EXHIBIT 10.4
XX XXXXXXXXXX, L.P., a Delaware limited partnership having its
principal place of business at 0000 Xxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000
("Borrower") hereby agrees with NATIONAL BANK OF CANADA, a Canadian banking
corporation with a domestic branch at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 ("Lender") as follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. As used herein, the following terms have the following
meanings:
a. Account Debtor - means a person or entity obligated to pay a
Receivable.
b. Additional Collateral - means (a) all general intangibles of
Borrower of every kind and description, including without
limitation all patents, trademarks, copyrights, and licenses
and all federal, state and local tax refund claims of all
kinds, whether now existing or hereafter arising; (b) all of
Borrower's deposit accounts, whether now owned or hereafter
created, wherever located; (c) all monies, securities,
instruments, cash and other property of Borrower and the
proceeds thereof, now or hereafter held or received by, or in
transit to, Lender from or for Borrower; and (d) all books,
records, customer lists, ledger cards, computer programs,
computer tapes, disks, printouts and records, and other
property and general intangibles at any time evidencing or
relating to any of the foregoing, whether now in existence or
hereafter created; and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing.
c. Borrower - means XX Xxxxxxxxxx, X.X.
x. Borrowing Base - the Borrowing Base for Line of Credit Loans
defined in Section 2.1(a).
e. Breakage Fee - means, in the case of a prepayment of the whole
or any portion of Line of Credit Loan principal bearing
interest based on the LIBOR Rate provided for in Section
2.7(a)(ii), a prepayment premium equal to such prepaid
principal, multiplied by a per annum interest rate equal to
the difference between the LIBOR Rate-based interest
applicable thereto, adjusted to an annual basis, and the
360-day equivalent interest yield (hereinafter called the
"Reinvestment Rate") on six-month United States Treasury Bills
in an aggregate amount comparable to such portion of the
prepaid principal, and with maturities comparable to the end
of the applicable Interest Period, calculated over a period of
time from the date of prepayment to and including the last day
of the applicable Interest Period. If the LIBOR Rate-based
interest applicable to such prepaid principal, adjusted to an
annual basis, is equal to or less than the Reinvestment Rate,
no prepayment premium shall be due.
f. Business Day - means any day other than a Saturday, Sunday or
other day on which the banks in New York State are required or
authorized by law to close.
g. Collateral - means, collectively, (a) all Receivables,
Inventory, Equipment, Fixtures, Documents, Instruments and
Additional Collateral, and (b) the Premises secured by the
Mortgage.
h. Disposal - means the intentional or unintentional abandonment,
discharge, deposit, injection, dumping, spilling, leaking,
storing, burning, thermal destruction or placing of any
substance so that it or any of its constituents may enter the
Environment.
i. Documentary Letter of Credit - means Lender's Letter of Credit
issued for the benefit of Borrower and payable upon payee's
presentation of specified documents.
j. Eligible Inventory - means Borrower's Inventory, consisting of
first quality raw material and finished goods in which Lender
has a perfected security interest, which is held for
manufacture, sale or resale in the ordinary course of the
Borrower's business and which is acceptable to Lender, in
Lender's reasonable discretion, in all respects. General
criteria for Eligible Inventory may be established and revised
from time to time by Lender in Lender's reasonable discretion
which shall be exercised in a manner consistent with Lender's
agreements to lend set forth herein. In determining such
eligibility, Lender may, but need not, rely on reports and
schedules of Inventory furnished to Lender by Borrower, but
reliance thereon by Lender from time to time shall not be
deemed to limit Lender's right to revise standards for
eligibility at any time. In general, Eligible Inventory shall
include goods returned to Borrower in the ordinary course of
business and seconds and defective goods, with seconds and
defective goods discounted at a fixed cost which approximates
thirty-three percent (33%) of Borrower's first quality book
value. Except in Lender's reasonable discretion, Eligible
Inventory shall not include work in process, components which
are not parts of finished goods, spare parts, packaging and
shipping materials, or supplies used or consumed in Borrower's
business, and further, Eligible Inventory shall not include
Inventory subject to a security interest or lien in favor of
any third party, xxxx and hold goods, Inventory which is not
subject to Lender's perfected security interest, Inventory
which is not insured as required pursuant to the terms hereof,
Inventory which was not produced in accordance with the
Federal Fair Labor Standards Act of 1938, as amended, or
Inventory purchased or held on consignment.
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k. Eligible Receivables - means the net amount of those
Receivables which continually meet the following requirements:
(i) The account is due and payable not more than sixty
(60) days from the date of the invoice evidencing the
Receivable;
(ii) The Receivable arose from the performance of services
by Borrower, which have been fully and satisfactorily
performed, or from the sale or lease of goods by
Borrower, in which Borrower had the sole and complete
ownership, and the goods have been shipped or
delivered to the Account Debtor, as evidence of which
Borrower or Lender has the possession of shipping and
delivery receipts;
(iii) The Receivable is not subject to any assignment,
claim, lien or security interest other than that of
Lender, other than trade credits payable to Xxx. A
Bank Clothiers, Inc., a Delaware corporation;
(iv) The Receivable is not subject to setoff,
counterclaim, defense, allowance or adjustment other
than discounts for prompt payment shown on the
invoice, or to dispute, objection or complaint by the
Account Debtor concerning its liability on the
Receivable; and the goods, the sale or lease of which
gave rise to the Receivable, have not been returned,
rejected, lost or damaged;
(v) The Receivable arose in the ordinary course of
business;
(vi) No petition in bankruptcy or other application for
relief under the Bankruptcy Code or other insolvency
law has been filed with respect to the Account
Debtor; and the Account Debtor has not made an
assignment for the benefit of creditors, become
insolvent, or suspended or terminated business; and
the Account Debtor is generally paying its debts as
they become due;
(vii) The Account Debtor is not an affiliate, subsidiary,
officer, shareholder or employee of Borrower, nor
owned or controlled by any such entity;
(viii) Either the Account Debtor maintains its chief
executive office in the United States of America and
is organized under the laws of the United States of
America or Canada or a state or province thereof, or
the Receivable is secured by a letter of credit or
credit insurance acceptable to Lender;
(ix) The full amount reflected on Borrower's books and on
any invoice delivered to Lender relating to any
Receivable is owing to Borrower, and no partial
prepayments have been made thereon, other than as
reflected on such books;
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(x) Perfection or enforcement of Lender's security
interest in the Receivable is not governed by any
state or federal statutory requirements other than
the Uniform Commercial Code, including, without
limitation, the Federal Assignment of Claims Acts of
1940, as amended;
(xi) The Receivable does not arise from a consignment or
other arrangement pursuant to which the subject
Inventory is returnable, if not sold or otherwise
disposed of by the Account Debtor; and
(xii) The Receivable is owed by an Account Debtor with
respect to which not more than fifty percent (50%) of
the outstanding dollar amount of all Receivables owed
by such Account Debtor has remained unpaid for more
than one hundred twenty (120) days from the invoice
date.
l. Environment - means any water including but not limited to
surface water and ground water or water vapor; land including
land surface or subsurface; stream sediments; air; fish,
wildlife, and plants; and all other natural resources or
environmental media.
m. Environmental Laws - means all federal, state and local
environmental, land use, zoning, health, chemical use, safety
and sanitation laws, statutes, ordinances, regulations, codes
and rules relating to the protection of the Environment and/or
governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal
of Hazardous Substances, and the policies, guidelines,
procedures, interpretations, decisions, orders and directives
of federal, state and local governmental agencies and
authorities with respect thereto.
n. Environmental Permits - means all licenses, permits,
approvals, authorizations, consents or registrations required
by any applicable Environmental Laws and all applicable
judicial and administrative orders in connection with the
ownership, lease, purchase, transfer, closure, use and/or
operation of Borrower's property and/or as may be required for
the storage, treatment, generation, transportation,
processing, handling, production or disposal of Hazardous
Substances.
o. Environmental Reports - means those documents, copies of which
have been provided to Lender, entitled Phase I Environmental
Assessment Update by Blasland, Xxxxx & Xxx, Inc. dated March
16, 1995.
p. Equipment - means all machinery, equipment, furniture,
fixtures, tools, parts, supplies and motor vehicles, now owned
and hereafter acquired by Borrower of whatsoever name, nature,
kind or description, wherever located, and all additions and
accessions thereto and replacements or substitutions therefor,
and all proceeds thereof and all proceeds of any insurance
thereon.
