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EXHIBIT 10.8
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CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
THE SPORTSMAN'S GUIDE, INC.
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Dated as of: DECEMBER 27, 1999
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Table of Contents
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ARTICLE I Definitions............................................................................................1
Section 1.1 Definitions.......................................................................................1
Section 1.2 Cross References..................................................................................9
ARTICLE II Amount and Terms of the Credit Facility..............................................................10
Section 2.1 Revolving Advances...............................................................................10
Section 2.2 Procedures for Borrowing.........................................................................10
Section 2.3 Letters of Credit................................................................................10
Section 2.4 Payment of Amounts Drawn Under Letters of Credit; Obligation of Reimbursement....................11
Section 2.5 Special Account..................................................................................12
Section 2.6 Obligations Absolute.............................................................................12
Section 2.8 Interest; Interest Rate Margin; Minimum Interest Charge; Default Interest; Participations;
Usury........................................................................................................13
Section 2.8 Fees.............................................................................................13
Section 2.9 Computation of Interest and Fees; When Interest Due and Payable..................................14
Section 2.12 Voluntary Prepayment; Reduction of the Maximum Line; Termination of the Credit Facility by
Borrower.....................................................................................................16
Section 2.12 Termination and Line Reduction Fees; Waiver of Termination and Line Reduction Fees..............16
Section 2.13 Mandatory Prepayment............................................................................16
Section 2.14 Payment.........................................................................................17
Section 2.15 Payment on Non-Banking Days.....................................................................17
Section 2.16 Use of Proceeds.................................................................................17
Section 2.17 Liability Records...............................................................................17
ARTICLE III Security Interest; Occupancy; Setoff................................................................17
Section 3.1 Grant of Security Interest.......................................................................17
Section 3.2 Notification of Account Debtors and Other Obligors...............................................17
Section 3.3 Assignment of Insurance..........................................................................18
Section 3.4 Occupancy........................................................................................18
Section 3.5 License..........................................................................................19
Section 3.6 Financing Statement..............................................................................19
Section 3.7 Setoff...........................................................................................19
ARTICLE IV Conditions of Lending................................................................................19
Section 4.1 Conditions Precedent to the Initial Revolving Advance and the Initial Letter of Credit...........19
Section 4.2 Conditions Precedent to All Advances and Letters of Credit.......................................21
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ARTICLE V Representations and Warranties........................................................................21
Section 5.1 Corporate Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
Tax Identification Number....................................................................................21
Section 5.2 Capitalization...................................................................................21
Section 5.3 Authorization of Borrowing; No Conflict as to Law or Agreements..................................21
Section 5.4 Legal Agreements.................................................................................22
Section 5.5 Subsidiaries.....................................................................................22
Section 5.6 Financial Condition; No Adverse Change...........................................................22
Section 5.7 Litigation.......................................................................................22
Section 5.8 Regulation U.....................................................................................23
Section 5.9 Taxes............................................................................................23
Section 5.10 Titles and Liens................................................................................23
Section 5.11 Year 2000.......................................................................................23
Section 5.12 Intellectual Property Rights....................................................................23
Section 5.13 Plans...........................................................................................24
Section 5.14 Default.........................................................................................24
Section 6.15 Environmental Matters...........................................................................24
Section 5.16 Submissions to Lender...........................................................................25
Section 5.17 Financing Statements............................................................................25
Section 5.18 Rights to Payment...............................................................................26
Section 5.19 Financial Solvency..............................................................................26
ARTICLE VI Borrower's Affirmative Covenants.....................................................................27
Section 6.1 Reporting Requirements...........................................................................27
Section 6.2 Books and Records; Inspection and Examination....................................................29
Section 6.3 Account Verification.............................................................................29
Section 6.4 Compliance with Laws.............................................................................30
Section 6.5 Payment of Taxes and Other Claims................................................................30
Section 6.6 Maintenance of Properties........................................................................30
Section 6.7 Insurance........................................................................................31
Section 6.8 Preservation of Existence........................................................................31
Section 6.9 Delivery of Instruments, etc.....................................................................31
Section 6.10 P.O. Box;Credit Card Payments; Collateral Accounts..............................................31
Section 6.11 Landlord's Disclaimers..........................................................................32
Section 6.12 Performance by the Lender.......................................................................32
Section 6.13 Maximum Debt to Book Net Worth Ratio............................................................33
Section 6.14 Minimum Pre-Tax Net Income per Accounting Period................................................33
Section 6.15 Minimum Fiscal Year-To-Date Net Income..........................................................33
Section 6.16 Maximum Inventory Days..........................................................................33
Section 6.17 New Covenants...................................................................................34
ARTICLE VII Negative Covenants..................................................................................34
Section 7.1 Liens............................................................................................34
Section 7.2 Indebtedness.....................................................................................34
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Section 7.3 Guaranties.......................................................................................35
Section 7.4 Investments and Subsidiaries.....................................................................35
Section 7.5 Dividends........................................................................................36
Section 7.6 Sale or Transfer of Assets; Suspension of Business Operations....................................36
Section 7.7 Intellectual Property............................................................................36
Section 7.8 Consolidation and Merger; Asset Acquisitions.....................................................36
Section 7.9 Sale and Leaseback...............................................................................36
Section 7.10 Restrictions on Nature of Business..............................................................36
Section 7.11 Capital Expenditures............................................................................36
Section 7.12 Accounting......................................................................................36
Section 7.13 Discounts, etc..................................................................................37
Section 7.14 Defined Benefit Pension Plans...................................................................37
Section 7.15 Other Defaults..................................................................................37
Section 7.16 Place of Business; Name.........................................................................37
Section 7.17 Organizational Documents........................................................................37
Section 7.18 Salaries........................................................................................37
ARTICLE VIII Events of Default, Rights and Remedies.............................................................37
Section 9.1 Events of Default................................................................................37
Section 8.2 Rights and Remedies..............................................................................39
Section 8.3 Certain Notices..................................................................................40
ARTICLE IX Miscellaneous........................................................................................40
Section 9.1 Release..........................................................................................40
Section 9.2 No Waiver; Cumulative Remedies...................................................................41
Section 9.3 Amendments, Etc..................................................................................41
Section 9.4 Addresses for Notices, Etc.......................................................................41
Section 9.5 Servicing of Credit Facility.....................................................................42
Section 9.6 Further Documents................................................................................43
Section 9.7 Collateral.......................................................................................43
Section 9.8 Costs and Expenses...............................................................................43
Section 9.9 Indemnity........................................................................................44
Section 9.10 Participants....................................................................................44
Section 9.11 Execution in Counterparts.......................................................................44
Section 9.12 Binding Effect; Assignment; Complete Agreement; Exchanging Information..........................45
Section 9.13 Severability of Provisions......................................................................45
Section 9.14 Headings........................................................................................45
Section 9.15 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial........................................46
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CREDIT AND SECURITY AGREEMENT
Dated as of December 27, 1999
The Sportsman's Guide, Inc., a Minnesota corporation (the
"Borrower"), and Norwest Bank Minnesota, National Association, a national
banking association (the "Lender"), hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounting Period" means a four or five week fiscal period of
the Borrower.
"Accounts" means as to any Person, all of that Person's
accounts, as such term is defined in the UCC, including without
limitation the aggregate unpaid obligations of customers and other
account debtors to that Person arising out of the sale or lease of
goods or rendition of services by that Person on an open account or
deferred payment basis.
"Advance" means a Revolving Advance.
"Affiliate" means, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person. For
the purposes of this definition, "control," when used with respect to
any specified Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"Availability" means the difference of (i) the Borrowing Base
and (ii) the sum of (A) the outstanding principal balance of the
Revolving Note and (B) the L/C Amount.
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"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in
Minneapolis, Minnesota.
"Book Net Worth" means the total assets of the Borrower minus
its total liabilities, as determined in accordance with GAAP.
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's
sole discretion, the sum of:
(i) 80% of Eligible Accounts, plus
(ii) 55% of Eligible Inventory, less
(iii) the Landlord's Disclaimer Reserve.
"Capital Expenditures", as to any Person, means any
expenditure of money for the capital lease, purchase or other
acquisition of any capital asset.
"Change of Control" means the occurrence of any of the
following events:
(i) Any event, transaction or occurrence, or
series thereof, where any Person or "group" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange
Act 1934) is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person will be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the
passage of time) of twenty-five percent (25%) or more of the
assets, or economic or voting rights associated with ownership
of the Borrower, and such Person or Group was not the
beneficial owner of such assets or rights immediately prior to
such event, transaction or occurrence, or series thereof;
provided, however, that this clause (i) does not exclude any
Person or group who becomes the benefical owner of up to
thirty-five percent (35%) of the assets, or economic or voting
rights associated with ownership of the Borrower, in
connection with the private placement being conducted by
Cruttenden Xxxx Incorporated on behalf of the Borrower.
(ii) During any consecutive two-year period,
individuals who at the beginning of such period constituted
the board of directors of the Borrower (together with any new
directors whose election to such board of directors, or whose
nomination for election by the stockholders of the Borrower,
was approved by a vote of 66 2/3% of the directors then still
in office who were either directors at the beginning of such
period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the board of directors of the Borrower then in
office.
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(iii) The Borrower is liquidated or dissolved or
adopts a plan of liquidation or dissolution.
"Collateral" means all of the Borrower's Equipment, General
Intangibles, Inventory, Receivables, Investment Property, all sums on
deposit in any Collateral Account, and any items in any lockbox or the
P.O. Box; together with (i) all substitutions and replacements for and
products of any of the foregoing; (ii) proceeds of any and all of the
foregoing; (iii) in the case of all tangible goods, all accessions;
(iv) all accessories, attachments, parts, equipment and repairs now or
hereafter attached or affixed to or used in connection with any
tangible goods; (v) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods; and (vi) all
sums on deposit in the Special Account.
"Collateral Account" has the meaning given in the Collateral
Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement of even date herewith by and among the Borrower, Norwest Bank
Minnesota, National Association, in its capacity as collateral account
agent, and the Lender.
"Commitment" means the Lender's commitment to make Advances
and to issue Letters of Credit to or for the Borrower's account
pursuant to Article II.
"Credit Facility" means the credit facility being made
available to the Borrower by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person on a consolidated basis as of the date as
of which Debt is to be determined. For purposes of determining a
Person's aggregate Debt at any time, "Debt" shall also include the
aggregate payments required to be made by such Person at any time under
any lease that is considered a capitalized lease in accordance with
GAAP.
"Debt to Book Net Worth Ratio" as of a given date means the
ratio of the Borrower's Debt to its Book Net Worth.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
first day of any fiscal quarter during which a Default or Event of
Default has occurred and ending on the date the Lender notifies the
Borrower in writing that such Default or Event of Default has been
cured or waived.
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"Default Rate" means an annual rate equal to two percent (2%)
over the Floating Rate, which rate shall change when and as the
Floating Rate changes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Eligible Accounts" means all unpaid Accounts owed to the
Borrower, net of any credits, except the following shall not in any
event be deemed Eligible Accounts:
(i) That portion of (a) the Borrower's "EZ Pay
Plan" Accounts for which payments are delinquent and (b) list
rental Accounts unpaid 120 days or more after the invoice
date;
(ii) That portion of Accounts that is disputed or
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services by the
Borrower to the customer;
(iv) Accounts owed by any unit of government,
whether foreign or domestic (provided, however, that there
shall be included in Eligible Accounts that portion of
Accounts owed by such units of government for which the
Borrower has provided evidence satisfactory to the Lender that
(A) the Lender has a first priority perfected security
interest and (B) such Accounts may be enforced by the Lender
directly against such unit of government under all applicable
laws);
(v) Accounts owed by an account debtor located
outside the United States which are not (A) backed by a bank
letter of credit naming the Lender as beneficiary or assigned
to the Lender, in the Lender's possession and acceptable to
the Lender in all respects, in its sole discretion, (B)
covered by a foreign receivables insurance policy acceptable
to the Lender in its sole discretion;
(vi) Accounts owed by an account debtor that is
insolvent, the subject of bankruptcy proceedings or has gone
out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected
security interest in the Lender's favor or which are subject
to any lien, security interest or claim in favor of any Person
other than the Lender including without limitation any payment
or performance bond;
(ix) That portion of Accounts that has been
restructured, extended, amended or modified;
(x) That portion of Accounts that constitutes
advertising, finance charges, service charges or sales or
excise taxes;
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(xi) List rental Accounts owed by an account
debtor, regardless of whether otherwise eligible, if 10% or
more of the total amount due under Accounts from such debtor
is ineligible under clauses (i), (ii) or (ix) above;
(xii) "EZ Pay Plan Accounts" owed by an account
debtor, regardless of whether otherwise eligible, if 10% or
more of the total amount due under Accounts from such debtor
is ineligible under clauses (ii) or (ix) above; and
(xiii) Accounts, or portions thereof,
otherwise deemed ineligible by the Lender in its sole
discretion.
