Exhibit 10.5
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THE ELECTRONICS BOUTIQUE, INC.
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LOAN AND SECURITY AGREEMENT
Dated: March 16, 1998
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FLEET CAPITAL CORPORATION
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TABLE OF CONTENTS
Page
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SECTION 1. CREDIT FACILITY. . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . .1
1.2 Supplemental Loan. . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 2. INTEREST, FEES AND CHARGES. . . . . . . . . . . . . . . . . . . .2
2.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 Computation of Interest and Fees . . . . . . . . . . . . . . . . .4
2.3 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.4 Collateral Management Fee. . . . . . . . . . . . . . . . . . . . .4
2.5 Audit and Appraisal Fees . . . . . . . . . . . . . . . . . . . . .4
2.6 Reimbursement of Expenses. . . . . . . . . . . . . . . . . . . . .4
2.7 Bank Charges . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.8 Indemnity re: LIBOR. . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 3. LOAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . .5
3.1 Manner of Borrowing Revolving Credit Loans . . . . . . . . . . . .5
3.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.3 Mandatory and Permissive Prepayments . . . . . . . . . . . . . . .7
3.4 Application of Payments and Collections. . . . . . . . . . . . . .7
3.5 All Loans to Constitute One Obligation . . . . . . . . . . . . . .8
3.6 Loan Account . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.7 Statements of Account. . . . . . . . . . . . . . . . . . . . . . .8
SECTION 4. TERM AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . .8
4.1 Term of Agreement. . . . . . . . . . . . . . . . . . . . . . . . .8
4.2 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
SECTION 5. SECURITY INTERESTS. . . . . . . . . . . . . . . . . . . . . . . .9
5.1 Security Interest in Collateral. . . . . . . . . . . . . . . . . .9
5.2 Lien Perfection; Further Assurances. . . . . . . . . . . . . . . 10
5.3 Lien on Realty . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6. COLLATERAL ADMINISTRATION . . . . . . . . . . . . . . . . . . . 11
6.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Administration of Accounts . . . . . . . . . . . . . . . . . . . 12
6.3 Administration of Inventory. . . . . . . . . . . . . . . . . . . 12
6.4 Administration of Equipment. . . . . . . . . . . . . . . . . . . 13
6.5 Payment of Charges . . . . . . . . . . . . . . . . . . . . . . . 13
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SECTION 7. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 13
7.1 General Representations and Warranties . . . . . . . . . . . . . 13
7.2 Continuous Nature of Representations and Warranties. . . . . . . 17
7.3 Survival of Representations and Warranties . . . . . . . . . . . 17
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS . . . . . . . . . . . . 18
8.1 Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . 18
8.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . 19
8.3 Specific Financial Covenants . . . . . . . . . . . . . . . . . . 22
8.4 Stock Ownership. . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 22
9.1 Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.3 Other Loan Documents . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Availability . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.5 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
ON DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Acceleration of the Obligations. . . . . . . . . . . . . . . . . 26
10.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 Remedies Cumulative; No Waiver . . . . . . . . . . . . . . . . . 28
SECTION 11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 28
11.1 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 28
11.2 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.3 Modification of Agreement; Sale of Interest. . . . . . . . . . . 29
11.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 30
11.6 Cumulative Effect; Conflict of Terms . . . . . . . . . . . . . . 30
11.7 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . 30
11.8 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.9 Lender's Consent . . . . . . . . . . . . . . . . . . . . . . . . 31
11.10 Credit Inquiries. . . . . . . . . . . . . . . . . . . . . . . . 31
11.11 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . 31
11.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 31
11.13 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . 31
11.14 GOVERNING LAW; CONSENT TO FORUM . . . . . . . . . . . . . . . . 32
11.15 WAIVERS BY BORROWER . . . . . . . . . . . . . . . . . . . . . . 33
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this ____ day of March, 1998,
by and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island corporation
with an office at 000 Xxxxxxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, XX 00000 and THE
ELECTRONICS BOUTIQUE, INC., a Pennsylvania corporation ("Borrower"), with its
chief executive office at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxx Xxxxxxx, XX 00000.
Capitalized terms used in this Agreement have the meanings assigned to them
in Appendix A, General Definitions. Accounting terms not otherwise specifically
defined herein shall be construed in accordance with GAAP, consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a Total Credit Facility of up to $50,000,000.00
available upon Borrower's request therefor, as follows:
1.1 Revolving Credit Loans. Lender agrees, for so long as no Event of
Default exists, to make Revolving Credit Loans to Borrower from time to time, as
requested by Borrower in the manner set forth in subsection 3.1.1 hereof, up to
a maximum principal amount at any time outstanding equal to the lesser of (a) an
amount equal to the difference between the Maximum Revolving Credit Amount and
the outstanding balance of the Supplemental Loan or (b)the Borrowing Base, which
shall be repayable in accordance with the terms of the Revolving Credit Note.
If the unpaid balance of the Revolving Credit Loans should exceed the Borrowing
Base or any other limitation set forth in this Agreement, such Revolving Credit
Loans shall nevertheless constitute Obligations that are due and payable on
demand, secured by the Collateral other than the Mortgage and entitled to all
benefits thereof.
1.2 Supplemental Loan. Lender agrees that upon Borrower's request and so
long as (i) no Event of Default is then outstanding, (ii) Borrower then executes
and delivers to lender the Supplemental Loan Note, and (iii) Borrower executes
and delivers or causes to be executed and delivered to Lender the Mortgage and
all other documents described in and otherwise fulfills its obligations under
Section 5.3 hereof, it shall make a supplemental loan (the "Supplemental Loan")
to Borrower in the principal amount of $6,000,000, which shall be repayable in
accordance with the terms of the Supplemental Loan Note and shall be secured by
all of the Collateral. Lender's obligation under this Section 1.2 shall
terminate upon the earlier to occur of (a) the Maturity Date or (b) termination
of the Revolving Credit.
1.3 Use of Proceeds. The proceeds of the Loans shall be used solely for
(i) satisfaction of all existing Indebtedness of Borrower to Bank of Seoul; (ii)
Borrower's working capital needs;
and (iii) other corporate needs of Borrower not otherwise prohibited under the
terms of Section 8.2 of this Agreement.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Revolving Credit Interest:
(a) Rate Options. At the time of each Loan, and thereafter
from time to time, Borrower shall have the right, subject to the terms and
conditions of this Agreement, and provided no Event of Default has occurred and
is continuing, to designate to Lender (in writing, if so requested by Lender)
that all, or a portion of the Loans shall bear interest at either the (i) LIBOR
Based Rate or (ii) Floating Rate. Interest on each portion thereof shall accrue
and be paid at the time and rate applicable to the respective option selected by
Borrower or otherwise governing under the terms of this Agreement. If for any
reason the LIBOR Based Rate option is unavailable, the Floating Rate shall
apply. The rate of interest on Floating Rate Loans shall increase or decrease
by an amount equal to any increase or decrease in the Base Rate effective as of
the opening of business on the day that any such change in the Base Rate occurs.
(i) LIBOR Rate Option:
(A) Requests. Provided no Event of Default has
occurred and is continuing, and subject to the provisions of this Section 2.1.1
(a)(i), if Borrower desires to have the LIBOR Based Rate apply to all or a
portion of the Loans, Borrower shall give Lender a written irrevocable request
no later than 11:00 A.M. Eastern time on the second (2nd) Business Day prior to
the requested borrowing date specifying (1) the date the LIBOR Based Rate shall
apply (which shall be a Business Day), (2) the LIBOR Interest Period, and (3)
the amount to be subject to the LIBOR Based Rate provided that such amount shall
be an integral multiple of Five Hundred Thousand Dollars ($500,000.00). In no
event may Borrower have outstanding at any time more than five (5) different
tranches of LIBOR Rate Loans.
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(B) LIBOR Interest Periods. LIBOR Rate Loans
shall be selected by Borrower for a LIBOR Interest Period during which the LIBOR
Based Rate is applicable; provided, however, that if the LIBOR Interest Period
would otherwise end on a day which shall not be a London Business Day, such
LIBOR Interest Period shall be extended to the next preceding or succeeding
London Business Day as is the Lender's custom in the market to which such LIBOR
Rate Loan relates. All accrued and unpaid interest on a LIBOR Rate Loan shall
be paid monthly in accordance with Section 3.2.2. No LIBOR Interest Period with
respect to any of the Loans may end after the Maturity Date. Subject to all of
the terms and conditions applicable to a request to convert all or a portion of
the Loans to a LIBOR Rate Loan, Borrower may extend a LIBOR Rate Loan as of the
last day of the LIBOR Interest Period to a new LIBOR Rate Loan. If Borrower
fails to notify the Lender of the LIBOR Interest Period for a subsequent LIBOR
Rate Loan at least two (2) Business Days prior to the last day of the then
current LIBOR Interest Period of an outstanding LIBOR Rate Loan, then such
outstanding LIBOR Rate Loan shall, at the end of the applicable LIBOR Interest
Period, accrue interest at the Floating Rate.
(C) Adjustments. The Adjusted LIBOR Rate may be
automatically adjusted by Lender on a prospective basis to take into account the
additional or increased cost of maintaining any necessary reserves for
Eurodollar deposits or increased costs due to changes in applicable law or
regulation or the interpretation thereof occurring subsequent to the
commencement of the then applicable LIBOR Interest Period, including but not
limited to, changes in tax laws (except changes of general applicability in
corporate income tax laws) and changes in the reserve requirements imposed by
the Board of Governors of the Federal Reserve System (or any successor or other
applicable governing body), excluding the Reserve Percentage and any Reserve
which has resulted in a payment pursuant to Section 2.8 below, that increase the
cost to Lender of funding the LIBOR Rate Loan. Lender shall promptly give
Borrower notice of such a determination and adjustment, which determination
shall be prima facie evidence of the correctness of the fact and the amount of
such adjustment.
(D) Unavailability. If Borrower shall have
requested the rate based on the Adjusted LIBOR Rate in accordance with this
Section 2.1.1(a)(I) and Lender shall have determined, in good faith, that
Eurodollar deposits equal to the amount of the principal of the requested LIBOR
Rate Loan and for the LIBOR Interest Period specified are unavailable, or that
the rate based on the Adjusted LIBOR Rate will not adequately and fairly reflect
the cost of the Adjusted LIBOR Rate applicable to the specified LIBOR Interest
Period, of making or maintaining the principal amount of the requested LIBOR
Rate Loan during the LIBOR Interest Period specified, or that by reason of
circumstances affecting Eurodollar markets, adequate means do not exist for
ascertaining the rate based on the Adjusted LIBOR Rate applicable to the
specified LIBOR Interest Period, Lender shall promptly give notice of such
determination to Borrower that the rate based on the Adjusted LIBOR Rate is not
available. A determination, in good faith, by Lender hereunder shall be prima
facie evidence of the correctness of the fact and amount of such additional
costs or unavailability. Upon such a determination, (i) the obligation to
convert to, or maintain a LIBOR Rate Loan at the rate based on the Adjusted
LIBOR Rate shall be suspended until Lender shall have notified Borrower that
such conditions shall have ceased to exist, and (ii) the portion of the Loans
subject to the request or requested conversion shall accrue interest at the
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Floating Rate.