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q. Event of Default - shall have the meaning assigned to it in
Section 7.1 of this Agreement.
r. Hazardous Substances - means, without limitation, any
explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances and
any other material defined as a hazardous substance in Section
101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section
9601(14).
s. Interest Period - means the period commencing on the date a
Line of Credit Loan is made or converted as a loan bearing
interest based on the LIBOR Rate as provided for in Section
2.7(a)(ii), which period shall end one (1) month, three (3)
months, or six (6) months thereafter, as Borrower may elect.
t. Inventory - means all inventory, as defined in the New York
Uniform Commercial Code.
u. Letter of Credit - means an engagement by Lender under the
Line of Credit provided for in Sections 2.1 and 2.4, to honor
certain demands for payment against Borrower.
v. LIBOR Rate - means the London Interbank Offered Rate for
corresponding deposits of U.S. dollars for the corresponding
Interest Period, determined as of two (2) Business Days prior
to the start of the Interest Period. The determination by
Lender as to the applicable LIBOR Rate shall be determinative.
w. Line of Credit Loans - means, collectively, all advances or
loans made to Borrower under the Line of Credit.
x. Loans - means collectively, all Line of Credit Loans and all
Term Loans made to Borrower by Lender pursuant to this
Agreement.
y. Mortgage - means a first lien collateral mortgage on the
Premises in the amount of $1,950,000.
z. Obligations - means all loans, advances, debts, liabilities,
obligations and duties owing by Borrower to Lender of every
kind and description, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter
arising, whether or not such obligations are related to the
transactions described in this Agreement, and whether such
obligations are from time to time reduced and thereafter
increased, or entirely extinguished and thereafter reincurred,
including without limitation, all interest, fees, charges,
expenses and attorneys' fees chargeable to Borrower or
incurred by Lender in connection with this Agreement or any
other agreement between Borrower and Lender.
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aa. Permitted Encumbrances - means liens, encumbrances, and
restrictions against the assets and property of Borrower,
identified in Schedule 1 to this Agreement.
bb. Premises - means the Premises located at 0000 Xxxxxx Xxxx,
Xxxxxxxxx, Xxxxxxxx Xxxxxx, Xxx Xxxx 00000.
cc. Prime Rate - means the prime rate for commercial loans
announced from time to time in the United States of America as
the National Bank of Canada prime rate, whether or not such
rate is the best, favored or lowest rate charged by Lender.
dd. Receivables - means (a) all of Borrower's now owned and
hereafter acquired accounts, chattel paper, documents and
instruments, and all proceeds of the foregoing and all
proceeds of any insurance on the foregoing; (b) all of
Borrower's rights, remedies, security and liens, in, to and in
respect of the accounts, including without limitation, rights
of stoppage in transit, replevin, repossession and reclamation
and other rights and remedies of an unpaid vendor, lienor or
secured party, guaranties or other contracts of suretyship
with respect to the accounts, deposits or other security for
the obligation of any debtor or obligor in any way obligated
on or in connection with any accounts and credit and other
insurance, and all proceeds of the foregoing and all proceeds
of any insurance on the foregoing; and (c) all of Borrower's
right, title and interest, present and future, in, to and in
respect of all goods relating to, or which by sale have
resulted in, accounts, including without limitation all goods
described in invoices or other documents or instruments with
respect to, or otherwise representing or evidencing any
accounts and all returned, reclaimed or repossessed goods, and
all proceeds of the foregoing and all proceeds of any
insurance on the foregoing.
ee. Release - means "Release" as defined in Section 101(22) of the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601(22), and the
regulations promulgated thereunder.
ff. Standby Letter of Credit - means Lender's Letter of Credit
issued for the benefit of Borrower and payable upon the
occurrence or non-occurrence of certain specified conditions.
gg. Supplemental Agreements - means any and all agreements,
instruments, documents, security agreements, guaranties,
mortgages, financing statements, assignment agreements,
repurchase agreements and supplements thereto, granting or
intending to grant to Lender any lien, security interest,
pledge, assignment or indemnification to secure the
Obligations, or entered into between Borrower and Lender, at
any time, for any purpose.
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hh. Term Loans - means, collectively, Term Loan A and Term Loan B
made to Borrower, as defined in Section 2.5 of this Agreement.
ii. Title Policy - means Certificate for Title Insurance Number
5398-25149 issued to Lender by Ticor Title Insurance Company
with respect to the Premises.
1.2 UCC Definitions - The words "debtor", "secured party", "collateral",
"perfection", "authorization", "consent", "security agreement",
"proceeds", "financing statement", "assignee", "assignment", "action",
"creditor", "goods", "equipment", "inventory", "accounts", "documents",
"instruments", "chattel paper", and "general intangibles", and all
other terms used in this Agreement and in all documents referred to
herein shall have the meanings given such terms in the New York Uniform
Commercial Code.
1.3 Accounting Terms - All accounting terms used but not defined in this
Agreement shall be construed in accordance with generally accepted
accounting principles consistently applied.
SECTION 2. TERMS OF BORROWING.
2.1 Line of Credit. As long as Borrower is not in default of any of its
Obligations to Lender, Lender agrees to lend to Borrower, and Borrower
agrees to borrow from Lender, subject to the terms and conditions of
this Agreement, a maximum Line of Credit Loan, at any one time
outstanding not to exceed the amount of the Borrowing Base, as set
forth below ("Line of Credit"). The Line of Credit shall be evidenced
by a Revolving Note of Borrower ("Revolving Note") substantially in the
form of Exhibit A attached hereto and shall be payable as set forth in
Section 2.8(a) hereof.
a. Borrowing Base. The Borrowing Base shall equal the lesser of:
(1) The sum of:
(i) Eighty-five percent (85%) of Eligible
Receivables less than sixty (60) days past
due date but not more than one hundred
twenty (120) days from invoice date, plus
(ii) Fifty percent (50%) of that portion of
Eligible Inventory consisting of raw
materials on a lower of cost or market
basis, plus
(iii) Sixty percent (60%) of that portion of
Eligible Inventory consisting of finished
goods, increasing to seventy percent (70%)
during any two (2) periods in a calendar
year of two (2) consecutive months each, to
accommodate seasonal requirements, less
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(iv) One hundred percent (100%) of outstanding
Standby Letters of Credit, less
(v) Fifty percent (50%) of outstanding
Documentary Letters of Credit,
provided, however, that Lender shall not be required
to advance an amount in excess of Five Million
Dollars ($5,000,000) against Eligible Inventory
described in (ii) and (iii) above,
or
(2) Twelve Million Five Hundred Thousand Dollars
($12,500,000) .
2.2 [Intentionally omitted].
2.3 Borrowing Base Reports, Etc. For purposes of computing the Borrowing
Base, Borrower shall furnish to Lender information adequate to identify
Receivables and Inventory at times and in form and substance as may be
required by Lender. Borrower shall provide to Lender in form and
content satisfactory to Lender:
(1) At least weekly and on the last day of each month, or, upon
the occurrence and continuation of an Event of Default, more
frequently upon the request of Lender, a Borrowing Certificate
reporting all Receivables, in the form attached hereto as
Exhibit D;
(2) At least monthly or, upon the occurrence and continuation of
an Event of Default, more frequently upon the request of
Lender, a Borrowing Certificate reporting all Inventory, in
the form attached hereto as Exhibit D;
(3) Monthly, on or before the 25th day of each month, an Accounts
Receivable Aging in form satisfactory to Lender based on
invoice date, listed in sequence by number, and showing the
amounts due and owing on all Receivables;
(4) Monthly, on or before the 25th day of each month, an Inventory
Report in form satisfactory to Lender showing the total cost
value of Inventory and separating Inventory into raw
materials, work-in-process, finished goods; and
(5) Monthly, on or before the 25th day of each month, a
reconciliation report of Receivables and Inventory.
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From time to time, Borrower shall provide Lender with such other schedules and
information as Lender may reasonably request. Together with such schedules,
Borrower shall, upon request of Lender, furnish copies of customers' invoices or
the equivalent, and original shipping or delivery receipts for all merchandise
sold, and Borrower shall warrant the genuineness thereof. Borrower shall further
warrant that all Receivables are and will be bona fide existing obligations
created by the sale and delivery of merchandise or the rendition of services to
customers in the ordinary course of business, free of liens, encumbrances and
security interests, except as permitted hereunder, and unconditionally owed to
Borrower, as applicable, without defense, offset or counterclaim.
2.4 Line of Credit Loans.
a. All Line of Credit Loans pursuant to this Agreement (other
than Letters of Credit under subsection (f) below) shall be
disbursed by Lender as credits to the operating account
maintained by Borrower with Lender. Lender, within its
discretion, is irrevocably authorized by Borrower to construe
and interpret the presentation to Lender for payment of a
check drawn on any deposit account maintained by Borrower with
Lender, in an amount greater than the then available balance
in such account, as a request by Borrower for a Line of Credit
Loan bearing interest based on the Prime Rate on the date of
such presentation for the account of Borrower, to the extent
of the amount available at such date under the Borrowing Base.
b. Borrower by resolution, a certified copy of which is annexed
to this Agreement as Schedule 3 and which may be amended and
modified from time to time by Borrower upon written notice to
Lender, shall appoint one or more agents and attorneys-in-fact
("Borrower's Agents") for the purpose of requesting Loans and
otherwise dealing with Lender in all matters under or relating
to this Agreement, the Supplemental Agreements, the Loans, and
the Obligations. Borrower's Agents are authorized to act
jointly and severally, and their authority may only be revoked
by a writing delivered to Lender as provided in Section 8.2 of
this Agreement. Lender is authorized to make Loans upon
receipt of a written Notice of Borrowing executed by a
Borrower's Agent and setting forth Borrower's disbursement
instructions, together with a Borrowing Certificate also
executed by a Borrower's Agent and certifying the amount of
the Borrowing Base as of the date a Loan is requested. The
Notice of Borrowing with Borrowing Certificate shall be in the
form attached hereto as Exhibit D. The crediting of the
proceeds of any Loan to the account of Borrower shall evidence
the making of the Loan and constitute the acknowledgment of
Borrower of receipt of such Loan proceeds. Lender shall have
no liability for any action, error or mistake not involving
Lender's own gross negligence or willful misconduct, based
upon any request or instruction of a Borrower's Agent.
c. No Loan shall be made which, by itself or together with the
principal balance then outstanding of prior Loans, would cause
the total outstanding principal balance of the Line of Credit
Loans to exceed the Borrowing Base described in Section 2.1(a)
of this Agreement.