"Eligible Inventory" means all Inventory of the Borrower
reduced by any Eligible Inventory Reserve; provided, however, that the
following shall not in any event be deemed Eligible Inventory:
(i) Inventory that is: in-transit unless such
Inventory is acquired with the support of a documentary Letter
of Credit and the Lender or a Person who has agreed to act as
the Lender's agent has possession of all duplicate original
documents of title covering such Inventory; located at any
warehouse, job site or other premises not approved by the
Lender in writing; located outside of the states, or
localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security
interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, xxxx of lading or other
document of title; on consignment from or to any Person or
subject to any bailment;
(ii) Supplies, packaging, maintenance parts or
sample Inventory;
(iii) Inventory that is damaged or not currently
saleable in the normal course of the Borrower's operations;
(iv) Inventory that the Borrower has returned, has
attempted to return, is in the process of returning or intends
to return to the vendor thereof;
(v) Inventory that is perishable or live;
(vi) Inventory that is subject to a security
interest in favor of any Person other than the Lender;
(vii) Inventory that has been held for two (2) years
or more to the extent the value thereof, after applying the
Eligible Inventory Reserve, exceeds $1,000,000; and
(viii) Inventory otherwise deemed ineligible by the
Lender in its sole discretion.
"Eligible Inventory Reserve" means the greater of:
(i) The reserve amount required by GAAP; or
(ii) The sum of:
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(A) For Inventory that has been held for one
(1) year or more but less than two (2) years,
twenty-five percent (25%) of cost for such Inventory;
and
(B) For Inventory that has been held for two
(2) years or more, fifty percent (50%) of cost for
such Inventory.
"Environmental Laws" has the meaning specified in Section
5.15.
"Equipment" means, as to any Person, all of that Person's
equipment, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all present and future
machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and recordkeeping equipment, parts, tools, supplies,
and including specifically (without limitation) the goods described in
any equipment schedule or list herewith or hereafter furnished to the
Lender by that Person.
"Event of Default" has the meaning specified in Section 8.1.
"Floating Rate" means an annual rate equal to the difference
of the Prime Rate less the Margin, which annual rate shall change when
and as the Prime Rate changes.
"Funding Date" has the meaning given in Section 2.1.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.6.
"General Intangibles" means, as to any Person, all of that
Person's general intangibles, as such term is defined in the UCC,
whether now owned or hereafter acquired, including (without limitation)
all present and future patents, patent applications, copyrights,
service marks, trademarks, trade names, trade secrets, customer or
supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use that Person's name, and the goodwill of
that Person's business.
"Hazardous Substance" has the meaning given in Section 5.15.
"Inventory" means, as to any Person, all of that Person's
inventory, as such term is defined in the UCC, whether now owned or
hereafter acquired, whether consisting of whole goods, spare parts or
components, supplies or materials, whether acquired, held or furnished
for sale, for lease or under service contracts or for manufacture or
processing, and wherever located.
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"Inventory Days" as of any date means the product of 360 times
the ratio of (i) Inventory at the lower of cost or market value as of
such date to (ii) the cost of goods sold during the period of twelve
(12) Accounting Periods ending on such date.
"Investment Property" means, as to any Person, all of that
Person's investment property, as such term is defined in the UCC,
whether now owned or hereafter acquired, including but not limited to
all securities, security entitlements, securities accounts, commodity
contracts, commodity accounts, stocks, bonds, mutual fund shares, money
market shares and U.S. Government securities.
"L/C Amount" means the sum of (i) the aggregate face amount of
any issued and outstanding Letters of Credit and (ii) the unpaid amount
of the Obligation of Reimbursement.
"L/C Application" means an application and agreement for
letters of credit in the Lender's then-current standard form.
"Landlord's Disclaimer Reserve" has the meaning specified in
Section 6.11.
"Letter of Credit" has the meaning specified in Section 2.3.
"Loan Documents" means this Agreement, the Note and the
Security Documents.
"Margin" has the meaning given in Section 2.7(a).
"Maturity Date" means December 23, 2002.
"Maximum Line" means $25,000,000, unless said amount is
reduced pursuant to Section 2.11, in which event it means such lower
amount.
"Minimum Interest Charge" has the meaning given in Section
2.7(c).
"Net Income" means after-tax consolidated net income from
continuing operations as determined in accordance with GAAP.
"Note" means the Revolving Note.
"Obligations" means the Note and each and every other debt,
liability and obligation of every type and description which the
Borrower may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrower,
and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole,
joint, several or joint and several, and including specifically, but
not limited to, the Obligation of Reimbursement and all indebtedness of
the Borrower arising under this Agreement, the Note, any L/C
Application
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completed by the Borrower, or any other loan or credit agreement or
guaranty between the Borrower and the Lender, whether now in effect or
hereafter entered into.
"Obligation of Reimbursement" has the meaning given in Section
2.4(a).
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for the Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its
business or has any rights of possession, including (without
limitation) the premises legally described in Exhibit C attached
hereto.
"Prime Rate" means the rate publicly announced from time to
time by Xxxxx Fargo Bank, N.A. as its "prime rate" or, if such bank
ceases to announce a rate so designated, any similar successor rate
designated by the Lender.
"Receivables" means each and every right of the Borrower to
the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other Person who subsequently
transfers such Person's interest to the Borrower, whether such right to
payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which the
Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but
not limited to all present and future accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Note" means the Borrower's revolving promissory
note, payable to the order of the Lender in substantially the form of
Exhibit A hereto and any note
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or notes issued in substitution therefor, as the same may hereafter be
amended, supplemented or restated from time to time.
"Security Documents" means this Agreement, the Collateral
Account Agreement, any lockbox agreement, the Trademark Security
Agreement and any other document delivered to the Lender from time to
time to secure the Obligations, as the same may hereafter be amended,
supplemented or restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Servicer" means Xxxxx Fargo Business Credit, Inc., a
Minnesota corporation, or such other Person as the Lender may from time
to time designate.
"Special Account" means a specified cash collateral account
maintained by the Lender in connection with Letters of Credit, as
contemplated by Section 2.5.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrower, by the Borrower and
one or more other Subsidiaries, or by one or more other Subsidiaries.
"Tax Expense" as of any date means state and federal income
taxes accrued for by the Borrower for the applicable period ending on
such date, in accordance with GAAP.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations after an
Event of Default pursuant to Section 8.2.
"Trademark Security Agreement" means the Trademark Security
Agreement by the Borrower in favor of the Lender of even date herewith.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.15 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
Section 1.2 Cross References. All references in this Agreement
to Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
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ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 Revolving Advances. The Lender agrees, on the
terms and subject to the conditions herein set forth, to make advances to the
Borrower from time to time from the date all of the conditions set forth in
Section 4.1 are satisfied (the "Funding Date") to the Termination Date (the
"Revolving Advances"). The Lender shall have no obligation to make a Revolving
Advance to the extent the amount thereof would exceed Availability. The
Borrower's obligation to pay the Revolving Advances shall be evidenced by the
Revolving Note and shall be secured by the Collateral as provided in Article
III. Within the limits set forth in this Section 2.1, the Borrower may borrow,
prepay pursuant to Section 2.11 and reborrow.
Section 2.2 Procedures for Borrowing. The Borrower agrees to
comply with the following procedures in requesting Revolving Advances under
Section 2.1:
(a) The Borrower shall make each request for a Revolving
Advance to the Lender before 11:00 a.m. (Minneapolis, Minnesota time)
of the day of the requested Revolving Advance. Requests may be made in
writing or by telephone, specifying the date of the requested Revolving
Advance and the amount thereof. Each request shall be by (i) any
officer of the Borrower; or (ii) any person designated as the
Borrower's agent by any officer of the Borrower in a writing delivered
to the Lender; or (iii) any person whom the Lender reasonably believes
to be an officer of the Borrower or such a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the same to the Borrower's demand
deposit account maintained with the Lender unless the Lender and the
Borrower shall agree in writing to another manner of disbursement. Upon
the Lender's request, the Borrower shall promptly confirm each
telephonic request for an Advance by executing and delivering an
appropriate confirmation certificate to the Lender. The Borrower shall
repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was not in
fact authorized to do so. Any request for an Advance, whether written
or telephonic, shall be deemed to be a representation by the Borrower
that the conditions set forth in Section 4.2 have been satisfied as of
the time of the request.
Section 2.3 Letters of Credit.
(a) The Lender agrees, on the terms and subject to the
conditions herein set forth, to issue, from the Funding Date to the
Termination Date, one or more irrevocable standby or documentary
letters of credit (each, a "Letter of Credit") for the Borrower's
account. The Lender shall have no obligation to issue any Letter of
Credit if the face amount of the Letter of Credit to be issued, would
exceed the lesser of:
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(i) $10,000,000 less the L/C Amount, or
(ii) Availability.
Each Letter of Credit, if any, shall be issued pursuant to a separate
L/C Application entered into between the Borrower and the Lender,
completed in a manner satisfactory to the Lender. The terms and
conditions set forth in each such L/C Application shall supplement the
terms and conditions hereof, but if the terms of any such L/C
Application and the terms of this Agreement are inconsistent, the terms
hereof shall control.
(b) No Letter of Credit shall be issued with an expiry date
later than the Termination Date in effect as of the date of issuance.
(c) Any request to issue a Letter of Credit under this Section
2.3 shall be deemed to be a representation by the Borrower that the
conditions set forth in Section 4.2 have been satisfied as of the date
of the request.
Section 2.4 Payment of Amounts Drawn Under Letters of Credit;
Obligation of Reimbursement. The Borrower shall reimburse the Lender for all
draws under any Letter of Credit in accordance with the applicable L/C
Application and as follows:
(a) The Borrower shall pay to the Lender on the day a draft is
honored under any Letter of Credit a sum equal to all amounts drawn
under such Letter of Credit plus any and all reasonable charges and
expenses that the Lender may pay or incur relative to such draw and the
applicable L/C Application, plus interest on all such amounts, charges
and expenses as set forth below (the Borrower's obligation to pay all
such amounts is herein referred to as the "Obligation of
Reimbursement").
(b) Whenever a draft is submitted under a Letter of Credit,
the Lender shall make a Revolving Advance in the amount of the
Obligation of Reimbursement and shall apply the proceeds of such
Revolving Advance thereto. Such Revolving Advance shall be repayable in
accordance with and be treated in all other respects as a Revolving
Advance hereunder.
(c) If a draft is submitted under a Letter of Credit when the
Borrower is unable, because a Default Period exists or for any other
reason, to obtain a Revolving Advance to pay the Obligation of
Reimbursement, the Borrower shall pay to the Lender on demand and in
immediately available funds, the amount of the Obligation of
Reimbursement together with interest, accrued from the date of the
draft until payment in full at the Default Rate. Notwithstanding the
Borrower's inability to obtain a Revolving Advance for any reason, the
Lender is irrevocably authorized, in its sole discretion, to make a
Revolving Advance in an amount sufficient to discharge the Obligation
of Reimbursement and all accrued but unpaid interest thereon.