2.1.2 Default Rate of Interest. Upon and after the occurrence of
an Event of Default, and during the continuation thereof, and after written
notice of Lender's intention to institute the Default Rate (as defined below),
the principal amount of all Loans shall bear interest at a rate per annum equal
to two hundred (200) basis points above the interest rate otherwise applicable
thereto (the "Default Rate").
2.1.3 Maximum Interest. In no event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the Notes and
charged or collected pursuant to the terms of this Agreement or pursuant to the
Notes exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
If any provisions of this Agreement or the Notes are in contravention of any
such law, the rate hereunder shall automatically be reduced to the maximum rate
permitted by applicable law, and Lender shall, in its discretion, to the extent
permitted by applicable law, apply such excess to the principal balance of the
Loans or refund such excess to Borrower, and such provisions shall be deemed
amended to conform thereto.
2.2 Computation of Interest and Fees. Interest and all fees shall be
calculated daily and shall be computed on the actual number of days elapsed over
a year of 360 days.
2.3 Commitment Fee. Borrower shall pay to Lender on the Closing Date, a
commitment fee of $100,000, which is deemed fully earned and nonrefundable on
the Closing Date.
2.4 Collateral Management Fee. Borrower shall pay to Lender an annual
collateral management fee of $25,000 ("Collateral Management Fee") which fee
shall be fully earned, non-refundable, and payable quarterly in advance,
commencing on the Closing Date and on the same day of each quarterly period
thereafter.
2.5 Audit and Appraisal Fees. Borrower shall pay to Lender audit and
appraisal fees in accordance with Lender's current schedule of fees in effect
from time to time in connection with Lender's audits and appraisals of
Borrower's books and records and such other matters as Lender shall deem
appropriate, plus all out-of-pocket expenses incurred by Lender in connection
with such audits and appraisals; provided that, so long as no Event of Default
has occurred and is continuing, all such audit and appraisal fees incurred
during each 12 month period after the Closing Date shall be limited to, and
included within, the Collateral Management Fee.
2.6 Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Lender incurs legal or
accounting expenses or any other costs or out-of-pocket expenses in connection
with (i) the analysis, negotiation and preparation of this Agreement or any of
the other Loan Documents and closing on the Credit Facility described herein
(provided that Borrower's reimbursement obligation for legal fees (excluding
out-of-pocket expenses) relating to closing on the Credit Facility shall be
capped at $17,500.00), any amendment, modification, replacement or termination
of this Agreement or any of the other Loan Documents;
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(ii) the reasonable out-of-pocket expenses incurred in the administration of
this Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby (Borrower's reimbursement obligation under this
clause (ii) to be limited to $5,000.00 per year absent the occurrence of an
Event of Default, in which case, such reimbursement obligation shall be
unlimited); (iii) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, Borrower or any other Person) in any way relating
to the Collateral, this Agreement or any of the other Loan Documents or
Borrower's affairs; (iv) any attempt (as permitted under this Agreement)
following the occurrence of an Event of Default to enforce any rights of Lender
against Borrower or any other Person which may be obligated to Lender by virtue
of this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (v) any attempt (as permitted under this
Agreement) to inspect, verify, protect, preserve, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; then all such
legal and accounting expenses, other costs and out of pocket expenses of Lender
shall be charged to Borrower. All amounts chargeable to Borrower under this
Section 2.6 shall be Obligations secured by all of the Collateral, shall be
payable on demand to Lender and shall bear interest from the date such demand is
made until paid in full at the Floating Rate applicable to the Loans from time
to time. Borrower shall also reimburse Lender for expenses incurred by Lender
in its administration of the Collateral to the extent and in the manner provided
in Section 6 hereof.
2.7 Bank Charges. Borrower shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender pays to a bank or other similar institution
arising out of or in connection with (i) the forwarding to Borrower or any other
Person on behalf of Borrower, by Lender of proceeds of Loans made by Lender to
Borrower pursuant to this Agreement and (ii) the depositing for collection by
Lender of any check or item of payment received or delivered to Lender on
account of the Obligations. As of the Closing Date, the average wire transfer
charges charged to Lender are approximately $20.00 per wire transfer.
2.8 Indemnity re: LIBOR. Borrower hereby indemnifies Lender and holds
Lender harmless from and against any and all losses or expenses that Lender may
sustain or incur as a consequence of any prepayment or any Default by Borrower
in the payment of the principal of or interest on any LIBOR Rate Loan or failure
by Borrower to complete a borrowing of, a prepayment of or conversion of or to a
LIBOR Rate Loan after notice thereof has been given by Borrower, including (but
not limited to) any interest payable by Lender to lenders of funds obtained by
it in order to make or maintain its LIBOR Rate Loans hereunder, and any other
loss or expense incurred by Lender by reason of the liquidation or reemployment
of deposits or other funds acquired by Lender to make, continue, convert into or
maintain, a LIBOR Rate Loan.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the
Credit Facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan shall
be made, or shall
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be deemed to be made, by an Authorized Officer in the following manner: (i)
Borrower may give Lender notice of the intention to borrow, in which notice
Borrower shall specify the amount of the proposed borrowing and the proposed
borrowing date (which shall be a Business Day), no later than 1:00 P.M. Eastern
time on the proposed borrowing date, provided, however, that no such request may
be made at a time when there exists an Event of Default; and (ii) the becoming
due of any amount required to be paid under this Agreement or any of the Notes,
whether as interest or for any other Obligation, shall be deemed irrevocably to
be a request for a Revolving Credit Loan on the due date in the amount required
to pay such interest or other Obligation. As an accommodation to Borrower,
Lender shall permit telephonic requests for Loans and electronic transmittal of
instructions, authorizations, agreements or reports to Lender by Borrower.
Unless Borrower specifically directs Lender in writing not to accept or act upon
telephonic or electronic communications from Borrower, Lender shall have no
liability to Borrower for any loss or damage suffered by Borrower as a result of
Lender's honoring of any requests, execution of any instructions, authorizations
or agreements or reliance on any reports communicated to it telephonically or
electronically and purporting to have been sent to Lender by Borrower and Lender
shall have no duty to verify the origin of any such communication or the
authority of the person sending it.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes Lender
to disburse the proceeds of each Loan requested, or deemed to be requested,
pursuant to this subsection 3.1.2 as follows: (i) the proceeds of each Loan
requested under subsection 3.1.1(i) shall be disbursed by Lender in lawful money
of the United States of America in immediately available funds, in the case of
the initial borrowing, in accordance with the terms of the written disbursement
letter from Borrower, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrower and Lender from
time to time or elsewhere if pursuant to a written direction from Borrower; and
(ii) the proceeds of each Loan requested under subsection 3.1.1(ii) shall be
disbursed by Lender by way of direct payment of the relevant interest or other
Obligation.
3.1.3 Authorization. Borrower hereby irrevocably authorizes
Lender, in Lender's sole discretion, to advance to Borrower, and to charge to
Borrower's Loan Account hereunder as a Revolving Credit Loan (regardless of
whether an Overadvance is thereby created) a sum sufficient to pay all interest,
when due, accrued on the Obligations during the immediately preceding month, all
principal when due, and all costs, fees and expenses at any time owed by
Borrower to Lender hereunder.
3.1.4 Borrowing Base Certificates. Borrower shall give Lender a
copy of its current inventory report as well as a current Borrowing Base
Certificate on a monthly basis within ten (10) Business Days days of the end of
each month.
3.2 Payments. Except where evidenced by notes or other instruments issued
or made by Borrower to Lender specifically containing payment provisions which
are in conflict with this Section 3.2 (in which event the conflicting provisions
of said notes or other instruments shall govern and control), the Obligations
shall be payable as follows:
3.2.1 Principal. Principal payable on account of Loans shall be
payable by
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Borrower to Lender immediately upon the earliest of (i) the receipt by Lender or
Borrower of any proceeds of any of the Collateral to the extent of said proceeds
under the conditions set forth in Section 3.3.1 below, (ii) the occurrence of an
Event of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations, or (iii) termination of this Agreement
pursuant to Section 4 hereof; provided, however, that if an Overadvance shall
exist at any time, Borrower shall, on demand, repay the Overadvance.
3.2.2 Interest. Interest accrued on the Loans shall be due on the
earliest of (i) the first calendar day of each month (for the immediately
preceding month), computed through the last calendar day of the preceding month,
(ii) the occurrence of an Event of Default in consequence of which Lender elects
to accelerate the maturity and payment of the Obligations or (iii) termination
of this Agreement pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided in
Section 2 hereof to Lender or to any other Person designated by Lender in
writing.
3.2.4 Other Obligations. The balance of the Obligations (other
than those set forth in this Section 3.2) requiring the payment of money shall
be payable by Borrower to Lender as and when provided in this Agreement, the
Notes, the Other Agreements or the Security Documents, or if not otherwise
provided, then on demand.
3.3 Mandatory and Permissive Prepayments.
3.3.1 Proceeds of Sale, Loss, Destruction or Condemnation of
Collateral. If Borrower sells any of its personal Property as permitted
pursuant to this Agreement or if any of the Collateral is lost or destroyed or
taken by condemnation and no Event of Default is then outstanding, the proceeds
of any such sale, loss, destruction or taking (including insurance proceeds) may
be retained by Borrower for any use in its business not prohibited hereunder.
Under all other circumstances, all proceeds (including insurance proceeds) of
any sale(s) of personal Property or of any loss, destruction, or taking of
personal Property as well as all proceeds of any sale, destruction or taking of
the real Property (if subject to the Mortgage) shall be immediately paid to or
retained by Lender and applied as a mandatory prepayment of the Loans (first to
the Supplemental Loan, then to the Revolving Credit Loans). Lender shall not be
required to release its Mortgage on the Real Property in connection with any
sale thereof unless the Supplemental Loan (including all accrued interest
thereon) is then unconditionally paid in full.
3.3.2 LIBOR Rate Loans. No portion of the LIBOR Rate Loans may be
prepaid for any reason during a LIBOR Interest Period unless Borrower first
satisfies in full its obligations under Section 2.8 arising from such
prepayment.
3.4 Application of Payments and Collections. Subject to subsection 2.2 of
this Agreement, all items of payment received by Lender by 2:00 p.m. Eastern
time, on any Business Day shall be deemed received on that Business Day. All
items of payment received after 2:00 p.m.