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d. Requests for Loans.
(i) Except as otherwise provided under this Section 2.4,
whenever Borrower desires Lender to make a Loan under
this Agreement, Borrower's Agents shall give Lender
prior written notice (or telephonic notice promptly
confirmed in writing) of such request (a "Notice of
Borrowing"). Such Notice of Borrowing shall be given
by Borrower no later than 1:00 p.m. New York, New
York Time at the office of Lender on the business day
of the requested funding date of such borrowing in
the case of Loans bearing interest based on the Prime
Rate ("Prime Rate Loans") and upon two (2) business
days prior notice in the case of Loans bearing
interest based on the LIBOR Rate. Notices received
after 1:00 p.m. shall be deemed received on the next
business day. Each Notice of Borrowing (or telephonic
notice thereof) shall be irrevocable and shall
specify the principal amount of the borrowing and the
account of Borrower to which the proceeds of such
borrowing are to be disbursed.
(ii) Borrower's failure to pay, within fifteen (15) days
of the due date, any amount required to be paid under
this Agreement or any of the Supplemental Agreements
as principal, accrued interest, fees or other charges
shall be deemed irrevocably to be a request for a
Prime Rate Loan on the due date of, and in an
aggregate amount required to pay, such principal,
accrued interest, fees or other charges. The proceeds
of such Loans may be disbursed by way of direct
payment of the relevant Obligation.
(iii) As an accommodation to Borrower, Lender may permit
telephonic requests for Loans and electronic
transmittal of instructions, authorizations,
agreement or reports to Lender by Borrower's Agents.
Unless Borrower's Agents specifically direct Lender
in writing not to accept or act upon telephonic or
electronic communications from Borrower's Agents,
Lender shall have no liability to Borrower for any
loss or damage suffered by Borrower as a result of
Lender's honoring of any requests, execution of any
instructions, authorizations or agreements or
reliance on any reports (in each case believed in
good faith by Lender to be genuine) communicated to
it telephonically or electronically and purporting to
have been sent to Lender by Borrower's Agents and
Lender shall have no duty to verify the origin of any
such communication or the identity or authority of
the person sending it.
e. Subject to the required terms of payment set forth in Section
2.8 below, and the provisions relating to prepayment set forth
in Section 2.9, Borrower may make principal payments upon its
indebtedness for Line of Credit Loans in its discretion and
may reborrow subject to the limits set forth in this
Agreement.
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f. Letters of Credit. So long as the Borrowing Base of Section
2.1(a) will not be exceeded, a portion of the Line of Credit
shall be reserved for issuance by Lender to Borrower of
Documentary Letters of Credit and/or Standby Letters of
Credit, provided that such Letters of Credit (i) have an
aggregate undrawn amount of One Million Dollars ($1,000,000)
or less, and (ii) have expiration dates no longer than one (1)
year from the date of issuance or the date on which payment of
the outstanding principal of Line of Credit Loans is due under
Section 2.8, whichever is earlier. Except as otherwise
expressly provided herein, the procedure set forth in this
Section 2.4 shall similarly apply to requests by Borrower for
Line of Credit Loans negotiated by Lender's issuance of
Letters of Credit under this subsection.
2.5 Term Loans. On the date of this Agreement, and subject to all the terms
and conditions of this Agreement, Lender agrees to make the Term Loans
available to Borrower. Borrower agrees to borrow the amount of such
Term Loans from Lender. Term Loan A ("Term Loan A") shall be evidenced
by a term note ("Term Note A") substantially in the form of Exhibit B
attached hereto and shall be payable as set forth in Section 2.8(b)(1)
of this Agreement, and Term Loan B ("Term Loan B") shall be evidenced
by a term note ("Term Note B") substantially in the form of Exhibit C
attached hereto and shall be payable as set forth in Section 2.8(b)(2)
of this Agreement. The original principal amount of Term Note A shall
be One Million Nine Hundred Fifty Thousand Dollars ($1,950,000), which
is sixty-five percent (65%) of the fair market value of the Premises
according to an appraisal prepared by Summit Associates dated June 4,
1998. The original principal amount of Term Note B shall be Eight
Hundred Fifty Thousand Dollars ($850,000), which is less than eighty
percent (80%) of the forced liquidation or auction value of Borrower's
Equipment according to an appraisal prepared by Xxxxx-Xxxxxx dated May
26, 1998.
2.6 [Intentionally omitted].
2.7 Interest.
a. Line of Credit Loans.
(i) Prime Rate. Borrower agrees to pay interest on the
outstanding principal balance of the Line of Credit
Loans at the rate of one-half of one percent (0.5%)
per annum above the Prime Rate, as it may change from
time to time based upon a 360-day year for the actual
number of days the Line of Credit Loans are
outstanding, which will result in a higher effective
annual rate. Interest based on the Prime Rate shall
be payable in arrears on the first day of the month.
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(ii) LIBOR Rate. In the alternative, subject to the
conditions and limitations set forth in this
Agreement, Lender shall, at the request of Borrower
upon advance written notice to Lender of not less
than two (2) Business Days, make advances of Line of
Credit Loans to Borrower, or convert any portion of
Borrower's Line of Credit Loan balances from a loan
bearing interest at a rate based on the Prime Rate as
provided for in (i) above to a loan bearing interest,
at a fixed rate equal to the LIBOR Rate plus two and
three-quarters percent (2.75%) for an Interest Period
specified by Borrower of one (1), three (3), or six
(6) months. LIBOR Rate-based interest shall be due
and payable at the end of each Interest Period for
one (1) and three (3) month Interest Periods, and at
the end of three (3) months and maturity for six (6)
month Interest Periods. Conversions from Prime
Rate-based interest shall be for a minimum of One
Million Dollars ($1,000,000) with increments of One
Hundred Thousand Dollars ($100,000). At no time shall
Borrower have more than three (3) separate LIBOR
Rate-based Interest Periods outstanding. Upon the
expiration of an Interest Period, interest shall
accrue at the rate based on the Prime Rate as
provided for in (i) above. All payments to Lender of
principal or of LIBOR Rate-based interest shall be
free and clear of any present or future tax imposed
by the United States of America, and without any
withholdings or deductions whatsoever. In addition,
Borrower shall reimburse Lender for any costs or
expenses related to or incurred by reason of any
Eurodollar reserve, special deposit or assessment, or
capital adequacy requirements related to LIBOR
Rate-based loans.
b. Term Loans. Borrower agrees to pay interest on the outstanding
principal balance of Term Loan A at the per annum rate of one
percent (l%) above the Prime Rate, and on the outstanding
principal balance of Term Note B at the per annum rate of
three-quarters of one percent (0.75%) above the Prime Rate, as
it may change from time to time based upon a 360-day year for
the actual number of days such Term Loan is outstanding, which
will result in a higher effective annual rate.
c. Changes in the Prime Rate. Any change in the Prime Rate shall,
without notice to Borrower, be effective hereunder commencing
at the same time such new rate becomes effective.
2.8 Payments.
a. Line of Credit Loans. Borrower agrees to pay the outstanding
principal of and accrued interest on the Line of Credit Loans
on June 30, 2001, or, upon the occurrence of an Event of
Default, at the time provided for in Section 7.2. In addition,
Borrower agrees to make, on demand, such principal payments as
are necessary so that the unpaid principal balance of the Line
of Credit Loans does not at any time exceed the Borrowing
Base. Without limiting the right of Lender to demand payment
as provided herein, Borrower shall pay accrued interest on the
first day of each month commencing the month following the
date of this Agreement and continuing until all of the
obligations under the Line of Credit Loans are paid in full.
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b. Term Loans.
1. Term Loan A. Borrower agrees to pay the principal
balance of Term Loan A to Lender in eighty-three (83)
consecutive monthly installments commencing on July
1, 1998, and on the first day of each month
thereafter, the first eighty-three (83) of which
shall be in the principal amount of $16,250.00 and
the eighty-fourth (84th) and final of which shall be
in an amount equal to the then unpaid principal
balance of Term Loan A. Borrower agrees to pay
accrued interest on Term Loan A on the first day of
each month hereafter commencing the month following
the date of this Agreement and on the date Term Loan
A is paid in full.
2. Term Loan B. Borrower agrees to pay the principal
balance of Term Loan B to Lender in fifty-nine (59)
consecutive monthly installments commencing on July
1, 1998, and on the first day of each month
thereafter, the first fifty-nine (59) of which shall
be in the principal amount of $10,119.05 and the
sixtieth (60th) and final of which shall be in an
amount equal to the then unpaid principal balance of
Term Loan B. Borrower agrees to pay accrued interest
on Term Loan B on the first day of each month
hereafter commencing the month following the date of
this Agreement and on the date Term Loan B is paid in
full.
c. General Provisions.
