICATE. The Borrower shall provide the Agent
by 11:30 A.M., daily, with a Borrowing Base Certificate (in the form of EXHIBIT
5-4 annexed hereto, as such form may be revised from time to time by the Agent).
Such Certificate may be sent to the Agent by facsimile transmission, provided
that, upon the Agent's request, the original thereof is forwarded to the Agent
on the date of such request. For purposes of such Borrowing Certificates,
Inventory shall be updated not less frequently than weekly.
5.5. INTENTIONALLY DELETED.
5.6. MONTHLY REPORTS.
(a) Monthly, the Borrower shall provide the Agent with
original counterparts of the following (each in such form as the Agent from time
to time may specify and (except as otherwise provided below) certified as to the
accuracy thereof by any two of the following persons: President, Treasurer,
Chief Financial Officer, or Controller of Borrower):
(i) Within Twenty (20) days of the end of the
previous month:
(A) A Certificate (signed by the Borrower's
President or Chief Financial Officer) concerning the
Borrower's Inventory.
(B) A Written verses Delivered Sales
Summary.
(C) A monthly Inventory Turns by
Department by Category Report.
(D) A Comparison of Markets Gross Margin
Percentage by Category.
(E) Major Sales Summary - Sales Totals by
SKU Range/Category.
(F) Deposit Balances Aging Schedule
Summary/Total Page by Region.
(G) "NAS" Summary Report by Location by
Division.
(ii) Within Thirty (30) days of the end of the
previous month:
(A) Reconciliation of the above described
Report and Inventory Certificate (Section 5-6(a)(i)(A)) to
Availability and to the general ledger as of the end of the
subject month.
(B) A Gross Margin Reconciliation.
(C) An aging of the Borrower's accounts
payable.
(D) A Store Activity Report.
31
33
(E) An internally prepared financial
statement of the Borrower's financial condition the results of
its operations for, the period ending with the end of the
subject month, which financial statement shall include, at a
minimum, a balance sheet, income statement (on a regional and
on a "consolidated" basis), capital expenditures schedule and
comparison of same store sales for the corresponding month of
the then immediately previous year, as well as to the
Borrower's business plan provided to Agent, certified as to
the accuracy thereof and compliance with GAAP (subject to
year-end audit adjustments) by any two (2) of the following
officers: the President, Chief Executive Officer, the Chief
Accounting Officer, the Chief Financial Officer, and
Treasurer.
(F) An Aging of Borrower's accounts payable.
(b) For purposes of Section 5-6(a)(i), above, the first
"previous month" in respect of which the items required by that Section shall be
provided shall be February, 1999 and for purposes of Section 5-6(a)(ii), above,
the first "previous month" in respect of which the items required by that
Section shall be provided shall be February, 1999.
5.7. QUARTERLY REPORTS. Quarterly, within Forty Five (45) days
following the end of each of the Borrower's fiscal quarters, the Borrower shall
provide the Agent with an original counterpart the Borrower's Form 10Q and
Report filed with the Security and Exchange Commission of a management prepared
financial statement of the Borrower for the period from the beginning of the
Borrower's then current fiscal year through the end of the subject quarter, with
comparative information for the same period of the previous fiscal year, which
statement shall include, at a minimum, a balance sheet, income statement (on a
store specific and on a "consolidated" basis), statement of changes in
shareholders' equity, cash flows and comparisons for the corresponding quarter
of the then immediately previous year, as well as to the Borrower's BUSINESS
PLAN provided to Lender, certified as to the accuracy thereof and compliance
with GAAP (subject to year-end audit adjustments) by any two (2) of the
following officers: the President, Chief Executive Officer, Chief Accounting
Officer, the Chief Financial Officer, Chief Executive Officer, Treasurer.
5.8. ANNUAL REPORTS.
(a) Annually, within ninety (90) days following the end of the
Borrower's fiscal year, the Borrower shall furnish the Agent with an original
signed counterpart of the Borrower's annual financial statement, which statement
shall have been prepared by, and bear the unqualified opinion of, the Borrower's
independent certified public accountants (i.e. said statement shall be
"certified" by such accountants). Such annual statement shall include, at a
minimum (with comparative information for the then prior fiscal year) a balance
sheet, income statement, statement of changes in shareholders' equity, cash
flows, and the Borrower's Form 10K Report filed with the Security and Exchange
Commission.
(b) No later than the earlier of Fifteen (15) days prior to
the end of each of the Borrower's fiscal years or the date on which such
accountants commence their work on the audit of the Borrower's annual financial
statement, the Borrower shall give written notice to such accountants (with a
copy of such notice, when sent, to the Agent) that:
(i) Such annual financial statement will be delivered
by the Borrower to the Agent (for subsequent distribution to each
Lender).
(ii) It is the primary intention of the Borrower, in
its engagement of such accountants, to satisfy the financial reporting
requirements set forth in this Article 5.
(iii) The Borrower has been advised that the Agent
(and each Lender) will rely thereon with respect to the administration
of, and transactions under, the credit facility contemplated by this
Agreement.
(c) Each annual statement shall be accompanied by such
accountant's Certificate indicating that, in the preparation of such annual
statement, such accountants did not conclude that any Suspension Event had
occurred during the subject fiscal year (or if one or more had occurred, the
facts and circumstances thereof).
5.9. OFFICERS' CERTIFICATES. The Borrower shall cause the Borrower's
President and Chief Financial Officer respectively to provide such Person's
Certificate with those monthly, quarterly, and annual statements to be furnished
pursuant to this Agreement, which Certificate shall:
(a) Indicate that the subject statement was prepared in
accordance with GAAP consistently applied and presents fairly the financial
condition of the Borrower at the close of, and the results of the Borrower's
operations and capital expenditures schedule or cash flows, as applicable, for,
the period(s) covered, subject, however
32
34
to the following:
(i) usual year end adjustments (this exception shall
not be included in the Certificate which accompanies such annual
statement).
(ii) Material Accounting Changes (in which event,
such Certificate shall include a schedule (in reasonable detail) of the
effect of each such Material Accounting Change) not previously
specifically taken into account in the determination of the financial
performance covenant imposed pursuant to Section 5-12.
(b) Indicate either that (i) no Suspension Event has occurred
or (ii) if such an event has occurred, its nature (in reasonable detail) and the
steps (if any) being taken or contemplated by the Borrower to be taken on
account thereof.
(c) Include calculations concerning the Borrower's compliance
(or failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 5-12 hereof.
5.10. INVENTORIES, APPRAISALS, AND AUDITS.
(a) The Agent and each Lender, at the expense of the Borrower,
may participate in and/or observe each physical count and/or inventory of so
much of the Collateral as consists of Inventory which is undertaken on behalf of
the Borrower.