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Eastern time, on any Business Day shall be deemed received on the following
Business Day. Until payment in full of all Obligations and termination of this
Agreement, Borrower irrevocably waives (except as expressly provided for in this
Agreement or otherwise by Lender) the right to direct the application of any and
all payments and collections at any time or times hereafter received by Lender
from or on behalf of Borrower, and Borrower does hereby irrevocably agree that
Lender shall have the continuing exclusive right to apply and reapply any and
all such payments and collections received at any time or times hereafter by
Lender or its agent against the Obligations, in such manner as Lender may deem
advisable, notwithstanding any entry by Lender upon any of its books and
records. Notwithstanding the foregoing, prior to the occurrence of an Event of
Default, Borrower shall be entitled to direct whether a payment of principal be
applied to the Supplemental Loan or the Revolving Credit Loans provided such
application does not contravene any other requirement for application expressly
set forth in this Agreement. If, as the result of receipt of proceeds or
collections of Collateral as authorized by subsection 6.2.6 hereof, a credit
balance exists in the Loan Account, such credit balance shall not accrue
interest in favor of Borrower, but shall be available to Borrower at any time or
times for so long as no Default or Event of Default exists. Such credit balance
may be applied to and offset any of the Obligations arising from time to time.
3.5 All Loans to Constitute One Obligation. The Loans shall constitute
one general Obligation of Borrower, and shall be secured by Lender's Lien upon
all of the Collateral, subject to Section 4.2.4.
3.6 Loan Account. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are finally paid to
Lender, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrower.
3.7 Statements of Account. Lender will account to Borrower monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
upon Borrower absent manifest error unless Lender is notified by Borrower in
writing to the contrary within sixty (60) days of the date each accounting is
mailed to Borrower. Such notice shall only be deemed an objection to those
items specifically objected to therein.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Lender's right to cease making Loans to
Borrower upon or after the occurrence, and during the continuance, of any
Default or Event of Default, this Agreement shall be in effect for a period of
three (3) years from the date hereof (the "Original Term") and this Agreement
shall automatically renew itself for one-year periods thereafter (the "Renewal
Terms") unless terminated as provided in Section 4.2 hereof.
4.2 Termination.
8
4.2.1 Termination by Lender. Upon at least 90 days prior written
notice to Borrower, Lender may terminate this Agreement as of the last day of
the Original Term or the then current Renewal Term and Lender may terminate this
Agreement without notice upon or after the occurrence, and during the
continuance, of an Event of Default.
4.2.2 Termination by Borrower. Upon at least 45 days prior
written notice to Lender, Borrower may, at its option, terminate this Agreement;
provided, however, no such termination shall be effective until Borrower has
paid all of the Obligations in immediately available funds. Any notice of
termination given by Borrower shall be irrevocable unless Lender otherwise
agrees in writing, and Lender shall have no obligation to make any Loans on or
after the termination date stated in such notice. Subject only to Section 4.2.4
below, Borrower may elect to terminate this Agreement in its entirety only and
no section of this Agreement or type of Loan available hereunder may be
terminated singly.
4.2.3 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents shall
survive any such termination, and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds. Notwithstanding the payment in
full of the Obligations, Lender shall not be required to terminate its security
interests in the Collateral unless, with respect to any loss or damage Lender
may incur as a result of dishonored checks or other items of payment received by
Lender from Borrower or any Account Debtor and applied to the Obligations,
Lender shall have received a written agreement in form and substance
satisfactory to Lender, executed by Borrower and by any Person (whose
creditworthiness for such purpose is reasonably acceptable to Lender) whose
loans or other advances to Borrower are used in whole or in part to satisfy the
Obligations, indemnifying Lender from any such potential loss or damage.
4.2.4 Prepayment of Supplemental Loan. Borrower may at any time
prepay all or a portion of the Supplemental Loan. At such time as the
Supplemental Loan is unconditionally paid in full, the Mortgage shall be
satisfied and released and be of no further force and effect.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing first Lien upon the following assets of Borrower, whether now owned
or existing or hereafter created, acquired or arising and wheresoever located:
(i) Accounts;
9
(ii) Inventory;
(iii) Equipment;
(iv) Fixtures;
(v) General Intangibles relating to credit card transactions and/or
related to or arising from other Collateral;
(vi) Instruments related to or arising from other Collateral;
(vii) Documents related to or arising from other Collateral;
(viii) All monies and other Property of any kind now or at any time
or times hereafter in the possession or under the control of Lender or a
bailee or Affiliate of Lender;
(ix) All books and records (including, without limitation, customer
lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (viii)
above; and
(x) All accessions to, substitutions for and all replacements and
cash and non-cash proceeds of (i) through (ix) above, including, without
limitation, proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral.
5.2 Lien Perfection; Further Assurances. Borrower shall execute such
UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are necessary to perfect Lender's Lien
upon any of the Collateral and shall take such other action as may be required
by applicable law to perfect or to continue the perfection of Lender's Lien upon
the Collateral, including without limitation, the execution of all instruments,
documents and agreements required to have Lender's Lien noted on all
certificates of title for Borrower's Property for which such a certificate has
been issued and delivery to Lender of all Collateral requested by Lender to be
so delivered in order for Lender to obtain a perfected Lien thereon. Unless
prohibited by applicable law, and following Borrower's failure to do so after
written request by Lender, Borrower hereby authorizes Lender to execute and file
any such financing statement on Borrower's behalf. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement and may be filed in any appropriate office in lieu
thereof. At Lender's request, Borrower shall also promptly execute or cause to
be executed and shall deliver to Lender any and all documents, instruments and
agreements deemed necessary by Lender to give effect to or carry out the terms
or intent of the Loan Documents, including, without limitation, delivery of all
landlord/ warehousemen lien subordination/waiver agreements requested by Lender.
5.3 Lien on Realty. Subject to the provisions of Section 4.2.4 hereof,
the due and punctual payment and performance of the Obligations related to the
Supplemental Loan shall also be secured by the Lien created by the Mortgage upon
the Real Property of the Borrower described
10
therein. The Mortgage shall be executed by the Borrower in favor of Lender and
shall be duly recorded, at Borrower's expense, in each office where such
recording is required to constitute a fully perfected first Lien on the Real
Property covered thereby. Borrower shall deliver to Lender, at Borrower's
expense, mortgagee title insurance policies issued by a title insurance company
satisfactory to Lender, which policies shall be in form and substance
satisfactory to Lender and shall insure a valid first Lien in favor of Lender on
the Real Property covered thereby, subject only to those exceptions acceptable
to Lender and its counsel. Borrower shall deliver to Lender such other
documents, including, without limitation, existing survey prints and flood plain
certificates of the Real Property, as Lender and its counsel may request
relating to the Real Property subject to the Mortgage.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General
6.1.1 Location of Collateral. All Collateral, other than
Inventory in transit and motor vehicles, will at all times be kept by Borrower
at one or more of the locations set forth in Exhibit 6.1.1 hereto and shall not,
without the prior written approval of Lender, be moved therefrom except, prior
to an Event of Default and Lender's acceleration of the maturity of the
Obligations in consequence thereof, for (i) transfers of Collateral among
locations on such Exhibit 6.1.1, (ii) sales of Inventory in the ordinary course
of business; and (iii) removals of Equipment in connection with dispositions
thereof that are authorized by subsection 6.4.2 hereof.
6.1.2 Insurance of Collateral. Borrower shall maintain and pay
for insurance upon all Collateral wherever located and with respect to
Borrower's business, covering casualty, hazard, public liability, flood and such
other risks in such amounts and with such insurance companies as are reasonably
satisfactory to Lender. Borrower shall deliver the originals of such policies
to Lender with satisfactory lender's loss payable endorsements, naming Lender as
lender loss payee, assignee, mortgagee and/or additional insured, as appropriate
and providing that all such insurance proceeds are paid to Lender. Each policy
of insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever and a clause specifying
that the interest of Lender shall not be impaired or invalidated by any act or
neglect of Borrower or the owner of the Property or by the occupation of the
premises for purposes more hazardous than are permitted by said policy. If
Borrower fails to provide and pay for such insurance, and after written demand
from Lender to do so, Lender may, at its option, but shall not be required to,
procure the same and charge Borrower therefor. Borrower agrees to deliver to
Lender, promptly as rendered, true copies of all reports made in any reporting
forms to insurance companies.
6.1.3 Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral or in respect of the
sale thereof shall be borne and paid by Borrower. If Borrower fails to promptly
pay any portion
11
thereof when due, and Borrower fails to immediately make such past due payment
after Lender requests in writing, Lender may, at its option, but shall not be
required to, pay the same and charge Borrower therefor. Lender shall not be
liable or responsible in any way for the safekeeping of any of the Collateral or
for any loss or damage thereto or for any diminution in the value thereof, or
for any act or default of any warehouseman, carrier, forwarding agency, or other
person whomsoever, but the same shall be at Borrower's sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrower
shall keep accurate and complete records of its Accounts (including without
limitation purchases made through use of credit cards) and all payments and
collections thereon and shall submit to Lender, as Lender shall request if an
Event of Default is outstanding, copies of such records.
6.2.2 Collection of Accounts, Proceeds of Collateral. To expedite
collection, Borrower shall endeavor in the first instance to make collection
of its Accounts. If an Event of Default is outstanding, at the request of
Lender, all remittances received by Borrower on account of Accounts, together
with the proceeds of any other Collateral, shall be held as Lender's property
by Borrower as trustee of an express trust for Lender's benefit and Borrower
shall immediately remit the same in kind to Lender or to a depository account
designated by Lender. Lender retains the right at all times after the
occurrence of an Event of Default to notify Account Debtors that Accounts
have been assigned to Lender and to collect Accounts directly in its own name
and to charge the collection costs and expenses, including attorneys' fees to
Borrower. Lender has no duty to protect, insure, collect or realize upon the
Accounts or preserve rights therein.
6.3 Administration of Inventory.
6.3.1 Records and Reports of Inventory. Borrower shall keep
accurate and complete records of its Inventory. Borrower shall continue to
conduct a physical inventory in accordance with its prior procedures and shall
provide to Lender a copy of its report based on each such physical inventory
promptly thereafter, together with such supporting information as Lender shall
request. If Lender has accelerated the Obligations following the occurrence of
an Event of Default, Lender shall have the right to require Borrower to conduct
a physical inventory.
6.3.2 Inventory Valuation System. Borrower shall at all times
maintain an Inventory valuation system acceptable to Lender, Borrower's existing
system being acceptable to Lender.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
value of its Equipment and all dispositions thereof and if an Event of Default
is outstanding shall furnish Lender, upon Lender's request, with a current
schedule containing the foregoing information.
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6.4.2 Dispositions of Equipment. Borrower will not sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof (a)
other than in the ordinary course of its business or (b) without the prior
written consent of Lender if an Event of Default is outstanding and Lender has
so required in writing.
6.5 Payment of Charges. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall be
payable within 10 days following demand and shall bear interest from the date
such advance was made until paid in full at the Floating Rate applicable to the
Loans from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Lender to enter
into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Lender that:
7.1.1. Organization and Qualification. Borrower is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is duly qualified and is authorized
to do business and is in good standing as a foreign corporation in each state or
jurisdiction listed on Exhibit 7.1.1 hereto. There is no other state or
jurisdiction where the character of its Properties or the nature of its
activities make such qualification necessary and Borrower's lack of
qualification is likely to have a Material Adverse Effect.