(1) Each payment received by Lender shall be applied
first to expenses and interest accrued and billed and
the balance, if any, to principal, provided that if
there has occurred an event of default under Section
7.1 below, Lender may apply payments in Lender's
absolute discretion.
(2) Any non-cash payment of Line of Credit Loans shall be
deemed paid, for purposes of calculating the
principal amount available for borrowing under
Section 2.1 of this Agreement, on the date such
non-cash payments are received by Lender; however,
for the purpose of calculating interest pursuant to
Section 2.4(a) of this Agreement, such payments shall
be deemed to have been received one (1) day after
actual receipt of such payment by Lender.
Notwithstanding the foregoing, if any such non-cash
payment presented for collection by Lender is not
paid in full, Lender may, without prior notice to
Borrower, reverse the provisional credit which has
been given, and make appropriate adjustments to the
amount of principal and interest due, and the amount
of the Borrowing Base available to Borrower.
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(3) If after the date hereof, Lender determines that (a)
the adoption of any applicable law, rule or
regulation regarding capital requirements for banks
or bank holding companies or their subsidiaries, (b)
any change in the interpretation or administration
thereof by any governmental authorities or agency
charged with the administration or interpretation, or
(c) compliance by Lender or, if applicable, its
holding company, with any requests or directive of
any such entity with respect to capital adequacy,
results in the reduction of Lender's return on its
capital to a level below that which Lender could have
achieved but for such adoption, change or compliance
as a result of Lender's commitment to make Loans
pursuant hereto, then Lender shall promptly notify
Borrower of such occurrence and within one hundred
eighty (180) days of receipt of such notice,
accompanied by a reasonably detailed summary and
explanation of the calculations and other data and
information utilized by Lender to formulate its
conclusions as to such occurrence, Borrower shall
either (i) pay to Lender an amount reasonably
determined by Lender to be the amount that will
compensate Lender for such reduction or (ii) prepay,
without premium, all outstanding indebtedness of
Borrower pursuant to the terms of this Agreement,
upon which this Agreement shall terminate.
(4) On the date that any principal or interest payable
under this Agreement is due, Borrower authorizes
Lender to debit any deposit account of Borrower on
such due date in an amount equal to such unpaid
principal, interest, facility fees or unused line
fees, as applicable.
(5) Notwithstanding anything to the contrary in this
Agreement, Lender consents to Borrower's (i)
maintaining one bank account with another financial
institution for xxxxx cash and manual payroll
purposes, provided that such account shall not have a
cash balance greater than $25,000 at any time while
the Revolving Note shall remain outstanding, and (ii)
maintaining its ADP automated payroll account with
another financial institution.
2.9 Prepayment. Borrower shall have the right to prepay the outstanding
principal balance of the Loans in whole, or in part, at any time, from
time to time out of Borrower's operating cash flow or from proceeds
from the sale of Borrower, provided, however, that if Borrower prepays
all or substantially all of the outstanding Line of Credit Loans, or
all or substantially all of the Term Loans, with the proceeds of new
secured indebtedness borrowed by Borrower from a person other than
Lenders, then Borrower shall pay to Lender a premium in an amount equal
to the following percentages of the amounts so prepaid:
(a) from closing through June 30, 1999 - one and one-half
percent (1.5%);
(b) from July 1, 1999 through June 30, 2000 - one percent (1%);
(c) from July 1, 2000 through March 31, 2001 - one-half percent
(0.5%); and
(d) after March 31, 2001 - zero percent (0%).
Any partial prepayment of the Term Loans shall be applied to the
outstanding principal balance of the Term Loans in inverse order of
maturity.
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2.10 Fees and Expenses.
a. Closing Fee. Borrower shall pay to Lender upon execution of
this Agreement a fee of $50,000.00, against which shall be
credited a $10,000.00 good faith deposit and a $15,000.00
commitment fee previously paid to Lender by Borrower, net of
any audits fees or legal expenses, as provided for in a
revised commitment letter dated May 20, 1998 between Lender
and Borrower.
b. Annual Facility Fee. For so long as the Revolving Note remains
outstanding and owing to Lender, Borrower shall pay Lender a
fee of $12,500.00 on each anniversary of the execution and
delivery of this Agreement.
c. Unused Line Fee. For so long as the Revolving Note remains
outstanding and owing to Lender, Borrower shall pay Lender on
the first day of each month a fee equal to one-quarter of one
percent (0.25%) per annum of the daily average of the unused
portion of the Line of Credit for the preceding month.
d. Letter of Credit Fees. For so long as the Revolving Note
remains outstanding and owing to Lender, Borrower shall pay
Lender on the first day of each month a fee equal to one
percent (1%) per annum of all issued and outstanding Standby
Letters of Credit (as identified in Section 2.4(d)). Borrower
shall pay Lender a fee equal to one quarter of one percent
(0.25%) of the face amount of any Documentary Letter of Credit
issued by Lender, or a minimum of $75.00, upon issuance.
Borrower shall also pay to Lender its standard issuance costs
for Letters of Credit.
e. Breakage Fee. Upon prepayment of any Line of Credit Loan
principal bearing interest based on the LIBOR Rate provided
for in Section 2.7(a)(ii), Lender shall deliver to Borrower a
statement setting forth the amount and basis of determination
of any Breakage Fee which may be due, it being agreed that (a)
Lender shall not be obligated or required to have actually
reinvested the prepaid amount in any such U.S. Government
Treasury obligations as a condition precedent to receiving a
Breakage Fee calculated as provided herein, and (b) Borrower
shall not have the right to question the correctness of any
such statement or the method of calculation set forth therein
in the absence of manifest error. Borrower shall, upon receipt
of such statement and contemporaneously with any such
prepayment of principal, remit to Lender the Breakage Fee, if
any, due in connection therewith. Lender shall not be
obligated to accept any prepayment unless it is accompanied by
the Breakage Fee, if any, due in connection therewith.
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f. Audit Fees. Borrower shall pay to Lender on demand field
examination fees in the amount of $450 per day per examiner
for all audits or field examinations of Borrower and shall
reimburse Lender on demand for all reasonable airfare,
mileage, hotel accommodations and other out-of-pocket expenses
in connection with such audits or examinations. The sum of
$2,319.29 for audit fees and expenses related to the preloan
field exam provided for in the revised commitment letter dated
May 20, 1998, shall be paid to Lender at closing.
g. Expenses. Borrower shall reimburse Lender on demand for all
reasonable costs and expenses incurred in connection with the
preparation, negotiation, closing and administration of this
Agreement and the Supplemental Agreements, and any amendments
thereto, including, without limitation, attorneys' fees and
expenses. If the obligations are placed in the hands of any
attorneys employed by Lender for collection, Borrower agrees
to pay on demand, Lender's attorneys' fees, together with
costs and expenses, whether or not a legal proceeding or
action is commenced, including those incurred in a bankruptcy
or insolvency proceeding.
2.11 Purpose of Loans. Borrower agrees to use the proceeds of the Loans
solely as working capital, for general corporate purposes, to repay
existing indebtedness owed by Borrower to Rochester Regional Joint
Board, Unite, AFL-CIO and to Marine Midland Bank, and for other
purposes not prohibited by this Agreement.
2.12 Collection of Receivables. After the occurrence of an Event of Default
hereunder Lender or its designee may notify Account Debtors that
Receivables have been assigned to Lender or of Lender's security
interest therein and collect them directly and charge the reasonable
collection costs and expenses to Borrower's account; but, unless and
until Lender does so or gives Borrower other instructions, Borrower
shall make collection of all Receivables for Lender, receive all
payments thereon as Lender's trustee and immediately deliver them to
Lender in their original form. All such payments will be placed by
Lender into cash collateral accounts and, until credited to Borrower's
account as hereinafter set forth, shall be held by Lender as collateral
for payment and/or performance of Borrower's Obligations to Lender.
2.13 Returns, Credits, Etc. Any merchandise which is returned by an Account
Debtor or otherwise recovered shall, after the occurrence of an Event
of Default, be set aside, marked with Lender's name and held by
Borrower as Lender's trustee, and, before and after the occurrence of
an Event of Default, shall remain part of Lender's security. After the
occurrence of an Event of Default, on request, Borrower shall notify
Lender promptly of all returns and recoveries and deliver the
merchandise to Lender. Borrower shall also notify Lender promptly of
all disputes and claims exceeding $50,000 in the aggregate at any one
time and settle or adjust them at no expense to Lender, but no
discount, credit or allowance (other than in the ordinary course of
Borrower's business) shall be granted to any Account Debtor, and no
returns of merchandise (other than in the ordinary course of Borrower's
business) shall be accepted by Borrower without Lender's consent. After
the occurrence of an Event of Default hereunder Lender may settle or
adjust disputes and claims directly with Account Debtors for amounts
and upon terms which Lender considers advisable, and in all cases
Lender will credit Borrower's account with only the net amounts
received by Lender in payment of such Receivables.
16
2.14 Further Assurance. Upon Lender's request, Borrower shall appropriately
xxxx Borrower's books of account to disclose Lender's security interest
in all Borrower's Receivables, and shall perform all other steps
reasonably requested by Lender to create and maintain in Lender's favor
a valid first priority security interest, or lien in or on all
Receivables and all other security held by or for Lender.
