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EXHIBIT 10.6
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XXXXXXXX'X INC.
LOAN AGREEMENT
Dated: As of July 14, 1997
$10,000,000
ABN AMRO BANK N.V.
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TABLE OF CONTENTS
SECTION HEADING PAGE
SECTION 1. GENERAL DEFINITIONS.......................................................1
Section 1.1. Defined Terms.........................................................1
Section 1.2. Accounting Terms.....................................................11
Section 1.3. Other Terms..........................................................12
Section 1.4. Certain Matters of Construction......................................12
SECTION 2. CREDIT FACILITY..........................................................12
Section 2.1. Borrowing and Disbursement...........................................12
Section 2.2. Loan Account.........................................................14
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT.......................................14
Section 3.1. Interest, Fees and Charges...........................................14
Section 3.2. Unused Line Fee......................................................15
Section 3.3. Loan Fee.............................................................15
Section 3.4. Payments.............................................................15
Section 3.5. Term of Loan.........................................................16
Section 3.6. Application of Payments and Collections..............................16
Section 3.7. Statements of Account................................................16
Section 3.8. Funding Indemnity....................................................16
'SECTION 4. COLLATERAL: GENERAL TERMS'..............................................17
Section 4.1. Security Interest in Collateral......................................17
Section 4.2. Representations, Warranties and Covenants -- Collateral..............17
Section 4.3. Lien Perfection......................................................18
Section 4.4. Location of Collateral...............................................18
Section 4.5. Insurance of Collateral..............................................18
Section 4.6. Protection of Collateral.............................................19
SECTION 5. PROVISIONS RELATING TO ACCOUNTS..........................................19
Section 5.1. Representations, Warranties and Covenants............................19
Section 5.2. Notice of Security Interest and Schedules of Accounts................20
Section 5.3. Administration of Accounts...........................................21
Section 5.4. Collection of Accounts...............................................21
SECTION 6. PROVISIONS RELATING TO INVENTORY.........................................22
Section 6.1. Representations, Warranties and Covenants............................22
Section 6.2. Location of Inventory................................................22
Section 6.3. Ownership of Inventories.............................................23
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Section 6.4. Status of Inventory..................................................23
SECTION 7. REPRESENTATIONS AND WARRANTIES...........................................23
Section 7.1. General Representations and Warranties...............................23
Section 7.2. Reaffirmation........................................................26
Section 7.3. Survival of Representations and Warranties...........................27
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS......................................27
Section 8.1. Affirmative Covenants................................................27
Section 8.2. Negative Covenants...................................................30
Section 8.3. Specific Financial Covenants.........................................33
SECTION 9. CONDITIONS PRECEDENT.....................................................34
Section 9.1. Documentation........................................................34
Section 9.2. Other Conditions.....................................................35
Section 9.3. Conditions Precedent to Subsequent Advances..........................36
Section 9.4. Request for Advances.................................................36
'SECTION 10. EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT........................37
Section 10.1. Events of Default....................................................37
Section 10.2. Acceleration of the Obligations......................................39
Section 10.3. Remedies.............................................................39
Section 10.4. Remedies Cumulative; No Waiver.......................................41
SECTION 11. MISCELLANEOUS............................................................41
Section 11.1. Power of Attorney....................................................41
Section 11.2. Indemnity............................................................42
Section 11.3. Modification of Agreement; Sale of Interest .........................42
Section 11.4. Reimbursement of Expenses............................................43
Section 11.5. Indulgences Not Waivers..............................................43
Section 11.6. Severability.........................................................43
Section 11.7. Successors and Assigns...............................................43
Section 11.8. Cumulative Effect; Conflict of Terms.................................44
Section 11.9. Execution in Counterparts............................................44
Section 11.10. Notice...............................................................44
Section 11.11. Lender's Right to Set-Off............................................44
Section 11.12. Demand Obligations...................................................45
Section 11.13. Time of Essence......................................................45
Section 11.14. Entire Agreement.....................................................45
Section 11.15. Interpretation.......................................................45
Section 11.16. Governing Law; Consent to Forum......................................45
Section 11.17. General Waivers by Borrower..........................................46
Section 11.18. Security Agreement...................................................46
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Exhibit A -- Borrowing Base Report
Exhibit B -- Note
Exhibit B-1 -- Permitted Indebtedness
Exhibit C -- Places of Business
Exhibit D -- Security Agreement
Exhibit E -- States in which Qualified to do Business
Exhibit F -- Fictitious Names during the Past Seven Years
Exhibit G -- Capital Structure
Exhibit H -- Contracts or Agreements Restricting Borrower's Right to Incur Debt
Exhibit I -- Actions, Suits, Proceedings or Investigations
Exhibit J -- Pension Plans
Exhibit K -- Compliance Certificate
Exhibit K-1 -- Permitted Loans
Exhibit K-2 -- Insurance Programs
Exhibit L -- Permitted Liens
Exhibit M -- Legal Opinion
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of July 14, 1997, by and between ABN AMRO
BANK N.V. ("Lender"), a bank organized under the laws of the Netherlands acting
through its New York Branch with an office at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, and XXXXXXXX'X INC. ("Borrower"), a Delaware business corporation,
with its chief executive office and principal place of business at 0 Xxxx Xxxxx
Xxxxxx, Xxxxxxxx, Xxxxxxx 00000.
SECTION 1. GENERAL DEFINITIONS
Section 1.1. Defined Terms. When used herein, the following terms shall
have the meanings set forth below (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 an
Account.
"Accounts" all accounts, contract rights, chattel paper, instruments and
documents, whether now owned or hereafter created or acquired by Borrower or in
which Borrower now has or hereafter acquires any interest; and all documents
evidencing chooses in action, causes of action, books and records, computer
equipment, and customer lists relating to any of the foregoing.
"Advance" an advance to Borrower of the Loan proceeds pursuant to a
Request For Advance.
"Affiliate" a Person: (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
Borrower; (ii) which beneficially owns or holds five percent (5.0%) or more of
the equity interest of Borrower. For purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of an equity interest, voting Stock, by contract or otherwise. In
addition, for purposes hereof, Affiliate shall include specifically MS Jewelers
Limited Partnership, MS Jewelers Corporation, Crescent Jewelers, Xxxxxxxx'x
Jewelers, Inc., Xxxxxx X. Xxxxxxxx, and Xxxxxxx X. Xxxxxxxx, but shall not
include any of the other limited partners of MS Jewelers Limited Partnership.
"Agreement" this Loan Agreement.
"Borrower" Xxxxxxxx'x Inc. or, for accounting purposes, any predecessor
including MS Jewelers Limited Partnership which transferred to Borrower
substantially all of its assets and liabilities.
"Borrower's Account" Borrower's deposit account maintained with Lender.
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"Borrowing Base" as at any date of determination thereof, an amount equal
to the lesser of (a) the Maximum Loan Commitment and (b) the sum of (i) 75% of
Eligible Accounts, plus (ii) 50% of Eligible Inventory, less (iii) the maximum
lending commitment of NationsBank under the NationsBank Credit Agreement, less
(iv) the maximum lending commitment of First Union under the First Union Loan
Agreement, and subtracting from (a) or (b) the Reserve Amount on such date.
"Borrowing Base Report" the certificate in the form of Exhibit "A" attached
hereto and incorporated by reference herein signed by an authorized officer of
Borrower showing a calculation of the Borrowing Base, and the components
comprising said Borrowing Base, as of the end of the preceding fiscal quarter,
listing the amounts of Eligible Accounts and updating the amount of Eligible
Inventory.
"Business Day" any day on which banking institutions in New York, New York
are open for the transaction of banking business, and in the case of LIBO Rate
Loans, any day on which banking institutions in London are open for the
transaction of banking business.
"Capital Lease" shall mean any lease or similar arrangement which 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 are satisfied and the initial Loan is made hereunder.
"Code" the Uniform Commercial Code as adopted and in force in the State of
Georgia, as from time to time in effect.
"Collateral" all of the Property and interests in Property described in
Section 4 hereof, and all other Property and interests in Property that now or
hereafter secure the payment and performance of any of the Obligations pursuant
to any of the Security Documents or otherwise.
"Consignment Agreement" that certain Consignment Agreement between Lender
and Borrower.
"Consolidated" the consolidation in accordance with GAAP of the accounts or
other items as to which such term applies.
"Debt" the aggregate amount of all items categorized as liabilities on the
balance sheet of Borrower prepared in accordance with GAAP.
"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 Section 3.1(B) of this Agreement.
"Dollars" and the sign "$" shall refer to currency of the United States of
America.
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"Draw Down Date" the date on which any Loan is made or is to be made and
the date on which any Loan is repaid or reborrowed in accordance with Section
2.1 herein.
"EBITDAR" shall mean, for any period of calculation, the Borrower's (i) Net
Income for such period, plus (ii) Interest Expense during such period, plus
(iii) income tax expense during such period, plus (iv) amortization and
depreciation expense deducted during such period in calculating Net Income, plus
(v) Rental Expense during such period, plus (vi) the actual principal amount
forgiven under the Long-Term Incentive Programs during such period plus (vii)
other non-cash, non-recurring charges deducted during the period in determining
Net Income.
"Eligible Account" an Account arising in the ordinary course of Borrower's
business from the sale of goods or rendition of services which Lender deems to
be an Eligible Account, and as to which Borrower has furnished reasonably
detailed information to Lender in a Borrowing Base Report. Without limiting the
generality of the foregoing, Eligible Account shall mean the aggregate of the
gross amount of Borrower's Accounts, less the amount of the then existing
unearned finance charges, unearned insurance premiums, returns, discounts,
credits, or offsets of any nature, of the Accounts owing to Borrower by the
Borrower's customers under consumer sales contracts which contain credit terms
not exceeding twenty-four (24) months, except that up to a maximum amount equal
to one percent (1.0%) of the aggregate amount of all such Accounts (under
consumer credit contracts) may contain credit terms exceeding twenty-four (24)
months but not exceeding forty-eight (48) months; provided, however, that
Eligible Accounts also shall not include any of the following: (i) any Account
of an Account Debtor for whom an Account is outstanding which is past due more
than fifty-nine (59) days; (ii) any Account which represents an obligation owed
to Borrower by an Account Debtor located in a foreign country; (iii) any Account
which represents an obligation of a director or officer of the Borrower or any
of its Affiliates; (iv) any Account deemed ineligible by the Lender when the
Lender, in its reasonable discretion, deems the creditworthiness or financial
condition of the Account Debtor unsatisfactory; (v) any Account against which
the Account Debtor or any other Person obligated to make payment thereon asserts
any defense, offset, counterclaim, or other right to avoid or reduce the
liability represented by such Account; (vi) any Account as to which the Account
Debtor or other Person obligated to make payment thereon is insolvent, subject
to bankruptcy or receivership proceedings, or has made an assignment for the
benefit of creditors or whose credit standing is unacceptable to Lender and
Lender has so notified Borrower; (vii) any Account for any Account Debtor who
comprises five percent (5.0%) or more of Borrower's total Accounts; (viii) any
Account of any governmental agency; (ix) any Account in which Lender does not
have a valid and perfected first priority Lien (subject only to the Lien in
favor of (a) NationsBank granted pursuant to the NationsBank Credit Agreement
and (b) First Union granted pursuant to the First Union Loan Agreement); and (x)
any Account which Lender in its reasonable discretion shall deem not to qualify
as an Eligible Account.
"Eligible Inventory" all Inventory as to which Borrower has furnished
reasonably detailed information to Lender in a Borrowing Base Report and such
Inventory of Borrower (other than documents evidencing choses in action, causes
of action, books and records, all
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rights to indemnification, licenses, and customer lists) which Lender deems to
be Eligible Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory unless, in Lender's opinion, it (i) is in
good, new and saleable condition, (ii) is not obsolete or unmerchantable, (iii)
meets all standards imposed by any governmental agency or authority, (iv) is at
all times subject to Lender's duly perfected, first priority security interest
and no other Lien except a Permitted Lien, (v) is situated at a location in
compliance with Section 6.1 hereof or is in transit between Places of Business
and is not otherwise in transit, (vi) is accounted for on Borrower's books and
records in accordance with GAAP and in detail satisfactory to Lender, in its
sole discretion, and (vii) is in excess of a minimum reserve as determined by
Borrower (or such greater amount as Lender in its reasonable discretion may
determine) for slow moving Inventory; provided, however, that Eligible Inventory
shall not include any precious metal consigned to the Borrower by any Person
(including without limitation Precious Metal (as such term is defined in the
Consignment Agreement) consigned by the Lender to the Borrower under the
Consignment Agreement).