7.1.2 Corporate Power and Authority. Borrower has full corporate
power and authority to enter into, execute, deliver and perform this Agreement
and each of the other Loan Documents to which it is a party. The execution,
delivery and performance of this Agreement and each of the other Loan Documents
have been duly authorized by all necessary corporate action and do not (i)
require any consent or approval of the shareholders of Borrower; (ii) contravene
Borrower's charter, articles or certificate of incorporation or by-laws; (iii)
violate, or cause Borrower to be in default under, any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award in effect having applicability to Borrower; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which Borrower is a party or by
which it or its Properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien upon or with respect to any of
the Properties now owned or hereafter acquired by Borrower.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of Borrower enforceable against it in
accordance with its respective terms.
7.1.4 Capital Structure. Exhibit 7.1.4 hereto states (i) the
correct name of each of the Subsidiaries, if any, of Borrower, its jurisdiction
of incorporation and the percentage of its
13
Voting Stock owned by Borrower, (ii) the name of Borrower's corporate or
joint venture Affiliates and the nature of the affiliation, (iii) the number,
nature and holder of all outstanding Securities of Borrower and each
Subsidiary of Borrower and (iv) the number of authorized, issued and treasury
shares of Borrower and each Subsidiary of Borrower. Borrower has good title
to all of the shares it purports to own of the stock of each of its
Subsidiaries, free and clear in each case of any Lien other than Permitted
Liens. All such shares have been duly issued and are fully paid and
non-assessable. Except as disclosed on Exhibit 7.1.4, there are no
outstanding options to purchase, or any rights or warrants to subscribe for,
or any commitments or agreements to issue or sell, or any Securities or
obligations convertible into, or any powers of attorney relating to, shares
of the capital stock of Borrower or any of its Subsidiaries. Except as shown
on Exhibit 7.1.4, there are no outstanding agreements or instruments binding
upon any shareholder of Borrower relating to the ownership of its shares of
capital stock.
7.1.5 Corporate Names. Borrower has not been known as or used any
corporate, fictitious or trade names except those listed on Exhibit 7.1.5
hereto during the 5 year period preceding the Closing Date. Except as set
forth on Exhibit 7.1.5, Borrower has not been the surviving corporation of a
merger or consolidation or acquired all or substantially all of the assets of
any Person during the 5 year period preceding the Closing Date.
7.1.6 Business Locations; Agent for Process. Borrower's chief
executive offices and other places of business are as listed on Exhibit 6.1.1
hereto. During the preceding 5 year period, Borrower has not had an office,
place of business or agent for service of process other than as listed on
Exhibit 6.1.1. Except as shown on Exhibit 6.1.1, no Inventory is stored with a
bailee, warehouseman or similar party, nor is any Inventory consigned to any
Person.
7.1.7 Title to Properties; Priority of Liens. Borrower has good,
indefeasible and marketable title to and fee simple ownership of, or valid and
subsisting leasehold interests in, all of its real Property (including the Real
Property), and good title to all of the Collateral and all of its other
Property, in each case, free and clear of all Liens except Permitted Liens.
Borrower has paid or discharged, or reserved for, all lawful claims which, if
unpaid, might become a Lien against any Properties of Borrower that is not a
Permitted Lien. The Liens granted to Lender under Section 5 hereof are first
priority Liens, subject only to Permitted Liens.
7.1.8 Equipment. The Equipment is in satisfactory operating
condition and repair, in light of its intended use, in all material respects.
7.1.9 Financial Statements; Fiscal Year. The balance sheets of
Borrower and such other Persons described therein (including the accounts of all
Subsidiaries, if any, of Borrower for the respective periods during which a
Subsidiary relationship existed) as of December 31, 1997 and the related
statements of income, changes in stockholder's equity, and changes in financial
position for the periods ended on such dates, have been prepared in accordance
with GAAP and present fairly the financial positions of Borrower at such dates
and the results of Borrower's operations for such period. Since December 31,
1997, there has been no material change in the condition, financial or
otherwise, of Borrower and no change in the aggregate value of Equipment and
real Property
14
(including the Real Property) owned by Borrower. The fiscal year of Borrower
and each of its Subsidiaries ends on January 31 of each year.
7.1.10 Full Disclosure. The financial statements referred to in
subsection 7.1.10 hereof do not, nor does this Agreement or any other written
statement of Borrower to Lender, contain any untrue statement of a material fact
or, (when taken as a whole with all other information submitted by Borrower or
made available to, and reviewed by Lender), omit a material fact necessary to
make the statements contained therein or herein not misleading. There is no
fact which Borrower has failed to disclose to Lender in writing which is likely
to have Material Adverse Effect.
7.1.11 Solvent Financial Condition. Borrower is now and, after
giving effect to the Loans to be made hereunder, at all times will be, Solvent.
7.1.12 Surety Obligations. Except as set forth on Exhibit 7.1.12
hereto, Borrower is not obligated as surety or indemnitor under any surety or
similar bond or other contract issued or entered into or any agreement to assure
payment, performance or completion of performance of any undertaking or
obligation of any Person.
7.1.13 Taxes. Borrower's federal tax identification number is
shown on Exhibit 7.1.13 hereto. Borrower has filed all federal, state and local
tax returns and other reports it is required by law to file and has paid, or
made provision for the payment of, all taxes, assessments, fees, levies and
other governmental charges upon it, its income and Properties as and when such
taxes, assessments, fees, levies and charges are due and payable, unless and to
the extent any thereof are being actively contested in good faith and by
appropriate proceedings and Borrower maintains reasonable reserves on its books
therefor. The provision for taxes on the books of Borrower is adequate for all
years not closed by applicable statutes, and for its current fiscal year.
7.1.14 Brokers. There are no claims against Borrower for brokerage
commissions, finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement.
7.1.15 Patents, Trademarks, Copyrights and Licenses. Borrower owns
or possesses all the patents, trademarks, service marks, trade names, copyrights
and licenses used in and necessary for the present and planned future conduct of
its business without any known conflict with the rights of others. All such
patents, trademarks, service marks, tradenames, copyrights, licenses and other
similar rights are listed on Exhibit 7.1.15 hereto.
7.1.16 Governmental Consents. Borrower has, and is in good
standing with respect to, all governmental consents, approvals, licenses,
authorizations, permits, certificates, inspections and franchises necessary to
continue to conduct its business as heretofore or proposed to be conducted by it
and to own or lease and operate its Properties as now owned or leased by it,
except where the failure to do so would not be likely to have a Material Adverse
Effect.
15
7.1.17 Compliance with Laws. Except as set forth on Exhibit 7.1.17
hereto, Borrower has duly complied with, and its Properties, business operations
and leaseholds are in compliance in all material respects with, the provisions
of all federal, state and local laws, rules and regulations applicable to
Borrower, its Properties or the conduct of its business and there have been no
citations, notices or orders of noncompliance issued to Borrower under any such
law, rule or regulation except where such noncompliance would not be likely to
have a Material Adverse Effect. Borrower has established and maintains an
adequate monitoring system to ensure that it remains in compliance with all
federal, state and local laws, regulations and rules applicable to it. To the
best of Borrower's knowledge, no Inventory has been produced in violation of the
Fair Labor Standards Act (29 U.S.C. Section 201 et seq.), as amended.
7.1.18 Restrictions. Borrower is not a party or subject to any
contract, agreement, or charter or other corporate restriction, which materially
and adversely affects its business or the use or ownership of any of its
Properties. Borrower is not a party or subject to any contract or agreement
which restricts its right or ability to incur Indebtedness, other than as set
forth on Exhibit 7.1.18 hereto, none of which prohibit the execution of or
compliance with this Agreement or the other Loan Documents by Borrower.
7.1.19 Litigation. Except as set forth on Exhibit 7.1.19 hereto,
there are no actions, suits, proceedings or investigations pending, or to the
knowledge of Borrower, threatened, against or affecting Borrower or the
business, operations, Properties, prospects, profits or condition of Borrower.
Borrower is not in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.20 No Defaults. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or
Borrower's performance hereunder, constitute a Default or an Event of Default.
Borrower is not in default, and no event has occurred and no condition exists
which constitutes, or which with the passage of time or the giving of notice or
both would constitute, a default in the payment of any Indebtedness to any
Person for Money Borrowed.
7.1.21 Pension Plans. Except as disclosed on Exhibit 7.1.21
hereto, Borrower does not have any Plan. Borrower is in full compliance in all
material respects with the requirements of ERISA and the regulations promulgated
thereunder with respect to each Plan. No fact or situation that could result in
a material adverse change in the financial condition of Borrower exists in
connection with any Plan. Neither Borrower nor any Subsidiary of Borrower has
withdrawal liability in connection with a Multiemployer Plan.
7.1.22 Third Party Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and credit card issuer having a
merchant agreement with Borrower whose purchases individually or in the
aggregate are material to the business of Borrower or with any material
supplier, the effect of which is likely to have a Material Adverse Effect.
There exists no present condition or state of facts or circumstances which would
materially affect adversely Borrower or
16
prevent Borrower from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted.
7.1.23 Labor Relations. Except as described on Exhibit 7.1.23
hereto, Borrower is not a party to any collective bargaining agreement. There
are no material grievances, disputes or controversies with any union or any
other organization of Borrower's employees, or threats of strikes, work
stoppages or any asserted pending demands for collective bargaining by any union
or organization.
7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall, in all material respects,
remain accurate, complete and not misleading at all times during the term of
this Agreement. Notwithstanding the foregoing, Lender acknowledges that certain
of the representations and warranties contained in this Agreement may no longer
be accurate if Borrower is recapitalized (including any recapitalization
reflecting the transfer of Borrower's stock to a new Delaware holding company in
exchange for stock of such company) as a result of a public offering of its
stock. Lender agrees that any such inaccuracy which results from such a public
offering shall not constitute an Event of Default provided the change in
circumstances giving rise to such inaccuracy is not likely to have a Material
Adverse Effect and Borrower discloses such changed circumstances to Lender in
writing within thirty (30) days of the occurrence of such changed circumstances.
7.3 Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Lender
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1 Visits and Inspections. Permit representatives of Lender,
from time to time, but only during normal business hours and, provided no Event
of Default has occurred, no more than four (4) times annually (after the
occurrence of an Event of Default, there shall be no limit on frequency) to
visit and inspect the Properties of Borrower, inspect, audit and make extracts
from its books and records, and discuss with its officers, its employees and its
independent accountants, Borrower's business, assets, liabilities, financial
condition, business prospects and results of operations.
8.1.2 Notices. Promptly notify Lender in writing of the
occurrence of any event or
17
the existence of any fact which renders any representation or warranty in this
Agreement or any of the other Loan Documents inaccurate, incomplete or
misleading in any material respect.