(b) The Borrower, at its own expense, shall cause not less
than Two (2) physical inventories to be undertaken in each twelve (12) month
period during which this Agreement is in effect (the spacing of the scheduling
of which inventories shall be subject to the Agent's discretion) conducted by
such inventory takers as are reasonably satisfactory to the Agent and following
such methodology as may be reasonably satisfactory to the Agent.
(i) The Borrower shall provide the Agent with a copy
of the preliminary results of each such inventory (as well as of any
other physical inventory undertaken by the Borrower) within ten (10)
days following the completion of such inventory.
(ii) The Borrower shall provide the Agent with a
reconciliation of the results of each such inventory (as well as of any
other physical inventory undertaken by the Borrower) to the Borrower's
books and records within thirty (30) days following the completion of
such inventory.
(iii) The Agent, in its discretion, following the
occurrence of a Suspension Event, may cause such additional inventories
to be taken as the Agent determines (each, at the expense of the
Borrower).
(c) Upon the Agent's request from time to time, the Borrower
shall permit the Agent to obtain appraisals conducted by such appraisers as are
satisfactory to the Agent, provided, however, that up to three such appraisals
during any 12 month period shall be at the Borrower's expense and all such
appraisals shall be at Borrower's expense following the occurrence and during
the continuance of an Event of Default hereunder.
(d) Borrower shall permit the Agent to conduct up to Four (4)
commercial finance audits (in each event, at the Borrower's expense, which
expense, in the absence of the occurrence of an Event of Default hereunder shall
not exceed $15,000 during any 12 month period, plus Agent's reasonable travel
expenses) of the Borrower's books and records during any Twelve (12) month
period during which this Agreement is in effect, but in its discretion, may (at
Agent's expense) undertake additional such audits during such period, provided,
however, following the occurrence and during the continuance of an Event of
Default hereunder, the Borrower shall permit the Agent to conduct such
additional commercial finance audits (in each event, at the Borrower's expense)
as Agent, in its sole discretion, deems necessary.
(e) The Agent from time to time (in all events, at the
Borrower's expense, which expense shall not exceed $250.00 during any 12 month
period) may undertake "mystery shopping" (so-called) visits to all or any of the
Borrower's business premises. The Agent shall provide the Borrower with a copy
of any non-company confidential results of such mystery shopping.
5.11. ADDITIONAL FINANCIAL INFORMATION.
(a) In addition to all other information required to be
provided pursuant to this Article 5, the Borrower promptly shall provide the
Agent (and any guarantor of the Liabilities), with such other and additional
information concerning the Borrower, the Collateral, the operation of the
Borrower's business, and the Borrower's financial condition, including original
counterparts of financial reports and statements, as the Agent may from time to
time request from the Borrower.
(b) The Borrower may provide the Agent, from time to time
hereafter, with updated projections of the Borrower's anticipated performance
and operating results.
(c) In all events, the Borrower, no sooner than ninety (90)
nor later than the last day of each of the Borrower's fiscal years, shall
furnish the Agent with an updated and extended projection (inclusive of balance
33
35
sheets, income statements, and statements of cash flow for each fiscal month)
which shall go out at least through the end of the then next fiscal year.
(d) Intentionally Deleted.
(e) The Borrower recognizes that all appraisals, inventories,
analysis, financial information, and other materials which the Agent or any
Lender may obtain, develop, or receive with respect to the Borrower is
confidential to the Agent and the Lenders and that, except as otherwise provided
herein, the Borrower is not entitled to receipt of any of such appraisals,
inventories, analysis, financial information, and other materials, nor copies or
extracts thereof or therefrom.
5.12. FINANCIAL PERFORMANCE COVENANTS. The Borrower shall at all times
observe and comply with those financial performance covenants set forth below:
5.12.1 FIXED CHARGE COVERAGE RATIO. The Borrower will not
suffer or permit its Fixed Charge Coverage Ratio as measured on a
rolling/trailing 12-month basis, to be measured on the last day of each of the
Borrower's fiscal month commencing with its month ending February, 1999, to be
less than as follows:
February, 1999 0.60
March, 1999 0.70
April, 1999 0.80
May, 1999 0.70
June, 1999 0.70
July, 1999 0.75
August, 1999 0.83
September, 1999 0.85
October, 1999 0.95
November, 1999 1.10
Thereafter on a 1.35
rolling/trailing 12-month basis
5.12.2 CAPITAL EXPENDITURES. The Borrower may not incur
Capital Expenditures in excess of $2,900,000 in any fiscal year with a maximum
of $1,300,000 expended in the first six months of any fiscal year (exclusive of
a computer lease contemplated as of the date of this Agreement of approximately
$1,700,000 from Data General Corporation or its Affiliate).
Compliance with such financial performance covenants shall be made as
if no Material Accounting Changes had been made (other than any Material
Accounting Changes specifically taken into account in the setting of such
covenants). The Agent may determine the Borrower's compliance with such
covenants based upon financial reports and statements provided by the Borrower
to the Agent or any Lender (whether or not such financial reports and statements
are required to be furnished pursuant to this Agreement) as well as by reference
to interim financial information provided to, or developed by, the Agent.
ARTICLE VI - USE AND COLLECTION OF COLLATERAL:
6.1. USE OF INVENTORY COLLATERAL.
(a) The Borrower shall not engage in any sale of the Inventory
other than for fair consideration in the conduct of the Borrower's business in
the ordinary course and shall not engage in sales or other dispositions to
creditors; sales or other dispositions in bulk; and any use of any of the
Inventory in breach of any provision of this Agreement.
(b) No sale of Inventory shall be on consignment, approval, or
under any other circumstances such that, with the exception of the Borrower's
customary return policy applicable to the return of inventory purchased by the
Borrower's retail customers in the ordinary course, such Inventory may be
returned to the Borrower without the consent of the Agent.
6.2. INVENTORY QUALITY. All Inventory now owned or hereafter acquired
by the Borrower is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances).
34
36
6.3. ADJUSTMENTS AND ALLOWANCES. The Borrower may grant such allowances
or other adjustments to the Borrower's Account Debtors (exclusive of extending
the time for payment of any Account or Account Receivable, which shall not be
done without first obtaining the Agent's prior written consent in each instance)
as the Borrower may reasonably deem to accord with sound business practice,
provided, however, the authority granted the Borrower pursuant to this Section
6-3 may be limited or terminated by the Agent at any time in the Agent's
discretion.
6.4. VALIDITY OF ACCOUNTS.
(a) The amount of each Account shown on the books, records,
and invoices of the Borrower represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall have
been fully earned by performance by the Borrower.