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(d) The Borrower's obligation to pay any Revolving Advance
made under this Section 2.4, shall be evidenced by the Revolving Note
and shall bear interest as provided in Section 2.7.
Section 2.5 Special Account. If the Credit Facility is
terminated for any reason whatsoever while any Letter of Credit is outstanding,
the Borrower shall thereupon pay the Lender in immediately available funds for
deposit in the Special Account an amount equal to the L/C Amount. The Special
Account shall be an interest bearing account maintained for the Lender by any
financial institution acceptable to the Lender. Any interest earned on amounts
deposited in the Special Account shall be credited to the Special Account.
Amounts on deposit in the Special Account may be applied by the Lender at any
time or from time to time to the Obligations in the Lender's sole discretion,
and shall not be subject to withdrawal by the Borrower so long as the Lender
maintains a security interest therein. The Lender agrees to transfer any balance
in the Special Account to the Borrower at such time as the Lender is required to
release its security interest in the Special Account under applicable law.
Section 2.6 Obligations Absolute. The Borrower's obligations
arising under Section 2.4 shall be absolute, unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of Section 2.4, under all
circumstances whatsoever, including (without limitation) the following
circumstances:
(a) any lack of validity or enforceability of any Letter of
Credit or any other agreement or instrument relating to any Letter of
Credit (collectively the "Related Documents");
(b) any amendment or waiver of or any consent to departure
from all or any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time, against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom
any such beneficiary or any such transferee may be acting), or other
person or entity, whether in connection with this Agreement, the
transactions contemplated herein or in the Related Documents or any
unrelated transactions;
(d) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) payment by or on behalf of the Lender under any Letter of
Credit against presentation of a draft or certificate which does not
strictly comply with the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
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Section 2.7 Interest; Interest Rate Margin; Minimum Interest
Charge; Default Interest; Participations; Usury. Interest accruing on the Note
shall be due and payable in arrears on the first day of each month.
(a) MARGIN. The margin by which the Prime Rate shall be
reduced (the "Margin") shall be equal to one quarter of one percent
(0.25%) until changed pursuant to this Subsection (a). On the date the
Lender receives and approves the Borrower's audited consolidated
financial statements for its fiscal year ending December 31, 2000, if
the Borrower's Net Income for such fiscal year is greater than
$1,000,000, the Margin shall be one half of one percent (0.50%).
(b) REVOLVING NOTE. Except as set forth in Sections 2.7(d) and
2.7(f), the outstanding principal balance of the Revolving Note shall
bear interest at the Floating Rate.
(c) MINIMUM INTEREST CHARGE. Notwithstanding the interest
payable pursuant to Section 2.7(b), the Borrower shall pay to the
Lender interest of not less than $500,000 per calendar year beginning
after December 31, 1999 (the "Minimum Interest Charge") during the term
of this Agreement, prorated for partial years, and the Borrower shall
pay any deficiency between the Minimum Interest Charge and the amount
of interest otherwise calculated under Section 2.7(b) on the date and
in the manner provided in Section 2.9.
(d) DEFAULT INTEREST RATE. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective
for any periods designated by the Lender from time to time during that
Default Period.
(e) PARTICIPATIONS. If any Person shall acquire a
participation in the Advances or the Obligation of Reimbursement, the
Borrower shall be obligated to the Lender to pay the full amount of all
interest calculated under this Section 2.7, along with all other fees,
charges and other amounts due under this Agreement, regardless if such
Person elects to accept interest with respect to its participation at a
lower rate than the Floating Rate, or otherwise elects to accept less
than its prorata share of such fees, charges and other amounts due
under this Agreement.
(f) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law.
Section 2.8 Fees.
(a) AMENDMENT FEE. The Borrower shall pay to the Lender a
fully earned and non-refundable amendment fee of $15,000, due and
payable upon the execution of this Agreement.
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(b) ANNUAL FACILITY FEE. The Borrower shall pay to the Lender
an annual facility fee equal to one eighth of one percent (0.125%) of
the Maximum Line which shall be due and payable in equal quarterly
installments on the date hereof and the first day of each calendar
quarter thereafter other than January 1, 2000, which fee shall be
deemed fully earned and non-refundable upon payment.
(c) LETTER OF CREDIT FEES. The Borrower shall pay to the
Lender a fee with respect to each Letter of Credit, if any, accruing on
a daily basis and computed at the annual rate of one and one half
percent (1.5%) of the aggregate amount that may then be drawn on all
issued and outstanding Letters of Credit assuming compliance with all
conditions for drawing thereunder (the "Aggregate Face Amount"), from
and including the date of issuance of such Letter of Credit until such
date as such Letter of Credit shall terminate by its terms or be
returned to the Lender, due and payable monthly in arrears on the first
day of each month and on the Termination Date; provided, however that
during Default Periods, in the Lender's sole discretion and without
waiving any of its other rights and remedies, such fee shall increase
to three and one half percent (3.5%) of the Aggregate Face Amount. The
foregoing fee shall be in addition to any and all fees, commissions and
charges of any Issuer of a Letter of Credit with respect to or in
connection with such Letter of Credit.
(d) AUDIT FEES. The Borrower shall pay to the Lender, on
demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrower's operations
or business at the rates established from time to time by the Lender as
its audit fees (which fees are currently $500 per eight (8) hour day
per auditor), together with all actual out-of-pocket costs and expenses
incurred in conducting any such audit or inspection; provided, however,
that except during Default Periods, the Borrower shall not have to
reimburse the Lender for more than two audits or inspections per year.
(e) INVENTORY APPRAISALS. The Borrower shall reimburse the
Lender on demand for the cost of any appraisal of its Inventory;
provided, however, that except during Default Periods, the Borrower
shall not have to reimburse the Lender for more than one inventory
appraisal per year.
Section 2.9 Computation of Interest and Fees; When Interest
Due and Payable. Fees hereunder and interest accruing on the outstanding
principal balance of the Advances and the Obligation of Reimbursement
outstanding from time to time shall be computed on the basis of actual number of
days elapsed in a year of 360 days. Interest shall be payable in arrears on the
first day of each month and on the Termination Date.
Section 2.10 Capital Adequacy; Increased Costs and Reduced
Return.
(a) CAPITAL ADEQUACY. If any Related Lender determines at any
time that its Return has been reduced as a result of any Rule Change,
such Related Lender may require the Borrower to pay it the amount
necessary to restore its Return to what it
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would have been had there been no Rule Change. For purposes of this
Section 2.10(a):
(i) "Capital Adequacy Rule" means any law, rule,
regulation, guideline, directive, requirement or request
regarding capital adequacy, or the interpretation or
administration thereof by any governmental or regulatory
authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender.
Such rules include rules requiring financial institutions to
maintain total capital in amounts based upon percentages of
outstanding loans, binding loan commitments and letters of
credit.
(ii) "L/C Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding letters
of credit, or the interpretation or administration thereof by
any governmental or regulatory authority, central bank or
comparable agency, whether or not having the force of law,
that applies to any Related Lender. Such rules include rules
imposing taxes, duties or other similar charges, or mandating
reserves, special deposits or similar requirements against
assets of, deposits with or for the account of, or credit
extended by any Related Lender, on letters of credit.
(iii) "Related Lender" includes (but is not limited
to) the Lender, any parent corporation of the Lender and any
assignee of any interest of the Lender hereunder and any
participant in the loans made hereunder.
(iv) "Return", for any period, means the return as
determined by a Related Lender on the Advances and Letters of
Credit based upon its total capital requirements and a
reasonable attribution formula that takes account of the
Capital Adequacy Rules and L/C Rules then in effect, costs of
issuing or maintaining any Letter of Credit and amounts
received or receivable under this Agreement or the Notes with
respect to any Advance or Letter of Credit. Return may be
calculated for each calendar quarter and for the shorter
period between the end of a calendar quarter and the date of
termination in whole of this Agreement.
(v) "Rule Change" means any change in any Capital
Adequacy Rule or L/C Rule occurring after the date of this
Agreement, but the term does not include any changes in
applicable requirements that at the Closing Date are scheduled
to take place under the existing Capital Adequacy Rules or L/C
Rules or any increases in the capital that any Related Lender
is required to maintain to the extent that the increases are
required due to a regulatory authority's assessment of the
financial condition of such Related Lender.
The Lender will promptly notify the Borrower of any event of which it
has knowledge, occurring after the date hereof, which will entitle the
Lender to compensation pursuant to this Section 2.10. Certificates of
any Related Lender sent to the Borrower from time to time claiming
compensation under this Section 2.10, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional
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amount or amounts to be paid to the Related Lender hereunder to restore
its Return shall be conclusive absent manifest error. In determining
such amounts, the Related Lender may use any reasonable averaging and
attribution methods.
Section 2.11 Voluntary Prepayment; Reduction of the Maximum
Line; Termination of the Credit Facility by Borrower. Except as otherwise
provided herein, the Borrower may prepay the Revolving Advances in whole at any
time or from time to time in part. The Borrower may terminate the Credit
Facility or reduce the Maximum Line at any time if (i) the Borrower gives the
Lender at least 30 days' prior written notice and (ii) the Borrower pays the
Lender the prepayment, termination or line reduction fees in accordance with
Section 2.12. Any reduction in the Maximum Line must be in an amount not less
than $1,000,000 or an integral multiple thereof. If the Borrower reduces the
Maximum Line to zero, all Obligations shall be immediately due and payable. Upon
termination of the Credit Facility and payment and performance of all
Obligations, the Lender shall release or terminate the Security Interest and the
Security Documents to which the Borrower is entitled by law.
Section 2.12 Termination and Line Reduction Fees; Waiver of
Termination and Line Reduction Fees.
(a) TERMINATION AND LINE REDUCTION FEES. If the Lender or the
Borrower terminates the Credit Facility for any reason as of a date
other than the Maturity Date, or if the Borrower reduces the Maximum
Line, the Borrower shall pay the Lender a fee in an amount equal to a
percentage of the Maximum Line (or the reduction thereof, as the case
may be) as follows: (i) one percent (1.0%) if the termination or
reduction occurs on or before the first anniversary of the Funding
Date; and (ii) one half of one percent (0.5%) if the termination or
reduction occurs after the first anniversary of the Funding Date but on
or before the second anniversary of the Funding Date.
(b) WAIVER OF TERMINATION AND LINE REDUCTION FEES. The
Borrower will not be required to pay the termination or line reduction
fees otherwise due under this Section 2.12 if such termination or line
reduction is made because of refinancing by the Lender or an affiliate
of the Lender.
Section 2.13 Mandatory Prepayment. Without notice or demand,
if the sum of the outstanding principal balance of the Revolving Advances plus
the L/C Amount shall at any time exceed the Borrowing Base, the Borrower shall
(i) first, immediately prepay the Revolving Advances to the extent necessary to
eliminate such excess; and (ii) if prepayment in full of the Revolving Advances
is insufficient to eliminate such excess, pay to the Lender in immediately
available funds for deposit in the Special Account an amount equal to the
remaining excess. Any payment received by the Lender under this Section 2.13 or
under Section 2.11 may be applied to the Obligations, in such order and in such
amounts as the Lender, in its discretion, may from time to time determine.
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Section 2.14 Payment. All payments to the Lender shall be made
in immediately available funds. Amounts constituting proceeds of checks or cash
shall be applied to the Obligations one Banking Day after receipt by the Lender.
Amounts constituting proceeds of credit card payments, wire transfers or ACH
transfers received at or before 12:30 p.m. Minneapolis, Minnesota on a Banking
Day shall be applied to the Obligations upon receipt. Except as provided in the
preceeding sentence, the Lender may hold all payments not constituting
immediately available funds for three (3) additional days before applying them
to the Obligations. Notwithstanding anything in Section 2.1, the Borrower hereby
authorizes the Lender to charge against the Borrower's account with the Lender
or, in its discretion at any time or from time to time without the Borrower's
request and even if the conditions set forth in Section 4.2 would not be
satisfied, to make a Revolving Advance in an amount equal to the portion of the
Obligations from time to time due and payable.