8.1.3 Financial Statements. Keep adequate records and books of
account with respect to its business activities in which proper entries are made
reflecting all of its financial transactions; and cause to be prepared and
furnished to Lender the following (all to be prepared on a consistent basis for
Borrower alone without consolidation with any other Person):
(i) not later than 120 days after the close of each fiscal
year of Borrower, unqualified audited financial statements of Borrower as
of the end of such year, certified by a firm of independent certified
public accountants of recognized standing selected by Borrower but
acceptable to Lender to have been prepared in accordance with GAAP;
(ii) not later than 30 days after the end of each month
hereafter, including the last month of Borrower's fiscal year, unaudited
interim financial statements of Borrower as of the end of such month and of
the portion of Borrower's fiscal year then elapsed, certified by the
principal financial officer of Borrower to have been prepared in accordance
with GAAP and fairly to present the financial position and results of
operations of Borrower for such month and period subject only to changes
from audit and year-end adjustments and except that such statements need
not contain notes;
(iii) promptly after the sending or filing thereof, as
the case may be, copies of any proxy statements, financial statements or
reports which Borrower has sent to all of its shareholders and copies of
any regular, periodic and special reports or registration statements which
Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(iv) promptly after the filing thereof, copies of any annual
report to be filed under ERISA in connection with each Plan;
(v) upon completion, but not later than 30 days prior to
the close of each fiscal year of Borrower, financial Projections for
Borrower, for Borrower's upcoming fiscal year, prepared on a month by month
basis, in form acceptable to Lender; and
(vi) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or Borrower's financial condition or
results of operations, including without limitation, detailed monthly
accounts payable agings.
Within 45 days after the delivery of the financial statements
described in clause (i) of this subsection 8.1.3, Borrower shall forward to
Lender a copy of the accountants' letter to Borrower's management that is
prepared in connection with such financial statements and also shall
18
cause to be prepared and shall furnish to Lender a certificate of the aforesaid
certified public accountants certifying to Lender that, based upon their
examination of the financial statements of Borrower performed in connection
with their examination of said financial statements, they are not aware of any
Event of Default, or, if they are aware of such Event of Default, specifying the
nature thereof, and acknowledging in a manner satisfactory to Lender, that they
are aware that Lender is relying on such financial statements in making its
decision with respect to the Loans. Concurrently with the delivery of the
financial statements described in clauses (i) and (ii) of this subsection 8.1.3,
or more frequently if requested by Lender, Borrower shall cause to be prepared
and furnished to Lender a Compliance Certificate in the form of Exhibit 8.1.3
hereto executed by the chief financial officer of Borrower.
8.1.4 Landlord and Storage Agreements. Provide Lender, upon
request by Lender, with copies of all leases and other material written
agreements between Borrower and any landlord or warehouseman which owns any
warehouse or distribution facility at which any Inventory may, from time to
time, be kept.
8.1.5 Intentionally Omitted.
8.2 Negative Covenants. During the term of this Agreement, and thereafter
for so long as there are any Obligations to Lender, Borrower covenants that,
unless Lender has first consented thereto in writing, it will not:
8.2.1 Mergers; Consolidations; Acquisitions. Merge or consolidate
with any Person; nor acquire all or any substantial part of the Properties of
any Person if (a) Aggregate Adjusted Availability would be less than $3,500,000
after taking into effect any such transaction, (b) an Event of Default is then
outstanding or would otherwise occur after taking into effect any such
transaction, or (c) in the case of a merger or consolidation, Borrower is not
the surviving Person.
8.2.2 Loans. Make any loans or other advances of money to any
Person if (a) Aggregate Adjusted Availability would be less than $3,500,000
after taking into effect such a loan or other advance or (b) an Event of Default
is then outstanding or would otherwise occur after taking into effect such a
loan or other advance.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to
exist any Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt;
(iii) accounts payable to trade creditors and current
operating expenses (other than for Money Borrowed) which are not aged
beyond normal business practice of Borrower, in each case incurred in the
ordinary course of business and paid within
19
the normal time period, unless the same are being actively contested in
good faith and by appropriate and lawful proceedings; and Borrower shall
have set aside such reserves, if any, with respect thereto as are required
by GAAP and deemed adequate by such Borrower and its independent
accountants;
(iv) Obligations to pay Rentals permitted by subsection
8.2.13 and Capitalized Lease Obligations permitted under subsection 8.2.8;
(v) Permitted Purchase Money Indebtedness;
(vi) taxes not yet due or being contested in the manner
described in subsection 7.1.14 hereto;
(vii) contingent liabilities arising out of endorsements
of checks and other negotiable instruments for deposit or collection in the
ordinary course of business; and
(viii) any other Indebtedness if (a) Aggregate Adjusted
Availability would be at least $3,500,000 after taking into effect the
incurrence of such Indebtedness and (b) no Event of Default is then
outstanding or would otherwise occur after taking into effect the
incurrence of such Indebtedness.
8.2.4 Affiliate Transactions. Enter into, or be a party to, any
transaction with any Affiliate of Borrower or any stockholder, except (a) in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms which are fully disclosed to Lender
and are no less favorable to Borrower than Borrower would obtain in a comparable
arm's length transaction with a Person not an Affiliate or stockholder of
Borrower or (b) if (i) Aggregate Adjusted Availability would be at least
$3,500,000 after taking into effect such transaction and (ii) no Event of
Default is then outstanding or would otherwise occur after taking into effect
such transaction.
8.2.5 Limitation on Liens. Create or suffer to exist any Lien
upon any of its Property, income or profits, whether now owned or hereafter
acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed
pursuant to any of the provisions of ERISA) not yet due, or being contested
in the manner described in subsection 7.1.14 hereto, but only if in
Lender's judgment such Lien does not adversely affect Lender's rights or
the priority of Lender's Lien in the Collateral;
(iii) such other Liens as appear on Exhibit 8.2.5
hereto;
(iv) Purchase Money Liens securing Permitted Purchase
Money
20
Indebtedness;
(v) Liens on Borrower's real Property after the
Supplemental Loan and all Obligations related thereto have been
indefeasibly paid in full; and
(vi) such other Liens as Lender may hereafter approve
in writing.
8.2.6 Subordinated Debt. Make any payment of any part or all of
any Subordinated Debt or take any other action or omit to take any other action
in respect of any Subordinated Debt in contravention of the written terms of any
instrument evidencing such Subordinated Debt.
8.2.7 Distributions. Declare or make any Distributions if (a)
Aggregate Adjusted Availability would be less than $3,500,000 after taking into
effect the proposed Distribution or (b) an Event of Default is then outstanding
or would otherwise occur after taking into effect the proposed Distribution.
8.2.8 Disposition of Assets. Sell, lease or otherwise dispose of
its Properties, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of business for so long as there has been no
acceleration of the Obligations; (ii) dispositions expressly authorized by this
Agreement or (iii) other dispositions if (a) Aggregate Adjusted Availability
would be at least $3,500,000 after taking into account the effects of such
transaction and (b) no Event of Default is then outstanding or would occur after
taking into account the effects of such transaction.
8.2.9 Restricted Investment. Make or have any Restricted
Investment if (a) Aggregate Adjusted Availability would be less than $3,500,000
after taking into effect such Restricted Investment or (b) an Event of Default
is then outstanding or would otherwise occur after taking into effect of such
Restricted Investment.
8.2.10 Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than a Subsidiary of
Borrower.
8.3 Specific Financial Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.3.1 Minimum Net Worth. Maintain at all times a Net Worth of not
less than $14,000,000.
8.3.2 Minimum Cash Flow. Achieve a positive Cash Flow
for the four fiscal quarters ending January 31, 1998 and for the four fiscal
quarter period ending on the last day of each subsequent fiscal quarter.
21
8.4 Stock Ownership. Xxxxx Xxx and/or any immediate family member of
Xxxxx Xxx and/or any trust for which any such immediate family member is the
beneficiary shall own and control, beneficially and of record, at least 25% in
the aggregate, of the issued and outstanding capital stock (i) of Borrower, or
(ii) of Borrower's parent company if the stock of Borrower is transferred to
such new parent company in conjunction with an initial public offering of
Borrower's stock and in which case such parent company shall at all times own
all issued and outstanding capital stock of Borrower.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Lender
under the other sections of this Agreement, Lender shall not be required to make
any Loan under this Agreement unless and until each of the following conditions
has been and continues to be satisfied:
9.1 Documentation. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments and certificates as Lender and its counsel shall require in
connection therewith from time to time (provided however that the Supplemental
Loan Note, Mortgage, Mortgagee Endorsement and the documents contemplated by
subsection (I) below are to be provided contemporaneously with the making of the
Supplemental Loan), all in form and substance satisfactory to Lender and its
counsel, including, without limitation, the following:
(A) Certified copies of Borrower's casualty insurance policies,
together with loss payable endorsements on Lender's standard form of Lender Loss
Payee and Mortgagee Endorsement naming Lender as lender loss payee and/or
mortgagee, as applicable, and certified copies of Borrower's liability insurance
policies, together with endorsements naming Lender as additional insured;
(B) Certified copies of (i) resolutions of Borrower's board of
directors authorizing the execution and delivery of this Agreement and the Loan
Documents and the performance of all transactions contemplated hereby and
thereby, (ii) Borrower's by-laws, and (iii) an incumbency certificate of
Borrower;
(C) A copy of the Articles or Certificate of Incorporation of
Borrower, and all amendments thereto, certified by the Secretary of State or
other appropriate official of its jurisdiction of incorporation;
(D) Good standing certificate for Borrower, issued by the Secretary
of State or other appropriate official of Borrower's jurisdiction of
incorporation and each jurisdiction where the conduct of Borrower's business
activities or the ownership of its Properties necessitates qualification;
(E) A closing certificate signed by the chief executive officer of
Borrower dated
22
as of the date hereof, stating that (i) the representations and warranties set
forth in Section 7 hereof are true and correct on and as of such date, (ii)
Borrower is on such date in compliance with all the terms and provisions set
forth in this Agreement and (iii) on such date no Default or Event of Default
has occurred or is continuing;
(F) The Security Documents duly executed, accepted and acknowledged
by or on behalf of each of the signatories thereto;
(G) The Other Agreements duly executed and delivered by Borrower;
(H) The favorable, written opinion of counsel to Borrower as to the
transactions contemplated by this Agreement and any of the other Loan Documents;
(I) Title insurance reports and commitments, surveys and flood plain
certificates of the Real Property;
(J) Written instruction from Borrower directing the application of
proceeds of the initial Loans made pursuant to this Agreement and an initial
Borrowing Base Certificate from Borrower;
(K) Payoff agreement and UCC-3 termination statements from Borrower's
existing lender;
(L) Execution and delivery by holders of the Subordinated Debt of
intercreditor and subordination agreements and instruments evidencing such
Subordinated Debt (all on payment terms acceptable to Lender);
(M) UCC-1 financing statement, state and federal tax lien and
judgment searches;
(N) Payment of all fees and expenses owing hereunder; and
(O) Such other documents, instruments and agreements as Lender shall
reasonably request in connection with the foregoing matters.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set forth in
the other Loan Documents shall have been satisfied.
9.4 Availability. Lender shall have determined that immediately after
Lender has made the initial Loans contemplated hereby and paid all closing costs
incurred in connection with the transactions contemplated hereby, Aggregate
Adjusted Availability on the Closing Date shall not be less than $5,000,000.