(b) The Borrower has no knowledge of any impairment of the
validity or collectibility of any of the Accounts and shall notify the Agent of
any such fact immediately after the Borrower becomes aware of any such
impairment.
(c) Except for those disclosed on EXHIBIT 6.4(c), the Borrower
shall not post any bond in excess of $100,000 (not to exceed $300,000 in the
aggregate at any one time) to secure the Borrower's performance under any
agreement to which the Borrower is a party nor cause any surety, guarantor, or
other third party obligee to become liable to perform any obligation of the
Borrower (other than to the Agent ) in the event of the Borrower's failure so to
perform.
6.5. NOTIFICATION TO ACCOUNT DEBTORS. The Agent shall have the right at
any time (whether or not an Event of Default has occurred) to notify any of the
Borrower's Account Debtors to make payment directly to the Agent and to collect
all amounts due on account of the Collateral.
ARTICLE VII - CASH MANAGEMENT. PAYMENT OF LIABILITIES:
7.1. DEPOSITORY ACCOUNTS.
(a) Annexed hereto as EXHIBIT 7-1 is a Schedule of all present
DDA's, which Schedule includes, with respect to each depository (i) the name and
address of that depository; (ii) the account number(s) of the account(s)
maintained with such depository; and (iii) a contact person at such depository.
(b) The Borrower shall deliver to the Agent, as a condition to
the effectiveness of this Agreement:
(i) Notification, executed on behalf of the Borrower,
to each depository institution with which any DDA is maintained (other
than the Operating Account or any Local DDA), in form satisfactory to
the Agent, of the Agent's interest in such DDA.
(ii) An agreement (generally referred to as a
"Blocked Account Agreement"), in form satisfactory to the Agent with
any depository institution at which both any DDA (other than the
Operating Account) and the Operating Account is maintained.
(iii) An agreement (generally referred to as a
"Blocked Account Agreement"), in form satisfactory to the Agent, with
any depository institution at which a Blocked Account is maintained.
(c) The Borrower will not establish any DDA hereafter (other
than a Local DDA) unless, contemporaneous with such establishment, the Borrower
delivers to the Agent an agreement (in form satisfactory to the Agent) executed
on behalf of the depository with which such DDA is being established.
7.2. CREDIT CARD RECEIPTS.
(a) Annexed hereto as EXHIBIT 7-2, is a Schedule which
describes all arrangements to which the Borrower is a party with respect to the
payment to the Borrower of the proceeds of all credit card charges for sales by
the Borrower.
(b) The Borrower shall deliver to the Agent, as a condition to
the effectiveness of this Agreement, notification, executed on behalf of the
Borrower, to each of the Borrower's credit card clearinghouses and processors of
notice (in form satisfactory to the Agent ), which notice provides that payment
of all credit card charges submitted by the Borrower to that clearinghouse or
other processor and any other amount payable to the Borrower by such
clearinghouse or other processor shall be directed to the Concentration Account
or as otherwise designated from time to time by the Agent. The Borrower shall
not change such direction or designation except upon and with the prior written
consent of the Agent.
7.3. THE CONCENTRATION, BLOCKED, AND OPERATING ACCOUNTS.
(a) The following checking accounts have been or will be
established (and are so referred to
35
37
herein):
(i) The CONCENTRATION ACCOUNT: Established by the
Agent with BankBoston, N.A.
(ii) The BLOCKED ACCOUNT: Established by the Borrower
with Bank One, or any of the Lenders.
(iii) The OPERATING ACCOUNT: Established by the
Borrower with Bank One, or any of the Lenders.
(b) The contents of each DDA (other than the Operating
Account) and of the Blocked Account constitutes Collateral and Proceeds of
Collateral. The contents of the Concentration Account constitutes the Agent's
property.
(c) The Borrower:
(i) Contemporaneous with the execution of this
Agreement, shall provide the Agent with such agreement (generally
referred to as a "Blocked Account Agreement") of the depository with
which the Blocked Account is maintained as may be satisfactory to the
Agent; and
(ii) Shall not establish any Blocked Account
hereafter except upon not less than thirty (30) days prior written
notice to the Agent and the delivery to the Agent of a similar such
agreement.
(d) The Borrower shall pay all fees and charges of, and
maintain such impressed balances as may be required by the Agent or by any bank
in which any account is opened as required hereby (even if such account is
opened by and/or is the property of the Agent).
7.4. PROCEEDS AND COLLECTION OF ACCOUNTS.
(a) All Receipts constitute Collateral and proceeds of
Collateral and shall be held in trust by the Borrower for the Agent; shall not
be commingled with any of the Borrower's other funds; and shall be deposited
and/or transferred only to the Blocked Account.
(b) The Borrower shall cause the ACH or wire transfer to the
Blocked Account, no less frequently than daily (and whether or not there is then
an outstanding balance in the Loan Account) of
(i) the then contents of each DDA (other than (A) any
Local DDA and (B) the Operating Account), each such transfer to be net
of any minimum balance, not to exceed $1,000.00, as may be required to
be maintained in the subject DDA by the bank at which such DDA is
maintained); and
(ii) the proceeds of all credit card charges not
otherwise provided for pursuant hereto. Telephone advice (confirmed by
written notice) shall be provided to the Agent on each Business Day on
which any such transfer is made.
(c) Whether or not any Liabilities are then outstanding, the
Borrower shall cause the ACH or wire transfer to the Concentration Account, no
less frequently than daily, of then entire ledger balance of the Blocked
Account, net of such minimum balance, not to exceed $1,000.00, as may be
required to be maintained in the Blocked Account by the bank at which the
Blocked Account is maintained.
(d) In the event that, notwithstanding the provisions of this
Section 7-4, the Borrower receives or otherwise has dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Borrower for the Agent
and shall not be commingled with any of the Borrower's other funds or deposited
in any account of the Borrower other than as instructed by the Agent.
7.5. PAYMENT OF LIABILITIES.
(a) On each Business Day, the Agent shall apply, towards the
Liabilities, the then collected balance of the Concentration Account (net of
fees charged, and of such impressed balances as may be required by the bank at
which the Concentration Account is maintained), provided, however, for purposes
of the calculation of interest on the unpaid principal balance of the Loan
Account, such payment shall be deemed to have been made one (1) Business Day
after such transfer.
(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
(i) Funds shall be deemed to have been deposited to
the Concentration Account on the Business Day on which deposited,
provided that notice of such deposit is available to the Agent by 2:00
P.M. on that Business Day.
(ii) Funds paid to the Agent, other than by deposit
to the Concentration Account, shall be deemed to have been received on
the Business Day when they are good and collected funds, provided that
notice of such payment is available to the Agent by 2:00 P.M. on that
Business Day.