"Environmental Laws" all federal, state and local laws, rules, regulations,
ordinances, programs, permits, guidances, orders and consent decrees relating to
health, safety and environmental matters, including, but not limited to, the
Resource Conservation and Recovery Act; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980; the Toxic Substances Control
Act; the Clean Water Act; the Clean Air Act; the River and Harbor Act; the Water
Pollution Control Act; the Marine Protection Research and Sanctuaries Act; the
Deep-Water Port Act; the Safe Drinking Water Act; the Superfund Amendments and
Reauthorization Act of 1986; the Federal Insecticide, Fungicide and Rodenticide
Act; the Mineral Lands and Leasing Act; the Surface Mining Control and
Reclamation Act; the Oil Pollution Act of 1990; state and federal superlien and
environmental cleanup programs and laws; and U.S. Department of Transportation
regulations.
"ERISA" the Employee Retirement Income Security Act of 1974 and all rules
and regulations promulgated thereunder.
"Event of Default" is defined in Section 10.1 of this Agreement.
"First Union" means First Union National Bank (formerly known as First
Union National Bank of Georgia).
"First Union Loan Agreement" the Loan Agreement, dated as of even date,
between First Union and the Borrower.
"Fixed Charge Coverage Ratio" as of any date of determination, the ratio of
the Borrower's (a) EBITDAR for the immediately preceding four (4) fiscal
quarters, to (b) total Fixed Charges for such period.
"Fixed Charges" for any period, sum of the Borrower's (i) total principal
payments with respect to all Indebtedness for Money Borrowed (including the
principal portion of
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payments under Capital Leases and Subordinated Debt during such period), plus
(ii) Interest Expense during such period plus (iii) Rental Expense during such
period plus (iv) income tax expense during such period.
"Funded Debt" as of any date of determination, (i) all Indebtedness for
Money Borrowed, including the principal portion of all Capital Lease obligations
and all Subordinated Debt plus (ii) all Rental Expense paid during the
immediately preceding four (4) fiscal quarters multiplied by 6.
"GAAP" generally accepted accounting principles in the United States of
America in effect from time to time.
"General Intangibles" all general intangibles of Borrower whether now owned
or hereafter created or acquired by Borrower relating or pertaining to Inventory
or pertaining to Accounts.
"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 and (iii) in the case of Borrower (without
duplication), the Obligations.
"Intercreditor Agreement" the Second Amended and Restated Intercreditor and
Security Agreement, dated of even date herewith, among NationsBank (in its
capacity as "collateral agent" thereunder and in its capacity as the lender
under the NationsBank Loan Agreement), First Union, Lender and Borrower, as
amended, modified, supplemented or restated from time to time.
"Interest Expense" shall mean, for any period of calculation, the aggregate
of all interest paid or accrued by the Borrower during such period, as
determined in accordance with GAAP.
"Interest Period" with respect to each Advance (a) initially, the period
commencing on the Draw Down Date of such Advance and ending on the last day of
one of the periods set forth below, as selected by the Borrower in a Request for
Advance, which shall be (i) for any Offered Rate Loan, the date specified by the
Borrower in the applicable Request for Advance; and (ii) for any LIBO Rate Loan,
the date specified by the Borrower in the applicable Request for Advance which
date is 1, 2, 3 or 6 months from the applicable Draw Down Date; and (b)
thereafter, each period commencing on the first day after the last day of the
last preceding Interest Period applicable to such Advance and ending on the last
day of one of the periods set forth above, as selected by the Borrower pursuant
to Section 2.1(H); provided that all of the foregoing provisions relating to
Interest Periods are subject to the following: if any Interest Period with
respect to an Advance would end on a day that is not a Business Day, that
Interest Period shall end on the next succeeding Business Day unless, in the
case of LIBO Rate Advances only, such Business Day would be in the next calendar
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month, in which case such Interest Period shall end on the immediately preceding
Business Day; the Borrower may not select any Interest Period that would extend
through the Maturity Date.
"Inventory" all of Borrower's inventory, whether now owned or hereafter
acquired by Borrower and wherever located, including, but not limited to, all
goods intended for sale or lease by Borrower, or for display or demonstration
including without limitation, all gold and other precious metal and precious
stones and gems (including, without limitation, diamonds) in whatever form and
all products in which any such gold, precious metal and precious stones and gems
are incorporated or into which such gold, precious metal and precious stones and
gems are processed or converted, including without limitation, bullion, alloys
or wire; 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 of such goods or otherwise used or consumed in Borrower's
business; and all documents evidencing choses in action, causes of action, books
and records, all rights to indemnification, licenses, and customer lists
relating to any of the foregoing.
"IRC" the Internal Revenue Code of 1986, as amended.
"LIBO Rate" means, with respect to any Interest Period for LIBO Rate Loans,
the offered rate per annum in the London interbank market for deposits in
Dollars of amounts equal or comparable to the principal amount of such LIBO Rate
Loan offered for a term comparable to such Interest Period, as currently shown
on the Reuters Screen LIBOR page as of 11:00 a.m., London Time, two Business
Days prior to the first day of such Interest Period; provided, however, that (a)
if more than one offered rate as described above appears on the Reuters Screen
LIBOR page, the rate used to determine the LIBO Rate will be the arithmetic
average (rounded upward, if necessary, to the next higher 1/16 of 1%) of such
offered rates, or (b) if no such offered rates appear, the rate used for such
Interest Period will be the arithmetic average (rounded upward, if necessary, to
the next higher 1/16 of 1%) of rates quoted by the Lender at approximately 10:00
a.m., New York time, two Business Days prior to the first day of such Interest
Period for deposits in Dollars offered to leading European banks for a period
comparable to such Interest Period in an amount comparable to the principal
amount of such LIBO Rate Loans. If the Lender ceases to use the Reuters Screen
LIBOR page for determining interest rates based on eurodollar deposit rates, a
comparable internationally recognized interest rate reporting service shall be
used to determine such offered rates.
"LIBO Rate Advance" an advance on a LIBO Rate Loan.
"LIBO Rate Basis" a simple rate per annum equal to the sum of (a) the LIBO
Rate and (b) seven-eighths of one percent (0.875%).
"LIBO Rate Loan" any Advance made hereunder bearing interest calculated by
reference to the LIBO Rate.
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"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 the common law, statute or contract, and including, but not limited to,
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 purposes.
The term "Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For the purpose of this
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 2.2 hereof.
"Loan Documents" this Agreement, the Consignment Agreement, the Other
Agreements and the Security Documents.
"Loans" all Advances made by Lender pursuant to this Agreement.
"Long-Term Incentive Programs" shall mean (i) the Loan Agreement, dated
November 17, 1994, between Borrower and Xxxxxxx X. Xxxxx, and the promissory
note, dated November 17, 1994, from Xxxxxxx X. Xxxxx to Borrower, in the
original principal amount of $1,500,000, each as amended through the date
hereof, a true and correct copy of each of which is attached hereto as Exhibit
O-1, and (ii) the Loan Agreement, dated November 17, 1994, between Borrower and
Xxxxxxxx X. Xxxxxxxx, and the promissory note, dated November 17, 1994, from
Xxxxxxxx X. Xxxxxxxx to Borrower, in the original principal amount of
$1,500,000, each as amended through the date hereof, a true and correct copy of
each of which is attached hereto as Exhibit O-2.
"Maturity Date" the earlier of April 30, 1999 or such earlier date as
payment of the Loans shall be due (whether by acceleration or otherwise).
"Maximum Loan Commitment" shall mean $10,000,000 minus the Fair Market
Value (as such term is defined in the Consignment Agreement) of all Consigned
Precious Metal (as such term is defined in the Consignment Agreement) under the
Consignment Agreement.
"Money Borrowed" as applied to Indebtedness, means (i) Indebtedness for
borrowed money; (ii) Indebtedness, whether or not in any such case the same was
for borrowed money, (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) Indebtedness under any
agreement or obligation to reimburse the issuer of any letter of credit for
amounts paid by
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the issuer on account of such letter of credit; and (v) Indebtedness under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed
under clauses (i) through (iii) hereof.
"Multiemployer Plan" has the meaning set forth in Section 4001(a)(3) of
ERISA.
"NationsBank" NationsBank, N.A. (formerly known as NationsBank of Georgia,
N.A.)
"NationsBank Credit Agreement" the Second Amended and Restated Loan
Agreement, dated as of even date herewith, between NationsBank and the Borrower.
"Net Income" shall mean, for any period of calculation, the Borrower's
consolidated net income (loss) after taxes, calculated in accordance with GAAP.
"Net Worth" means, with respect to any Person, such Person's total
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings, after deducting treasury stock) which would appear as such on
a balance sheet of such Person prepared in accordance with GAAP.
"Non-subordinated Debt" indebtedness of Borrower that is not subordinated
to the Obligations.
"Note" the Promissory Note dated July 14, 1997, made by Borrower to the
order of Lender in the stated principal amount of $10,000,000 in substantially
the form of Exhibit "B" attached hereto, as hereafter amended, modified,
restated or extended.
"Obligations" all Loans and all other advances, debts, liabilities,
obligations, covenants and duties 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 this 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 evidenced or acquired. The term includes, without
limitation, all interest, charges, expenses, fees, reasonable attorneys' fees
and any other sums chargeable to Borrower under any of the Loan Documents and
all rights Lender may at any time or times have to reimbursement in connection
with any letter of credit or guaranty issued for Borrower's benefit.
"Offered Rate" shall mean, for any applicable Interest Period, the rate of
interest offered by Lender to the Borrower and accepted by the Borrower on a
designated Advance.
"Offered Rate Advance" an Advance on a Offered Rate Loan.
"Offered Rate Basis" a simple rate per annum equal to the sum of (a) the
Offered Rate and (b) seven-eighths of one percent (0.875%).
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"Offered Rate Loan" any Advance made hereunder bearing interest calculated
by reference to the Offered Rate.
"OSHA" the Occupational Safety and Health Act and all rules and regulations
from time to time promulgated thereunder.
"Other Agreements" any and all agreements, instruments and documents (other
than this Agreement and the Security Documents), heretofore, now or hereafter
executed, by Borrower and delivered to Lender in respect to the transactions
contemplated by this Agreement, including, without limitation, the Note.
"Overadvance" an Advance made by Lender when an Overadvance Condition
exists or would result from the making of such Advance.
"Overadvance Condition" at any date, a condition such that the outstanding
principal amount of the Loans on such date exceeds the Borrowing Base an such
date.
"Payment Date" with respect to any Advance which is accruing interest at
the Prime Rate, the last day of each calendar quarter and with respect to any
other Advance, the last day of the Interest Period applicable to such Advance,
and if such date is more than 3 months from the Draw Down Date of each Advance,
"Payment Date" shall also mean each day falling 3 months from such Draw Down
Date.
"Permitted Indebtedness" means (i) the Indebtedness to NationsBank pursuant
to the NationsBank Credit Agreement as in effect on the date hereof, (ii) the
Indebtedness to First Union pursuant to the First Union Loan Agreement as in
effect on the date hereof, (iii) other Indebtedness in an amount outstanding not
in excess of $2,500,000 in principal each fiscal year, (iv) any Indebtedness
described in Exhibit "B-1" hereto, and (v) trade payables and accrued expenses
incurred in the ordinary course of business and (vi) any amounts owing to the
Lender.
"Permitted Liens" any Lien of a kind specified in subparagraphs (i) through
(xi) of section 8.2(H) of this Agreement.
"Permitted Loan and Guarantee Amount" the maximum amount of Loans or other
advances of money (other than for salary, travel advances, advances against
commission, other similar advances in the ordinary course of business, and Loans
to officers to exercise stock options) plus guarantees, assumptions, and
endorsements (except endorsements of instruments or items of payment for deposit
or collection) which Borrower may make hereunder; which amount in the aggregate
shall be limited to $2,500,000.