9.5 No Litigation. No action, proceeding, investigation, regulation or
legislation shall
23
have been instituted, threatened or proposed before any court, governmental
agency or legislative body (i) to enjoin, restrain or prohibit, or to obtain
damages in respect of, or which is related to or arises out of this Agreement or
the consummation of the transactions contemplated hereby or (ii) which relates
to the Collateral, assets, business operations or obligations of Borrower which
(in Lender's judgment) could have a material adverse effect upon the
creditworthiness, condition, operations or prospects (financial or otherwise) of
Borrower.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Obligations. Borrower shall fail to pay any
Obligations owing hereunder or under the Notes, or any other of the Obligations,
on the due date thereof (whether due at stated due date, maturity, on demand,
upon acceleration, or otherwise).
10.1.2 Misrepresentations. Any representation, warranty or other
statement made or furnished to Lender by or on behalf of Borrower or any
Subsidiary of Borrower in this Agreement, any of the other Loan Documents or any
instrument, certificate or financial statement furnished in compliance with or
in reference thereto, proves to have been false or misleading in any material
respect when made or furnished or when reaffirmed pursuant to Section 7.2
hereof.
10.1.3 Breach of Specific Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in Sections 5.2, 5.3,
8.1.1, 8.1.3, 8.2 or 8.3 hereof on the date that Borrower is required to
perform, keep or observe such covenant.
10.1.4 Breach of Other Covenants. Borrower shall fail or neglect
to perform, keep or observe any covenant contained in this Agreement (other than
a covenant which is dealt with specifically elsewhere in Section 10.1 hereof)
and the breach of such other covenant is not cured to Lender's satisfaction
within twenty (20) days (ten (10) days in the case of a breach of the covenants
contained in Section 6.1.1 hereof) after the sooner to occur of Borrower's
receipt of notice of such breach from Lender or the date on which such failure
or neglect first becomes known to any officer of Borrower.
10.1.5 Default Under Security Documents/Other Agreements. Any
event of default shall occur under, or Borrower shall default in the performance
or observance of any term, covenant, condition or agreement contained in, any of
the Security Documents or the Other Agreements and such default shall continue
beyond any applicable grace period.
10.1.6 Other Defaults. There shall occur any default with respect
to the Subordinated Debt or any default or event of default on the part of
Borrower under any agreement, document or instrument to which Borrower is a
party or by which Borrower or any of its Property is bound, creating or relating
to any Indebtedness (other than the Obligations) in excess of $50,000.
24
10.1.7 Uninsured Losses. Any material loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
10.1.8 Adverse Changes. There shall occur any material adverse
change in the financial condition or business prospects of Borrower.
10.1.9 Insolvency and Related Proceedings. Borrower shall cease to
be Solvent or shall suffer the appointment of a receiver, trustee, custodian or
similar fiduciary, or shall make an assignment for the benefit of creditors, or
any petition for an order for relief shall be filed by or against Borrower under
the Bankruptcy Code (if against Borrower, the continuation of such proceeding
for more than 30 days), or Borrower shall make any offer of settlement,
extension or composition to its unsecured creditors generally.
10.1.10 Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of Borrower for a period which
significantly affects Borrower's capacity to continue its business, on a
profitable basis; or Borrower shall suffer the loss or revocation of any license
or permit now held or hereafter acquired by Borrower which is necessary to the
continued or lawful operation of its business and which loss or revocation will
have a Material Adverse Effect; or Borrower shall be enjoined, restrained or in
any way prevented by court, governmental or administrative order from conducting
all or any part of its business affairs which will have a Material Adverse
Effect; or any lease or agreement pursuant to which Borrower leases, uses or
occupies any Property shall be canceled or terminated prior to the expiration of
its stated term and such cancellation or termination will have a Material
Adverse Effect; or any material part of the Collateral shall be taken through
condemnation or the value of such Property shall be impaired through
condemnation.
10.1.11 ERISA. A Reportable Event shall occur which Lender, in its
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated in a "distress termination" pursuant to
Section 4041(c) or any such trustee shall be requested or appointed, or if
Borrower is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan resulting from Borrower's complete
or partial withdrawal from such Plan.
10.1.12 Challenge to Agreement. Borrower or any Subsidiary of
Borrower shall challenge or contest in any action, suit or proceeding the
validity or enforceability of this Agreement or any of the other Loan Documents,
the legality or enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Lender.
10.1.13 Criminal Action or Forfeiture. Borrower shall be criminally
indicted or convicted under any law or engage in any conduct which is reasonably
likely to result in a forfeiture of any material Property of Borrower.
25
10.1.14 Judgments. Any money judgment in excess of $1,000,000, writ
of attachment or similar process is filed against Borrower.
10.2 Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with Section 3.2 hereof, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations shall,
at the option of Lender and without presentment, demand, protest or further
notice by Lender, become at once due and payable and Borrower shall forthwith
pay to Lender, the full amount of such Obligations, provided, that upon the
occurrence of an Event of Default specified in subsection 10.1.9 hereof, all of
the Obligations shall become automatically due and payable without declaration,
notice or demand by Lender.
10.3 Other Remedies. Upon and after the occurrence of an Event of Default,
Lender shall have and may exercise from time to time the following rights and
remedies (to the full extent permitted by applicable law):
10.3.1 All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable rights to
which Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2 The right to take immediate possession of the Collateral,
and to (i) require Borrower to assemble the Collateral, at Borrower's expense,
and make it available to Lender at a place designated by Lender which is
reasonably convenient to both parties, and (ii) enter any premises where any of
the Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, Borrower
agrees not to charge Lender for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable. Borrower agrees that 7 days written
notice to Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Lender may designate in said notice. Lender shall have the right
to conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable law.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or any part of the Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Obligations. The
proceeds realized from the sale of any Collateral may be applied, after allowing
2 Business Days for collection, first to the costs, expenses and attorneys' fees
incurred by Lender in collecting the Obligations, in enforcing the rights of
Lender under the Loan Documents
26
and in collecting, retaking, completing, protecting, removing, storing,
advertising for sale, selling and delivering any Collateral; second to the
interest due upon any of the Obligations; and third, to the principal of the
Obligations. If any deficiency shall arise, Borrower shall remain liable to
Lender therefor.
10.3.4 Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Lender's benefit.
10.3.5 Lender may, at its option, reduce or modify the Borrowing
Base, or any portion thereof or the advance rates or to take additional reserves
in the Borrowing Base.
10.4 Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule given to Lender or contained in any other agreement between
Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall
be deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions, or agreements of Borrower herein contained. The
failure or delay of Lender to require strict performance by Borrower of any
provision of this Agreement or to exercise or enforce any rights, Liens, powers,
or remedies hereunder or under any of the aforesaid agreements or other
documents or security or Collateral shall not operate as a waiver of such
performance, Liens, rights, powers and remedies, but all such requirements,
Liens, rights, powers, and remedies shall continue in full force and effect
until all Loans and all other Obligations owing or to become owing from Borrower
to Lender shall have been fully satisfied. None of the undertakings,
agreements, warranties, covenants and representations of Borrower contained in
this Agreement or any of the other Loan Documents and no Event of Default by
Borrower under this Agreement or any other Loan Documents shall be deemed to
have been suspended or waived by Lender, unless such suspension or waiver is by
an instrument in writing specifying such suspension or waiver and is signed by a
duly authorized representative of Lender and directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the cost and expense of Borrower:
11.1.1 At such time or times as Lender or said agent, in its sole
discretion, may determine if an Event of Default is outstanding, endorse
Borrower's name on any checks, notes, acceptances, drafts, money orders or any
other evidence of payment or proceeds of the Collateral which come into the
possession of Lender or under Lender's control.
27
11.1.2 At such time or times as Lender or its agent in its sole
discretion may determine after Lender has accelerated the Obligations following
the occurrence of an Event of Default: (i) demand payment of the Accounts from
the Account Debtors, enforce payment of the Accounts by legal proceedings or
otherwise, and generally exercise all of Borrower's rights and remedies with
respect to the collection of the Accounts; (ii) settle, adjust, compromise,
discharge or release any of the Accounts or other Collateral or any legal
proceedings brought to collect any of the Accounts or other Collateral; (iii)
sell or assign any of the Accounts and other Collateral upon such terms, for
such amounts and at such time or times as Lender deems advisable; (iv) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign Borrower's name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any of the Collateral; (vi) receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Lender on account of the Obligations;
(viii) endorse the name of Borrower upon any chattel paper, document,
instrument, invoice, freight xxxx, xxxx of lading or similar document or
agreement relating to the Accounts, Inventory and any other Collateral; (ix) use
Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (x) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, Equipment and any other
Collateral; (xi) make and adjust claims under policies of insurance; and (xii)
do all other acts and things necessary, in Lender's determination, to fulfill
Borrower's obligations under this Agreement.
11.2 Indemnity. Borrower hereby agrees to indemnify Lender and hold Lender
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including attorneys' fees and
legal expenses) as the result of Borrower's failure to observe, perform or
discharge Borrower's duties hereunder. In addition, Borrower shall defend
Lender against and save it harmless from all claims of any Person with respect
to the Collateral. Without limiting the generality of the foregoing, these
indemnities shall extend to any claims asserted against Lender by any Person
under any Environmental Laws or similar laws by reason of Borrower's or any
other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances. Notwithstanding any contrary
provision in this Agreement, the obligation of Borrower under this Section 11.2
shall survive the payment in full of the Obligations and the termination of this
Agreement.
11.3 Modification of Agreement; Sale of Interest. This Agreement may not
be modified, altered or amended, except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including, without limitation, Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrower
hereby consents to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof,
28
including, without limitation, Lender's rights, title, interests, remedies,
powers, and duties hereunder or thereunder. In the case of an assignment, the
assignee shall have, to the extent of such assignment, the same rights, benefits
and obligations as it would if it were "Lender" hereunder and Lender shall be
relieved of all obligations hereunder upon any such assignments. Borrower
agrees that it will use its best efforts to assist and cooperate with Lender in
any manner reasonably requested by Lender to effect the sale of participations
in or assignments of any of the Loan Documents or any portion thereof or
interest therein, including, without limitation, assisting in the preparation of
appropriate disclosure documents. Borrower further agrees that Lender may
disclose credit information regarding Borrower to any potential participant or
assignee.
11.4 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.5 Successors and Assigns. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender.
11.6 Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2
hereof and except as otherwise provided in any of the other Loan Documents by
specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
11.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
11.8 Notice. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, one
Business Day after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile notice, when sent, addressed as follows:
If to Lender: Fleet Capital Corporation
000 Xxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx, Vice President
Facsimile No.: 000-000-0000
29
With a copy to: Blank Rome Comisky & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile No.: 215-569-5522
If to Borrower: The Electronics Boutique, Inc.
000 Xxxxx Xxxxxxx Xx.
Xxxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx, Chief Financial
Officer
Facsimile No.: 000-000-0000
With a copy to: Siana, Xxxxxxx & Xxxxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxx Xxxxxxx, Xx 00000
Attention: Xxxxxxx Xxxxx, Esquire
Facsimile No.: 000-000-0000
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to subsections 2.1.1., 3.1.1 or
4.2.2 hereof shall not be effective until received by Lender.