2.15 Power of Attorney. Borrower appoints Lender, or any person whom Lender
may designate as its attorney, with power of attorney to sign
Borrower's name on notices of assignment, financing statements and
other public records; and to endorse Borrower's name on any checks,
notes, acceptances, money orders, drafts or other forms of payment or
security that may come into Lender's possession; to sign Borrower's
name on any invoice or xxxx of lading relating to any Receivables, on
verifications of accounts and on notices to customers; to notify the
post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender; to send requests
for verification of Receivables to Account Debtors; and to do all
things necessary to carry out this Agreement. Borrower ratifies and
approves all acts of such attorney. Neither Lender nor the attorney
will be liable for any acts or omissions nor for any error of judgment
or mistake of fact or law. This power, being coupled with an interest,
is irrevocable so long as any Receivables in which Lender has a
security interest remain unpaid or until the Obligations have been
fully satisfied. Lender may file one or more financing statements
disclosing Lender's security interest without Borrower's signature
appearing thereon.
SECTION 3. COLLATERAL
3.1 Security Interest. As security for payment and performance of all
Obligations, Borrower hereby assigns and grants to Lender a continuing
mortgage or security interest in the Collateral. Lender shall retain
its security interest in all Collateral until all Obligations have been
finally and irrevocably satisfied, provided, however, that Lender shall
release all Collateral other than the Premises and the Equipment upon
the payment in full to Lender and cancellation or negotiation of the
Revolving Note.
3.2 Possession of Collateral. After the occurrence and during the
continuance of an Event of Default hereunder, Lender will at all times
have the right to take physical possession of the Collateral and to
maintain possession of the personal property constituting Collateral on
Borrower's premises or to remove the personal property constituting
Collateral or any part thereof to such other places as Lender may
desire. If Lender exercises its right to take possession of the
Collateral, Borrower shall, upon Lender's demand, assemble the personal
property constituting Collateral and make it available to Lender at a
place reasonably convenient to Lender.
17
3.3 Location of Collateral. All Collateral is owned by Borrower free of all
other liens and encumbrances, except as set forth on Schedule 1 hereto,
and all personal property constituting Collateral shall be kept by
Borrower at the locations set forth in Schedule 2 hereto. Borrower will
not (without Lender's prior written approval) remove any material
personal property constituting Collateral therefrom, except for the
purposes of sale or lease in the regular course of Borrower's business.
3.4 Limitation on Disposition of Assets. Borrower will not sell, exchange
or otherwise dispose of the Collateral, or any material part thereof,
or any interest therein to any party or entity, including, without
limitation, any affiliate or subsidiary of Borrower, other than
Inventory in the ordinary course of business and other assets which
Borrower is specifically permitted to sell or transfer under Section
6.4 of this Agreement, without the express written authorization of
Lender. In the event of any other sale, exchange or other disposition
of the Collateral or any part thereof or any interest therein (and no
such sale, exchange or other disposition is hereby otherwise authorized
or consented to), the security interest of Lender shall nevertheless
continue in said Collateral (including all proceeds, cash and non-cash)
notwithstanding said sale, exchange or other disposition; all of said
proceeds shall remain Collateral hereunder and shall be transferred and
paid over to Lender immediately following said sale, exchange or other
disposition, and shall be applied at the option of Lender to the
payment of Obligations due hereunder; and the receipt by Lender of all
or any of said proceeds shall not be deemed or construed to be an
authorization or consent of Lender to such sale, exchange or other
disposition of said Collateral.
3.5 Further Assurances Regarding Inventory. Borrower shall perform any and
all steps reasonably requested by Lender to perfect Lender's security
interest in the Inventory, such as leasing warehouses to Lender or
Lender's designee, placing and maintaining signs, appointing
custodians, executing and filing financing or continuation statements
in form and substance satisfactory to Lender, maintaining stock records
and transferring Inventory to warehouses. If any Inventory is in the
possession or control of any of Borrower's agents or processors,
Borrower shall notify such agents or processors of Lender's security
interest therein, and, upon request, instruct them to hold all such
Inventory for Lender's account and subject to Lender's instructions. A
physical listing of all Inventory, wherever located, shall be taken by
Borrower at least annually and whenever reasonably requested by Lender,
and a copy of each such physical listing shall be supplied to Lender.
Lender may examine and inspect the Inventory at any time during
Borrower's regular business hours.
3.6 Compliance. Borrower will comply with the terms and conditions of any
leases covering the premises wherein the Collateral consisting of
personal property is located and any orders, ordinances, laws or
statutes of any city, state or other governmental department having
jurisdiction with respect to such premises or the conduct of business
thereon.
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3.7 Discharge of Liens. Lender may, at its option, discharge any taxes,
liens, security interests or other encumbrances at any time levied or
placed on the Collateral (other than indebtedness which is expressly
subordinate to the Loans), and Lender may pay insurance premiums or
procure insurance and otherwise pay for the maintenance and
preservation of the Collateral and Borrower will reimburse Lender on
demand for any payment made or expense incurred by Lender pursuant to
the foregoing authority, with interest at the rate provided in Section
2.7(a) of this Agreement.
3.8 Corporate Existence, Properties. Borrower will at all times maintain,
preserve and protect all franchises, patents, and trade names and
preserve all the remainder of its property used or useful in the
conduct of its business and keep the same in good condition and repair
(normal wear and tear and obsolescence excepted), and from time to time
make, or cause to be made, all needed and proper repairs, renewals,
replacements, betterments and improvements thereto, and will pay or
cause to be paid all rent due on premises where any property is held or
may be held, so that the business carried on in connection therewith
may be continuously conducted.
3.9 Insurance. Borrower will have and maintain insurance at all times with
respect to all Collateral against risks of fire (including so-called
extended coverage), theft and such risks as Lender may require
containing such terms, in such form, and for such periods, and written
by such companies as may be satisfactory to Lender, such insurance to
be payable to Lender and Borrower as their interests may appear; each
policy of insurance shall have a loss payee endorsement in form
satisfactory to Lender providing:
a. That loss or damage, if any under the policy, shall be payable
to Lender, as mortgagee or secured party, as its interests may
appear;
b. That the insurance as to the interest of Lender shall not be
invalidated by any act or neglect of the insured or owner of
the property described in said policy, nor by any foreclosure,
or other proceeding, nor by any change in the title of
ownership of said property, nor by the occupation of the
premises where the property is located for purposes more
hazardous than are permitted by said policy;
c. That, if the policy is canceled at any time by the insurance
carrier, in such case the policy shall continue in force for
the benefit of Lender for not less than thirty (30) days after
written notice of cancellation to Lender from the insurance
carrier; and
d. That the policy will not be reduced or canceled at the request
of the insured nor will said mortgagee or loss payee
endorsement be amended or deleted without thirty (30) days,
prior written notice to Lender from the insurance carrier.
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Borrower will furnish Lender with certificates or other evidence
satisfactory to Lender of compliance with the foregoing insurance
provisions, and Lender may act as attorney for Borrower in obtaining,
adjusting, settling, and canceling such insurance and receiving and
endorsing any drafts. Borrower hereby assigns to Lender any and all
monies which may become due and payable under any policy insuring the
Collateral covered by this Agreement, including return of unearned
premiums, and hereby directs any insurance company issuing any such
policy to make payment directly to Lender and authorizes Lender, at its
option: (i) to apply such monies in payment on account of any
Obligation hereunder, whether or not due, and remit any surplus to
Borrower; or (ii) to return said funds to Borrower for the purpose of
replacement of the Collateral. Borrower will also at all times maintain
necessary workers, compensation insurance and such other insurance as
may be required by law or as may be reasonably required in writing by
Lender.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties. Borrower warrants and represents to
Lender that: (a) Borrower is a limited partnership duly organized and
existing in good standing under the laws of the state of its formation
and qualified and licensed to do business in any other state in which
its ownership of property or its conduct of business requires it to be
so qualified and/or licensed; (b) Borrower has the right and power and
is duly authorized to enter into this Agreement and the Supplemental
Agreements; (c) The execution by Borrower of this Agreement and the
Supplemental Agreements shall not constitute a breach of any provision
contained in Borrower's partnership agreement or certificate of limited
partnership or contained in any agreement to which Borrower is now or
hereafter becomes a party; (d) The performance by Borrower of all of
the terms and provisions contained in this Agreement and in the
Supplemental Agreements shall not constitute a default or an event of
default under any agreement to which Borrower is now or hereafter a
party; (e) Borrower has good and indefeasible title to the Collateral,
subject only to Permitted Encumbrances identified in Schedule 1 hereto;
(f) All financial statements and information relating to Borrower which
have been or may hereafter be delivered by Borrower to Lender are true
and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles, and there has
been no material adverse change in the financial condition of Borrower
since the submission of any such financial information to Lender; (g)
There are no actions or proceedings which are pending or, to Borrowers,
knowledge, threatened against Borrower which might result in any
material adverse change in Borrower's financial condition or which
might in any material way affect any of the assets of Borrower; (h)
Borrower has duly filed all federal, state and other governmental tax
returns which it is required by law to file, and that all taxes and
other sums which may be due to the United States of America, any state
or other governmental authority have been fully paid and that Borrower
now has and shall hereafter maintain reserves adequate in amount to
fully pay all such tax liabilities which may hereafter accrue, and (i)
Borrower is solvent.