(iii) If notice of a deposit to the Concentration
Account (Section 7-5(b)(i)) or payment (Section 7-5(b)(ii)) is not
available to the Agent until after 2:00 P.M. on a Business Day, such
deposit or
36
38
payment shall be deemed to have been made at 9:00 A.M. on the then next
Business Day.
(iv) All deposits to the Concentration Account and
other payments to the Agent are subject to clearance and collection.
(c) The Agent shall transfer to the Operating Account any
surplus in the Concentration Account remaining after the application towards the
Liabilities referred to in Section 7-5(a), above (less those amount which are to
be netted out, as provided therein) provided, however, in the event that both
(i) a Suspension Event has occurred and (ii) one or more L/C's are then
outstanding, the Agent may establish a funded reserve of up to 110% of the
aggregate Stated Amounts of such L/C's.
7.6. THE OPERATING ACCOUNT. Except as otherwise specifically provided
in, or permitted by, this Agreement, all checks shall be drawn by the Borrower
upon, and other disbursements shall be made by the Borrower solely from, the
Operating Account.
ARTICLE VIII - GRANT OF SECURITY INTEREST:
8.1. GRANT OF SECURITY INTEREST. To secure the Borrower's prompt,
punctual, and faithful performance of all and each of the Liabilities, the
Borrower hereby grants to the Agent, for the ratable benefit of the Lenders, a
continuing security interest in and to, and assigns to the Agent, for the
ratable benefit of the Lenders, the following, and each item thereof, whether
now owned or now due, or in which the Borrower has an interest, or hereafter
acquired, arising, or to become due, or in which the Borrower obtains an
interest, and all products, Proceeds, substitutions, and accessions of or to any
of the following (all of which, together with any other property in which the
Agent may in the future be granted a security interest, is referred to herein as
the "COLLATERAL"):
(a) All Accounts and accounts receivable.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
(h) All books, records, and information relating to the
Collateral and/or to the operation of the Borrower's business, and all rights of
access to such books, records, and information, and all property in which such
books, records, and information are stored, recorded, and maintained.
(i) All Investment Property, Instruments, Documents, Deposit
Accounts, policies and certificates of insurance, deposits, impressed accounts,
compensating balances, money, cash, or other property.
(j) All insurance proceeds, refunds, and premium rebates,
including, without limitation, proceeds of fire and credit insurance, whether
any of such proceeds, refunds, and premium rebates arise out of any of the
foregoing (8-1(a) through 8-1(i)) or otherwise.
(k) All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing (8-1(a) through 8-1(i)), including the right
of stoppage in transit.
(l) All Leasehold Interests.
8.2. EXTENT AND DURATION OF SECURITY INTEREST. The security interest
created and granted herein is in addition to, and supplemental of, any security
interest previously granted by the Borrower to the Agent and shall continue in
full force and effect applicable to all Liabilities until all Liabilities have
been paid and/or satisfied in full and the security interest granted herein is
specifically terminated in writing by a duly authorized officer of the Agent.
ARTICLE IX - AGENT AS BORROWER'S ATTORNEY-IN-FACT:
9.1. APPOINTMENT AS ATTORNEY-IN-FACT. The Borrower hereby irrevocably
constitutes and appoints the Agent as the Borrower's true and lawful attorney,
with full power of substitution, to convert the Collateral into cash at the sole
risk, cost, and expense of the Borrower, but for the sole benefit of the Agent.
The rights and powers granted the Agent by the within appointment include but
are not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) Sign change of address forms to change the address to
which the Borrower's mail is to be sent to such address as the Agent shall
designate; receive and open the Borrower's mail; remove any Receivables
Collateral and Proceeds of Collateral therefrom and turn over the balance of
such mail either to the Borrower or to any trustee in bankruptcy, receiver,
assignee for the benefit of creditors of the Borrower, or other legal
representative of
37
39
the Borrower whom the Agent determines to be the appropriate person to whom to
so turn over such mail.
(c) Endorse the name of the Borrower in favor of the Agent
upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the Borrower on, and receive as
secured party, any of the Collateral, any invoices, schedules of Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title respectively relating to the Collateral.
(d) Sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Receivables Collateral; sign
the Borrower's name on any Proof of Claim in Bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic's liens, or assignments or releases
of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which the Borrower
is a beneficiary.
(f) Repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of the Borrower.
(g) Use, license or transfer any or all General Intangibles of
the Borrower.
9.2. NO OBLIGATION TO ACT. The Agent shall not be obligated to do any
of the acts or to exercise any of the powers authorized by Section 9-1 herein,
but if the Agent elects to do any such act or to exercise any of such powers, it
shall not be accountable for more than it actually receives as a result of such
exercise of power, and shall not be responsible to the Borrower for any act or
omission to act except for any act or omission to act as to which there is a
final determination made in a judicial proceeding (in which proceeding the Agent
has had an opportunity to be heard) which determination includes a specific
finding that the subject act or omission to act had been grossly negligent or in
actual bad faith.
ARTICLE X - EVENTS OF DEFAULT:
The occurrence of any event described in this Article 10 respectively
shall constitute an "EVENT OF DEFAULT" herein. Upon the occurrence of any Event
of Default described in Section 10-11, any and all Liabilities shall become due
and payable without any further act on the part of the Agent or any Lender. Upon
the occurrence of any other Event of Default, any and all Liabilities shall
become immediately due and payable, at the option of the Agent and without
notice or demand. The occurrence of any Event of Default shall also constitute,
without notice or demand, a default under all other agreements between the Agent
or any Lender and the Borrower and instruments and papers given the Agent or any
Lender by the Borrower, whether such agreements, instruments, or papers now
exist or hereafter arise.
10.1. FAILURE TO PAY REVOLVING CREDIT. The failure by the Borrower to
pay any amount when due under the Revolving Credit.
10.2. FAILURE TO MAKE OTHER PAYMENTS. The failure by the Borrower to
pay when due (or upon demand, if payable on demand) any payment Liability other
than under the Revolving Credit.
10.3. FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD). The
failure by the Borrower to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability not otherwise described in
Section 10-1 or Section 10-2 hereof, and included in any of the following
provisions hereof:
SECTION RELATES TO:
------------------------------------------
4-6 Location of Collateral
4-7 Title to Assets
4-8 Indebtedness
4-9 Insurance Policies
4-14 Pay taxes
4-23 Affiliate Transactions
4-24 Additional Assurances
6-1 Use of Collateral
Article 5 Reporting Requirements and Financial Covenants
Article 7 Cash Management
10.4. FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The
failure by the Borrower, upon Ten (10) days written notice by the Agent, to
cure the Borrower's failure to promptly, punctually and faithfully perform,
38
40
discharge, or comply with any covenant or Liability not described in any of
Sections 10-1, 10-2, or 10-3 hereof.