Section 2.15 Payment on Non-Banking Days. Whenever any payment
to be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest
on the Advances or the fees hereunder, as the case may be.
Section 2.16 Use of Proceeds. The Borrower shall use the
proceeds of Advances, and each Letter of Credit, if any, for ordinary working
capital purposes.
Section 2.17 Liability Records. The Lender may maintain from
time to time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the Borrower
establishes the contrary. Upon the Lender's demand, the Borrower will admit and
certify in writing the exact principal balance of the Obligations that the
Borrower then asserts to be outstanding. Any billing statement or accounting
rendered by the Lender shall be conclusive and fully binding on the Borrower
unless the Borrower gives the Lender specific written notice of exception within
30 days after receipt.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 Grant of Security Interest. The Borrower hereby
pledges, assigns and grants to the Lender a security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations.
Section 3.2 Notification of Account Debtors and Other
Obligors. The Lender may at any time (whether or not a Default Period then
exists) notify any account debtor of the Borrower or other Person obligated to
pay an amount due that such right to payment has been assigned or transferred to
the Lender for security and shall be paid directly to the Lender. The Borrower
will join in giving such notice if the Lender so requests. At any time after the
Borrower or the Lender gives such notice to an account debtor or other obligor,
the
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Lender may, but need not, in the Lender's name or in the Borrower's name, (a)
demand, xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose (to the extent such mail constitutes Collateral) of the
Borrower's mail, applying all Collateral as permitted under this Agreement and
holding all other mail for the Borrower's account or promptly forwarding such
mail to the Borrower's last known address.
Section 3.3 Assignment of Insurance. As additional security
for the payment and performance of the Obligations, the Borrower hereby assigns
to the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrower with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof or
any business records or valuable papers pertaining thereto, and the Borrower
hereby directs the issuer of any such policy to pay all such monies directly to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the
right to take exclusive possession of the Premises at any time during a
Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all
such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrower shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties,
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imposts, charges and expenses at any time incurred by or imposed upon
the Lender by reason of the execution, delivery, existence,
recordation, performance or enforcement of this Agreement or the
provisions of this Section 3.4.
Section 3.5 License. Without limiting the generality of the
Trademark Security Agreement, the Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of the Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral during any Default Period.
Section 3.6 Financing Statement. A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed by
the Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby. For this purpose, certain information is set out in Schedule 3.6.
Section 3.7 Setoff. The Borrower agrees that the Lender may at
any time or from time to time during any Default Period, at its sole discretion
and without demand and without notice to anyone, setoff any liability owed to
the Borrower by the Lender, whether or not due, against any Obligation, whether
or not due. In addition, each other Person holding a participating interest in
any Obligations shall have the right to appropriate or setoff any deposit or
other liability then owed by such Person to the Borrower, whether or not due,
and apply the same to the payment of said participating interest, as fully as if
such Person had lent directly to the Borrower the amount of such participating
interest.
ARTICLE IV
CONDITIONS OF LENDING
Section 4.1 Conditions Precedent to the Initial Revolving
Advance and the Initial Letter of Credit. The Lender's obligation to make the
initial Revolving Advance or to issue the initial Letter of Credit hereunder
shall be subject to the condition precedent that the Lender shall have received
all of the following, each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) An acknowledgment and agreement from each licensor in
favor of the Lender, together with a true, correct and complete copy of
all license agreements.
(d) The Collateral Account Agreement, properly executed by the
Borrower.
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(e) The Trademark Security Agreement, properly executed by the
Borrower.
(f) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower, (ii) no financing statements or
assignments of patents or trademarks have been filed and remain in
effect against the Borrower except those financing statements and
assignments of patents or trademarks relating to Permitted Liens or to
liens held by Persons who have agreed in writing that upon receipt of
proceeds of the Advances, they will deliver UCC releases and/or
terminations and releases of such assignments of patents or trademarks
satisfactory to the Lender, and (iii) the Lender has duly filed all
financing statements necessary to perfect the Security Interest, to the
extent the Security Interest is capable of being perfected by filing.
(g) A certificate of the Borrower's secretary certifying as to
(i) the resolutions of the Borrower's directors and if required,
shareholders, authorizing the execution, delivery and performance of
the Loan Documents, (ii) the Borrower's articles of incorporation and
bylaws, and (iii) the signatures of the Borrower's officers or agents
authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance requests,
on the Borrower's behalf.
(h) For the Borrower, a current certificate issued by the
Secretary of State of its jurisdiction of organization, certifying that
it is in good standing in such State.
(i) Evidence that the Borrower is duly licensed or qualified
to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary.
(j) An opinion of counsel to the Borrower, addressed to the
Lender.
(k) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(l) Payment of the fees and commissions due through the date
of the initial Advance or Letter of Credit under Section 2.8 and
expenses incurred by the Lender through such date and required to be
paid by the Borrower under Section 9.8, including all legal expenses
incurred through the date of this Agreement.
(m) Evidence that after making the initial Revolving Advance
and satisfying all obligations under the Old Credit Documents, trade
payables unpaid more than forty-five (45) days after their stated due
date, any book overdrafts and all costs incurred in connection with
this Agreement, Availability shall be not less than $500,000.
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(n) Such other documents as the Lender in its sole discretion may
require.
Section 4.2 Conditions Precedent to All Advances and Letters of
Credit. The Lender's obligation to make each Advance or to issue any Letter of
Credit shall be subject to the further conditions precedent that on such date:
(a) the representations and warranties contained in Article V are
correct on and as of the date of such Advance or issuance of Letter of
Credit as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from such
Advance or the issuance of such Letter of Credit, as the case may be, which
constitutes a Default or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Corporate Existence and Power; Name; Chief Executive
Office; Inventory and Equipment Locations; Tax Identification Number. The
Borrower is a corporation, duly organized, validly existing and in good standing
under the laws of the State of its organization and is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. No dissolution or termination of the
Borrower has occurred, and no notice of dissolution or articles of termination
have been filed with respect to the Borrower. The Borrower has all requisite
power and authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. For the Borrower, during its existence, (i) it has
done business solely under the names set forth in Schedule 5.1 (ii) its chief
executive office and principal place of business is located at the address set
forth in Schedule 5.1, (iii) all of its records relating to its business or the
Collateral are kept at that location, (iv) all of its Inventory and Equipment is
located at that location or at one of the other locations set forth in Schedule
5.1, and (v) its tax identification number is correctly set forth in Schedule
3.6.
Section 5.2 Capitalization. Schedule 5.2 constitutes a correct and
complete list of all ownership interests in the Borrower and rights to acquire
ownership interests equal to or exceeding five percent (5.0%).
Section 5.3 Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the
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Borrower's shareholders; (ii) require any authorization, consent or approval by,
or registration, declaration or filing with, or notice to, any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any third party, except such authorization, consent, approval,
registration, declaration, filing or notice as has been obtained, accomplished
or given prior to the date hereof; (iii) violate any provision of any law, rule
or regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to the Borrower or its articles
of incorporation; (iv) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other material agreement, lease or
instrument to which the 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 mortgage, deed of trust, pledge, lien, security interest or other charge
or encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
Section 5.4 Legal Agreements.
(a) The Old Credit Documents constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance
with their respective terms. The Borrower has no claim, defense or offset
to enforcement of the Old Credit Documents.
(b) This Agreement constitutes and, upon due execution by the
Borrower, the other Loan Documents will constitute, the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms.
Section 5.5 Subsidiaries. Except for XxxxxXxxxxxxx.xxx Inc. which the
Borrower intends to organize as a wholly owned subsidiary of the Borrower, the
Borrower has no Subsidiaries. Guide Xxxxxxxx.xxx Inc. has been incorporated
under the laws of the State of Delaware.
Section 5.6 Financial Condition; No Adverse Change. The Borrower has
heretofore furnished to the Lender audited financial statements dated as of
January 3, 1999, and unaudited interim financial statements dated as of October
31, 1999 and those statements fairly present the Borrower's financial condition
as of the dates thereof and the results of its operations and cash flows for the
periods then ended and were prepared in accordance with generally accepted
accounting principles. Since the date of the most recent financial statements,
there has been no material adverse change in the Borrower's business, properties
or condition (financial or otherwise).
Section 5.7 Litigation. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any of
its Affiliate before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would
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have a material adverse effect on the financial condition, properties or
operations of the Borrower or any of its Affiliates.
Section 5.8 Regulation U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance 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.
Section 5.9 Taxes. The Borrower and its Affiliates has paid or caused
to be paid to the proper authorities when due all federal, state and local taxes
required to be withheld by each of them. The Borrower and its Affiliates have
filed all federal, state and local tax returns which to the knowledge of the
officers of the Borrower or any of its Affiliates, as the case may be, are
required to be filed, and the Borrower and its Affiliates have paid or caused to
be paid to the respective taxing authorities all taxes as shown on said returns
or on any assessment received by any of them to the extent such taxes have
become due.
Section 5.10 Titles and Liens. The Borrower has good and absolute
title to all Collateral described in the collateral reports provided to the
Lender and all other Collateral, properties and assets reflected in the latest
financial statements referred to in Section 5.6 and all proceeds thereof, free
and clear of all mortgages, security interests, liens, adverse claims and
encumbrances, except for Permitted Liens. No financing statement naming the
Borrower as debtor is on file in any office except to perfect only Permitted
Liens.
Section 5.11 Year 2000. The Borrower has evaluated all of the data
processing systems necessary to the conduct of its business (including computer
hardware, software and firmware, and including data processing systems embedded
within equipment) and has implemented such hardware and software modifications
and upgrades as may be necessary for such systems to be Year 2000 Compliant. For
purposes hereof, "Year 2000 Compliant" means with respect to any data processing
system, (i) that such system accurately records, stores, processes and presents
date data with respect to dates on and after January 1, 2000 in the same manner,
and with substantially the same functionality, as the such system records,
stores, processes and presents date data with respect to dates on and before
December 31, 1999; and (ii) that such system accurately records, stores,
processes and presents date ranges beginning on or before December 31, 1999 and
ending on or after January 1, 2000, or occurring entirely on or after January 1,
2000, in the same manner, and with substantially the same functionality, as such
system records, stores, processes and presents date ranges occurring entirely on
or before December 31, 1999.
Section 5.12 Intellectual Property Rights. The Borrower owns or has
the exclusive right to use, free and clear of all material liens, claims and
restrictions, all patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect to the foregoing, used in the conduct of its
business as now conducted. The Borrower is not obligated or under any liability
whatsoever to make any payments of a material nature by
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way of royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any patent, trademark, trade name, copyright or other intangible
asset, with respect to the use thereof or in connection with the conduct of its
business or otherwise. The Borrower owns or has the unrestricted right to use
all trade secrets, including know-how, inventions, designs, processes, computer
programs and technical data necessary to the development, operation and sale of
all products and services sold or proposed to be sold by it, free and clear of
any rights, liens or claims of others. The Borrower is not using any
confidential information or trade secrets of others. The Borrower is not, nor
has the Borrower received notice with respect to, infringing upon or otherwise
acting adversely to any known right or claimed right of any Person under or with
respect to any patents, trademarks, service marks, trade names, copyrights,
licenses or rights with respect to the foregoing which could have a material
adverse effect on the Borrower.
Section 5.13 Plans. Except as disclosed to the Lender in writing prior
to the date hereof, neither the Borrower nor any of its Affiliates maintains or
has maintained any Plan. Neither the Borrower nor any of its Affiliates has
received any notice or has any knowledge to the effect that they are not in full
compliance with any of the requirements of ERISA. No Reportable Event or other
fact or circumstance which may have an adverse effect on the Plan's tax
qualified status exists in connection with any Plan. Neither the Borrower nor
any of its Affiliates has:
(a) Any accumulated funding deficiency within the meaning of ERISA; or
(b) Any liability or know of any fact or circumstances which could
result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than accrued benefits which or which may
become payable to participants or beneficiaries of any such Plan).