4.2 Environmental Matters.
a. No above ground or underground storage tanks containing
Hazardous Substances are or have been located on any property
owned, leased or operated by Borrower.
20
b. No property owned, leased or operated by Borrower is or has
been used for the treatment, storage or Disposal of Hazardous
Substances in violation of Environmental Laws.
c. No Release of a Hazardous Substance in violation of
Environmental Laws has occurred or is threatened on, at, from
any property owned, leased or operated by Borrower.
d. Borrower has not received any notices of violations of
Environmental Laws that have not been resolved to the
satisfaction of the issuing authority or agency.
e. Borrower has not received any request for information under
any Environmental Law.
f. There are no existing, pending or threatened suits or claims
under any Environmental Law.
g. To the best of Borrower's knowledge, Borrower is in compliance
with all Environmental Laws.
SECTION 5. AFFIRMATIVE COVENANTS. Borrower agrees as follows:
5.1 Monthly Financial Reports. To furnish to Lender, within thirty (30)
days after the end of each month, internally prepared financial reports
of the operations of Borrower for such month and for the fiscal
year-to-date, certified by the Chief Financial Officer of Borrower.
5.2 Annual Statements. To furnish to Lender within one hundred twenty (120)
days after the end of each of Borrower's fiscal years, audited
financial statements of Borrower consisting of a balance sheet, income
statement and associated statements of cash flow and retained earnings
for such year prepared on a consolidated basis, in accordance with
generally accepted accounting principles, by a firm of independent
certified public accountants satisfactory to Lender and certified by
such accountants.
5.3 Forecasts. To furnish to Lender (a) on or before the date of this
Agreement a financial forecast for each of Borrower's fiscal years from
1998 through 2001 with fiscal 1998 projections being on a monthly basis
and fiscal year 1999, 2000, and 2001 being on an annual basis,
consisting of (a) annual projections of Borrower's balance sheet,
income statement and associated cash flows, and (b) on each annual
anniversary of the date of this Agreement, an updated forecast for the
next fiscal year on a monthly basis.
5.4 Management. To notify Lender days prior to any reasonably foreseeable
change in the senior management of Borrower.
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5.5 Taxes. To pay promptly all tax assessments and other governmental
charges, provided, however, that nothing herein contained shall be
interpreted to require the payment of any tax assessments and other
governmental charges so long as their validity is being contested in
good faith, by appropriate proceedings diligently pursued, provided
such contest does not impair the rights and security of Lender.
5.6 Maintenance of Property. To maintain and keep its real and personal
property in good condition and in compliance in all material respects,
with applicable federal, state and local laws, rules and regulations.
5.7 Litigation. To notify Lender of any litigation instituted against
Borrower and any judgment entered against Borrower in any court
involving more than $150,000 in the aggregate at any one time, which is
not covered by insurance or where the insurance coverage is questioned
by the carrier.
5.8 Limited Partnership Existence. To maintain Borrower's limited
partnership existence in good standing, provided, however, that Lender
acknowledges that Borrower is considering its reorganization as a "C"
corporation, which reorganization shall be permitted with the prior
written consent of Lender, which consent shall not be unreasonably
withheld.
5.9 Other Information. To furnish such other information and at such times
as may be reasonably requested by Lender including,
5.10 Audits. To permit Lender and its agents from time to time, to examine,
audit, and make extracts from, or copies of, any of Borrower's books,
ledgers, reports and other records and to otherwise verify all or any
Collateral in any reasonable manner Lender considers appropriate.
5.11 Environmental Compliance.
a. To comply with all Environmental Laws.
b. To promptly notify Lender in the event of the Disposal of any
Hazardous Substance in violation of Environmental Laws at any
property owned, leased or operated by Borrower, or in the
event of any Release, or threatened Release, of a Hazardous
Substance, from any such property in violation of
Environmental Laws.
c. To deliver promptly to Lender (i) copies of any documents
received from the United States Environmental Protection
Agency or any state, county or municipal environmental or
health agency concerning a violation by Borrower of any
Environmental Law or of a notice of the commencement of a suit
or claim pursuant to any Environmental Law; and (ii) copies of
any documents submitted by Borrower to the United States
Environmental Protection Agency or any state, county or
municipal environmental or health agency concerning a
violation by Borrower of any Environmental Law or of a notice
of the commencement of a suit or claim pursuant to any
Environmental Law.
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SECTION 6. NEGATIVE COVENANTS. Borrower will not, without the prior written
consent of Lender:
6.1 Capital Expenditures. Expend annually for fixed assets, or enter into
leases which must be capitalized under generally accepted accounting
principles, or make leasehold improvements during the following fiscal
years in an aggregate amount in excess of the following amounts:
Fiscal Year ending 12/31/98 and thereafter $500,000
6.2 Liens. Create or permit to exist against any of its property or assets,
real or personal, tangible or intangible, now owned or hereafter
acquired, any mortgage or other lien or encumbrance, except liens and
mortgages listed on Schedule 1 hereto.
6.3 Borrowed Money. Incur other secured indebtedness for borrowed money,
except (a) indebtedness related to the Permitted Encumbrances described
on Schedule 1 hereto and (b) indebtedness from the Lender.
6.4 Sell Fixed Assets. Sell or dispose of a substantial portion of
presently owned fixed assets, such as furniture, fixtures and
equipment.
6.5 Declare Dividends. Declare any dividends or make any other distribution
on any partnership interest or set apart any sum for the payment of any
such dividends or distributions, except that Borrower shall be
permitted to make distributions to its partners in amounts sufficient
to fund its partners' tax obligations based on the income of Borrower.
6.6 Purchase Partnership Interests. Purchase or redeem any of its
partnership interests.
6.7 Purchase Other Business. Purchase or acquire all or substantially all
of the property, assets, or business of any other person, firm or
corporation, except with notification to and the prior written consent
of Lender, which shall not be unreasonably withheld, provided, however,
that Lender's prior written consent shall not be required if (a) after
giving effect to such transaction, such person, firm or corporation
would be a consolidated subsidiary of Borrower, (b) Borrower notifies
Lender prior to the consummation of such transaction, and (c) prior to
the consummation of such transaction, Borrower delivers to Lender
projections demonstrating that, after giving effect to such
transaction, Borrower would be in compliance with Sections 6.16, 6.17,
6.18, 6.19 and 6.20 of this Agreement as of the end of the most recent
fiscal quarter or fiscal year, as applicable.
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6.8 Contingent Debt. Assume, guarantee, endorse, contingently agree to
purchase, or otherwise become liable upon the obligation of any person,
firm, or corporation, except (a) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business or (b) guarantees of any obligations owed
to Lender.
6.9 Purchase Stock; Merger or Consolidate. Enter into any merger or
consolidation, or purchase or acquire the obligations or stock of, or
any other interest in, any person, firm, corporation, or other
enterprise whatsoever, except the purchase of direct obligations of the
United States of America or of any state, county, or municipality, or
except with notification to and the prior written consent of Lender,
which shall not be unreasonably withheld, provided, however, that
Lender's prior written consent shall not be required if (a) after
giving effect to such transaction, such person, firm, corporation or
enterprise would be a consolidated subsidiary of Borrower, (b) Borrower
notifies Lender prior to the consummation of such transaction, and (c)
prior to the consummation of such transaction, Borrower delivers to
Lender projections demonstrating that, after giving effect to such
transaction, Borrower would be in compliance with Sections 6.16, 6.17,
6.18, 6.19 and 6.20 of this Agreement as of the end of the most recent
fiscal quarter or fiscal year, as applicable.
6.10 Sale-Leaseback. Directly or indirectly enter into any arrangement
whereby the Borrower shall sell or transfer all or any substantial part
of its fixed assets then owned by it and shall thereafter or thereupon
rent or lease such property or a substantial part thereof, except with
notification to and the prior written consent of Lender, which shall
not be unreasonably withheld.
6.11 Accounts Receivable. Sell, assign, transfer, or dispose of any of its
Receivables, except with Lender's prior written consent.
6.12 Loans. Make loans or advances to any person, firm, or corporation in
excess of $25,000, except in the ordinary course of Borrower's
business.
6.13 Lease of Real and Personal Property. Enter into any arrangements for
the lease of real or personal property where the annual lease payments
for all such leases would exceed in the aggregate $100,000 in any
fiscal year, other than renewals of leases in existence on the date
hereof.
6.14 Prepay Debt. Make any prepayment in regard to any indebtedness that is
subordinated in any respect to indebtedness owing to Lender, except for
the unsecured trade credit owed by Borrower to Xxx. A. Bank Clothiers,
Inc., a Delaware corporation.
24
6.15 ERISA Compliance.
a. Engage in any "prohibited transaction" (as such term is
defined in Section 406 or Section 2003(a) of the Employee
Retirement Income Security Act of 1974 and the regulations
thereunder, as now or hereafter in effect, ("ERISA"));
b. Incur any "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA) whether or not waived; or
c. Terminate any pension plan in a manner which could result in
the imposition of a lien on any property of the Borrower or
any affiliate pursuant to Section 4068 of ERISA.