"Person" an individual, partnership, corporation, joint venture, joint
stock company, land trust, business trust or unincorporated organization, or a
government or agency or political subdivision thereof.
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"Place of Business" a location at which Borrower conducts its business and
at which Borrower's Property is located, including, without limitation, those
existing locations identified on Exhibit "C" attached hereto and incorporated
herein by this reference and those future locations of which Borrower is
obligated to notify Lender pursuant to the terms of Section 8.2(I) hereof.
"Plan" an employee benefit plan now or hereafter maintained for employees
of Borrower that is covered by Title IV of ERISA.
"Prime Rate" means the rate announced from time to time by the Lender as
its "prime rate" for Dollar loans by its United States offices to borrowers
located in the United States, with any change in the "prime rate" being
effective on the date such change is announced.
"Prohibited Transaction" any transaction set forth in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986.
"Property" any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
"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.
"Rental Expense" shall mean, for any period of calculation, all rental
payments made by the Borrower during the period, as determined in accordance
with GAAP.
"Reportable Event" any of the events set forth in Section 4043(b) of
ERISA.
"Request For Advance" a request for an Advance pursuant to Section 9.4
hereof.
"Reserve Amount" at any date, an amount equal to the face amount of all
letters of credit issued by Lender for the account of the Borrower outstanding
on such date.
"Restricted Investment" any investment 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; (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 and its Subsidiaries; (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 or issued by Lender; (vi) investments
in
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commercial paper given a rating by a national credit rating agency of A-1 or
greater and maturing not more than two hundred seventy (270) days from the date
of creation thereof; (vii) any investment or investments which in the aggregate
do not exceed $2,000,000; and (viii) "Dutch-Auction" tender securities of any
Person, provided such securities are given an investment grade rating by a
national credit rating agency.
"Schedule of Accounts" a sales and collections report for the preceding
month and a detailed aged trial balance of all Accounts existing as of the last
day of the preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account so
listed.
"Security" shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
"Security Agreement" the Security Agreement dated July 14, 1997
substantially in the form of Exhibit "D" attached hereto and incorporated by
reference herein.
"Security Documents" shall mean (i) that certain Security Agreement dated
as of the date hereof among the Borrower, the Lender, First Union and
NationsBank, as Collateral Agent and (ii) any swap agreement or arrangement
between the Lender and the Borrower relating to the Consignment Agreement.
"Solvent" as to any Person, such Person (i) owns Property whose fair value
of which is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (ii) owns Property the present fair
salable value of which is greater than the amount that will be required to pay
the probable liability of such Person on its existing Indebtedness as such
become absolute and matured, (iii) is able to pay all of its Indebtedness as
such Indebtedness matures, and (iv) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage.
"Subordinated Debt" Indebtedness of Borrower that is expressly
subordinated to the Obligations.
"Subsidiary" any corporation of which a Person owns, directly or indirectly
through one or more intermediaries, more than fifty percent (50%) of the Voting
Stock at the time of determination.
"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).
Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with that
applied in preparation of the financial statements referred to in Section
8.1(I), and all financial data pursuant to this Agreement shall be prepared in
accordance with such principles.
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Section 1.3. Other Terms. All other terms contained in this 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.
Section 1.4. Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this 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 this Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including, without
limitation, references to any of the Loan Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof. To the extent any of the terms or provisions of the Other Documents or
the Security Documents conflict with the provisions of this Agreement, this
Agreement shall control.
SECTION 2. 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 TEN MILLION
AND NO/100 DOLLARS ($10,000,000) available upon Borrower's request therefor, as
follows:
Section 2.1. Borrowing and Disbursement. (A) Loan Advances. Lender shall
make Advances to Borrower from time to time in accordance with and subject to
the terms and conditions hereof, up to a maximum principal amount at any time
outstanding equal to the Borrowing Base at such time. It is expressly understood
and agreed that Lender may use the Borrowing Base as a maximum ceiling on any
Advance to Borrower at any time. If the unpaid balance of the Loan should at any
time exceed the Borrowing Base or any other limitation set forth in this
Agreement, such Loan shall nevertheless constitute Obligations that are secured
by the Collateral and entitled to all benefits thereof. The Loan shall be
evidenced by the Note.
(B) Overadvances. Insofar as Borrower may request and Lender may be
willing, in its sole and absolute discretion, to make Overadvances, Lender shall
enter such Overadvances as debits in the Loan Account. All Overadvances shall be
payable on demand, shall be secured by the Collateral and shall bear interest as
provided in this Agreement.
(C) Use of Proceeds. The Loan shall be used solely for Borrower's general
operating capital needs and store expansion to the extent not inconsistent with
the provisions of this Agreement.
(D) Choice of Interest Rates. Any Advance shall, at the option of the
Borrower, be made as an Offered Rate Advance or a LIBO Rate Advance. Any notice
given to the Lender in connection with a requested Advance hereunder shall be
given to the Lender prior to
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11:00 A.M. Eastern time in order for such Business Day to count toward the
minimum number of Business Days required.
(E) Offered Rate Advances. The Borrower shall give Lender in the case of
Offered Rate Advances at least one (1) Business Day's irrevocable written notice
in the form of a Request for Advance, or notice by telecopy followed immediately
by a Request for Advance; provided, however, that the failure by the Borrower to
confirm any notice by telecopy with a Request for Advance shall not invalidate
any notice so given.
(F) LIBO Rate Advances. The Borrower shall give Lender in the case of LIBO
Rate Advances at least three (3) Business Days' irrevocable written notice in
the form of a Request for Advance, or notice by telecopy followed immediately by
a Request for Advance; provided, however, that the failure by the Borrower to
confirm any notice by telecopy with a Request for Advance shall not invalidate
any notice so given. The Lender, whose determination shall be conclusive, shall
determine the available LIBO Rate Basis and shall notify the Borrower of such
LIBO Rate Basis. The Borrower shall promptly notify the Lender by telecopy or by
telephone, and shall immediately confirm any such telephonic notice in writing,
of its selection of a LIBO Rate Basis and Interest Period for such Advance.
(G) Disbursement. Prior to Lender's close of business on the date of an
Advance hereunder, Lender shall, subject to the satisfaction of the conditions
set forth in this Section 2 and in Section 9, disburse the funds by (i)
transferring the amounts by wire transfer pursuant to the instructions of
Borrower, or (ii) in the absence of such instructions, crediting the amounts so
made available to the Loan Account.
(H) Repayments and Reborrowings. At least three (3) Business Days prior to
the last day of the Interest Period with respect to each LIBO Rate Advance, the
Borrower shall give Lender written notice specifying whether all or a portion of
such LIBO Rate Advance (a) is to be repaid and then reborrowed in whole or in
part as a LIBO Rate Advance and (b) is to be repaid and not reborrowed. At least
one (1) Business Day prior to the last day of the Interest Period with respect
to each LIBO Rate Advance, the Borrower shall give Lender written notice
specifying whether all or a portion of such LIBO Rate Advance is to be repaid
and then reborrowed in whole or in part as an Offered Rate Advance. At least
three (3) Business Days prior to the last day of the Interest Period with
respect to each Offered Rate Advance, the Borrower shall give Lender written
notice specifying whether all or a portion of such Offered Rate Advance is to be
repaid and then reborrowed in whole or in part as a LIBO Rate Advance. At least
one (1) Business Day prior to the last day of the Interest Period with respect
to each Offered Rate Advance, the Borrower shall give Lender written notice
specifying whether all or a portion of such LIBO Rate Advance (a) is to be
repaid and not reborrowed and (b) is to be repaid and then reborrowed in whole
or in part as an Offered Rate Advance. Upon the last day of the Interest Period
with respect to each such Advance, such Advance will, subject to the provisions
hereof, be so repaid and, as applicable, reborrowed. Any payment of all or any
portion of an Advance prior to the last day of the Interest Period therefor
shall be subject to Section 3.8 hereof.
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Section 2.2. Loan Account. Lender shall enter all Advances as debits to the
Loan Account and shall also record in the Loan Account all payments made by
Borrower on the Loan and all proceeds of Collateral which are finally paid to
Lender, and may record therein, in accordance with customary accounting
practice, all charges and expenses properly chargeable to Borrower hereunder.
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT
Section 3.1. Interest, Fees and Charges. (A) Interest.
(i) On Offered Rate Advances. Interest on each Offered Rate Advance
shall be computed on the basis of a year of 360 days for the actual number
of days elapsed and shall be payable at the Offered Rate Basis for such
Advance in arrears on each Payment Date. Interest on Offered Rate Advances
then outstanding shall also be due and payable on the Maturity Date.
(ii) On LIBO Rate Advances. Interest on each LIBO Rate Advance shall
be computed on the basis of a 360-day year for the actual number of days
elapsed and shall be payable at the LIBO Rate Basis for such Advance in
arrears on the applicable Payment Date. Interest on LIBO Rate Advances
then outstanding shall also be due and payable on the Maturity Date.
(iii) If No Notice of Selection of Interest Rate Basis. If the
Borrower fails to give Lender timely notice pursuant to Section 2.1(H)
hereof with regard to any Advance, then on the last day of the applicable
Interest Period such Advance shall begin accruing interest at the Prime
Rate as in effect on such date. Interest on any Advance accruing interest
at the Prime Rate shall be due and payable on each Payment Date.
(B) Default Rate of Interest. Upon and after the occurrence of an Event of
Default and the acceleration of the Obligations as permitted in Section 10.2
hereof, the principal amount of the Obligations shall automatically (without
notice to or demand upon Borrower) bear interest, calculated daily (computed on
the actual days elapsed over a year of 360 days), at a fluctuating rate per
annum equal to two percent (2.0%) above the Prime Rate (the "Default Rate").
Borrower acknowledges that the cost and expenses to Lender attendant upon the
occurrence of an Event of Default are difficult to ascertain or estimate and
that the Default Rate is a fair and reasonable estimate to compensate Lender for
such added cost and expense.
(C) Maximum Interest. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the Note and charged
or collected pursuant to the terms of this Agreement or pursuant to the Note
exceed the highest rate permissible under any law (including, to the extent
applicable, the provisions of Section 5197 of the Revised Statutes of the United
States of America, as amended, 12 U.S.C. Section 85, as amended) which a court
of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such a court determines that Lender
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has charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by applicable law and Lender shall promptly refund to Borrower
any interest received by Lender in excess of the maximum lawful rate or, if so
requested by Borrower, shall apply such excess to the principal balance of the
Obligations. It is the intent hereof that Borrower not pay or contract to pay,
and that Lender not receive or contract to receive, directly or indirectly in
any manner whatsoever, interest in excess of that which may be paid by Borrower
under applicable law.
Section 3.2. Unused Line Fee. The Borrower shall pay to the Lender an
unused line fee equal to one-eighth of one percent (.125%) per annum of the
average daily unused amount of the maximum Loan commitment, payable on the first
day of each calendar quarter for the previous calendar quarter and on the
Maturity Date.
Section 3.3. Loan Fee. At the closing of the Loan facility provided herein,
the Borrower shall pay to Lender a loan fee equal to $10,000, which fee has been
fully earned by Lender and is non-refundable.
Section 3.4. Payments. All payments shall be made by Borrower in U.S.
currency and without any defenses, offset or counterclaim of any kind. Except
where evidenced by notes or other instruments issued or made by Borrower to
Lender specifically containing payment provisions which are in conflict with
paragraphs (A) through (C) of this Section 3.4 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), the
obligations (in addition to any other Obligation) consisting of:
(A) Principal shall be paid by Borrower to Lender immediately upon
the earliest of (i) April 30, 1999, or (ii) the occurrence of an Event of
Default and election by Lender to accelerate the maturity and payment of
such Loans; provided, however, that if the principal balance of the Loan
outstanding at any time shall exceed the Borrowing Base at such time,
Borrower shall, on demand, repay the Loan in an amount sufficient to
reduce the aggregate unpaid principal amount of such Loan by an amount
equal to such excess;
(B) Interest accrued on the Loan shall be paid on the earliest of (i)
each Payment Date, or (ii) the occurrence of an Event of Default and
election by Lender to accelerate the maturity and payment of the
Obligations; provided, however, that Borrower hereby irrevocably
authorizes Lender, in Lender's sole discretion, to advance to Borrower,
and to charge to Borrower's Loan Account hereunder a sum sufficient each
quarter to pay all interest accrued on the Obligations during the
immediately preceding quarter and a sum sufficient to pay costs, fees and
expenses payable pursuant to this Agreement;
(C) The balance of the obligations requiring the payment of money, if
any, shall be paid by Borrower to Lender as and when provided in this
Agreement, the Other Agreements or the Security Documents.