10.5. MISREPRESENTATION. The determination by the Agent that any
representation or warranty at any time made by the Borrower to the Agent or any
Lender, was not true or complete in all material respects when given.
10.6. ACCELERATION OF OTHER DEBT, BREACH OF LEASE. The occurrence of
any event such that any Indebtedness of the Borrower to any creditor other than
the Agent or any Lender could be accelerated or, without the consent of the
Borrower, any Lease could be terminated (whether or not the subject creditor or
lessor takes any action on account of such occurrence).
10.7. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach or
default under any agreement between the Agent or any Lender and the Borrower or
instrument or paper given the Agent or any Lender by the Borrower, whether such
agreement, instrument, or paper now exists or hereafter arises (notwithstanding
that the Agent or the subject Lender may not have exercised its rights upon
default under any such other agreement, instrument or paper).
10.8. UNINSURED CASUALTY LOSS. The occurrence of any uninsured loss,
theft, damage, or destruction of or to any material portion of the Collateral
which exceeds $100,000 in the aggregate at any one time.
10.9. JUDGMENT; RESTRAINT OF BUSINESS.
(a) The service of process upon the Agent or any Lender or any
Participant seeking to attach, by trustee, mesne, or other process, any of the
Borrower's funds on deposit with, or assets of the Borrower in the possession
of, the Agent or any Lender or such Participant.
(b) The entry of any judgment against the Borrower, which
judgment is not satisfied (if a money judgment) or appealed from (with execution
or similar process stayed) within thirty (30) days of its entry.
(c) The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by the Borrower of its business in the ordinary course.
10.10. BUSINESS FAILURE. Any act by, against, or relating to the
Borrower, or its property or assets, which act constitutes the application for,
consent to, or sufferance of the appointment of a receiver, trustee, or other
person, pursuant to court action or otherwise, over all, or any part of the
Borrower's property; the granting of any trust mortgage or execution of an
assignment for the benefit of the creditors of the Borrower, or the occurrence
of any other voluntary or involuntary liquidation or extension of debt agreement
for the Borrower; the offering by or entering into by the Borrower of any
composition, extension, or any other arrangement seeking relief from or
extension of the debts of the Borrower; or the initiation of any judicial or
non-judicial proceeding or agreement by, against, or including the Borrower
which seeks or intends to accomplish a reorganization or arrangement with
creditors; and/or the initiation by or on behalf of the Borrower of the
liquidation or winding up of all or any part of the Borrower's business or
operations.
10.11. BANKRUPTCY. The failure by the Borrower to generally pay the
debts of the Borrower as they mature; adjudication of bankruptcy or insolvency
relative to the Borrower; the entry of an order for relief or similar order with
respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by the Borrower initiating any matter in which the Borrower is or may
be granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the filing of any complaint,
application, or petition against the Borrower initiating any matter in which the
Borrower is or may be granted any relief from the debts of the Borrower pursuant
to the Bankruptcy Code or any other insolvency statute or procedure, which
complaint, application, or petition is not timely contested in good faith by the
Borrower by appropriate proceedings or, if so contested, is not dismissed within
thirty (30) days of when filed.
10.12. DEFAULT BY GUARANTOR OR RELATED ENTITY. The occurrence of any of
the foregoing Events of Default with respect to any guarantor of the
Liabilities, or the occurrence of any of the foregoing Events of Default with
respect to any parent (if the Borrower is a corporation), subsidiary, or Related
Entity, as if such guarantor, parent, or Related Entity were the "Borrower"
described therein.
10.13. INDICTMENT - FORFEITURE. The indictment of, or institution of
any legal process or proceeding against,
39
41
the Borrower, under any federal, state, municipal, and other civil or criminal
statute, rule, regulation, order, or other requirement having the force of law
where the relief, penalties, or remedies sought or available include the
forfeiture of any property of the Borrower and/or the imposition of any stay or
other order, the effect of which could be to restrain in any material way the
conduct by the Borrower of its business in the ordinary course.
10.14. TERMINATION OF GUARANTY. The termination or attempted
termination of any guaranty by any guarantor of the Liabilities.
10.15. CHALLENGE TO LOAN DOCUMENTS.
(a) Any challenge by or on behalf of the Borrower or any
guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance with
the subject Loan Document's terms or which seeks to void, avoid, limit, or
otherwise adversely affect any security interest created by or in any Loan
Document or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable strictly in
accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.
10.16. EXECUTIVE MANAGEMENT. The death, disability, or failure of
either of Xxxxxx X. Xxxxxx or Xxxxxx X. Xxxxxx at any time to exercise that
authority and discharge those management responsibilities with respect to the
Borrower as are exercised and discharged by such Person at the execution of this
Agreement.
10.17. CHANGE IN CONTROL. Any Change in Control.
ARTICLE XI - RIGHTS AND REMEDIES UPON DEFAULT:
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Agent is provided prior to the occurrence of an Event of
Default, the Agent shall have the following rights and remedies upon the
occurrence of any Event of Default and at any time thereafter. No stay which
otherwise might be imposed pursuant to Section 362 of the Bankruptcy Code or
otherwise shall stay, limit, prevent, hinder, delay, restrict, or otherwise
prevent the Agent's exercise of any of such rights and remedies.
11.1. RIGHTS OF ENFORCEMENT. The Agent shall have all of the rights and
remedies of a secured party upon default under the UCC, in addition to which the
Agent shall have all and each of the following rights and remedies:
(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.
(b) To take possession of all or any portion of the
Collateral.
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Agent deems advisable and with or without the taking of possession of any of
the Collateral.
(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.
(e) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
11.2. SALE OF COLLATERAL.
(a) Any sale or other disposition of the Collateral may be at
public or private sale upon such terms and in such manner as the Agent deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Agent's disposition of the Collateral.
(b) The Agent, in the exercise of the Agent's rights and
remedies upon default, may conduct one or more going out of business sales, in
the Agent's own right or by one or more agents and contractors. Such sale(s) may
be conducted upon any premises owned, leased, or occupied by the Borrower. The
Agent and any such agent or contractor, in conjunction with any such sale, may
augment the Inventory with other goods (all of which other goods shall remain
the sole property of the Agent or such agent or contractor). Any amounts
realized from the sale of such goods which constitute augmentations to the
Inventory (net of an allocable share of the costs and ex-
40
42
penses incurred in their disposition) shall be the sole property of the Agent or
such agent or contractor and neither the Borrower nor any Person claiming under
or in right of the Borrower shall have any interest therein.