Section 5.14 Default. The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on the Borrower's financial
condition, properties or operations.
Section 5.15 Environmental Matters.
(a) Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(i) "Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
(ii) "Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions
thereof, and all other chemicals, wastes, substances and materials
listed in, regulated by or identified in any Environmental Law.
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(b) To the Borrower's best knowledge, there are not present in, on or
under the Premises any Hazardous Substances in such form or quantity as to
create any liability or obligation for the Borrower or the Lender under
common law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked,
discharged, emitted or released in, on or under the Premises in such a way
as to create any such liability.
(c) To the Borrower's best knowledge, the Borrower has never disposed
of Hazardous Substances in such a manner as to create any liability under
any Environmental Law.
(d) There are not and there never have been, during the Borrower's
occupancy, any requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation, relating in any way to
the Premises or the Borrower, alleging liability under, violation of, or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto. To the Borrower's best knowledge, no
such matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's businesses are
and have in the past always been conducted in accordance with all
Environmental Laws and all licenses, permits and other authorizations
required pursuant to any Environmental Law and necessary for the lawful and
efficient operation of such businesses are in the Borrower's possession and
are in full force and effect. No permit required under any Environmental
Law is scheduled to expire within 12 months and there is no threat that any
such permit will be withdrawn, terminated, limited or materially changed.
(f) To the Borrower's best knowledge, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or
any similar federal, state or local list, schedule, log, inventory or
database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or the Borrower's
businesses.
Section 5.16 Submissions to Lender. All financial and other
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's request for the Credit Facility is true and correct in all
material respects and, as to projections, valuations or proforma financial
statements, present a good faith opinion as to such projections, valuations and
proforma condition and results.
Section 5.17 Financing Statements. The Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the Security
Interest and the other security interests created by the Security Documents.
When such financing statements
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are filed in the offices noted therein, the Lender will have a valid and
perfected security interest in all Collateral and all other collateral described
in the Security Documents which is capable of being perfected by filing
financing statements. None of the Collateral or other collateral covered by the
Security Documents is or will become a fixture on real estate, unless a
sufficient fixture filing is in effect with respect thereto.
Section 5.18 Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
Section 5.19 Financial Solvency. Both before and after giving effect
to the transactions contemplated in the Loan Documents, neither the Borrower or
any of its Affiliates:
(a) was or will be insolvent, as that term is used and defined in
Section 101(32) of the United States Bankruptcy Code and Section 2 of the
Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to engage in
a business or a transaction for which any remaining assets of the Borrower
or such Affiliate are unreasonably small;
(c) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any
action with respect thereto, intends to, nor believes that it will, incur
debts beyond its ability to pay them as they mature;
(d) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any
action with respect thereto, intends to hinder, delay or defraud either its
present or future creditors; and
(e) at this time contemplates filing a petition in bankruptcy or for
an arrangement or reorganization or similar proceeding under any law any
jurisdiction, nor, to the best knowledge of the Borrower, is the subject of
any actual, pending or threatened bankruptcy, insolvency or similar
proceedings under any law of any jurisdiction.
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ARTICLE VI
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements. The Borrower will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days after the
end of each fiscal year of the Borrower, the Borrower's audited financial
statements with the unqualified opinion of independent certified public
accountants selected by the Borrower and acceptable to the Lender, which
annual financial statements shall include the Borrower's balance sheet as
at the end of such fiscal year and the related statements of the Borrower's
income, retained earnings and cash flows for the fiscal year then ended,
prepared on a consolidating and consolidated basis to include any
Subsidiaries of the Borrower, all in reasonable detail and prepared in
accordance with GAAP, together with (i) copies of all management letters
prepared by such accountants; (ii) a report signed by such accountants
stating that in making the investigations necessary for said opinion they
obtained no knowledge, except as specifically stated, of any Default or
Event of Default hereunder and all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the requirements set forth in Sections 6.13, 6.14, 6.15,
6.16 and 7.11; and (iii) a certificate of the Borrower's chief financial
officer, vice president of finance or controller stating that such
financial statements have been prepared in accordance with GAAP, fairly
represent the Borrower's financial position and the results of its
operations, and whether or not such officer has knowledge of the occurrence
of any Default or Event of Default hereunder and, if so, stating in
reasonable detail the facts with respect thereto;
(b) as soon as available and in any event within 20 days after the end
of each Accounting Period, an unaudited/internal balance sheet and
statements of income and retained earnings of the Borrower as at the end of
and for such Accounting Period and for the fiscal year-to-date period then
ended, prepared on a consolidating and consolidated basis to include any
Subsidiaries, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments;
and accompanied by a certificate of the Borrower's chief financial officer,
vice president of finance or controller, substantially in the form of
Exhibit B hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit adjustments,
and fairly represent the Borrower's financial position and the results of
its operations, (ii) whether or not such officer has
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knowledge of the occurrence of any Default or Event of Default hereunder
not theretofore reported and remedied and, if so, stating in reasonable
detail the facts with respect thereto, and (iii) all relevant facts in
reasonable detail to evidence, and the computations as to, whether or not
the Borrower is in compliance with the requirements set forth in Sections
6.13, 6.14, 6.15, 6.16 and 7.11;
(c) within 15 days after the end of each Accounting Period or more
frequently if the Lender so requires, agings of the Borrower's accounts
receivable and its accounts payable, an inventory certification report for
the Borrower, and a calculation of the Borrower's Accounts, Eligible
Accounts, Inventory and Eligible Inventory as at the end of such month or
shorter time period;
(d) at least 30 days before the beginning of each fiscal year of the
Borrower, the projected balance sheets and income statements for each
Accounting Period of such year, each in reasonable detail, representing the
Borrower's good faith projections and certified by the Borrower's chief
financial officer as being the most accurate projections available and
identical to the projections used by the Borrower for internal planning
purposes, together with such supporting schedules and information as the
Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or regulatory
agency affecting the Borrower of the type described in Section 5.15 or
which seek a monetary recovery against the Borrower in excess of $100,000;
(f) as promptly as practicable (but in any event not later than five
business days) after an officer of the Borrower obtains knowledge of the
occurrence of any breach, default or event of default under any Security
Document or any event which constitutes a Default or Event of Default
hereunder, notice of such occurrence, together with a detailed statement by
a responsible officer of the Borrower of the steps being taken by the
Borrower to cure the effect of such breach, default or event;
(g) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Reportable Event with respect
to any Plan has occurred, the statement of the Borrower's chief financial
officer setting forth details as to such Reportable Event and the action
which the Borrower proposes to take with respect thereto, together with a
copy of the notice of such Reportable Event to the Pension Benefit Guaranty
Corporation;
(h) as soon as possible, and in any event within 10 days after the
Borrower fails to make any quarterly contribution required with respect to
any Plan under Section 412(m) of the Internal Revenue Code of 1986, as
amended, the statement of the Borrower's chief financial officer setting
forth details as to such failure and the action which the Borrower proposes
to take with respect thereto, together with a copy of any notice of such
failure required to be provided to the Pension Benefit Guaranty
Corporation;
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(i) promptly upon knowledge thereof, notice of (i) any disputes or
claims by the Borrower's customers exceeding $100,000 in the aggregate
during any fiscal year; and (ii) any change in the persons constituting the
Borrower's officers and board of directors;
(j) promptly upon knowledge thereof, notice of any loss of or material
damage to any Collateral or other collateral covered by the Security
Documents or of any substantial adverse change in any Collateral or such
other collateral or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have sent
to its stockholders;
(l) promptly after the sending or filing thereof, copies of all
regular and periodic reports which the Borrower shall file with the
Securities and Exchange Commission or any national securities exchange;
(m) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect the Borrower's business or its
financial condition; and
(n) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents and
delivery receipts for goods sold, and such other material, reports, records
or information as the Lender may request.
Section 6.2 Books and Records; Inspection and Examination. The
Borrower will keep accurate books of record and account for itself pertaining to
the Collateral and pertaining to its business and financial condition and such
other matters as the Lender may from time to time request in which true and
complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all corporate and
financial books and records at all times during ordinary business hours, to send
and discuss with account debtors and other obligors requests for verification of
amounts owed to the Borrower, and to discuss the Borrower's affairs with any of
its board of directors, officers and designated employees or agents. The
Borrower will permit the Lender, or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of the Borrower at any time during
ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time and from
time to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
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Section 6.4 Compliance with Laws.
(a) The Borrower will (i) comply with the requirements of applicable
laws and regulations, the non-compliance with which would materially and
adversely affect its business or its financial condition and (ii) use and
keep the Collateral, and require that others use and keep the Collateral,
only for lawful purposes, without violation of any federal, state or local
law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable Environmental
Laws and obtain and comply with all permits, licenses and similar approvals
required by any Environmental Laws, and will not generate, use, transport,
treat, store or dispose of any Hazardous Substances in such a manner as to
create any liability or obligation under the common law of any jurisdiction
or any Environmental Law.
Section 6.5 Payment of Taxes and Other Claims. The Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including, without limitation, the Collateral) or upon or
against the creation, perfection or continuance of the Security Interest, prior
to the date on which penalties attach thereto, (b) all federal, state and local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien or charge
upon any properties of the Borrower; provided, that the Borrower will be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Section 6.6 Maintenance of Properties.
(a) The Borrower will keep and maintain the Collateral, the other
collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition, repair
and working order (normal wear and tear excepted) and will from time to
time replace or repair any worn, defective or broken parts; provided,
however, that nothing in this Section 6.6 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties if
such discontinuance is, in the Borrower's judgment, desirable in the
conduct of its business and not disadvantageous in any material respect to
the Lender as holder of the Obligations.
(b) The Borrower will defend the Collateral against all claims or
demands of all Persons (other than the Lender) claiming the Collateral or
any interest therein.
(c) The Borrower will keep all Collateral and other collateral covered
by the Security Documents free and clear of all security interests, liens
and encumbrances except Permitted Liens.
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Section 6.7 Insurance. The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower operates.
Without limiting the generality of the foregoing, the Borrower will at all times
maintain business interruption insurance including coverage for force majeure
and keep all tangible Collateral insured against risks of fire (including
so-called extended coverage), theft, collision (for Collateral consisting of
motor vehicles) and such other risks and in such amounts as the Lender may
reasonably request, with any loss payable to the Lender to the extent of its
interest, and all policies of such insurance shall contain a lender's loss
payable endorsement for the Lender's benefit acceptable to the Lender. All
policies of liability insurance required hereunder shall name the Lender as an
additional insured.
Section 6.8 Preservation of Existence. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments, etc. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel papers constituting Collateral, duly endorsed or assigned
by the Borrower.
Section 6.10 P.O. Box; Credit Card Payments; Collateral Accounts.
(a) The Borrower will irrevocably direct all present and future
Account debtors (except account debtors whose payments arise from credit
cards) and other Persons obligated to make payments constituting Collateral
to make such payments directly to the P.O. Box. All of the borrower's
invoices, account statements and other written or oral communciations
directing, instructing, demanding or requesting payment of any Account or
any other amount constituting Collateral shall conspicuously direct that
all payments be made to the P.O. Box and shall include the P.O. Box
address.
(b) The Borrower shall instruct all present and future credit card
processors to deposit all funds payable to the Borrower under all present
and future agreements between the Borrower and such credit card processors
directly into the Collateral Account. The Borrower shall deposit in the
Collateral Account or, at the Lender's option, to deliver to the Lender all
collections on Accounts and all other proceeds of Collateral which are
received in the P.O. Box, and/or which the Borrower may receive directly
notwithstanding its direction to Account debtors and other obligors to make
payments to the P.O. Box, immeditaely upon reciept thereof, in the form
received, except for any necessary endorsement of the Borrower.