6.16 Working Capital Ratio. Permit the ratio of Borrower's Current Assets to
Current Liabilities (including the Line of Credit Loans) to be less
than the following as of the following time periods:
Time Period Ratio
----------- -----
June 30, 1998 0.85:1
Sept. 30, 1998 0.85:1
Dec. 31, 1998 0.90:1
Mar. 31, 1999 0.90:1
June 30, 1999 0.95:1
Sept. 30, 1999 0.95:1
Dec. 31, 1999 1.00:1
Mar. 31, 2000 1.05:1
June 30, 2000 1.05:1
Sept. 30, 2000 1.10:1
Dec. 31, 2000 1.10:1
Mar. 31, 2001 1.10:1
June 30, 2001 1.10:1
6.17 Total Liabilities-to-Tangible Net Worth. Permit the ratio of Borrower's
Total Liabilities (less indebtedness subordinated to Lender) to
Tangible Net Worth (partners' equity plus indebtedness subordinated to
Lender) to be greater than the following during the following time
periods:
Time Period Ratio
----------- -----
June 30, 1998 7.70:1
Sept. 30, 1998 6.40:1
Dec. 31, 1998 5.50:1
Mar. 31, 1999 4.90:1
June 30, 1999 4.40:1
Sept. 30, 1999 4.00:1
Dec. 31, 1999 to June 30, 2001 4.00:1
25
6.18 Minimum Tangible Net Worth. Permit the Borrower's Tangible Net Worth
(partner's equity plus indebtedness subordinated to Lender), less
Intangible Assets, to fall below the following as of any of the
following dates:
Time Period Amount
----------- ------
June 30, 1998 $2,500,000
Sept. 30, 1998 $2,900,000
Dec. 31, 1998 $3,200,000
Mar. 31, 1999 $3,400,000
June 30, 1999 $3,600,000
Sept. 30, 1999 $3,800,000
Dec. 31, 1999 $4,000,000
Mar. 31, 2000 $4,250,000
June 30, 2000 $4,500,000
Sept. 30, 2000 $4,750,000
Dec. 31, 2000 $5,000,000
Mar. 31, 2001 $5,250,000
June 30, 2001 $5,500,000
6.19 Debt Service Coverage. Permit the ratio of (a) Borrower's income before
payment or allowance for depreciation and amortization, interest or
taxes payable, plus proceeds of long-term debt to (b) the sum of
Borrower's interest expense plus the current maturities of Borrower's
long-term indebtedness, plus capital expenditures, on a fiscal year
basis to be less than:
Time Period Ratio
----------- -----
Fiscal Year End 1998 1.50:1
Fiscal Year End 1999 and thereafter 1.75:1
6.20 Pretax Income. Permit Borrower's Pretax Income, measured on a
cumulative year-to-date basis, tested quarterly and reset each year, to
be less than the following during the following time periods:
Time Period Ratio Period Covered
----------- ----- --------------
June 30, 1998 $ 250,000 two qtrs.
Sept. 30, 1998 $ 600,000 three qtrs.
Dec. 31, 1998 $1,000,000 four qtrs.
March 31, 1999 $ 250,000 one qtr.
June 30, 1999 $ 600,000 two qtrs.
Sept. 30, 1999 $1,000,000 three qtrs.
Dec. 31, 1999 $1,500,000 four qtrs.
Mar. 31, 2000 $ 250,000 one qtr.
June 30, 2000 $ 600,000 two qtrs.
Sept. 30, 2000 $1,000,000 three qtrs.
Dec. 31, 2000 $1,750,000 four qtrs.
Mar. 31, 2001 $ 250,000 one qtr.
June 30, 2001 $ 600,000 two qtrs.
26
6.21 Disposal of Hazardous Substances. Suffer, cause or permit the Disposal
of Hazardous Substances in violation of Environmental Laws at any
property owned, leased or operated by it.
SECTION 7. DEFAULT.
7.1 Events of Default. The occurrence of any one or more of the following
events with respect to Borrower shall constitute an Event of Default
under this Agreement:
a. Failure by Borrower to pay any principal or interest or fees
within fifteen (15) days of the date when due and payable
pursuant to this Agreement, any note executed pursuant to this
Agreement, or any other document executed and delivered by
Borrower to Lender in connection with this Agreement, and upon
written notice of delinquency from Lender following such due
date.
b. Default shall be made in (a) the due observance and
performance of any term, covenant, or agreement contained in
this Agreement (other than Section 6 of this Agreement, but
including Sections 6.2, 6.8, and 6.15(a) or (b)) or in any
other present or future agreement, note, or instrument between
Borrower and Lender, including, without limitation, any
default under any Supplemental Agreements and, to the extent
such default is capable of being cured, such default shall
remain uncured for a period of thirty (30) days after the
occurrence of such default, or (b) the due observance and
performance of any term, covenant or agreement contained in
Section 6 (other than Sections 6.2, 6.8, and 6.15(a) or (b))
of this Agreement.
c. Any representation or warranty made in this Agreement or any
certificate or statement furnished pursuant to or in
connection with this Agreement shall prove to have been false
in any material respect at the date of which the facts therein
set forth were certified, or shall have omitted any material
contingent or unliquidated liability or claim against
Borrower, or if upon the date of the execution of this
Agreement there shall have been any material adverse change in
any of the facts disclosed on any such statement, which change
shall not have been disclosed to Lender in writing at or prior
to the time of such execution.
27
d. The termination of existence or business of Borrower, or the
making of an assignment for the benefit of creditors by
Borrower.
e. The entry of any judgment or judgments against Borrower
aggregating as to any one of them at any one time in excess of
$150,000 which shall remain unsatisfied, undischarged, or
unsecured for a period of thirty (30) days or as to which a
stay of execution shall not have been obtained within ten (10)
days of the entry thereof.
f. If any governmental agency or department shall take control of
a substantial part of the property of Borrower.
g. If any tax lien is filed against the property of Borrower,
except for taxes or assessments or other governmental charges
not then due and payable or which are contested in good faith
by Borrower and for which Borrower has set aside adequate
reserves.
h. Failure by Borrower to generally pay its debts as such debts
become due, unless the delinquent payment of a particular debt
is consistent with Borrower's prior custom and practice and
does not otherwise result in or contribute to a covenant
violation or other Event of Default under this Agreement.
i. [Intentionally omitted].
j. If Borrower (i) shall file a petition or request for
liquidation, reorganization, arrangement, adjudication as a
bankrupt, relief as a debtor or other relief under the
bankruptcy, insolvency or similar laws of the United States of
America or any state or territory thereof or any foreign
jurisdiction, now or hereafter in effect; (ii) shall make a
general assignment for the benefit of creditors; (iii) shall
consent to the appointment of a receiver or trustee for
Borrower or any of its assets, including, without limitation,
the appointment of or taking possession by a "custodian" as
defined in the federal Bankruptcy Code; (iv) make any, or send
notice of any intended, bulk sale; or (v) shall execute a
consent to any other type of insolvency proceeding (under the
federal Bankruptcy Code or otherwise) or any formal or
informal proceeding for the dissolution or liquidation of, or
settlement of claims against or winding up of affairs of,
Borrower.
k. The appointment of a receiver, trustee, custodian or officer
performing similar functions for Borrower, including, without
limitation, the appointment of or taking possession by a
"custodian" as defined in the federal Bankruptcy Code; or the
filing against Borrower of a request or petition for
liquidation, reorganization, arrangement, adjudication as a
bankrupt or other relief under the bankruptcy, insolvency or
similar laws of the United States of America or any state or
territory thereof or any foreign jurisdiction, now or
hereafter in effect; or the institution against Borrower of
any other type of insolvency (under the federal Bankruptcy
Code or otherwise) or of any formal or informal proceeding for
the dissolution or liquidation of, settlement of claims
against or winding up of affairs of Borrower of payment of the
Obligations, and the failure to have such appointment vacated
or such petition or proceeding dismissed within thirty (30)
days after such appointment, filing or institution.
28
1. If all, or a controlling interest of, the partnership
interests of the Borrower shall be sold, assigned, or
otherwise transferred, whether pursuant to a security
agreement or pledge agreement or otherwise.
7.2 Effects of an Event of Default.
a. Upon the happening of one or more Events of Default (except a
default under either Section 7.1(j) or 7.1(k) hereof), Lender
may declare any obligations it may have hereunder to be
canceled and the principal of Loans then outstanding to be
immediately due and payable, together with all interest
thereon and fees and expenses accruing under this Agreement.
Upon such declaration, any obligations Lender may have
hereunder shall be immediately canceled and Loans then
outstanding shall become immediately due and payable without
presentation, demand or further notice of any kind to
Borrower.
b. Upon the happening of one or more Events of Default under
Section 7.1(j) or 7.1(k) hereof, Lender's obligations
hereunder shall be canceled immediately, automatically and
without notice, and the Loans then outstanding shall become
immediately due and payable without presentation demand or
notice of any kind to Borrower.