11.9 Lender's Consent. Whenever Lender's consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
Lender shall be authorized to give or withhold such consent in its sole and
absolute discretion and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
11.10 Credit Inquiries. Borrower hereby authorizes and permits Lender to
respond to usual and customary credit inquiries from third parties concerning
Borrower; provided, however, that Lender shall have no duty or obligation to so
respond or continue to respond.
11.11 Time of Essence. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
11.12 Entire Agreement. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
11.13 Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
30
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
PHILADELPHIA, PENNSYLVANIA. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA; PROVIDED,
HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION
OTHER THAN PENNSYLVANIA, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD,
MANNER AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND
THE ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT
WITH THE LAWS OF PENNSYLVANIA. AS PART OF THE CONSIDERATION FOR NEW VALUE
RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF
BUSINESS OF ANY BORROWER OR LENDER, EACH BORROWER HEREBY CONSENTS AND AGREES
THAT THE COMMON PLEAS COURT OF PHILADELPHIA, PENNSYLVANIA OR, AT LENDER'S
OPTION, THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN
THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
31
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY
(WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL: (ii) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER,
ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS CHATTEL PAPER AND GUARANTIES
AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY
RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (iii) EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED BY THIS AGREEMENT, NOTICE PRIOR TO TAKING
POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE
REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S
REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS;
AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND
THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH
BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING
WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
IN WITNESS WHEREOF, this Agreement has been duly executed in Philadelphia,
Pennsylvania on the day and year specified at the beginning of this Agreement.
ATTEST: THE ELECTRONICS BOUTIQUE, INC.
By:_________________________ By:_________________________
Secretary
Title:________________________
Accepted in Philadelphia, PA
FLEET CAPITAL CORPORATION
By:___________________________
Title:_________________________
32
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of _____________,
1998, by and between Fleet Capital Corporation and The Electronics Boutique,
Inc. the following terms shall have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Accounts - collectively, all accounts and accounts receivable,
contract rights arising from Borrower's agreements with credit card
issuers, whether now owned or hereafter created or acquired by Borrower or
in which Borrower now has or hereafter acquired any interest.
Adjusted LIBOR Rate - For any LIBOR Interest Period, as applied
to a LIBOR Rate Loan, the rate per annum (rounded upwards, if
necessary to the next 1/16 of 1%) determined pursuant to the following
formula:
Adjusted Libor Rate = Libor Rate
--------------------------
(1.00 - Reserve Percentage)
For purposes hereof, "Libor Rate" shall mean the arithmetic average of the
rates of interest per annum (rounded upwards, if necessary to the next 1/16
of 1%) at which Bank is offered deposits of United States Dollars in the
interbank eurodollar loan market on or about 2:00 P.M. New York time two
(2) Business Days prior to the commencement of such LIBOR Interest Period
on amounts substantially equal to the LIBOR Rate Loan as to which Borrower
may elect the Adjusted LIBOR Rate to be applicable with a maturity of
comparable duration to the LIBOR Interest Period selected by Borrower for
such LIBOR Rate Loan.
Adjusted Net Earnings From Operations - with respect to any fiscal
period, means the net earnings (or loss) after provision for income taxes
for such fiscal period of Borrower, as reflected on the financial statement
of Borrower supplied to Lender pursuant to subsection 8.1.3 of the
Agreement, but excluding:
(i) any gain or loss arising from the sale of capital
assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary of Borrower accrued prior to
the date it became a Subsidiary;
(iv) earnings of any corporation, substantially all the
assets of which have been acquired in any manner by Borrower, realized
by such corporation prior to the date of such acquisition;
(v) net earnings of any business entity (other than a
Subsidiary of Borrower) in which Borrower has an ownership interest
unless such net earnings shall have actually been received by Borrower
in the form of cash distributions;
(vi) any portion of the net earnings of any Subsidiary of
Borrower which for any reason is unavailable for payment of dividends
to Borrower;
(vii) the earnings of any Person to which any assets of
Borrower shall have been sold, transferred of disposed of, or into
which Borrower shall have merged, or been a party to any consolidation
or other form of reorganization, prior to the date of such
transaction;
(viii) any gain arising from the acquisition of any Securities
of Borrower; and
(ix) any gain arising from extraordinary or non-recurring
items.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with, a Person; (ii) which beneficially owns
or holds 5% or more of any class of the Voting Stock of a Person; or (iii)
5% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially
owned or held by a Person or a Subsidiary of a Person.
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits thereto and this Appendix A as
each of the same may be amended, modified, renewed, extended, replaced,
restated or substituted from time to time.
Aggregate Adjusted Availability - at the time of determination, an
amount equal to the then applicable Borrowing Base less the sum of (i) the
amount of Revolving Credit Loans as of such time of determination
(including Loans requested to be made on such date) plus (ii) all sums then
due and owing to trade creditors which remain outstanding beyond normal
trade terms or other normal business practice of Borrower, plus (iii) for
the purposes of such determination on the Closing Date, closing payments
and expenses.
Authorized Officer - any officer of Borrower authorized by resolution
of the Board of Directors of Borrower to execute documents, instruments,
certificates and agreements on behalf of Borrower in favor of Lender and
who is identified on the incumbency certificate referenced in Section
9.1(B) herein.
2
Availability - the amount of money which Borrower is entitled to
borrow from time to time as Revolving Credit Loans, such amount being the
difference derived when the sum of the principal amount of Revolving Credit
Loans then outstanding (including any amounts which Lender may have paid
for the account of Borrower pursuant to any of the Loan Documents and which
have not been reimbursed by Borrower) is subtracted from the lesser of (i)
the Maximum Revolving Credit Amount (minus the outstanding balance of the
Supplemental Loan) or (ii) the Borrowing Base. If the amount outstanding
is equal to or greater than the Lesser of (i) Maximum Revolving Credit
Amount or (ii) the Borrowing Base, Availability is 0.
Bank - Fleet National Bank, or such other bank as Lender may hereafter
designate.
Base Rate - the rate of interest announced or quoted by Bank from time
to time as its base rate for commercial loans, whether or not such rate is
the lowest rate charged by Bank to its most preferred borrowers; and, if
such base rate for commercial loans is discontinued by Bank as a standard,
a comparable reference rate designated by Bank as a substitute therefor
shall be the Base Rate.
Borrowing Base - as at any date of determination thereof, an amount
equal to:
(a) 60% of the value of Eligible Inventory at such date
calculated on the basis of the lower of cost or market on a first-in,
first-out basis;
MINUS
(b) such reserves as Lender may have established from time
to time.
Borrowing Base Certificate - the certificate signed by the chief
executive officer, chief financial officer, controller or accounting
manager of Borrower showing the status of Borrower's Inventory, outstanding
Revolving Credit Loans and other information in the form of Exhibit A-1 to
the Agreement.
Business Day - any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the Commonwealth of Pennsylvania or is a
day on which banking institutions located in such state are closed.
Capital Expenditures - cash expenditures made for the acquisition of
any fixed assets or improvements, replacements, substitutions or additions
thereto which have a useful life of more than one year, including the total
principal portion of Capitalized Lease Obligations excluding expenditures
for the replacement of any assets leased under a Capitalized Lease
Obligation in connection with a casualty or loss thereof.
Cash Flow - for any period, means Borrower's (i) Adjusted Net Earnings
from
3
Operations for such period plus (ii) depreciation and amortization expenses
for such period plus (iii) deferred taxes for such period, plus (iv)
expenses incurred by Borrower in conjunction with its anticipated initial
public offering, less (v) non-financed Capital Expenditures, less (vi)
principal payments on account of current maturities of long-term
Indebtedness and less (vii) principal payments on Capitalized Lease
Obligations, less (viii) cash Distributions (excluding the first
$10,000,000 in 1998), less (ix) an amount equal to the difference (if a
positive number) between (a) all loans and advances to Affiliates during
such period and (b) all repayments of loans and advances received from
Affiliates in such period, all as determined in accordance with GAAP.
There shall be excluded from the foregoing calculations all proceeds
received from and disbursements (other than under clause (iv) above) made
of the proceeds of Borrower's anticipated initial public offering.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
Closing Date - the date on which all of the conditions precedent in
Section 9 of the Agreement are satisfied and the initial Loan is made or
issued under the Agreement.
Code - the Uniform Commercial Code as adopted and in force in the
Commonwealth of Pennsylvania and as from time to time in effect.
Collateral - all of the Property and interests in Property described
in Section 5 of the Agreement, and all other Property and interests in
Property that now or hereafter secure the payment and performance of any of
the Obligations.
Credit Facility - the Revolving Credit Facility and Supplemental Loan.
Default - an event or condition, the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
Distribution - in respect of any corporation means and includes: (i)
the payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities unless made contemporaneously from the net
proceeds of the sale of Securities.
Eligible Inventory - all Inventory of Borrower, unless it constitutes
one of the following (the determination thereof to be in Lender's
reasonable discretion):
(i) it is not finished goods Inventory; or
(ii) it is slow-moving, obsolete, defective, or not
deemed saleable in accordance with Borrower's standard practices; or
4
(iii) it does not meet all material standards imposed
by any governmental agency or authority for Inventory of its type; or
(iv) it does not conform, in all material respects, to
the warranties and representations applicable thereto set forth in the
Agreement; or
(v) it is not at all times subject to Lender's duly
perfected, first priority security interest and no other Lien except a
Permitted Lien; or
(vi) it is not situated at a location in the United
States or Puerto Rico listed on Exhibit 6.1.1 (as it may be amended,
supplemented or replaced from time to time in writing) and as to which
non-retail locations Lender has received a landlord's waiver or
warehouseman's waiver acceptable to Lender; or
(vii) it is in transit (except in transit from any of
Borrower's warehouses to its retail stores or between its retail
stores); or
(viii) it is sports collectible Inventory.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to environmental matters.
Equipment - collectively, all machinery, apparatus, equipment,
fittings, furniture, fixtures, motor vehicles and other tangible personal
Property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower or in which Borrower has an
interest, whether now owned or hereafter acquired by Borrower and wherever
located, and all parts, accessories and special tools and all increases and
accessions thereto and substitutions and replacements therefor.
ERISA - the Employee Retirement Income Security Act of 1974, as amended,
and all rules and regulations from time to time promulgated thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
Floating Rate - the Base Rate.
Floating Rate Loans - collectively, all Loans bearing interest at the
Floating Rate.
GAAP - generally accepted accounting principles in the United States
of America in effect from time to time.
General Intangibles - collectively, all personal property of Borrower
(including without limitation choses in action, patents, trademarks and
copyrights and applications therefor, tax and other types of refunds,
deposits, licenses, contract rights, and computer
5
disks, data and software) other than goods, Accounts, Chattel Paper,
Documents, Instruments, Investment Property and money, whether now owned or
hereafter created or acquired by Borrower.