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Section 3.5. Term of Loan. Subject to Lender's right to cease making Loans
or Advances to Borrower at any time upon the occurrence of a Default or Event of
Default, Borrower may request Lender to make Advances in accordance with the
terms of this Agreement from the date hereof through the Maturity Date.
Section 3.6. Application of Payments and Collections. Borrower irrevocably
waives 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. If as the
result of collections of Accounts as authorized by Section 5.4 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.
Section 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 unless Lender is notified by Borrower in writing to the
contrary within thirty (30) days after the date each account is mailed to
Borrower. Such notice shall only be deemed an objection to those items
specifically objected to therein.
Section 3.8. Funding Indemnity. If the Lender shall incur any actual loss,
cost or expense (including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or re-employment of deposits or other
funds acquired by the Lender to fund or maintain any Advance or the relending or
reinvesting of such deposits or amounts paid or prepaid to the Lender, but
excluding any loss of profit) as a result of:
(a) any payment, prepayment or conversion of an Advance or
Offered Rate Advance on a date other than the last day of its
Interest Period,
(b) any failure by the Borrower to borrow an Advance on the date
specified in a notice given pursuant to Section 1.5(a) or established
pursuant to Section 2.1(H), or
(c) any acceleration of the maturity of an Advance as a result
of the occurrence of any Event of Default hereunder,
then, upon the demand of the Lender, the Borrower shall pay to the Lender such
amount as will reimburse the Lender for such loss, cost or expense. If the
Lender makes such a claim for compensation, it shall provide to the Borrower a
certificate executed by an officer of the Lender setting forth the amount of
such loss, cost or expense in reasonable detail (including an explanation of the
basis for and the computation of such loss, cost or expense) and the
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amounts and components of such calculation shown on such certificate if
reasonably calculated shall be conclusive.
SECTION 4. COLLATERAL: GENERAL TERMS
Section 4.1. Security Interest in Collateral. To secure the prompt payment
and performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing security interest in, security title to and Lien upon all the
following Property and interests in Property of Borrower, whether now owned or
existing or hereafter created, acquired or arising and wheresoever located:
(A) All Accounts;
(B) All Inventory;
(C) 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 of Lender;
(D) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A), (B), and (C) above,
including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(E) All books and records (including, without limitation, customer
lists, credit files, computer programs, printouts, and other computer
materials and records) of Borrower pertaining to any of (A), (B), (C) or
(D) above and all chattel paper pertaining to any of (A), (B), (C) or (D)
above.
Section 4.2. Representations, Warranties and Covenants -- Collateral. To
induce Lender to enter into this Agreement, Borrower represents, warrants, and
covenants to Lender that:
(A) The Collateral is now and will continue to be owned solely by
Borrower. No other Person has or will have any right, title, interest,
claim, or Lien therein, thereon or thereto other than a Permitted Lien.
(B) Except as specifically consented to in writing by Lender, the
Liens granted to Lender shall be first and prior on the Collateral and as
to the Accounts and proceeds, including insurance proceeds, resulting from
the sale, disposition, or loss thereof (other than (i) the pari passu Lien
granted by Borrower to NationsBank under the NationsBank Credit Agreement
and (ii) the pari passu Lien granted by Borrower to First Union under the
First Union Loan Agreement). No further action need be taken to perfect
the Liens granted to Lender, other than the filing of continuation
statements under the Code or other applicable law.
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(C) All goods evidenced by the Collateral constituting chattel paper,
documents or instruments are owned by Borrower and the same are free and
clear of any prior Lien (other than (i) the pari passu Lien granted by
Borrower to NationsBank under the NationsBank Credit Agreement and (ii)
the pari passu Lien granted by Borrower to First Union under the First
Union Loan Agreement). Borrower further warrants and guarantees the value,
quantities, sound condition, grades and qualities of the goods and
services described therein. Borrower shall pay and discharge when due all
taxes, levies, and other charges upon said Collateral and upon the goods
evidenced by any documents constituting Collateral and shall defend Lender
against and save it harmless from all claims of any Person with respect to
the Collateral. This indemnity shall include reasonable attorneys' fees
and legal expenses.
Section 4.3. Lien Perfection. Borrower agrees to execute the UCC-1
financing statements provided for by the Code, or other applicable law, together
with any and all other instruments, assignments or documents and shall take such
other action as may be required to perfect or to continue the perfection of
Lender's security interest in the Collateral. Unless prohibited by applicable
law, 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.
Section 4.4. Location of Collateral. All Collateral, other than Inventory
in transit, will at all times be kept by Borrower at one or more of the business
locations set forth in Exhibit "C" and shall not, without the prior written
approval of Lender, be moved therefrom except for transfers between Places of
Business and, prior to an Event of Default, for sales of Inventory in the
ordinary course of business and sales or transfers pursuant to the Consignment
Agreement.
Section 4.5. Insurance of Collateral. Borrower agrees to maintain and pay
for insurance upon all Collateral wherever located, in storage or in transit in
vehicles, including goods evidenced by documents, covering casualty, hazard,
public liability and such other risks and in such amounts and with such
insurance companies as shall be reasonably satisfactory to Lender to insure
Lender's interest in the Collateral. Borrower shall deliver the originals of
such policies to Lender with satisfactory lender's loss payable endorsements
naming loss payee. Each policy of insurance or endorsements shall contain a
clause requiring the insurer to give not less than thirty (30) days' prior
written notice to Lender in the event of cancellation of the policy for any
reason whatsoever and a clause that the interest of Lender shall not be impaired
or invalidated by any act or neglect of Borrower or owner of the Property nor 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, Lender
may, at Borrower's expense, procure the same, but shall not be required to do
so. Borrower agrees to deliver to Lender, promptly as rendered, true copies of
all reports made in any reporting forms to insurance companies. Borrower will
maintain, with financially sound and reputable insurers, insurance with respect
to its Properties and business against such casualties and contingencies of such
type (including public liability, larceny,
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embezzlement, or other criminal misappropriation insurance) and in such amounts
as is customary in the business or as otherwise required by Lender.
Section 4.6. Protection of Collateral. All insurance expenses and all
expenses of protecting, storing, warehousing, insuring, handling, maintaining
and shipping the Collateral (including, without limitation, all rent payable by
Borrower to any landlord of any premises where any of the Collateral may be
located), and, 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 thereof when due, Lender may, at its option, but shall not be
required to, pay the same and charge the Loan Account therefor. Borrower agrees
to reimburse Lender promptly therefor with interest accruing thereon daily at
the Default Rate provided in this Agreement. All sums so paid or incurred by
Lender for any of the foregoing and all costs and expenses (including reasonable
attorneys' fees, necessary legal expenses, and court costs) which Lender may
incur in enforcing or protecting its Lien on or rights and interest in the
Collateral or any of its rights or remedies under this or any other agreement
between the parties hereto or in respect of any of the transactions to be had
hereunder until paid by Borrower to Lender with interest at the Default Rate,
shall be considered Obligations owing by Borrower to Lender hereunder. Such
Obligations shall be secured by all Collateral and by any and all other
collateral, security, assets, reserves, or funds of Borrower in or coming into
the hands or inuring to the benefit of Lender. 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 (except for reasonable care in the custody thereof while
any Collateral is in Lender's actual possession) 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.
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
Section 5.1. Representations, Warranties and Covenants. With respect to all
Accounts, Borrower represents and warrants to Lender that Lender may rely, in
determining which Accounts are Eligible Accounts, on all statements and
representations made by Borrower with respect to any Account or Accounts,
(including, without limitation, the Borrowing Base Report) and, unless otherwise
indicated in writing to Lender, that with respect to each Account:
(A) It is genuine and in all respects what it purports to be, and it
is not evidenced by a judgment;
(B) It arises out of a completed, bona fide sale and delivery of
goods or rendition of services by Borrower in the ordinary course of its
business and in accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto and forming a part
of the contract between Borrower and the Account Debtor;
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(C) It is for a liquidated amount maturing as stated in the duplicate
invoice or chattel paper covering such sale or rendition of services, a
copy of which has been furnished or is available to Lender;
(D) Such Account, and Lender's security interest therein, is not, and
will not be in the future, subject to any offset, Lien (other than (i) the
pari passu Lien granted in favor of NationsBank pursuant to the
NationsBank Credit Agreement and (ii) the pari passu Lien granted in favor
of First Union pursuant to the First Union Loan Agreement), deduction,
defense, dispute, counterclaim or any other adverse condition except for
disputes resulting in returned goods where the amount in controversy is
deemed by Lender to be immaterial, and each such Account is absolutely
owing to Borrower and is not contingent in any respect or for any reason;
(E) Borrower has made no agreement with any Account Debtor thereunder
for any deduction therefrom, except discounts or allowances which are
granted by Borrower in the ordinary course of its business for prompt
payment and which are reflected in the calculation of the net amount of
each respective invoice related thereto;
(F) There are no facts, events or occurrences which in any way impair
the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the face amount of the invoice and statements
delivered to Lender with respect thereto;
(G) To the best of Borrower's knowledge, the Account Debtor
thereunder (i) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (ii) such
Account Debtor is Solvent; and
(H) Borrower has no knowledge of any fact or circumstance which would
impair the validity or collectibility of the Account, and to the best of
Borrower's knowledge there are no proceedings or actions which are
threatened or pending against any Account Debtor thereunder which might
result in any material adverse change in such Account Debtor's financial
condition or the collectibility of such Account.
Section 5.2. Notice of Security Interest and Schedules of Accounts. Within
thirty (30) days from the date hereof, Borrower shall enter a notation on each
Account by the execution on the face of each written contract document,
instrument, or security agreement, the following notice or such other notice as
may be approved in writing by the Lender:
This chattel paper and the obligations owing to and rights of
Xxxxxxxx'x Inc. hereunder are subject to pari passu security interests in
favor of NationsBank, N.A., as Collateral Agent for NationsBank N.A., ABN
AMRO Bank N.V. and First Union National Bank.
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; provided, the reference to "NationsBank, N.A." and to "First Union National
Bank" shall be deleted therefrom in the event of the termination of the
NationsBank Credit Agreement and the First Union Loan Agreement, as applicable.
Similar language shall be entered on future Accounts or preprinted language
included in all written contracts, documents, and instruments or security
agreements as and when each Account is created. Each Account shall contain
language acceptable to Lender whereby the Account Debtor agrees not to assert
any claim or defenses against Lender as assignee, which such Account Debtor may
have against Borrower. Borrower shall keep accurate and complete records of its
Accounts and all payments and collections thereon and shall submit to Lender at
Lender's request, on or before the fifteenth day of each month from and after
the date of such request, a schedule of Accounts, and, upon Lender's request
therefor, copies of proof of delivery and the original copy of all documents,
including, without limitation, repayment histories and present status reports
relating to the Accounts so scheduled and such other matters and information
relating to the status of then existing Accounts as Lender shall reasonably
request.
Section 5.3. Administration of Accounts. (A) Upon and after the occurrence
of an Event of Default and acceleration of the Obligations as permitted in
Section 10.2 hereof, Lender shall have the right to collect and settle or adjust
all disputes and claims directly with the Account Debtor and to compromise the
amount or extend the time for payment of the Accounts upon such terms and
conditions as Lender may deem advisable, and to charge the deficiencies, costs
and expenses thereof, including reasonable attorney's fees, to Borrower.
(B) If an Account includes a charge for any tax payable to any governmental
taxing authority, Lender is authorized, in its sole discretion, to pay the
amount thereof to the proper taxing authority for the account of Borrower and to
charge the Loan Account therefor. Borrower shall notify Lender if any Account
includes any tax due to any governmental taxing authority and, in the absence of
such notice, Lender shall have the right to retain the full proceeds of the
Account and shall not be liable for any taxes to any governmental taxing
authority that may be due by Borrower by reason of the sale and delivery
creating the Account.