(c) Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Agent shall provide the Borrower with such notice as
may be practicable under the circumstances), the Agent shall give the Borrower
at least seven (7) days prior written notice of the date, time, and place of any
proposed public sale, and of the date after which any private sale or other
disposition of the Collateral may be made. The Borrower agrees that such written
notice shall satisfy all requirements for notice to the Borrower which are
imposed under the UCC or other applicable law with respect to the exercise of
the Agent's rights and remedies upon default.
(d) The Agent and any Lender may purchase the Collateral, or
any portion of it at any sale held under this Article.
(e) If any of the Collateral is sold, leased, or otherwise
disposed of by the Agent on credit, the Liabilities shall not be deemed to have
been reduced as a result thereof unless and until payment is finally received
thereon by the Agent.
(f) The Agent shall apply the proceeds of any exercise of the
Agent's Rights and Remedies under this Article 11 towards the Liabilities in
such manner, and with such frequency, as the Agent determines.
11.3. OCCUPATION OF BUSINESS LOCATION. In connection with the Agent's
exercise of the Agent's rights under this Article 11, the Agent may enter upon,
occupy, and use any premises owned or occupied by the Borrower, and may exclude
the Borrower from such premises or portion thereof as may have been so entered
upon, occupied, or used by the Agent. The Agent shall not be required to remove
any of the Collateral from any such premises upon the Agent's taking possession
thereof, and may render any Collateral unusable to the Borrower. In no event
shall the Agent be liable to the Borrower for use or occupancy by the Agent of
any premises pursuant to this Article 11, nor for any charge (such as wages for
the Borrower's employees and utilities) incurred in connection with the Agent's
exercise of the Agent's Rights and Remedies.
11.4. GRANT OF NONEXCLUSIVE LICENSE. The Borrower hereby grants to the
Agent a royalty free nonexclusive irrevocable license to use, apply, and affix
any trademark, trade name, logo, or the like in which the Borrower now or
hereafter has rights, such license being with respect to the Agent's exercise of
the rights hereunder including, without limitation, in connection with any
completion of the manufacture of Inventory or sale or other disposition of
Inventory.
11.5. ASSEMBLY OF COLLATERAL. The Agent may require the Borrower to
assemble the Collateral and make it available to the Agent at the Borrower's
sole risk and expense at a place or places which are reasonably convenient to
both the Agent and Borrower.
11.6. RIGHTS AND REMEDIES. The rights, remedies, powers, privileges,
and discretions of the Agent hereunder (herein, the "AGENT'S RIGHTS AND
REMEDIES") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by the Agent in exercising or
enforcing any of the Agent's Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Agent of any Event of Default or
of any default under any other agreement shall operate as a waiver of any other
default hereunder or under any other agreement. No single or partial exercise of
any of the Agent's Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between the Agent and any person, at
any time, shall preclude the other or further exercise of the Agent's Rights and
Remedies. No waiver by the Agent of any of the Agent's Rights and Remedies on
any one occasion shall be deemed a waiver on any subsequent occasion, nor shall
it be deemed a continuing waiver. All of the Agent's Rights and Remedies and all
of the Agent's rights, remedies, powers, privileges, and discretions under any
other agreement or transaction are cumulative, and not alternative or exclusive,
and may be exercised by the Agent at such time or times and in such order of
preference as the Agent in its sole discretion may determine. The Agent's Rights
and Remedies may be exercised without resort or regard to any other source of
satisfaction of the Liabilities.
ARTICLE XII - NOTICES:
12.1. NOTICE ADDRESSES. All notices, demands, and other communications
made in respect of this Agreement (other than a request for a loan or advance or
other financial accommodation under the Revolving Credit) shall be made to the
following addresses, each of which may be changed upon seven (7) days written
notice to all others given by certified mail, return receipt requested:
41
43
If to the Agent: BankBoston Retail Finance Inc.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention : Xxxxxxx Xxxxxxx
Managing Director
Fax : 000 000-0000
With a copy to: Stroock & Stroock & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention : Xxxxx X. Xxxxxxxx, Esquire
Fax : 000 000-0000
If to the Borrower: Xxxxxxx, Inc.
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000-0000
Attention : Xxxxxx X. Xxxxxx
Fax : 000 000-0000
With a copy to: Xxxxxxx, Xxxxxxxxx & Xxxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000-0000
Attention : Xxx X. Xxxxxxxxx, Esquire
Fax: : 000 000-0000
12.2. NOTICE GIVEN.
(a) Except as otherwise specifically provided herein, notices
shall be deemed made and correspondence received, as follows (all times being
local to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or
Three (3) days following deposit in the United States mail, postage
prepaid.
(ii) By recognized overnight express delivery: the
Business Day following the day when sent.
(iii) By Hand: If delivered on a Business Day after
9:00 A.M. and no later than Three (3) hours prior to the close of
customary business hours of the recipient, when delivered.
Otherwise, at the opening of the then next Business Day.
(iv) By Facsimile transmission (which must include a
header on which the party sending such transmission is indicated): If
sent on a Business Day after 9:00 A.M. and no later than Three (3)
hours prior to the close of customary business hours of the recipient,
one (1) hour after being sent. Otherwise, at the opening of the then
next Business Day.
(b) Rejection or refusal to accept delivery and inability to
deliver because of a changed address or Facsimile Number for which no due notice
was given shall each be deemed receipt of the notice sent.
ARTICLE XIII - TERM:
13.1. TERMINATION OF REVOLVING CREDIT. The Revolving Credit shall
remain in effect (subject to suspension as provided in Section 2-4(i) hereof)
until the Termination Date.
13.2. EFFECT OF TERMINATION. On the Termination Date, the Borrower
shall pay the Agent (whether or not then due), in immediately available funds,
all then Liabilities including, without limitation: the entire balance of the
Loan Account; any then remaining balance of the Facility Fee; any accrued and
unpaid Line Fee; any payments due on account of the indemnification obligations
included in Section 2-8(e); and all unreimbursed costs and expenses of the Agent
and of each Lender for which the Borrower is responsible; and shall make such
arrangements concerning any L/C's then outstanding are reasonably satisfactory
to the Agent. Until such payment, all provisions of this Agreement, other than
those contained in Article 2 which place an obligation on the Agent and any
Lender to make any loans or advances or to provide financial accommodations
under the Revolving Credit or otherwise, shall remain in full force and effect
until all Liabilities shall have been paid in full. The release by the Agent of
the security and
42
44
other collateral interests granted the Agent by the Borrower hereunder may be
upon such conditions and indemnifications as the Agent may reasonably require.