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(c) Until so deposited, the Borrower shall hold all such payments in
trust for and as the property of the Lender and shall not commingle such
payments with any of its other funds or property.
(d) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except
after full payment and discharge of all Obligations.
(e) All deposits in the Collateral Account shall constitute proceeds
of Collateral and shall not constitute payment of the Obligations. The
Lender from time to time at its discretion may, in accordance with Section
2.14, apply deposited funds in the Collateral Account to the payment of the
Obligations, in any order or manner of application satisfactory to the
Lender, by transferring such funds to the Lender's general account.
(f) All items deposited in any Collateral Account shall be subject to
final payment. If any such item is returned uncollected, the Borrower will
immediately pay the Lender the amount of that item, or the Lender at its
discretion may charge any uncollected item to the Borrower's commercial
account or other account. The Borrower shall be liable as an endorser on
all items deposited in any Collateral Account, whether or not in fact
endorsed by the Borrower.
Section 6.11 Landlord's Disclaimers. The Borrower shall deliver to the
Lender, in form and substance satisfactory to the Lender, true and correct copy
of any and all leases pursuant to which the Borrower is leasing the Premises,
together with a landlord's disclaimer and consent with respect to each lease
within sixty (60) days of the date hereof. Until the Borrower so delivers all of
the aforementioned documents, the Lender shall reserve an amount equal to three
months rent owed under the Leases (the "Landlord's Disclaimer Reserve").
Section 6.12 Performance by the Lender. If the Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a period
of ten calendar days after the Lender gives the Borrower written notice thereof
(or in the case of the agreements contained in Sections 6.5, 6.7 and 6.10,
immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Borrower (or, at the Lender's option, in
the Lender's name) and may, but need not, take any and all other actions which
the Lender may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of
security interests, liens or encumbrances, the performance of obligations owed
to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or
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as a result of the performance or observance of such agreements or the taking of
such action by the Lender, together with interest thereon from the date expended
or incurred at the Default Rate. To facilitate the Lender's performance or
observance of such covenants of the Borrower, the Borrower hereby irrevocably
appoints the Lender, or the Lender's delegate, acting alone, as the Borrower's
attorney in fact (which appointment is coupled with an interest) with the right
(but not the duty) from time to time to create, prepare, complete, execute,
deliver, endorse or file in the name and on behalf of the Borrower any and all
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by the Borrower under this Section
6.12.
Section 6.13 Maximum Debt to Book Net Worth Ratio. The Borrower will
maintain the ratio of its Debt to its Book Net Worth, determined as at the end
of each fiscal quarter ending on or about the dates listed below, at not more
than the ratio set forth opposite such period:
Date Maximum Debt to Book Net
---- ------------------------
Worth Ratio
---------------
3/31/2000 2.25 to 1.00
6/30/2000 2.25 to 1.00
9/30/2000 2.50 to 1.00
12/31/2000 2.00 to 1.00
Section 6.14 Minimum Pre-Tax Net Income per Accounting Period. The
Borrower will achieve Net Income plus Tax Expense during each Accounting Period
of not less than $(500,000).
Section 6.15 Minimum Fiscal Year-To-Date Net Income. The Borrower will
achieve fiscal year-to-date Net Income, determined as of the end of each fiscal
quarter ending on or about the dates listed below, of not less than the amount
set forth opposite such date:
Date Minimum Fiscal Year-To-
---- ------------------------
Date Net Income
---------------
3/31/2000 $(300,000)
6/30/2000 $(300,000)
9/30/2000 $(300,000)
12/31/2000 $1,000,000
Section 6.16 Maximum Inventory Days. As of the end of each fiscal
quarter, the Borrower shall maintain an Inventory level of not more than 175
Inventory Days on hand.
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Section 6.17 New Covenants. On or before the end of each fiscal year
of the Borrower, the Borrower and the Lender shall agree on new covenant levels
for Sections 6.13, 6.15 and 7.11 for periods after such date. The new covenant
levels will be based on the Borrower's projections for such periods and shall be
no less stringent than the present levels.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower agrees that, without the Lender's prior
written consent:
Section 7.1 Liens. The Borrower will not create, incur or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, adverse
claim, assignment or transfer upon or of any of its assets, now owned or
hereafter acquired, to secure any indebtedness; excluding, however, from the
operation of the foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrower's business or
operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security interests and
assignments in existence on the date hereof and listed in Schedule 7.1
hereto, securing indebtedness for borrowed money permitted under Section
7.2;
(c) the Security Interest and liens and security interests created by
the Security Documents; and
(d) purchase money security interests relating to the acquisition of
machinery and equipment of the Borrower not exceeding the lesser of cost or
fair market value thereof , not exceeding $2,000,000 for any one purchase
or $3,000,000 in the aggregate during any fiscal year]and so long as no
Default Period is then in existence and none would exist immediately after
such acquisition.
Section 7.2 Indebtedness. The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money or letters of credit issued on
its behalf, or any other indebtedness or liability evidenced by notes, bonds,
debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness in existence on the date hereof and listed in
Schedule 7.2 hereto; and
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(c) indebtedness relating to liens permitted in accordance with
Section 7.1.
Section 7.3 Guaranties. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar transactions in the ordinary course of
business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto.
Section 7.4 Investments and Subsidiaries.
(a) The Borrower will not purchase or hold beneficially any stock or
other securities or evidences of indebtedness of, make or permit to exist
any loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, including specifically but without
limitation any partnership or joint venture, except:
(i) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued
by U.S. corporations rated "A-1" or "A-2" by Standard & Poors
Corporation or "P-1" or "P-2" by Xxxxx'x Investors Service or
certificates of deposit or bankers' acceptances having a maturity of
one year or less issued by members of the Federal Reserve System
having deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the Federal
Deposit Insurance Corporation);
(ii) except as set forth in clause (iii), travel advances or
loans to the Borrower's officers and employees not exceeding at any
one time an aggregate of $100,000;
(iii) a loan to Xx. Xxxx in the amount of $262,583.03 and all
interest accrued and accruing thereon not exceeding the applicable
federal rate;
(iv) the Borrower's investment in XxxxxXxxxxxxx.xxx Inc. not
exceeding its investment as of the date hereof and the net proceeds of
any offering of the Borrower's equity securities for the purpose of
financing such company; and
(v) advances in the form of progress payments, prepaid rent not
exceeding two months or security deposits.
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(b) The Borrower will not create or permit to exist any Subsidiary
other than XxxxxXxxxxxxx.xxx Inc.
Section 7.5 Dividends. Except as set forth below, the Borrower will
not declare or pay any dividends (other than dividends payable solely in stock
of the Borrower) on any class of its stock or make any payment on account of the
purchase, redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
Section 7.6 Sale or Transfer of Assets; Suspension of Business
Operations. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrower will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.7 Intellectual Property. The Borrower will not sell, assign
or grant licenses to use, any of its applications for patents, patents,
copyrights, trademarks, trade secrets, trade names or other intellectual
property to any other Person.
Section 7.8 Consolidation and Merger; Asset Acquisitions. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person.
Section 7.9 Sale and Leaseback. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.10 Restrictions on Nature of Business. The Borrower will not
engage in any line of business materially different from that in which it is
presently engaged and will not purchase, lease or otherwise acquire assets not
related to its business.
Section 7.11 Capital Expenditures. The Borrower will not incur or
contract to incur Capital Expenditures of more than $3,000,000.
Section 7.12 Accounting. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP. The Borrower
will not adopt, permit or consent to any change in its fiscal year.
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Section 7.13 Discounts, etc. The Borrower will not at any time
(whether before or after notice from the Lender) modify, amend, subordinate,
cancel or terminate the obligation of any account debtor or other obligor.
Section 7.14 Defined Benefit Pension Plans. The Borrower will not
adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.13.
Section 7.15 Other Defaults. The Borrower will not permit any breach,
default or event of default to occur under any note, loan agreement, indenture,
lease, mortgage, contract for deed, security agreement or other contractual
obligation binding upon it.
Section 7.16 Place of Business; Name. The Borrower will not transfer
its chief executive office or principal place of business, or move, relocate,
close or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrower will not change
its name.
Section 7.17 Organizational Documents. The Borrower will not amend its
articles of incorporation and bylaws. The Borrower will not become an S
Corporation within the meaning of the Internal Revenue Code of 1986, as amended.
Section 7.18 Salaries. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation.
ARTICLE VIII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.1 Events of Default. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of the Obligations when they become due and
payable;
(b) Failure to pay when due any amount specified in Section 2.4
relating to the Obligation of Reimbursement, or failure to pay immediately
when due or upon termination of the Credit Facility any amounts required to
be paid for deposit in the Special Account under Section 2.5;
(c) Default in the payment of any fees, commissions, costs or expenses
required to be paid by the Borrower under this Agreement ;
(d) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
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(e) A Change of Control shall occur with respect to the Borrower;
(f) The Borrower shall be or become insolvent, or admit in writing its
inability to pay its debts as they mature, or make an assignment for the
benefit of creditors; or the Borrower shall apply for or consent to the
appointment of any receiver, trustee, or similar officer for it or for all
or any substantial part of its property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of
the Borrower; or the Borrower shall institute (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against the Borrower; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower;
(g) A petition shall be filed by or against the Borrower under the
United States Bankruptcy Code naming the Borrower as debtor;
(h) Any representation or warranty made by the Borrower in this
Agreement or by the Borrower (or by any of its officers) in any agreement,
certificate, instrument or financial statement or other statement
contemplated by or made or delivered pursuant to or in connection with this
Agreement shall prove to have been incorrect in any material respect when
deemed to be effective;
(i) The rendering against the Borrower of a final judgment, decree or
order for the payment of money in excess of $100,000 and the continuance of
such judgment, decree or order unsatisfied and in effect for any period of
30 consecutive days without a stay of execution;
(j) A default under any bond, debenture, note or other evidence of
indebtedness of the Borrower owed to any Person other than the Lender, or
under any indenture or other instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any lease
of any of the Premises, and the expiration of the applicable period of
grace, if any, specified in such evidence of indebtedness, indenture, other
instrument or lease;
(k) Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan, shall have occurred and be continuing 30 days after
written notice to such effect shall have been given to the Borrower by the
Lender; or a trustee shall have been appointed by an appropriate United
States District Court to administer any Plan; or the Pension Benefit
Guaranty Corporation shall have instituted proceedings to terminate any
Plan or to appoint a trustee to administer any Plan; or the Borrower shall
have filed for a distress termination of any Plan under Title IV of ERISA;
or the Borrower shall have failed to make any quarterly contribution
required with respect to any Plan under
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Section 412(m) of the Internal Revenue Code of 1986, as amended, which the
Lender determines in good faith may by itself, or in combination with any
such failures that the Lender may determine are likely to occur in the
future, result in the imposition of a lien on the Borrower's assets in
favor of the Plan;
(l) An event of default shall occur under any Security Document or
under any other security agreement, mortgage, deed of trust, assignment or
other instrument or agreement securing any obligations of the Borrower
hereunder or under any note;
(m) The Borrower shall liquidate, dissolve, terminate or suspend its
business operations or otherwise fail to operate its business in the
ordinary course, or sell all or substantially all of its assets, without
the Lender's prior written consent;
(n) The Borrower shall fail to pay, withhold, collect or remit any tax
or tax deficiency when assessed or due (other than any tax deficiency which
is being contested in good faith and by proper proceedings and for which it
shall have set aside on its books adequate reserves therefor) or notice of
any state or federal tax liens shall be filed or issued;
(o) Default in the payment of any amount owed by the Borrower to the
Lender other than any indebtedness arising hereunder;
(p) Any event or circumstance with respect to the Borrower shall occur
such that the Lender shall believe in good faith that the prospect of
payment of all or any part of the Obligations or the performance by the
Borrower under the Loan Documents is impaired or any material adverse
change in the business or financial condition of the Borrower shall occur;
or
(q) Any breach, default or event of default by or attributable to any
Affiliate of the Borrower under any agreement between such Affiliate and
the Lender.