(C) Whether or not a Default or an Event of Default has occurred, any of
Lender's officers, employees or agents shall have the right, at any time or
times hereafter, in the name of Lender, or any designee of Lender or Borrower,
to verify the validity, amount or any other matter relating to any Accounts by
mail, telephone, telegraph or otherwise. Borrower shall cooperate fully with
Lender in an effort to facilitate and promptly conclude any such verification
process.
Section 5.4. Collection of Accounts. To expedite collection, Borrower shall
endeavor in the first instance to make collection of its Accounts for Lender.
All remittances received by Borrower on account of Accounts shall be held as
Lender's property by Borrower as trustee of an express trust for Lender's
benefit. Lender retains the right after an Event of Default and acceleration of
the Obligations as permitted in Section 10.2 hereof to notify Account Debtors
that Accounts have been assigned to Lender and to collect
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Accounts directly in its own name and to charge the collection costs and
expenses, including reasonable attorneys' fees to Borrower. The Borrower shall,
following the occurrence and during the continuance of an Event of Default and,
at request of Lender, (a) notify the Account Debtors of the security interest of
Lender in any Account and that payment thereof or thereunder is to be made
directly to Lender, and (b) furnish to Lender upon request additional statements
of any Accounts, together with all notes or other papers evidencing the same and
any guaranty, securities or other documents or information relating thereto.
Lender has no duty to protect, insure, collect or realize upon the Accounts or
preserve rights in them. For the purpose of computing interest hereunder, all
items of payment received by Lender shall be deemed applied by Lender on account
of the Obligations (subject to final payment of such items) on the second
Business Day after receipt by Lender of such items of payment in New York,
New York. Such credits shall be conditional upon final payment in cash or cash
equivalents of the items giving rise to them. If any item is not so paid, the
Lender, in its discretion, whether or not the item is returned, may reverse any
credit given for the item.
SECTION 6. PROVISIONS RELATING TO INVENTORY
Section 6.1. Representations, Warranties and Covenants. With respect to
Inventory, Borrower represents and warrants to Lender that:
(A) All Inventory is presently and will continue to be located at
Borrower's places of business listed on Exhibit "C" and will not be
removed therefrom except as authorized by Section 4.4 of this Agreement.
(B) No Inventory is now, nor shall any Inventory at any time or times
hereafter be, stored with a bailee, warehouseman or similar party without
Lender's prior written consent.
(C) No Inventory is or will be consigned to any Person without
Lender's prior written consent.
(D) No Inventory is or will be produced in violation of the Fair
Labor Standards Act.
Section 6.2. Location of Inventory. Contemporaneously herewith Borrower has
given Lender a list of all locations where Borrower has a Place of Business (in
the form of Exhibit "C" attached hereto), and thereafter shall give 30 days
written notice prior to any change in, each warehouse location at which
Inventory is or will be kept and each office of Borrower at which the records of
Borrower pertaining to Inventory, are kept. All Eligible Inventory is and shall
be kept, and all records pertaining to Eligible Inventory are and shall be kept,
only at locations of which the Lender has been given notice as provided for
herein or at locations notice of which shall be given to Lender within thirty
(30) days of the end of the next quarter.
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Section 6.3. Ownership of Inventories. Borrower is, and as to Eligible
Inventory to be acquired after the date hereof, and to be included in the
Borrowing Base shall be, the owner of all Eligible Inventory to be included in
the Borrowing Base and (except for carrier, warehouse, customs and similar
statutory liens arising in the ordinary course of business) shall neither create
or suffer to exist any Lien (other than (i) the pari passu Lien granted to
NationsBank under the NationsBank Credit Agreement and (ii) the pari passu Lien
granted to First Union under the First Union Loan Agreement) nor sell,
assign, transfer or create or suffer to exist any Lien (other than (i) the pari
passu Lien granted to NationsBank under the NationsBank Credit Agreement and
(ii) the pari passu Lien granted to First Union under the First Union Loan
Agreement) in any account or contract right relating to the Eligible Inventory
to or in favor of any Person other than Lender.
Section 6.4. Status of Inventory. Borrower shall notify Lender on Friday of
each week of any of the following events of which Borrower becomes aware during
such week: any material loss or depreciation in value of Eligible Inventory and
the amount of the loss or depreciation; damage to any such goods; and any other
event which materially affects Eligible Inventory, or the value or amount
thereof.
SECTION 7. REPRESENTATIONS AND WARRANTIES
Section 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:
(A) Organization and Qualification. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Borrower has duly qualified and is authorized to do
business and is in good standing in each state or jurisdiction listed on
Exhibit "E" attached hereto and made a part hereof and in all other states
and jurisdictions where the character of its Properties or the nature of
its activities make such qualification necessary and in which the failure
to be so qualified would have a material adverse effect on the Borrower.
(B) Borrower's Names. During the preceding seven (7) years, Borrower
has not been known as or used any fictitious or trade or other names
except as disclosed on Exhibit "F" attached hereto and made a part hereof.
Except as set forth on Exhibit "F", Borrower has not, during the preceding
seven (7) years, acquired all or substantially all of the assets of any
Person.
(C) Power and Authority. Borrower has the right and power and is duly
authorized and empowered 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 and will not (i) require any consent or approval from
any Person; (ii) contravene Borrower's Articles of Incorporation or
Bylaws; (iii) violate, or cause Borrower to be in default under, any
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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 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 (other than Permitted Liens) upon or with respect to any of the
Properties now owned or hereafter acquired by Borrower.
(D) Legally Enforceable Agreements. 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 their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally or by principles of
equity pertaining to the availability of equitable remedies.
(E) Use of Proceeds. Borrower's uses of the proceeds of the Loan
pursuant to this Agreement are, and will continue to be, legal and proper
uses, duly authorized by its directors, and such uses will not violate any
applicable laws, including, without limitation, the Foreign Assets Control
Regulations, the Foreign Funds Control Regulations and the Transaction
Control Regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended).
(F) Margin Stock. Borrower is not engaged principally, or as one of
its important activities, in the business of purchasing or carrying
"margin stock" (within the meaning of Regulation G or U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of
the Loan to Borrower will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying any
margin stock or be used for any purpose which violates or is inconsistent
with the provisions of Regulation X of said Board of Governors.
(G) Governmental Consents. Borrower has, and is in good standing with
respect to, all governmental consents, approvals, 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.
(H) Capital Structure. Exhibit "G" attached hereto and made a part
hereof states (a) the correct name of Borrower, the jurisdiction of
organization, (b) the name of each of Borrower's directors, (c) the name
of each of Borrower's partnership or joint venture Affiliates, if any, and
the nature of the affiliation, and (d) a description of Borrower's
Subordinated Debt.
(I) Solvent Financial Condition. Borrower is now and, after giving
effect to the Loan to be made hereunder, at all times will be, Solvent.
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(J) 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 "H" attached hereto, none of which
prohibit the execution of or compliance with this Agreement by Borrower.
Borrower has not agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its Property,
whether now owned or hereafter acquired, to be subject to a Lien that is
not a Permitted Lien.
(K) Litigation. Except as set forth on Exhibit "I" attached hereto
and made a part hereof, as of the date hereof, 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, in
any court or before any governmental authority or arbitration board or
tribunal, and no action, suit, proceeding or investigation shown on
Exhibit "I" involves the possibility of materially and adversely affecting
the Properties, business, prospects, profits or condition (financial or
otherwise) of Borrower or the ability of Borrower to perform this
Agreement. Borrower is not in default with respect to any order, writ,
injunction, judgement, decree or rule of any court, governmental authority
or arbitration board or tribunal.
(L) Title to Properties. 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, and good title to all of
its other Property, in each case, free and clear of all Liens except
Permitted Liens.
(M) Financial Statements: Fiscal Year. The balance sheets of
Borrower dated as of September 30, 1996 and March 31, 1997, and the
related statements of income, changes in shareholder's equity and cash
flow for the periods ended on such dates, have been prepared on a basis
consistent with Borrower's historical accounting practices (except for
changes in application in which Borrower's independent certified public
accountants concur), and present fairly the financial position of Borrower
at such dates and the results of Borrower's operations for such periods.
As of the date hereof, since May 31, 1997, there has been no material
change in the condition, financial or otherwise, of Borrower except
changes in the ordinary course of business, none of which individually or
in the aggregate has been materially adverse. The fiscal year of Borrower
ends on September 30 of each year.
(N) Full Disclosure. The financial statements referred to in Section
7.1(M) above, do not, nor does this Agreement or any other written
statement of Borrower to Lender (including, without limitation, Borrower's
filings, if any, with the Securities and Exchange Commission), contain any
untrue statement of a material fact or 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
materially affects adversely or, so far as Borrower can now foresee,
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will materially affect adversely the Properties, business, prospects,
profits, or condition (financial or otherwise) of Borrower or the ability
of Borrower to perform this Agreement.
(O) Pension Plans. Except as disclosed on Exhibit "J" attached hereto
and made a part hereof, Borrower has no Plan. Borrower has not received
any notice to the effect that it is not in full compliance with any of the
requirements of ERISA and the regulations promulgated thereunder. No fact
or situation that could result in a material adverse change in the
financial condition of Borrower, including, but not limited to, any
Reportable Event, or Prohibited Transaction, exists in connection with any
Plan. Borrower has no withdrawal liability in connection with a
Multiemployer Plan.
(P) Taxes. Borrower's federal tax identification number is
00-0000000. 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 and other
governmental charges that are due and payable. The provision for taxes on
the books of Borrower are adequate for all years not closed by applicable
statutes, and for its current fiscal year.
(Q) Compliance With Laws. 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, including, without limitation, the federal
Truth-In-Lending Act and applicable state consumer lending laws, OSHA and
all Environmental Laws, and there have been no citations, notices or
orders of noncompliance issued to Borrower under any such law, rule or
regulation.
(R) No Defaults. No event has occurred and no condition exists which
would, upon 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.
Section 7.2. Reaffirmation. Each request for an Advance made by Borrower
pursuant to this Agreement or any of the other Loan Documents shall constitute
(i) an automatic representation and warranty by Borrower to Lender that there
does not then exist any Default or Event of Default and (ii) a reaffirmation as
of the date of said request that all of the representations and warranties of
Borrower contained in this Agreement (other than the first sentence of Section
7.1(K) and the second sentence of Section 7.1(M) hereof) and the other Loan
Documents are true in all material respects except for (x) any changes in the
nature of Borrower's business or operations that would render the information
contained in any exhibit, attached hereto either inaccurate or incomplete, so
long as Lender has consented to such changes or such changes are expressly
permitted by this Agreement and (y) such
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changes to the facts and/or circumstances that are the subject of such
representations and warranties, so long as such changes are not materially
adverse to the condition of the Borrower (financially or otherwise) either
individually or in the aggregate.
Section 7.3. Survival of Representations and Warranties. Borrower
covenants, warrants and represents to Lender that all representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall be true at the time of Borrower's execution of this Agreement
and the other Loan Documents, and shall survive the execution, delivery and
acceptance hereof by Lender and the closing of the transactions described herein
or related hereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
Section 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:
(A) Taxes and Liens. Pay and discharge all taxes, assessments and
governmental charges upon it, its income and Properties as and when such
taxes, assessments and charges are due and payable, (i) except and to the
extent only that such taxes, assessments and charges are being actively
contested in good faith and by appropriate proceedings, Borrower promptly
notifies Lender in writing of such contest, Borrower maintains adequate
reserves on its books therefor and the nonpayment of such taxes,
assessments and charges does not result in a Lien upon any Properties of
Borrower other than a Permitted Lien and (ii) except such taxes,
assessments and governmental changes that do not exceed, in the aggregate,
$250,000 at any time. Borrower shall also pay and discharge any lawful
claims which, if unpaid, might become a Lien against any of Borrower's
Properties except for Permitted Liens.
(B) Tax Returns. Timely, file all federal, state and local tax
returns and other reports Borrower is required by law to file and maintain
adequate reserves for the payment of all taxes, assessments, governmental
charges, and levies imposed upon it, its income, or its profits, or upon
any Property belonging to it.
(C) Payment of Bank Charges. Pay to Lender, when due, 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, 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.