Indebtedness - as applied to a Person means, without duplication
(i) all items, which in accordance with GAAP would be
included in determining total liabilities as shown on the liability
side of a balance sheet of such Person as at the date as of which
Indebtedness is to be determined, including, without limitation,
Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person has
guaranteed,
(iii) all reimbursement obligations in connection with
letters of credit or letter of credit guaranties issued for the
account of such Person, and
(iv) in the case of Borrower (without duplication), the
Obligations.
Inventory - collectively, all Inventory of Borrower, whether now
owned or hereafter acquired including, without limitation, all goods
intended for sale or lease by Borrower, or for display or demonstration;
all work in process; all raw materials and other materials and supplies of
every nature and description used or which might be used in connection with
the manufacture, printing, packing, shipping, advertising, selling, leasing
or furnishing of such goods or otherwise used or consumed in Borrower's
business; and all Documents evidencing and General Intangibles relating to
any of the foregoing, whether now owned or hereafter acquired by Borrower.
Investment Property - has the meaning ascribed thereto in the Code.
LIBOR Interest Period - a period of one, two, three or six months
duration during which the LIBOR Based Rate is applicable.
LIBOR Based Rate - a rate of interest equal to the Adjusted LIBOR Rate
plus 250 basis points.
LIBOR Rate Loans - collectively, all Loans bearing interest at the
LIBOR Based Rate.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract and including, without
limitation, the security interest, security title or lien arising from a
security agreement, mortgage, deed of trust, deed to secure debt,
encumbrance, pledge, conditional sale or trust receipt, or a lease,
consignment or bailment for security
6
purposes. The term "Lien" shall also include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purpose of the Agreement, Borrower shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to
the Property has been retained by or vested in some other Person for
security purposes.
Loan Account - the loan account established on the books of Lender
pursuant to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents as each of the same may be amended, modified, renewed, extended,
replaced, restated or substituted from time to time.
Loans - all loans and advances of any kind made by Lender pursuant to
the Agreement, including without limitation the Revolving Credit Loans and
the Supplemental Loan.
London Business Day - any Business Day on which banks in London,
England are open for business.
Material Adverse Effect - a material and adverse effect on the (a)
financial condition, business, prospects or Property of Borrower, (b) the
ability of Borrower to pay or perform its obligations and undertakings
hereunder, or (c) the validity or enforceability of the Obligations or
Lender's Liens in the Collateral or the priority thereof.
Maturity Date - the last day of the Original Term or, if any Renewal
Term is in effect, then the last day of such Renewal Term.
Maximum Revolving Credit Amount - $50,000,000.
Money Borrowed - means (i) Indebtedness arising from the lending of
money by any Person to Borrower; (ii) Indebtedness, whether or not in any
such case arising from the lending by any Person of money to Borrower, (A)
which is represented by notes payable or drafts accepted that evidence
extensions of credit, (B) which constitutes obligations evidenced by bonds,
debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was
issued or assumed as full or partial payment for Property; (iii)
Indebtedness that constitutes a Capitalized Lease Obligation; (iv)
reimbursement obligations with respect to letters of credit or guaranties
of letters of credit and (v) Indebtedness of Borrower under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed under
clauses (i) through (iii) hereof, if owed directly by Borrower.
Mortgage - that certain mortgage as described in Section 5.3 of the
Agreement, as the
7
same may be amended, modified, renewed, extended, replaced, restated or
substituted from time to time, to be executed by Borrower in favor of
Lender, to be in form and substance acceptable to Lender, and by which
Borrower shall grant and convey to Lender, as security for the Supplemental
Loan, a Lien upon the Real Property.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3)
of ERISA.
Net Worth - at any date means a sum equal to:
(i) the net book value (after deducting related depreciation,
obsolescence, amortization, valuation, and other proper reserves) at which
the assets of a Person would be shown on a balance sheet at such date in
accordance with GAAP, minus
(ii) the amount at which such Person's liabilities (other than
capital stock and surplus and Subordinated Debt) and including as
liabilities all reserves for contingencies and other potential liabilities,
all as would be shown on such balance sheet in accordance with GAAP.
Notes - collectively, the Revolving Credit Note and the Supplemental
Loan Note.
Obligations - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest, fees and
other charges thereon, owing, arising, due or payable from Borrower to
Lender of any kind or nature, present or future, whether or not evidenced
by any note, guaranty or other instrument, whether arising under the
Agreement or any of the other Loan Documents or otherwise whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter
arising and however acquired. The term includes without limitation, all
interest, charges, fees, expenses, attorneys' fees, and any other sums
chargeable to Borrower, under any of the Loan Documents.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements and instruments (other than
the Agreement and the Security Documents), heretofore, now or hereafter
executed by Borrower, any guarantor, or any other third party and delivered
to Lender in respect of the transactions contemplated by the Agreement, as
each of the same may be amended, modified, renewed, extended, replaced,
restated or substituted from time to time.
Overadvance - the amount, if any, by which the outstanding principal
amount of Revolving Credit Loans exceeds the Borrowing Base.
Participating Lender - each Person who shall be granted the right by
Lender to participate in any of the Loans described in the Agreement and
who shall have entered into a participation agreement in form and substance
satisfactory to Lender.
8
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of
the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
Borrower incurred after the date hereof which is secured by a Purchase
Money Lien.
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Projections - Borrower's forecasted Consolidated and Consolidating (if
applicable) (a) balance sheets, (b) profit and loss statements, and (c)
cash flow statements, all prepared on a consistent basis with Borrower's
historical financial statements, together with appropriate supporting
details and a statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) Indebtedness
(other than the Obligations) for the payment of all or any part of the
purchase price of any fixed assets, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within 10 days prior to or after
the acquisition of any fixed assets for the purchase price thereof, and
(iii) any renewals, extensions or refinancings thereof, but not any
increases in the principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined
solely to the fixed assets, the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such
Lien.
Real Property - the real estate (with buildings, improvements, rents
and profits) described on Exhibit A-2 to this Agreement.
Regulation D - Regulation D of the Board of Governors of the Federal
Reserve System, comprising Part 204 of Title 12, Code of Federal
Regulations, as amended, and any successor thereto.
Rentals - as defined in subsection 8.2.13 of the Agreement.
Renewal Terms - as defined in Section 4.1 of the Agreement.
9
Reportable Event - any of the events set forth in Section 4043(b) of
ERISA.
Reserve - for any day, that reserve (expressed as a decimal) which is
in effect (whether or not actually incurred) with respect to Bank on such
day, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor or any other banking authority to which Bank is subject
including any board or governmental or administrative agency of the United
States or any other jurisdiction to which Bank is subject), for determining
the maximum reserve requirement (including without limitation any basic,
supplemental, marginal or emergency reserves) for Eurocurrency liabilities
as defined in Regulation D.
Reserve Percentage - for Bank on any day, that percentage (expressed
as a decimal) which is in effect on such day, prescribed by the Board of
Governors of the Federal Reserve System (or any successor or any other
banking authority to which Lender is subject, including any board or
governmental or administrative agency of the United States or any other
jurisdiction to which Bank is subject) for determining the maximum reserve
requirement (including without limitation any basic, supplemental, marginal
or emergency reserves) for (i) deposits of United States Dollars or (ii)
Eurocurrency liabilities as defined in Regulation D, in each case used to
fund a LIBOR Rate Loan subject to an Adjusted LIBOR Rate. The Adjusted
LIBOR Rate shall be adjusted automatically on and as of the effective day
of any change in the Reserve Percentage.
Restricted Investment - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance or capital contribution,
or otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of Borrower to
the extent existing on the Closing Date;
(ii) Property to be used in the ordinary course of
business;
(iii) Current assets arising from the sale of goods and
services in the ordinary course of business of Borrower;
(iv) investments in direct obligations of the United States
of America, or any agency thereof or obligations guaranteed by the
United States of America, provided that such obligations mature within
one year from the date of acquisition thereof;
(v) investments in certificates of deposit maturing within
one year from the date of acquisition issued by a bank or trust
company organized under the laws of the United States or any state
thereof having capital surplus and undivided profits aggregating at
least $100,000,000;
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(vi) investments in commercial paper given the highest
rating by a national credit rating agency and maturing not more than
270 days from the date of creation thereof; and
(vii) mutual funds that invest in any of the foregoing.
Revolving Credit Loan - a Loan made by Lender as provided in Section
1.1 of the Agreement.
Revolving Credit Facility - the credit facility established by for the
making of Revolving Credit Loans pursuant to Section 1.1.1 hereof.
Revolving Credit Note - the secured promissory note to be executed by
Borrower on the Closing Date in favor of Lender to evidence Borrower's
obligation to repay the Revolving Credit Loans, which shall be in the form
of Exhibit A-3 to the Agreement.
Schedule of Accounts - as defined in subsection 6.4.1 of the
Agreement.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Documents - the Mortgage, and all other instruments and
agreements now or at any time hereafter securing the whole or any part of
the Obligations, as each of the same may be amended, modified, renewed,
extended, replaced, restated or substituted from time to time.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is able to pay all
of its Indebtedness as such Indebtedness matures and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
Subordinated Debt - Unsecured indebtedness of Borrower that is
subordinated to the Obligations in a manner, under terms and subject to a
written agreement satisfactory to Lender.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination.
Supplemental Loan - the Loan described in subsection 1.2 of the
Agreement.
Supplemental Loan Note - the secured promissory note to be executed by
Borrower in favor of Lender as a pre-condition to Lender's making the
Supplemental Loan available to Borrower to evidence Borrower's obligation
to pay the Supplemental Loan, which shall
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be in the form of Exhibit A-4 to the Agreement.
Total Credit Facility - $50,000,000.
Voting Stock - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing
similar functions).
Other Terms. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a
whole and not to any particular section, paragraph or subdivision. Any
pronoun used shall be deemed to cover all genders. The section titles,
table of contents and list of exhibits appear as a matter of convenience
only and shall not affect the interpretation of the Agreement. All
references to statutes and related regulations shall include any amendments
of same and any successor statutes and regulations. All references to any
of the Loan Documents shall include any and all modifications thereto and
any and all extensions or renewals thereof.
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LIST OF EXHIBITS
Exhibit A-1 Borrowing Base Certificate
Exhibit A-2 Real Property
Exhibit A-3 Revolving Credit Note
Exhibit A-4 Supplemental Loan Note
Exhibit 6.1.1 Borrower's and each Subsidiary's Business Locations
Exhibit 7.1.1 Jurisdictions in which Borrower and each
Subsidiary is Authorized to do Business
Exhibit 7.1.4 Capital Structure of Borrower
Exhibit 7.1.5 Corporate Names
Exhibit 7.1.12 Existing Sureties
Exhibit 7.1.13 Tax Identification Numbers of Subsidiaries
Exhibit 7.1.15 Patents, Trademarks, Copyrights and Licenses
Exhibit 7.1.16 Contracts Restricting Borrower's Right to Incur Debts
Exhibit 7.1.17 Compliance with Laws
Exhibit 7.1.19 Litigation
Exhibit 7.1.21 Pension Plans
Exhibit 7.1.23 Labor Contracts
Exhibit 8.1.3 Compliance Certificate
Exhibit 8.2.5 Permitted Liens
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