Section 8.2 Rights and Remedies. During any Default Period, the Lender
may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the Commitment
to be terminated, whereupon the same shall forthwith terminate;
(b) the Lender may, by notice to the Borrower, declare the Obligations
to be forthwith due and payable, whereupon all Obligations shall become and
be forthwith due and payable, without presentment, notice of dishonor,
protest or further notice of any kind, all of which the Borrower hereby
expressly waives;
(c) the Lender may, without notice to the Borrower and without further
action, apply any and all money owing by the Lender to the Borrower,
including without limitation any funds on deposit with the Lender, whether
or not matured, to the payment of the Obligations;
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(d) the Lender may make demand upon the Borrower and, forthwith upon
such demand, the Borrower will pay to the Lender in immediately available
funds for deposit in the Special Account pursuant to Section 2.13 an amount
equal to the aggregate maximum amount available to be drawn under all
Letters of Credit then outstanding, assuming compliance with all conditions
for drawing thereunder;
(e) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of Collateral,
or any evidence thereof, proceeding without judicial process or by judicial
process (without a prior hearing or notice thereof, which the Borrower
hereby expressly waives) and the right to sell, lease or otherwise dispose
of any or all of the Collateral, and, in connection therewith, the Borrower
will on demand assemble the Collateral and make it available to the Lender
at a place to be designated by the Lender which is reasonably convenient to
both parties;
(f) the Lender may exercise and enforce its rights and remedies under
the Loan Documents; and
(g) the Lender may exercise any other rights and remedies available to
it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (f) or (g) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 Certain Notices. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 9.4) at least ten calendar days before
the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
Section 9.1 Release. The Borrower hereby absolutely and
unconditionally releases and forever discharges the Lender, any participants and
any and all parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower has had, now has or has made claim to have against any such Person for
or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date of this
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Agreement, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
Section 9.2 No Waiver; Cumulative Remedies. No failure or delay by the
Lender in exercising any right, power or remedy under the Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy under the Loan Documents. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
Section 9.3 Amendments, Etc. No amendment, modification, termination
or waiver of any provision of any Loan Document or consent to any departure by
the Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
Section 9.4 Addresses for Notices, Etc. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed or telecopied to the party to whom notice is being given at
its address or telecopier number as set forth below:
If to the Borrower:
The Sportsman's Guide, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx Xx. Xxxx, Xxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
With a copy to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxxxx, Xxxxxx & Xxxxx P.L.L
00 Xxxxxxxxxx Xxxxx XX, Xxxxx 0000
Xxxxxx, Xxxx 00000
Telecopier: (000) 000-0000
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If to the Lender:
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
MAC X0000-000
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxxxxxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
Section 9.5 Servicing of Credit Facility.
(a) The Lender has entered into a servicing agreement (the "Servicing
Agreement") with the Servicer to service and enforce the Loan Documents and
collect the Obligations on the Lender's behalf. Pursuant to the Servicing
Agreement, the Lender has authorized the Servicer to take certain actions,
perform certain duties and exercise certain powers on the Lender's behalf
under the provisions of the Loan Documents and any other instruments and
agreements referred to in this Agreement.
(b) The Servicer shall have no duties or responsibilities to the
Borrower, but only to the Lender and then only as expressly set forth in
the Servicing Agreement. Without limiting the generality of the foregoing,
the Servicer shall have no obligation to make any loans or advances to the
Borrower. Neither the Servicer nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted by them
hereunder or in connection herewith, unless caused by its or their willful
misconduct. The Servicer's duties shall be mechanical and administrative in
nature; nothing in this Agreement, express or implied, is intended to or
shall be so construed as to impose upon the Servicer any obligations with
respect to the Loan Documents except as expressly set forth herein. The
Borrower will not in any way be construed to be a third party beneficiary
of any relationship between the Servicer and the Lender.
(c) The Servicer shall be entitled to rely, and shall be fully
protected in relying, upon any communication whether written or oral
believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person, and, with respect to all legal matters
pertaining to this Agreement and its duties hereunder, upon advice of
counsel selected by it.
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(d) The Borrower shall be entitled to rely upon any communication
whether written or oral sent or made by the Servicer for and on behalf of
the Lender with respect to all matters pertaining to the Loan Documents and
the Borrower's duties and obligations hereunder, unless and until the
Borrower receives written notice from the Lender that the Servicer is no
longer servicing the Credit Facility.
(e) The Servicer shall hold and be the custodian of the Loan Documents
on the Lender's behalf for so long as the Servicer is servicing the Credit
Facility.
(f) The Servicing Agreement may be terminated at any time without
prior notice to or consent of the Borrower. Upon termination of the
Servicing Agreement and failure to replace the Servicing Agreement with a
new servicing agreement, all references herein to the Servicer shall
thereafter mean and refer to the Lender.
Section 9.6 Further Documents. The Borrower will from time to time
execute and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interest or the Lender's rights under the Loan
Documents (but any failure to request or assure that the Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).
Section 9.7 Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
Section 9.8 Costs and Expenses. The Borrower shall pay on demand all
costs and expenses, including (without limitation) reasonable attorneys' fees,
incurred by the Lender in connection with the Obligations, this Agreement, the
Loan Documents, any Letters of Credit, and any other document or agreement
related hereto or thereto, and the transactions contemplated hereby, including
without limitation all such costs, expenses and fees incurred in connection with
the negotiation, preparation, execution, amendment, administration, performance,
collection and enforcement of the Obligations and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interest.
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Section 9.9 Indemnity. In addition to the payment of expenses pursuant
to Section 9.8, the Borrower shall indemnify, defend and hold harmless the
Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution
and delivery of the Loan Documents or the making of the Advances;
(ii) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section 5.15
proves to be incorrect in any respect or as a result of any violation
of the covenant contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel) in connection with the foregoing and any
other investigative, administrative or judicial proceedings, whether
or not such Indemnitee shall be designated a party thereto, which may
be imposed on, incurred by or asserted against any such Indemnitee, in
any manner related to or arising out of or in connection with the
making of the Advances and the Loan Documents or the use or intended
use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.9 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
Section 9.10 Participants. The Lender and its participants, if any,
are not partners or joint venturers, and the Lender shall not have any liability
or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.11 Execution in Counterparts. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed
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and delivered shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same instrument.
Section 9.12 Binding Effect; Assignment; Complete Agreement;
Exchanging Information. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower will not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, Xxxxx Fargo & Company, and all direct and indirect
subsidiaries of Xxxxx Fargo & Company, may exchange among themselves any and all
information they may have in their possession regarding the Borrower and its
Affiliates, and the Borrower waives any right of confidentiality it may have
with respect to such exchange of such information.
Section 9.13 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.14 Headings. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
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Section 9.15 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Minnesota. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the District Court of Hennepin County,
Minnesota, or the United States District Court, District of Minnesota, Fourth
Division; and (iv) agree that a final judgment in any such suit, action or
proceeding may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
NORWEST BANK MINNESOTA, THE SPORTSMAN'S GUIDE, INC.
NATIONAL ASSOCIATION
By /s/ Xxxxx Xxxxxxxxxxx By /s/ Xxxxx X. Xxxxxxx
--------------------------------- ------------------------------------
Xxxxx Xxxxxxxxxxx Xxxxx X. Xxxxxxx
Its Vice President Its Vice President Finance/Treasurer
-46-
51
Table of Exhibits and Schedules
Exhibit A Form of Revolving Note
Exhibit B Form of Compliance Certificate
Exhibit C Premises
-------------------
Schedule 3.6 Financing Statement Information
Schedule 5.1 Trade Names, Chief Executive Office, Principal
Place of Business, and Locations of Collateral
Schedule 5.2 Capital Stock
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
52
Exhibit A to Credit and Security
Agreement
REVOLVING NOTE
$25,000,000 Minneapolis, Minnesota
December 27, 1999
For value received, the undersigned, The Sportsman's Guide, Inc., a
Minnesota corporation (the "Borrower"), hereby promises to pay on the
Termination Date under the Credit Agreement (defined below), to the order of
Norwest Bank Minnesota, National Association, a national banking association
(the "Lender"), at its main office in Minneapolis, Minnesota, or at any other
place designated at any time by the holder hereof, in lawful money of the United
States of America and in immediately available funds, the principal sum of
Twenty-Five Million Dollars and No Cents ($25,000,000) or, if less, the
aggregate unpaid principal amount of all Revolving Advances made by the Lender
to the Borrower under the Credit Agreement (defined below) together with
interest on the principal amount hereunder remaining unpaid from time to time,
computed on the basis of the actual number of days elapsed and a 360-day year,
from the date hereof until this Note is fully paid at the rate from time to time
in effect under the Credit and Security Agreement of even date herewith (as the
same may hereafter be amended, supplemented or restated from time to time, the
"Credit Agreement") by and between the Lender and the Borrower. The principal
hereof and interest accruing thereon shall be due and payable as provided in the
Credit Agreement. This Note may be prepaid only in accordance with the Credit
Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Revolving Note referred to in the Credit Agreement. This Note is secured, among
other things, pursuant to the Credit Agreement and the Security Documents as
therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
The Borrower hereby agrees to pay all costs of collection, including
reasonable attorneys' fees and legal expenses if this Note is not paid when due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and
protest are expressly waived.
THE SPORTSMAN'S GUIDE, INC.
By
-------------------------------------
Xxxxx X. Xxxxxxx
Its Vice President Finance/Treasurer
53
Exhibit B to Credit and Security
Agreement
COMPLIANCE CERTIFICATE
To: Xxxxx Xxxxxxxxxxx
Norwest Bank Minnesota, National Association
Date: , 200
------------------ -----
Subject: The Sportsman's Guide, Inc.
Financial Statements
In accordance with our Credit and Security Agreement dated as of
December 23, 1999 (the "Credit Agreement"), attached are the financial
statements of The Sportsman's Guide, Inc. (the "Borrower") as of and for
, 200 (the "Reporting Date") and the year-to-date period then
ended (the "Current Financials"). All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in accordance
with GAAP, subject to year-end audit adjustments, and fairly present the
Borrower's financial condition and the results of its operations as of the
Reporting Date.
Events of Default. (Check one):
[ ] The undersigned does not have knowledge of the occurrence of a Default
or Event of Default under the Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a Default or Event
of Default under the Credit Agreement and attached hereto is a
statement of the facts with respect to thereto. The Borrower
acknowledges that pursuant to Section 2.7(d) the Lender may impose the
Default Rate at any time during the resulting Default Period.
Financial Covenants. I further hereby certify as follows:
1. Maximum Debt to Book Net Worth Ratio. Pursuant to Section 6.13 of
the Credit Agreement, as of the Reporting Date, the ratio of the Borrower's
Debt to its Book Net Worth was to 1.00 which [ ] satisfies [ ] does
not satisfy the requirement that such ratio be no more than to 1.00
on the Reporting Date as set forth in table below:
54
Date Maximum Debt to Book Net
---- ------------------------
Worth Ratio
-----------
3/31/2000 2.25 to 1.00
6/30/2000 2.25 to 1.00
9/30/2000 2.50 to 1.00
12/31/2000 2.00 to 1.00
2. Minimum Net Income. Pursuant to Section 6.15 of the Credit
Agreement, the Borrower's fiscal year-to-date Net Income as of the
Reporting Date was $ , which [ ] satisfies [ ] does not satisfy
the requirement that such amount be not less than $ during such period as
set forth in table below:
Date Minimum Fiscal Year-To-
---- -----------------------
Date Net Income
---------------
3/31/2000 $(300,000)
6/30/2000 $(300,000)
9/30/2000 $(300,000)
12/31/2000 $1,000,000
3. Minimum Pre-Tax Net Income per Accounting Period. Pursuant to
Section 6.14, for the Accounting Period ending on the Reporting Date, the
Borrower's Net Income plus Tax Expense was $ , which [ ]
satisfies [ ] does not satisfy the requirement that such amount be not less
than $(500,000) during such Accounting Period.