(D) Business and Existence. Preserve and maintain its existence and
all rights, privileges, and franchises in its qualification and good
standing in all states in which such qualification is necessary.
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(E) Maintain Properties. Maintain its Properties in good condition
and make, all necessary renewals, repairs, replacements, additions and
improvements thereto.
(F) Compliance with Laws. Comply with all laws, ordinances,
governmental rules and regulations to which it is subject, including,
without limitation, all laws, statutes, regulations and ordinances
regarding the collection, payment and deposit of employees, income,
unemployment and Social Security taxes and sales and excise taxes, ERISA
and Environmental Laws, and obtain and keep in force any and all licenses,
permits, franchises, or other governmental authorizations necessary to the
ownership of its Properties or to the conduct of its business, which
violation or failure to obtain would be reasonably likely to materially
and adversely affect the business, prospects, profits, Properties, or
condition (financial or otherwise) of Borrower.
(G) Business Records. Keep adequate records and books of account with
respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all its financial transactions.
(H) Visits, Inspections and Audits. Permit representatives of Lender,
from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit, inspect and audit the Properties
of Borrower, inspect 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 and to pay in full the cost of one
audit by Lender of the Collateral each year (provided, however, that
Borrower shall not be required to pay more than $10,000 with respect to
any such audit).
(I) Financial Statements. Cause to be prepared and furnished to
Lender the following (all to be kept and prepared in accordance with GAAP
applied on a consistent basis, unless Borrower's certified public
accountants concur in any change therein and such change is disclosed to
Lender and is consistent with GAAP): (i) as soon as possible, but not
later than one hundred twenty (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 national standing or otherwise acceptable
to Lender (except for a qualification for a change in accounting
principles with which the independent public accountant concurs); (ii) as
soon as possible, but not later than the earlier of sixty (60) days after
the end of each quarter hereafter or the date on which the same shall be
required to be filed with the Securities Exchange Commission, unaudited
interim consolidated financial statements of Borrower, and of the portion
of Borrower's fiscal year then elapsed, including without limitation, upon
reasonable request of Lender, Accounts receivables aging, and Accounts
payable aging as of the end of such quarter, on a consolidated and
consolidating basis, certified by the principal financial officer of
Borrower as fairly presenting the consolidated 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; and (iii) such other data and
information (financial and otherwise) as Lender, from time
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to time, may reasonably request, bearing upon or related to the
Collateral, Borrower's financial condition or results of operations,
including, without limitation, federal income tax returns of Borrower,
accounts payable ledgers, and bank statements.
(J) Notices to Lender. Notify Lender in writing: (i) promptly after
Borrower's learning thereof, of the commencement of any litigation
materially affecting Borrower or any of its Properties, whether or not the
claim is considered by Borrower to be covered by insurance, and of the
institution of any administrative proceeding which may materially and
adversely affect Borrower's operations, financial condition, Properties at
business or Lender's Lien upon any of the Collateral; (ii) within
forty-five (45) days after each quarter for the preceding quarter, of
Borrower's opening of any new office or Place of Business in a state in
which Borrower previously has had no Place of Business or within
forty-five (45) days of the end of each quarter of Borrower's opening of a
new office or new Place of Business in a state where Borrower has a prior
office or Place of Business; (iii) within forty-five (45) days after each
quarter for the preceding quarter, of the closing of any existing office
or Place of Business; (iv) promptly after Borrower's learning thereof, of
any default by Borrower under any note, indenture, loan agreement,
mortgage, lease, deed, guaranty or other similar agreement relating to any
Indebtedness of Borrower in excess of $250,000; (v) promptly after the
occurrence thereof, of any Default or Event of Default; (vi) promptly
after the rendition thereof, of any judgment rendered against Borrower;
and (vii) concurrently with the filing thereof with the Securities and
Exchange Commission ("SEC"), any filings with the SEC by providing to
Lender a copy of such filings.
(K) Landlord and Storage Agreements. Provide Lender at Lender's
request with copies of all agreements between Borrower and any landlord or
warehouseman which owns any premises at which any Inventory or other
Collateral may, from time to time, be kept.
(L) Further Assurances. At Lender's request, promptly execute or
cause to be executed and 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 this Agreement or any of the other Loan
Documents.
(M) Communications with Lender. Borrower hereby irrevocably
authorizes Lender to communicate directly with any of the following
Persons concerning Borrower, its business, the Collateral and the Loans:
(a) any service bureau, warehousing service, freight forwarder, trade
creditor, consignee, bailee, customer or other similar services; (b) any
Person employed by Borrower; and (c) Borrower's present and future
independent public accountants, each of whom is authorized by Borrower to
communicate with Lender and to disclose to Lender any and all matters
relating to Borrower, its financial condition and prospects, and the
Collateral.
(N) Borrowing Base Report. For the purposes of computing the
Borrowing Base, Borrower shall furnish to Lender on the forty-fifth (45th)
day after the end of
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each calendar quarter, a Borrowing Base Report as of the last day of the
immediately preceding calendar quarter containing information adequate to
identify Eligible Inventory and Eligible Accounts, signed by an authorized
officer of Borrower showing a calculation of the Borrowing Base as of the
end of the preceding week, listing the amount of Eligible Accounts and
updating the amount of Eligible Inventory. If on the date any such report
is delivered, the sum of the aggregate principal amount of the Loan shall
exceed the Borrowing Base as set forth in the Borrowing Base Report,
Borrower will immediately pay to Lender the amount of such excess.
Borrower shall also, if the Lender so requests, accompany such information
with pledges or designations of Eligible Inventory or assignments of
Eligible Accounts in form and substance satisfactory to Lender which
assignments shall give Lender full power to collect, compromise or
otherwise deal with the assigned Accounts as the sole owner thereof.
(O) Inspection; Further Assurances. Borrower shall at all reasonable
times and from time to time allow Lender by or through any of its
authorized officers, agents, attorneys or accountants, to examine, inspect
or make extracts from Borrower's books and records, and to arrange for
verification of Eligible Accounts and Eligible Inventory under reasonable
procedures on a "blind basis", directly with account debtors or factors or
by other methods; and shall do, make, execute and deliver all such
additional and further acts, things, deeds, assurances, and instruments as
Lender may require more completely to vest in and assure to Lender its
rights hereunder or in any Collateral and to carry into effect the
provisions and intent of this Agreement.
(P) Borrower's Account. At all times during the term of this
Agreement maintain Borrower's Account so long as the terms thereof are as
favorable to Borrower as those generally available for similar customers
with comparable accounts.
(Q) Compliance Certificate. Within ninety (90) days after the fiscal
year end and forty-five (45) days after the end of each calendar quarter,
or more frequently if requested by Lender, cause the chief financial
officer of Borrower to prepare and deliver to Lender a compliance
certificate in the form of Exhibit "K" attached hereto, with appropriate
insertions.
Section 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:
(A) Indebtedness. Incur, assume or suffer to exist any Indebtedness
except for Permitted Indebtedness.
(B) Mergers; Consolidations: Acquisitions. Acquire all or any
substantial part of the Properties of any Person if the consideration
paid as part of any such
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transaction in cash or other property (other than stock of Borrower)
exceeds $5,000,000, nor merge or consolidate with any Person.
(C) Loans. Except as set forth on Exhibit K-1, make any Loans or
other advances of money in the aggregate in excess of the Permitted Loan
and Guarantee Amount (other than for salary, travel advances, advances
against commissions and other similar advances in the ordinary course of
business and Loans to officers to exercise stock options) to any Person,
including, without limitation, any of Borrower's Affiliates, officers or
employees.
(D) Affiliate Transactions. Enter into, or be a party to, any
transaction with any Affiliate or stockholder, except (i) transactions 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 would
obtain in a comparable arm's length transaction with a Person not an
Affiliate of Borrower; (ii) an agreement with Xxxxxx Xxxxxx & Co., Inc.
for management services, with the total consideration thereunder not to
exceed $500,000 annually; (iii) bonuses to the chairman, president and
chief executive officer of the Borrower in an amount reasonably consistent
with past practices, (iv) the Long Term Incentive Programs; (v) Insurance
Programs with Cougar Reinsurance Company, Ltd. as described on Exhibit K-2
and (vi) loan and other indebtedness evidenced by the agreements listed on
Exhibit K-1 hereto.
(E) Partnerships or Joint Ventures. Become or agree to become a
general or limited partner in any general or limited partnership or a
joint venturer in any joint venture.
(F) Adverse Transactions. Enter into any transaction, which
materially and adversely affects or may materially and adversely affect
the Collateral or Borrower's ability to repay the Obligations or permit or
agree to any material extension, compromise or settlement or make any
change or modification of any kind or nature with respect to any Account,
including any of the terms relating thereto, other than discounts and
allowances in the ordinary course of business, all of which shall be
reflected in the Schedules of Accounts submitted to Lender pursuant to
Section 5.2 of this Agreement.
(G) Guaranties. Guarantee, assume, endorse or otherwise, in any way,
become directly or contingently liable with respect to the Indebtedness of
any Person if the aggregate amount of the same exceeds the Permitted Loan
and Guarantee Amount except by endorsement of instruments or items of
payment for deposit or collection.
(H) 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
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contested as permitted by Section 8.1(A) hereof, but only if in Lender's
judgment such Lien does not affect adversely Lender's rights or the
priority of Lender's Lien in the Collateral; (iii) Liens securing the
claims or demands of materialmen, mechanics, carriers, warehousemen,
landlords and other like Persons for labor, materials, supplies or rentals
incurred in the ordinary course of Borrower's business, but only if the
payment thereof is not at the time required and only if such Liens are
junior in priority to the Liens in favor of Lender; (iv) Liens resulting
from deposits made in the ordinary course of business in connection with
workmen's compensation, unemployment insurance, social security and other
like laws; (v) attachment, judgment and other similar non-tax Liens
arising in connection with court proceedings, but only if and for so long
as the execution or other enforcement of such Liens is and continues to be
effectively stayed and bonded on appeal in a manner satisfactory to Lender
for the full amount thereof, the validity and amount of the claims secured
thereby are being actively contested in good faith and by appropriate
lawful proceedings, such Liens do not, in the aggregate, materially
detract from the value of the Property of Borrower or materially impair
the use thereof in the operation of Borrower's business and such Liens are
and remain junior in priority to the Liens in favor of Lender; (vi)
Purchase Money Liens securing purchase money indebtedness which is not
incurred in violation of Section 8.3(C) of this Agreement; (vii)
reservations, exceptions, easements, rights-of-way, and other similar
encumbrances affecting real Property, provided that, in Lender's sole
judgment, they do not in the aggregate materially detract from the value
of said Properties or materially interfere with their use in the ordinary
conduct of Borrower's business and, if said real Property constitutes
Collateral, Lender has consented thereto; (viii) such other Liens as
appear an Exhibit "L" attached hereto; (ix) the pari passu Lien granted in
favor of NationsBank pursuant to the NationsBank Credit Agreement; (x) the
pari passu Lien granted in favor of First Union pursuant to the First
Union Loan Agreement; and (xi) such other Liens as Lender may hereafter
approve in writing.
(I) Business Locations. Transfer its principal place of business or
chief executive office, or maintain warehouses or records with respect to
Accounts or Inventory, to or at any locations other than those at which
the same are presently kept or maintained, as set forth on Exhibit "C"
hereto, except upon at least thirty (30) days' prior written notice to
Lender and after the delivery to Lender of financing statements, if
required by Lender, in form satisfactory to Lender to perfect or continue
the perfection of Lender's Lien and security interest hereunder.
(J) Change of Business. Enter into any new type of business or make
any material change in any of Borrower's business objectives, purposes and
operations provided, however, Borrower shall be permitted to engage in any
retail business incidental or related to Borrower's business conducted on
the date hereof.
(K) Disposition of Assets. Sell, lease or otherwise dispose of any 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 Borrower's business for so long as
no Event of Default exists hereunder,
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dispositions expressly authorized by this Agreement, (iii) dispositions of
Properties other than Inventory for not less than the reasonable value of
the Properties which have been disposed or (iv) transactions contemplated
by the Consignment Agreement.