ARTICLE XIV - GENERAL:
14.1. PROTECTION OF COLLATERAL. The Agent has no duty as to the
collection or protection of the Collateral beyond the safe custody of such of
the Collateral as may come into the possession of the Agent and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent may include reference to the Borrower (and may
utilize any logo or other distinctive symbol associated with the Borrower) in
connection with any advertising, promotion, or marketing undertaken by the
Agent.
14.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Borrower and the Borrower's representatives, successors, and assigns and shall
enure to the benefit of the Agent and each Lender and the respective successors
and assigns of each provided, however, no trustee or other fiduciary appointed
with respect to the Borrower shall have any rights hereunder. In the event that
the Agent or any Lender assigns or transfers its rights under this Agreement,
the assignee shall thereupon succeed to and become vested with all rights,
powers, privileges, and duties of such assignor hereunder and such assignor
shall thereupon be discharged and relieved from its duties and obligations
hereunder.
14.3. SEVERABILITY. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.
14.4. AMENDMENTS. COURSE OF DEALING.
(a) This Agreement and the other Loan Documents incorporate
all discussions and negotiations between the Borrower and the Agent and each
Lender, either express or implied, concerning the matters included herein and in
such other instruments, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions, negotiations, custom, usage, or course of
dealings shall limit, modify, or otherwise affect the provisions thereof. No
failure by the Agent or any Lender to give notice to the Borrower of the
Borrower's having failed to observe and comply with any warranty or covenant
included in any Loan Document shall constitute a waiver of such warranty or
covenant or the amendment of the subject Loan Document. No change made by the
Agent in the manner by which Availability is determined shall obligate the Agent
to continue to determine Availability in that manner.
(b) The Borrower may undertake any action otherwise prohibited
hereby, and may omit to take any action otherwise required hereby, upon and with
the express prior written consent of the Agent. No consent, modification,
amendment, or waiver of any provision of any Loan Document shall be effective
unless executed in writing by or on behalf of the party to be charged with such
modification, amendment, or waiver (and if such party is the Agent, then by a
duly authorized officer thereof). Any modification, amendment, or waiver
provided by the Agent shall be in reliance upon all representations and
warranties theretofore made to the Agent by or on behalf of the Borrower (and
any guarantor, endorser, or surety of the Liabilities) and consequently may be
rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.
14.5. POWER OF ATTORNEY. In connection with all powers of attorney
included in this Agreement, the Borrower hereby grants unto the Agent full power
to do any and all things necessary or appropriate in connection with the
exercise of such powers as fully and effectually as the Borrower might or could
do, hereby ratifying all that said attorney shall do or cause to be done by
virtue of this Agreement. No power of attorney set forth in this Agreement shall
be affected by any disability or incapacity suffered by the Borrower and each
shall survive the same. All powers conferred upon the Agent by this Agreement,
being coupled with an interest, shall be irrevocable until this Agreement is
terminated by a written instrument executed by a duly authorized officer of the
Agent.
14.6. APPLICATION OF PROCEEDS. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Agent
determines in its sole discretion. The Borrower shall remain liable for any
deficiency remaining following such application.
14.7. COSTS AND EXPENSES OF AGENT AND OF LENDERS.
43
45
(a) The Borrower shall pay on demand all Costs of Collection
and all reasonable expenses of the Agent in connection with the preparation,
execution, and delivery of this Agreement and of any other Loan Documents,
whether now existing or hereafter arising, and all other reasonable expenses
which may be incurred by the Agent in preparing or amending this Agreement and
all other agreements, instruments, and documents related thereto, or otherwise
incurred with respect to the Liabilities, and all costs and expenses of the
Agent which relate to the credit facility contemplated hereby.
(b) The Borrower shall pay on demand all costs and expenses
(including attorneys' reasonable fees) incurred, following the occurrence of any
Event of Default, by each Lender in connection with the enforcement, attempted
enforcement, or preservation of any rights and remedies under this, or any other
Loan Document, as well as any such costs and expenses in connection with any
"workout", forbearance, or restructuring of the credit facility contemplated
hereby.
(c) The Borrower authorizes the Agent to pay all such fees and
expenses and in the Agent's discretion, to add such fees and expenses to the
Loan Account.
(d) The undertaking on the part of the Borrower in this
Section 14-7 shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by the Agent in favor of the Borrower, other than
a termination, release, or discharge which makes specific reference to this
Section 14-7.
14.8. COPIES AND FACSIMILES. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished the Agent or any
Lender may be reproduced by that Person or by the Agent by any photographic,
microfilm, xerographic, digital imaging, or other process, and that Person may
destroy any document so reproduced. Any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business). Any facsimile which
bears proof of transmission shall be binding on the party which or on whose
behalf such transmission was initiated and likewise shall be so admissible in
evidence as if the original of such facsimile had been delivered to the party
which or on whose behalf such transmission was received.
14.9. MASSACHUSETTS LAW. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of The Commonwealth of Massachusetts.
14.10. CONSENT TO JURISDICTION.
(a) The Borrower agrees that any legal action, proceeding,
case, or controversy against the Borrower with respect to any Loan Document may
be brought in the Superior Court of Suffolk County Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Agent's sole discretion. By
execution and delivery of this Agreement, the Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
(b) The Borrower WAIVES personal service of any and all
process upon it, and irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to the Borrower at the
Borrower's address for notices as specified herein, such service to become
effective five (5) Business Days after such mailing.
(c) The Borrower WAIVES any objection based on forum non
conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of the Agent to
bring legal actions or proceedings in any other competent jurisdiction.
(e) The Borrower agrees that any action commenced by the
Borrower asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Suffolk County Massachusetts or in the United States District
Court, District of Massachusetts, sitting in Boston, Massachusetts, and that
such Courts shall have exclusive jurisdiction with respect to any such action.
14.11. INDEMNIFICATION. The Borrower shall indemnify, defend, and hold
the Agent and each Lender and any Participant and any employee, officer, or
agent of any of the foregoing (each, an "INDEMNIFIED PERSON") harmless of and
from any claim brought or threatened against any Indemnified Person by the
Borrower, any guarantor or endorser of the Liabilities, or any other Person (as
well as from attorneys' reasonable fees and expenses in connection therewith) on
account of the relationship of the Borrower or of any other guarantor or
endorser of the Liabilities with
44
46
the Agent or any Lender (each of claims which may be defended, compromised,
settled, or pursued by the Indemnified Person with counsel of the Lender's
selection, but at the expense of the Borrower) other than any claim as to which
a final determination is made in a judicial proceeding (in which the Agent and
any other Indemnified Person has had an opportunity to be heard), which
determination includes a specific finding that the Indemnified Person seeking
indemnification had acted in a grossly negligent manner or in actual bad faith.
This indemnification shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Agent in favor of the
Borrower, other than a termination, release, or discharge which makes specific
reference to this Section 14-11.