7.3 Rights of Lender. Upon the occurrence of an Event of Default under
Section 7.1 hereof: (a) Lender shall have, in addition to all other
rights provided herein, the rights and remedies of a secured party
under the New York Uniform Commercial Code; and (b) Lender may sell and
deliver any or all Receivables and any or all other security and
Collateral held by Lender or for Lender at public or private sale, for
cash, upon credit or otherwise; and (c) in addition to all other sums
due Lender, Borrower will pay to Lender upon demand all costs and
expenses incurred by Lender, including attorneys' fees and expenses, to
obtain or enforce payment of Receivables or obligations, or in the
prosecution or defense of any action or proceeding either against
Lender or against Borrower concerning any matter arising out of or
connected with this Agreement or the Collateral or obligations and all
Supplemental Agreements, if any, or otherwise due pursuant to the terms
of this Agreement. Any requirement of reasonable notice shall be met if
such notice is mailed postage prepaid to Borrower at Borrower's address
as set forth herein at least five (5) days before the time of sale or
other disposition. Lender may be the purchaser at any such sale, if it
is public, and, in the event Lender is the purchaser, Lender shall have
all the rights of a good faith, bona fide purchaser for value from a
secured party after default. The proceeds of sale shall be applied
first to all costs and expenses of sale, including actual attorneys'
fees and expenses, and second to the payment (in whatever order Lender
elects) of all Obligations, and any remaining proceeds shall be applied
in accordance with the provisions of Part 5 of Article 9 of the New
York Uniform Commercial Code. Borrower shall remain liable to Lender
for any deficiency. Failure by Lender to exercise any right, remedy or
option under this Agreement or any present or future Supplemental
Agreement or in any other agreement between Borrower and Lender, or
delay by Lender in exercising the same will not operate as a waiver. No
waiver by Lender will be effective unless it is in writing and then
only to the extent specifically stated. Neither Lender nor any party
acting as Lender's attorney pursuant to Section 2.15 hereof shall be
liable for any good faith error of judgment or mistake of fact or law.
Lender's rights and remedies under this Agreement will be cumulative
and not exclusive of any other right or remedy which Lender may have.
29
SECTION 8. OTHER PROVISIONS
8.1 Lease of Ledgers. For good and valuable consideration, Borrower hereby
leases to Lender and Lender hereby hires from Borrower, for a term
which shall last as long as there shall be any present or future
indebtedness or obligations of whatever nature owing from Borrower to
Lender, all of Borrower's books of account, ledgers and cabinets in
which there are reflected or maintained the Collateral, and all
supporting evidence and documents relating thereto in the form of
written applications, credit information, account cards, payment
records, correspondence, delivery and installation certificates,
invoice copies, delivery receipts, notes and other evidences of
indebtedness, insurance certificates and the like. Lender and its
representatives shall at all reasonable times during normal business
hours have and be entitled to free and undisturbed access to such books
of account, ledgers and cabinets and may examine and audit the contents
thereof and take excerpts therefrom. All additional books of account,
ledgers and cabinets in which there may hereafter be reflected or
maintained assigned Collateral and supporting evidence or documents
pertaining thereto shall also and without further act be subject to the
provisions of this paragraph.
8.2 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand or, if sent by facsimile, upon
confirmed receipt thereof, or one (1) business day after being
delivered to a courier for overnight delivery, or five (5) business
days after being deposited in the mail, certified mail with return
receipt requested, addressed to the addresses set forth in the preamble
to this Agreement, or to such other address as may be hereafter
notified by the respective parties hereto.
8.3 Setoff. All sums at any time standing to Borrower's credit on Lender's
books and all of Borrower's property at any time in Lender's
possession, or upon or in which Lender has a lien or security interest
shall be security for all Obligations. In addition to and not in
limitation of the above, with respect to any deposits or property of
Borrower in Lender's possession or control, now or in the future,
Lender shall have the right after default and demand hereunder to
setoff all or any portion thereof, at any time, against any Obligations
hereunder, without prior notice or demand to Borrower.
30
8.4 Counsel Fees and Expenses. Borrower agrees to pay all counsel fees and
expenses, including recording and filing fees, incurred by Lender in
connection with the financing evidenced by this Agreement as well as
any fees and expenses of counsel which Lender may hereafter incur in
protecting, enforcing, increasing or releasing any security held by
Lender.
8.5 Further Assurance. Borrower agrees that any time, or from time to time,
upon the written request of Lender, Borrower will execute and deliver
such further documents and do such other acts and things as Lender may
reasonably request in order to fully effect the purposes of this
Agreement and the Supplemental Agreements.
8.6 Construction. This Agreement and the Supplemental Agreements may not
be amended orally.
8.7 Successors. All rights of Lender hereunder shall inure to the benefit
of its successors and assigns, and all Obligations of Borrower shall
bind the successors and assigns of Borrower.
8.8 [Intentionally omitted].
8.9 Payments. The acceptance of any check, draft or money order rendered in
full or partial payment of any obligation hereunder is conditioned upon
and subject to the receipt of final payment in cash.
8.10 Exhibits and Schedules. All exhibits and schedules referred to herein
and annexed hereto are hereby incorporated into this Agreement and made
a part hereof.
8.11 Governing Law. This Agreement shall be governed and construed in
accordance with the internal laws of the State of New York, without
regard to principles of conflicts of law.
8.12 Environmental Indemnification. Borrower agrees to indemnify, defend,
and hold harmless Lender from and against any and all liabilities,
claims, damages, penalties, expenditures, losses, or charges,
including, but not limited to, all costs of investigation, monitoring,
legal representation, remedial response, removal, restoration or permit
acquisition, which may now or in the future be undertaken, suffered,
paid, awarded, assessed, or otherwise incurred by Lender or any other
person or entity as a result of the presence of, Release of or
threatened Release or Hazardous Substances on, in, under the property
owned or operated by Borrower. The liability of Borrower under the
covenants of this Section is not limited by any exculpatory provisions
in this Agreement or any other Supplemental Documents and shall survive
repayment of the Documents and shall survive repayment of the
obligations or any transfer or termination of this Agreement regardless
of the means of such transfer or termination.
31
8.13 WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER AND LENDER HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR
NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED ARISING OUT OF
THIS AGREEMENT, THE COLLATERAL AND SUPPLEMENTAL AGREEMENTS OR ANY
ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OF DISPUTE BETWEEN
BORROWER AND LENDER.
8.14 CONSENT TO JURISDICTION. BORROWER AND LENDER AGREE THAT ANY ACTION OR
PROCEEDING TO ENFORCE, OR ARISING OUT OF, THIS AGREEMENT OR ANY
DOCUMENT EXECUTED IN CONNECTION HEREWITH, MAY BE COMMENCED IN NEW YORK
STATE IN ONONDAGA COUNTY, OR IN THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF NEW YORK, AND BORROWER WAIVES PERSONAL SERVICE
OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION
OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL
CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL
TO BORROWER, OR AS OTHERWISE PROVIDED BY THE LAWS OF NEW YORK STATE OR
THE UNITED STATES.
32
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered by the proper and duly authorized officers as of
the 19th day of June, 1998.
XX XXXXXXXXXX, L.P.
By: XX Xxxxxxxxxx Acquisition Corporation,
its sole general partner
By: /s/ Xxxx Xxxxxxx
-----------------------
NATIONAL BANK OF CANADA
By: /s/ Xxxxxx X. Xxxxx
-----------------------
and
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------
33
SCHEDULE 1
PERMITTED ENCUMBRANCES
1. Memorandum of Lease Agreement made by and between XX Xxxxxxxxxx, L.P.,
"Company", and Onondaga County Industrial Development Agency, "Agency",
dated October 1, 1994, and recorded December 28, 1994, in the Onondaga
County Clerk's Office in Book 3974 of Deeds at page 320;
2. Memorandum of Lease Agreement made by and between Onondaga County
Industrial Development Agency, "Agency", and XX Xxxxxxxxxx, L.P.,
"Company", dated October 1, 1994, and recorded December 28, 1994, in
the Onondaga County Clerk's Office in Book 3974 of Deeds at page 324&c;
3. Direct Mortgage in the original principal amount of $520,000 by XX
Xxxxxxxxxx, L.P. to New York State Urban Development Corporation d/b/a
Empire State Development Corporation, dated as of November 22, 1995;
4. Liens for taxes or assessments or other governmental charges not yet
due and payable or which are being contested in good faith or for which
adequate reserves have been set aside;
5. Pledges or deposits of money securing obligations under workers'
compensation, unemployment insurance, social security, or public
liability laws or similar legislation (excluding liens under ERISA);
6. Leases of equipment, to the extent deemed financing instruments and not
true leases;
7. Banker's liens, rights of set-off, and similar liens incurred on
deposits made in the ordinary course of business;
8. Workers', mechanics' or similar liens arising in the ordinary course of
business;
9. Unperfected carriers', warehousemen's, suppliers' or other similar
possessory liens arising in the ordinary course of business;
10. Deposits securing, or in lieu of, surety, appeal or custom bonds in
proceedings to which Borrower is a party;
11. Any attachment or judgment lien not constituting an Event of Default;
A-1
12. Zoning restrictions, utility access and other easements and rights of
way, licenses, or other restrictions on the use of any real property
interest or other insurable exceptions and minor defects and
irregularities in title (including leasehold title) thereto;
13. Presently existing or hereinafter created liens in favor of Lender.
A-2