(L) Name of Borrower. Use any corporate name (other than its own) or
any fictitious name, tradestyle or "d/b/a" except for the names disclosed
on Exhibit "F" attached hereto, unless Borrower has provided such name to
Lender and executed such Uniform Commercial Code statements as Lender
shall require.
(M) Xxxx-and-Hold Sales, Etc. Except in the ordinary course of
business, make a sale to any customer on a xxxx-and-hold, guaranteed sale,
sale and return, sale on approval or consignment basis, or any sale on a
repurchase or return basis.
(N) Margin Securities. Own, purchase or acquire (or enter into any
contract to purchase or acquire) any "margin security" as defined by any
regulation of the Federal Reserve Board as now in effect or as the same
may hereafter be in effect unless, prior to any such purchase or
acquisition or entering into any such contract, Lender shall have received
an opinion of counsel satisfactory to Lender to the effect that such
purchase or acquisition will not cause this Agreement to violate
Regulations G or U or any other regulation of the Federal Reserve Board
then in effect.
(O) Fiscal Year. Change its fiscal year without the prior written
consent of Lender, which consent shall not be unreasonably withheld.
(P) Distributions to Affiliates. Make any distributions, dividends or
payments to Affiliates (including any permitted payments under section
8.2(D)(ii) and (iii)) in excess of $1,500,000 during any calendar year
without the prior written consent of Lender, except Borrower may redeem
its Class B shares from time to time if no Default or Event of Default
then exists or would be caused by such redemption.
Section 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:
(A) Minimum Net Worth. Maintain at all times a Net Worth of at least
$140,000,000, plus 50% of the net proceeds of any equity offering after
September 30, 1996; in addition, effective as of the start of each fiscal
year, commencing with the fiscal year beginning on October 1, 1997, such
Net Worth requirement shall be increased by 50% of the Borrower's Net
Income after distributions to shareholders during the immediately
preceding fiscal year.
(B) Fixed Charge Coverage Ratio. Maintain, as of the end of each
fiscal quarter, a Fixed Charge Coverage Ratio of not less than 1.5:1.
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(C) Debt Ratio. Not permit, as of the end of any fiscal quarter, the
ratio of the Borrower's Funded Debt as of such date to its EBITDAR for the
four immediately preceding fiscal quarters to exceed 3:1.
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, it is understood and agreed that the
obligation of Lender to make the initial Advance is subject to the conditions
precedent that Lender shall have received, in form and substance satisfactory to
it, each of the following documents and that each of the conditions described
herein is fulfilled to the satisfaction of Lender:
Section 9.1. Documentation. Lender shall have received the following
documents, each to be in form and substance satisfactory to Lender and its
counsel:
(A) This Agreement and the Note, each duly executed by Borrower;
(B) The Security Agreement and any other Security Documents duly
executed by Borrower;
(C) A legal opinion of Xxxxxx & Bird, counsel to Borrower,
substantially in the form of Exhibit "M" attached hereto and incorporated
by reference herein;
(D) A Compliance Certificate in the form of Exhibit "K" attached
hereto and incorporated by reference herein duly executed by an officer of
Borrower;
(E) Certificates or policies of insurance evidencing compliance with
the applicable provisions of this Agreement;
(F) A request for Advance pursuant to Section 9.4 hereof and a
Borrowing Base Report;
(G) Certified copies of (a) Borrower's casualty insurance policies,
together with loss payable endorsements on Lender's standard form of loss
payee endorsement naming Lender as loss payee, and (b) Borrower's
liability insurance policies, together with endorsements naming Lender as
a co-insured;
(H) Copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral and evidence in a form
acceptable to Lender that such Liens constitute valid and perfected
security interests and Liens, having the Lien priority specified in
Section 4.2(B) hereof;
(I) A copy of the Articles or Certificate of Incorporation of
Borrower, and all amendments thereto, certified by the Secretary of State
or other appropriate
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official of its jurisdiction of incorporation and a copy of the Bylaws of
Borrower, each certified by the Secretary of the Borrower;
(J) Good standing certificates for Borrower, issued by the Secretary
of State or other appropriate official of the jurisdiction of
incorporation;
(K) Certificate as to qualification to transact business as a foreign
corporation in each state, other than its state of incorporation, in which
Borrower transacts business; provided, however, that so long as the
representation in Section 7.1(A) is true and correct, Borrower may provide
such certificates within 30 days of the date hereof;
(L) A copy of the Intercreditor Agreement, duly executed and
delivered by NationsBank, First Union and Borrower;
(M) Such other documents, instruments and agreements as Lender shall
reasonably request in connection with the foregoing matters;
(N) Omitted;
(O) A certificate of the Secretary or Assistant Secretary of Borrower
certifying to the votes of Borrower's Board of Directors authorizing the
execution, delivery and performance of this Agreement, the Consignment
Agreement and any Security Documents;
(P) A certificate of the Secretary or Assistant Secretary of Borrower
certifying the names of the officers of Borrower authorized to sign this
Agreement, the Consignment Agreement, any Security Documents and any other
documents or certificates to be delivered pursuant to this Agreement and
the Consignment Agreement by Borrower or any of its officers, together
with the true signatures of such officers, on which certificates Lender
may conclusively rely until it shall receive a further certificate
canceling or amending the prior certificate and submitting the signatures
of the officers named in such further certificate; and
(Q) A copy of the collateral audit performed (in a manner
satisfactory to Lender) by NationsBank.
Section 9.2. Other Conditions. The following conditions have been and
shall continue to be satisfied, in the reasonable discretion of Lender:
(A) No Default or Event of Default shall exist;
(B) Each of the conditions precedent set forth in the other Loan
Documents shall have been satisfied;
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(C) Since September 30, 1996, except for changes which are reflected
on the unaudited May 31, 1997 financial statements (excluding footnotes)
submitted to Lender, there shall not have occurred any material adverse
change in the business, financial condition or results of operations of
Borrower, or the existence or value of any Collateral, or any event,
condition or state of facts which would reasonably be expected materially
and adversely to affect the business, financial condition or results of
operations of Borrower;
(D) No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit,
or to obtain damages from any Person in respect of, the consummation of
the transactions contemplated hereby or which, in Lender's sole
discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement or any of the other Loan Documents; and
(E) The Borrower shall have paid in full the loan and upfront fees
described in Section 3.3 hereof.
Section 9.3. Conditions Precedent to Subsequent Advances. The obligation of
Lender to make subsequent Advances is subject to the conditions precedent that
Lender shall have received, in form and substance satisfactory to it, each of
the following documents and that each of the conditions described below is
fulfilled to the satisfaction of Lender:
(A) A request for Advance pursuant to Section 9.4 hereof;
(B) The representation and warranties contained herein and in each of
the other Loan Documents shall be correct on and as of the date of the
request for the Advance and the date of the Advance, with the same effect
as though made on and as of those dates, except to the extent that such
representations and warranties relate solely to an earlier date, and on
each of such dates, no event, act, or condition shall have occurred or be
continuing, or would result from the Advance requested, which constitutes
a Default or Event of Default. The submission by Borrower of a written
request for an Advance shall constitute a representation and warranty as
to the correctness of the above facts, and if requested by Lender with
respect to the Advance requested, Borrower shall furnish to Lender a
written certificate of an officer of the Borrower, satisfactory in form
and substance to Lender, as to the correctness of the above facts as a
condition precedent to such Advance; and
(C) A Compliance Certificate in the form of Exhibit "L" attached
hereto and incorporated by reference herein duly executed by an officer of
Borrower.
Section 9.4. Request for Advances. Borrower shall request each Advance of
Loan proceeds (including requests by telephonic communication which shall be
promptly followed by a conforming written request) (i) no later than 11:00 A.M.
(New York time) at least 3 Business Days prior to the date upon which the
Borrower requests that a LIBO Rate Advance be made and (ii) no later than 11:00
A.M. (New York time) at least 1 Business
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Day prior to the date upon which the Borrower requests that an Offered Rate
Advance be made. Each request for Advance shall specify the proposed date of the
Advance (which shall be a Business Day), the amount thereof, the type of Advance
requested, and the Interest Period applicable thereto but with no Interest
Period to extend beyond the Maturity Date. Each request for an Advance to be
comprised of an Offered Rate Advance shall be effective upon receipt by the
Lender and shall be irrevocable. Upon its receipt of a request for an Advance to
be comprised of an Offered Rate Advance, the Lender shall provide the Borrower,
by no later than 12:30 P.M. (New York time) a proposed Offered Rate applicable
to such Offered Rate Advance. The Borrower may, in its sole discretion, by no
later than 1:00 P.M. (New York time) irrevocably accept or reject the proposed
Offered Rate applicable to such Offered Rate Advance. Not later than close of
business (New York time) on the day on which an Advance is requested, and upon
fulfillment of the applicable conditions set forth herein, as applicable, Lender
will make each requested Advance in the amount requested, or in a lesser amount
as determined by the Borrowing Base, to the Borrower in immediately available
funds by deposit into Borrower's Account as of the proposed date. The persons
authorized to request Advances hereunder shall be those individuals designated
in writing by Borrower to Lender. In the case of a request for Advance made by
telephonic communication, the action taken by Lender in good faith upon such
notice shall be deemed to be the action authorized by Borrower pursuant to such
request for Advance.
SECTION 10. EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT
Section 10.1. Events of Default. The occurrence of any one or more of the
following events or conditions shall constitute an "Event of Default":
(A) Payment of Note. Borrower shall fail to pay any installment of
principal, interest or premium, if any, owing on the Note on the due date
of such installment and shall fail to cure the same within five (5) days
of notice thereof from Lender.
(B) Payment of Other Obligations. Borrower shall fail to pay any of
the Obligations that are not evidenced by the Note on the due date thereof
(whether due at stated maturity, on demand, upon acceleration or
otherwise).
(C) Misrepresentations. Any warranty, representation, or other
statement made or furnished to Lender by or on behalf of Borrower or in
any instrument, certificate or financial statement furnished in compliance
with or in reference to this Agreement or any of the other Loan Documents
proves to have been false or misleading in any material respect when made
or furnished.
(D) Breach of Covenants. Breach of any covenant contained herein or
any covenant contained in the other Loan Documents (other than a covenant
or default in the performance) if the breach of such other covenant is not
cured to Lender's satisfaction within ten (10) days 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.
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(E) Default Under 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 Other
Agreements or other instrument, contract, or document evidencing any
existing or future indebtedness of Borrower to Lender and such default
shall continue beyond any applicable period of grace.
(F) Default Under Security Documents. 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 and such default shall continue beyond any applicable
period of grace.
(G) Other Defaults. There shall occur any default or event of default
on the part of Borrower (including specifically, but without limitation,
due to non-payment) under any agreement, document or instrument to which
Borrower is a party (including, without limitation, the NationsBank Credit
Agreement, the First Union Loan Agreement and the Consignment Agreement)
or by which Borrower or any of its Property is bound, creating or relating
to any indebtedness (other than the Obligations) if the payment or
maturity of such Indebtedness is accelerated in consequence of such event
of default or demand for payment of such Indebtedness is made.
(H) Uninsured Losses; Unauthorized Dispositions. Any material loss,
theft, damage or destruction not fully covered by insurance (as required
by this Agreement and subject to such deductibles as Lender shall have
agreed to in writing), or sale, lease or encumbrance of any of the
Collateral or the making of any levy, seizure, or attachment thereof or
thereon except in all cases as may be specifically permitted by other
provisions of this Agreement.
(I) Insolvency, etc. 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 thirty (30) days), or Borrower shall make any
offer of settlement, extension or composition to their respective
unsecured creditors generally, or any motion, complaint or other pleading
is filed in any bankruptcy case of any Person other than Borrower and such
motion, complaint or pleading seeks the consolidation of Borrower's assets
and liabilities with the assets and liabilities of such Persons.
(J) Business Disruptions; 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 all or any material part
of its business; or Borrower shall be enjoined, restrained or in any way
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prevented by court, governmental or administrative order from conducting
all or any material part of its business affairs; or any material lease or
agreement pursuant to which Borrower leases, uses or occupies any Property
shall be cancelled or terminated prior to the expiration of its stated
term; or any part of the Collateral shall be taken through condemnation or
the value of such Property shall be impaired through condemnation.
(K) ERISA. A Reportable Event shall occur which Lender, in its
reasonable 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 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.