14.12. RULES OF CONSTRUCTION. The following rules of construction shall
be applied in the interpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:
(a) Words in the singular include the plural and words in the
plural include the singular.
(b) Titles, headings (indicated by being UNDERLINED or shown
in SMALL CAPITALS) and any Table of Contents are solely for convenience of
reference; do not constitute a part of the instrument in which included; and do
not affect such instrument's meaning, construction, or effect.
(c) The words "includes" and "including" are not limiting.
(d) Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.
(e) Except where the context otherwise requires or where the
relevant subsections are joined by "or", compliance with any Section or
provision of any Loan Document which constitutes a warranty or covenant requires
compliance with all subsections (if any) of that Section or provision. Except
where the context otherwise requires, compliance with any warranty or covenant
of any Loan Document which includes subsections which are joined by "or" may be
accomplished by compliance with any of such subsections.
(f) Text which is shown in italics, shown in BOLD, shown IN
ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to
be conspicuous.
(g) The words "may not" are prohibitive and not permissive.
(h) The word "or" is not exclusive.
(i) Any reference to a Person's "knowledge" (or words of
similar import) are to such Person's knowledge assuming that such Person has
undertaken reasonable and diligent investigation with respect to the subject of
such "knowledge" (whether or not such investigation has actually been
undertaken).
(j) Terms which are defined in one section of any Loan
Document are used with such definition throughout the instrument in which so
defined.
(k) The symbol "$" refers to United States Dollars.
(l) Unless limited by reference to a particular Section or
provision, any reference to "herein", "hereof", or "within" is to the entire
Loan Document in which such reference is made.
(m) References to "this Agreement" or to any other Loan
Document is to the subject instrument as amended to the date on which
application of such reference is being made.
(n) Except as otherwise specifically provided, all references
to time are to Boston time.
(o) In the determination of any notice, grace, or other period
of time prescribed or allowed hereunder:
(i) Unless otherwise provided (I) the day of the act,
event, or default from which the designated period of time begins to
run shall not be included and the last day of the period so computed
shall be included unless such last day is not a Business Day, in which
event the last day of the relevant period shall be the then next
Business Day and (II) the period so computed shall end at 5:00 PM on
the relevant Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to, but
excluding".
(iv) The work "through" means "to and including".
(p) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 14-13
hereof, provided, however, in the event of any inconsistency between the
provisions of this Agreement and any other Loan Document, the provisions of this
Agreement shall govern and control.
14.13. INTENT. It is intended that:
(a) This Agreement take effect as a sealed instrument.
(b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Agent.
45
47
(c) The security interests created by this Agreement secure
all Liabilities, whether now existing or hereafter arising.
(d) All reasonable costs and expenses incurred by the Agent
and, to the extent provide in Section 14-7 each Lender in connection with such
Person's relationship(s) with the Borrower shall be borne by the Borrower.
(e) Unless otherwise explicitly provided herein, the Agent's
consent to any action of the Borrower which is prohibited unless such consent is
given may be given or refused by the Agent in its sole discretion and without
reference to Section 2-15 hereof.
14.14. RIGHT OF SET-OFF. Any and all deposits or other sums at any time
credited by or due to the Borrower from the Agent, any Lender, or any
participant (a "PARTICIPANT") in the credit facility contemplated hereby or any
from any Affiliate of the Agent, any Lender, or any Participant and any cash,
securities, instruments or other property of the Borrower in the possession of
the Agent, any Lender, any Participant or any such Affiliate, whether for
safekeeping or otherwise (regardless of the reason such Person had received the
same) shall at all times constitute security for all Liabilities and for any and
all obligations of the Borrower to the Agent and each Lender or any Participant
or any such Affiliate and may be applied or set off against the Liabilities and
against such obligations at any time, whether or not such are then due and
whether or not other collateral is then available to the Agent, any Lender, or
any Participant or any such Affiliate.
14.15. MAXIMUM INTEREST RATE. Regardless of any provision of any Loan
Document, none of the Agent or any Lender shall be entitled to contract for,
charge, receive, collect, or apply as interest on any Liability, any amount in
excess of the maximum rate imposed by applicable law. Any payment which is made
which, if treated as interest on a Liability would result in such interest's
exceeding such maximum rate shall be held, to the extent of such excess, as
additional collateral for the Liabilities as if such excess were "Collateral."
14.16. WAIVERS.
(a) The Borrower (and all guarantors, endorsers, and sureties
of the Liabilities) make each of the waivers included in Section 14-16(b),
below, knowingly, voluntarily, and intentionally, and understands that the Agent
and each Lender, in entering into the financial arrangements contemplated hereby
and in providing loans and other financial accommodations to or for the account
of the Borrower as provided herein, whether not or in the future, is relying on
such waivers.
(b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND
SURETY RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby,
notice of non-payment, demand, presentment, protest and all forms of
demand and notice, both with respect to the Liabilities and the
Collateral.
(ii) Except as otherwise specifically required
hereby, the right to notice and/or hearing prior to the Agent's
exercising of the Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT
OR ANY LENDER OR IN WHICH THE AGENT OR ANY LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON
AND THE AGENT OR ANY LENDER (AND THE AGENT AND EACH LENDER LIKEWISE
WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR
CONTROVERSY).
(iv) The benefits or availability of any stay,
limitation, hindrance, delay, or restriction (including, without
limitation, any automatic stay which otherwise might be imposed
pursuant to Section 362 of the Bankruptcy Code) with respect to any
action which the Agent may or may become entitled to take hereunder.
(v) Any defense, counterclaim, set-off, recoupment,
or other basis on which the amount of any Liability, as stated on the
books and records of the Agent or any Lender, could be reduced or
claimed to be paid otherwise than in accordance with the tenor of and
written terms of such Liability.
(vi) Any claim to consequential, special, or punitive
damages.
46
48
XXXXXXX, INC.
("BORROWER")
By: /S/ XXXXXX X. XXXXXX
------------------------------
Print Name: Xxxxxx X. Xxxxxx
Title: President
BANKBOSTON RETAIL FINANCE INC.
("AGENT")
By: /S/ XXXXXXX X. XXXXXXX
------------------------------
Print Name: Xxxxxxx X. Xxxxxxx
Title: Managing Director
BANKBOSTON RETAIL FINANCE INC.
("LENDER")
By: /S/ XXXXXXX X. XXXXXXX
------------------------------
Print Name: Xxxxxxx X. Xxxxxxx
Title: Managing Director
NATIONAL CITY COMMERCIAL
FINANCE, INC.
By: /S/ XXXXX X. XXXX
------------------------------
Print Name: Xxxxx X. Xxxx
Title: Vice President
47