(L) Litigation. Borrower, or any Affiliate, 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.
(M) Criminal Forfeiture. Borrower shall be criminally indicted or
convicted under any law that could lead to a forfeiture of any Property of
Borrower.
(N) Judgments. Borrower shall suffer any money judgments, or suffer
any writs, warrants of attachment or similar processes which give rise to
a Lien, other than a Permitted Lien, which individually or in the
aggregate involve an amount in excess of $500,000 over the amount covered
in full, subject to customary and reasonable deductibles, by insurance or
a surety bond, and shall not discharge, vacate, bond or stay the same
within a period of sixty (60) consecutive days.
Section 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 3.4 hereof, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations due or
to become due from Borrower to Lender, whether under this Agreement or any of
the other Loan Documents or otherwise, shall, at the option of Lender and
without notice or demand by Lender, become at once due and payable and Borrower
shall forthwith pay to Lender, in addition to any and all sums and charges due,
the entire principal of and accrued and unpaid interest on the obligations plus
reasonable attorneys' fees not to exceed fifteen percent (15.0%) of the
Obligations if the same are collected by or through an attorney at law.
Section 10.3. Remedies. Upon or at any time after the occurrence of an
Event of Default, Lender shall have and may exercise from time to time the
following rights and remedies:
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(A) 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 none of which shall be exclusive, and shall be in addition
to any other rights or remedies contained in this Agreement or any of the
other Loan Documents.
(B) The right to notify Account Debtors to make remittances to Lender
of all sums due on Accounts and to collect the Accounts directly from the
Account Debtors.
(C) The right to take immediate possession of the Collateral, and (i)
to 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) to enter any of the
premises of Borrower or wherever any of the Collateral shall be located,
and to keep and store the same on said premises until sold (and if said
premises be the Property of Borrower, Borrower agrees not to charge Lender
for storage thereof).
(D) The right to sell or otherwise dispose of all or any of the
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 ten (10) days' written notice to Borrower of any public or private
sale or other disposition of any Collateral shall be reasonable notice
thereof; provided, however, that no notice of Lender's intended
disposition of Collateral shall be required with respect to any portion of
the Collateral that is perishable, threatens to decline speedily in value
or is of a type customarily sold on a recognized market, nor shall any
such notice be required hereunder if not otherwise required under
applicable law. Lender shall have the right to conduct such sales an
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 any
Collateral, or any part thereof, for cash, credit or any combination
thereof, and Lender may purchase all or any part of any 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.
(E) 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, trade names, 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.
(F) The proceeds realized from the sale of any Collateral may be
applied, after allowing two (2) Business Days for collection, first to the
costs, expenses and reasonable attorneys' fees incurred by Lender in
collecting the obligations, in enforcing the rights of Lender under the
Loan Documents and in, collecting, retaking,
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completing, protecting, removing, storing, advertising for sale, selling
and delivering any of the Collateral; secondly, to interest due upon any
of the Obligations; and thirdly, to the principal of the Obligations. If
any deficiency shall arise, Borrower shall remain jointly and severally
liable to Lender therefor.
Section 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 exercise or enforce any rights, Liens, powers, or
remedies hereunder or under any of the other Loan Documents shall not operate as
a waiver of any of such Liens, rights, powers or remedies, but all such 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 indefeasibly paid in full, and all Liens, rights, powers, and
remedies provided herein and the other Loan Documents are cumulative and none
are exclusive.
SECTION 11. MISCELLANEOUS
Section 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:
(A) At such time or times hereafter as Lender or said agent, in its
sole discretion, may determine, 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; and
(B) At such time or times upon or after the occurrence of an Event of
Default as Lender or its agent in its sole discretion may determine: (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
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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 and to which Borrower has access; (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.
Section 11.2. Indemnity. Borrower hereby agrees to and hereby does
indemnify Lender and hold Lender harmless from and against any liability, loss,
damage, suit, action or proceeding ever suffered or incurred by Lender as the
result of Borrower's failure to observe, perform or discharge Borrower's duties
hereunder; provided, however, that the Borrower shall have no liability under
this Section 11.2 resulting from Lender's gross negligence or wilful misconduct.
Without limiting the generality of the foregoing, this indemnity shall extend to
any claims asserted against Lender by any Person under any Environmental Laws.
Notwithstanding any contrary provision of 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.
Section 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 or any of the other Loan Documents, 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, any of the other Loan Documents
or any of the Obligations, or of any portion hereof or thereof to any Affiliate
of Lender, and Lender's participation thereof with any Person if the amount so
participated is less than a fifty percent (50%) interest and Lender remains as
the servicing agent for this Agreement, including, without limitation, Lender's
rights, title, interests, remedies, powers, and duties hereunder or thereunder.
In the event of any such participation, sale, assignment, transfer or other
disposition, Lender shall be authorized to provide to each participating lender,
assignee or transferee all information in Lender's possession regarding Borrower
and the Collateral, including, without limitation, information required to be
disclosed pursuant to Banking Circular 181 (Rev. Aug. 2, 1984), issued by the
Comptroller of the Currency. 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
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relieved immediately (and without the necessity of the execution of further
documentation by Borrower or any other Person) of all obligations hereunder upon
any such assignment.
Section 11.4. Reimbursement of Expenses. If, at any time or times prior or
subsequent to the date hereof, regardless of whether or not an Event of Default
then exists or any of the transactions contemplated hereunder are concluded,
Lender employs counsel for advice or other representation, or incurs legal
expenses or other costs or out- of-pocket expenses in connection with: (A) the
negotiation and preparation of this Agreement or any of the other Loan
Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents; (B) periodic audits and appraisals (but no more than one
(1) annually) performed by Lender; (C) 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; (D) any attempt to enforce any
rights or remedies 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 (E) any
attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate
or otherwise dispose of or realize upon the Collateral; then, in any such event,
the reasonable attorneys' fees arising from such services and all reasonable
expenses, costs, charges and other fees of such counsel or of Lender or relating
to any of the events or actions described in this Section shall be payable when
incurred by Borrower to Lender, as the case may be, and shall be additional
Obligations hereunder secured by the Collateral.
Section 11.5. Indulgences Not Waivers. Lender's failure, at any time or
times hereafter, to require strict performance by Borrower of any provision of
this Agreement shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by Lender of an Event of Default by Borrower under this Agreement or
any of the other Loan Documents shall not suspend, waive or affect any other
Event of Default by Borrower under this Agreement or any of the other Loan
Documents, whether the same is prior or subsequent thereto and whether of the
same or of a different type. 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 of the 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 11.6. 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.
Section 11.7. 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
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assigns of Borrower and Lender. This provision, however, shall not he deemed to
modify Section 11.3 hereof.
Section 11.8. 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 of
this Agreement 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.
Section 11.9. 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. In proving this Agreement in any judicial
proceeding, it shall not be necessary to produce or account for more one such
counterpart signed by the party against whom such enforcement is sought.
Section 11.10. Notice. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto shall be in writing and shall be
sent by certified or registered mail, return receipt requested, personal
delivery against receipt or by telecopier or other facsimile transmission and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered when delivered against receipt or one Business Day
after deposit in the mail, postage prepaid, or, in the case of facsimile
transmission, when received at the office of the noticed party, addressed as
follows:
(A) Lender: ABN AMRO Bank N.V.,
New York Branch
000 Xxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxx Xxxxxxx
(B) If to Borrower: Xxxxxxxx'x Inc.
0 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: Xx. Xxxxxx Xxxxxx
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 11.10; provided, however, that any notice,
request or demand to or upon Lender shall not be effective until received by
Lender. Any written notice that is not sent in conformity with the provisions
hereof shall nevertheless be effective on the date that such notice is actually
received by the noticed party.
Section 11.11. Lender's Right to Set-Off. Upon the occurrence of an Event
of Default and acceleration of the Obligations as permitted in Section 10.2
hereof, Lender, without
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notice or demand of any kind, may hold and set-off against such of the
Obligations (whether matured or unmatured) as Lender may elect, any balance or
amount to the credit of Borrowers in any deposit, agency, reserve, holdback or
other account of any nature whatsoever (other than any account specifically
identified as a payroll account for employees of Borrower), maintained by or on
behalf of Borrowers with Lender at its offices, regardless of whether such
accounts are general or special and regardless of whether such accounts are
individual or joint.
Section 11.12. Demand Obligations. Nothing in this Agreement shall affect
or abrogate the demand nature of any portion of the Obligations expressly made
payable on demand by this Agreement or by any instrument evidencing or securing
same, and the occurrence of an Event of Default shall not be a prerequisite for
Lender's requiring payment of such Obligations.
Section 11.13. Time of Essence. Time is of the essence in the payment and
performance of this Agreement, the Other Agreements and the Security Documents.
Section 11.14. 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.
Section 11.15. 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's having or being deemed to have structured or
dictated such provision.
Section 11.16. Governing Law; Consent to Forum. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
ATLANTA, GEORGIA. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF GEORGIA; PROVIDED, HOWEVER,
THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN
GEORGIA, 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 GEORGIA. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED,
AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS
OF BORROWER OR LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR
COURT OF XXXXXX COUNTY, GEORGIA, OR, AT LENDER'S OPTION, THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION, 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; PROVIDED,
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HOWEVER, LENDER MAY, AT ITS OPTION, COMMENCE ANY ACTION, SUIT OR PROCEEDING IN
ANY OTHER APPROPRIATE FORUM OR JURISDICTION TO OBTAIN POSSESSION OF OR
FORECLOSURE UPON ANY COLLATERAL, TO OBTAIN EQUITABLE RELIEF OR TO ENFORCE ANY
JUDGMENT OR ORDER OBTAINED BY LENDER AGAINST BORROWER OR WITH RESPECT TO ANY
COLLATERAL OR TO OBTAIN ANY OTHER RELIEF DEEMED APPROPRIATE BY LENDER. 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 FOR 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 THREE (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.
Section 11.17. General Waivers by Borrower. BORROWER WAIVES (I)
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; (II) NOTICE PRIOR TO LENDER'S TAKING POSSESSION OR CONTROL OF ANY
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, INCLUDING THE
ISSUANCE OF AN IMMEDIATE WRIT OF POSSESSION; (III) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; (IV) ANY RIGHT BORROWER MAY HAVE UPON PAYMENT
IN FULL OF THE OBLIGATIONS TO REQUIRE LENDER TO TERMINATE ITS SECURITY INTEREST
IN THE COLLATERAL OR IN ANY OTHER PROPERTY OF BORROWER UNTIL TERMINATION OF THIS
AGREEMENT IN ACCORDANCE WITH ITS TERMS AND THE EXECUTION BY BORROWER, AND BY ANY
PERSON WHOSE LOANS TO BORROWER ARE USED IN WHOLE OR IN PART TO SATISFY THE
OBLIGATIONS, OF AN AGREEMENT INDEMNIFYING LENDER FROM ANY LOSS OR DAMAGE LENDER
MAY INCUR AS THE RESULT OF DISHONORED CHECKS OR OTHER ITEMS OF PAYMENT RECEIVED
BY LENDER FROM BORROWER OR ANY ACCOUNT DEBTOR AND APPLIED TO THE OBLIGATIONS;
AND (V) NOTICE OF ACCEPTANCE HEREOF.
Section 11.18. Security Agreement. The relative rights and obligations of
Borrower and Lender hereunder and under the Other Agreements are subject to the
terms and provisions of the Intercreditor Agreement. To the extent there is any
conflict with respect to the Lender's rights or the Borrower's obligations
hereunder or under the Other
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Agreements, on the one hand, and under the Intercreditor Agreement, on the other
hand, the Intercreditor Agreement shall control.
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IN WITNESS WHEREOF, this Agreement has been duly executed in New York, New
York on the day and year specified at the beginning hereof.
BORROWER:
XXXXXXXX'X INC.
By:/s/ Xxxxxxx X. Xxxxx
----------------------------
Xxxxxxx X. Xxxxx,
Chairman and Chief
Executive Officer
[CORPORATE SEAL]
LENDER:
ABN AMRO BANK N.V.
By: /s/
----------------------------
Title: S.V.P.
----------------------
By: /s/
----------------------------
Title: VP
----------------------
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