4. Maximum Inventory Days. Pursuant to Section 6.16 of the Credit
Agreement, as of the end of the Reporting Date, the turnover rate for
Inventory was Inventory Days which [ ] satisfies [ ] does not
satisfy the requirement that such amount be not more than 175 Inventory
Days.
5. Capital Expenditures. Pursuant to Section 7.11 of the Credit
Agreement, for the year-to-date period ending on the Reporting Date, the
Borrower has expended or contracted to expend during the year
ended , 199 , for Capital Expenditures, $
in the aggregate and at most $ in any one transaction, which
[ ] satisfies [ ] does not satisfy the requirement that such expenditures
not exceed $3,000,000 in the aggregate and $ for any one
transaction during such year.
6. Salaries. As of the Reporting Date, the Borrower [ ] is [ ] is not
in compliance with Section 7.18 of the Credit Agreement concerning
salaries.
-2-
55
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
THE SPORTSMAN'S GUIDE, INC.
By
-------------------------------
Its
---------------------------
-3-
56
Exhibit C to Credit and Security
Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement are
legally described as follows:
I. 000 XXXXXXX XXXXXX XXXXX, XXXXX XXXX, XXXXXXXXX 00000
Legal Description of Land: All that part of Government Xxx 0, Xxxxxxx 00,
Xxxxxxxx 00, Xxxxx 23, described as follows: Beginning at a point 233.00
feet south of the Northwest Corner of said Government Lot 2 and 934.76 feet
East of the West line of above-mentioned Government Lot 2, which point is
established with an Iron Monument; thence continuing East 398.91 feet to
the West Right-of-Way line (Radius of curve 1547.69 feet) to an Iron
Monument; thence South 40 09' E a distance of 182.79 feet, along said
Right-of-Way line, to an Iron Monument; thence West, parallel with
aforesaid North line of Government Lot 2 a distance of 567.27 feet to an
Iron Monument thence North, parallel with the West line of Government Lot 2
a distance of 195.43 feet to the point of beginning.
That part of Government Xxx 0 xx Xxxxxxx 00, Xxxxxxxx 00, Xxxxx 23,
described as follows, to-wit: Commencing at the intersection of the
northerly line of the Chicago, Milwaukee, St. Xxxx and Pacific Railroad and
the west line of said Government Lot 2, thence northerly along said west
line to its intersection with the southerly right-of-way line of S.T.H. No.
13, thence Northeasterly along said Southeasterly right-of-way line to a
point which is 233 feet south of the North line of said Government Lot 2,
thence East parallel with the North line of said Government Lot 2, to a
point which is 934.76 feet East of the West line of said Government Lot 2,
thence South parallel to the West line of said Government Lot 2, a distance
of 195.43 feet thence East parallel to the North line of said Government
Lot 2, to a point which is 1002.03 feet East of the West line of said
Government Lot 2, thence south and parallel to the West line of said
Government Lot 2, a distance of 895.60 feet to a point on the Northerly
right-of-way of the Chicago, Milwaukee, St. Xxxx and Pacific Railroad,
thence Northwesterly along said Northerly right-of-way line to the point of
beginning.
II. 0000 XXXXX XXXX XXXX, XXXXXXX XXXXXXX, XXXXXXXXX
That part of the NE 1/4 of Section 27, T 28 N, R 22 W described as follows:
57
Commencing at the Southeast corner of said NE 1/4; thence S 89 degrees
26' 30" W, along the South line of said NE 1/4, 50 feet to the West R/W
line of the Chicago & North Western Rwy.; thence N 0 degrees 00' W,
along said R/W line 177.43 feet to the point of beginning of the
property to be described; thence S 63 degrees 25' W, 356.37 feet;
thence N 26 degrees 35' W, 429 feet; thence S 63 degrees 25' W, 100
feet; thence N 26 degrees 35' W 48 feet; thence S 63 degrees 25' W, 287
feet to the Northeasterly R/W line of the Stockyards Road (a private
road with a R/W 25 feet on each side of the centerline); thence N 26
degrees 35' W, along said R/W line 563.01 feet to the Southeasterly R/W
line of Armour Ave. (a private road 66 feet wide); thence N 63 degrees
26' E, along said R/W line 977.32 feet to the Westerly R/W line of the
Chicago & North Western Rwy.; thence S 26 degrees 32' E along said R/W
line 356.53 feet; thence Southerly along said R/W line on a curve
concave to the West, central angle 26 degrees 32', radius of 918.9
feet, arc distance of 425.54 feet; thence S 0 degrees 00' E, along said
R/W line 305.04 feet to the point of beginning, containing 776,592
square feet or 17.828 acres more or less.
The bearings for this description are based on an assumed bearing of N
0 degrees 00' E on the East line of said NE 1/4 of Section 27.
III. 0000 XXXX XXXXXXX 00, XXXXXX XXXX, XXXXXXXXX
All that part of the Northeast Quarter of the Northeast Quarter
of Section 7, Township 30 North, Range 23 West, Xxxxxx County,
Minnesota, lying northeasterly of S.T.H. No. 10, subject to S.T.H. Xx.
00, xx Xxxx Xxxx Xxxx over the easterly 33 feet thereof, and subject to
County Road "I," said County Road "I" is described as follows on Page
299, Book 1034 of Deeds, Document No. 951328:
The northerly 33 feet of the Northeast Quarter of the Northeast
Quarter of Section 7, Township 30 North, Range 23 West, lying easterly
of the right-of-way of the Anoka Cutoff (U.S. #10) and westerly of the
right-of-way of Long Lake Road.
Subject to a utility easement to the City of Mounds View
described as follows:
A strip of land 20 feet in width lying 10 feet on each side of
the following described centerline: Commencing at the Northeast corner
of Section 0, Xxxxxxxx 00, Xxxxx 00, Xxxxxx Xxxxxx, Xxxxxxxxx; thence
South along the east line of said Section 7 a distance of 597 feet;
thence deflecting to the right 89 degrees 07 feet to the west line of
Long Lake Road for the actual point of beginning of the strip being
described; thence continuing along said line deflected right 89 degrees
017 feet a distance of 320.99 feet; thence deflecting to the right 41
degrees 32 feet a distance of 180.26 feet to Point A and then
continuing on said deflection right of 41 degrees 32 feet a further
distance of 244.18 feet, being a distance of 424.44 feet in all on this
line;
-C2-
58
thence deflecting to the right 49 degrees 21 feet a distance of 47.74
feet to Point B and continuing on said line deflected right 49 degrees
21 feet a distance of 234.73 feet, more or less, being a total distance
of 282.47 feet, more or less, on this line, to the south line of County
Road "I" for the point of termination of the strip being described;
thence continuing on said line deflected 49 degrees 21 feet right to
the north line of said Section 7; thence East on the north line of said
Section 7 a distance of 676 feet, more or less, to the point of
commencement. And also a strip of land 20 feet in width lying 10 feet
on each side of the following described centerline: Commencing at Point
A in the previously described description; thence northeasterly at
right angles to the line on which Point A is situated a distance of
282.70 feet and there terminating. And also a strip of land 20 feet in
width lying 10 feet on each side of the following described centerline:
Commencing at Point B in the previously described centerline; thence
Easterly at right angles to the line on which Point B is situated a
distance of 54 feet and there terminating.
Subject to the rights of the State of Minnesota to erect
temporary snow fences upon S.T.H. No. 10 right-of-way and upon the
lands adjacent thereto as described on Page 453, Book 1440 of Deeds,
Document No. 1326463.
-C3-
59
Schedule 3.6 to Credit and Security
Agreement
FINANCING STATEMENT INFORMATION
-------------------------------------------------------------------------------
NAME, ADDRESS AND EMPLOYER
IDENTIFICATION NUMBER OF DEBTOR:
The Sportsman's Guide, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx Xx. Xxxx, Xxxxxxxxx 00000
Federal Employer Identification No. 41-
1293081
NAME, ADDRESS AND EMPLOYER
IDENTIFICATION NUMBER OF SECURED PARTY:
Norwest Bank Minnesota, National
Association
Sixth Street and Marquette Avenue
MAC X0000-000
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Federal Tax Identification No. 00-0000000
-------------------------------------------------------------------------------
60
Schedule 5.1 to Credit and Security
Agreement
Trade Names, Chief Executive Office, Principal Place of Business,
and Locations of Collateral
TRADE NAMES
The Sportsman's Guide
Guide Xxxxxxxx.xxx
Bargain Xxxxxxxxxx.xxx
The Company transacted business under the name "The
Xxxx Company" prior to 1986.
CHIEF EXECUTIVE OFFICE/PRINCIPAL PLACE OF BUSINESS
000 Xxxxxxx Xxxxxx
Xxxxx Xx. Xxxx, Xxxxxxxxx 00000
OTHER INVENTORY AND EQUIPMENT LOCATIONS
0000 X. Xxxxxxx 00 0000 Xxxxx Xxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxxx 00000 Xxxxxxx Xxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attention: Xxxx Xxxxxx Attention: Xx Xxxxxx
61
Schedule 5.2 to Credit and Security
Agreement
CAPITAL STOCK
---------------------------------------- -------------------------------------- ----------------------------------
TYPE/CLASS/SERIES OF STOCK NUMBER OF AUTHORIZED SHARES NUMBER OF ISSUED AND OUTSTANDING
SHARE
---------------------------------------- -------------------------------------- --------------------------------------
Common, $.01 par value 36,800,000 4,747,810
---------------------------------------- -------------------------------------- --------------------------------------
Series A Preferred, $.01 par value 200,000 0
---------------------------------------- -------------------------------------- --------------------------------------
Undesignated 3,000,000 0
---------------------------------------- -------------------------------------- --------------------------------------
The Borrower has granted options to purchase up to 617,069 common
shares pursuant to incentive and other employee stock option plans.
The Borrower granted to the managing underwriters of the Borrower's
1998 public equity offering a warrant to purchase up to 100,000 common shares.
See attached for 5% holders.
62
FIVE PERCENT BENEFICIAL OWNERS
The following list sets forth certain information with respect to the
beneficial ownership of common stock of the Borrower as of December 27, 1999 by
those persons or groups known to the Borrower to beneficially own more than 5%
of our common stock.
COMMON STOCK
BENEFICIALLY OWNED
------------------
NAME NUMBER PERCENT (1)
---- ------ -----------
522,000 11.0%
Xxxxxxx X. Xxxxx (2)...............................................
250,851 5.1%
Xxxx Xxxx (3)......................................................
Xxxxx X. Xxxxxx,
individually and as trustee of various trusts for the
benefit of Dr. and Xxx. Xxxxx and their children 383,725 8.1%
and grandchildren (4) ........................................
Wellington Management Company, LLP (5)
00 Xxxxx Xxxxxx 335,400 7.1%
Boston, MA 02109.............................................
Dimensional Fund Advisors Inc. (6)
0000 Xxxxx Xxxxxx
11th Floor 302,800 6.4%
Santa Monica, CA 90401.......................................
Kalmar Investments Inc. (7)
0000 Xxxxxxx Xxxx 300,000 6.3%
Xxxxxxxxxx, XX 00000 ........................................
-5.2-2-
63
----------------
(1) Percentages are calculated on the basis of the number of shares
outstanding on December 27, 1999 plus the number of shares issuable
pursuant to options held by the individual which are exercisable within
60 days after December 27, 1999.
(2) Includes 420,051 shares held by the Xxxxxxx X. Xxxxx Family Limited
Partnership of which the Xxxxxxx X. Xxxxx Revocable Trust, of which Xx.
Xxxxx is trustee, owns a 99.9% limited partnership interest and a 99.8%
interest in the general partner, and 101,949 shares held by the Xxxxx
X. Xxxxx Family Limited Partnership of which the Xxxxx X. Xxxxx
Revocable Trust, of which Xxx. Xxxxx is trustee, owns a 99.9% limited
partnership interest and a 99.8% interest in the general partner. Xxxxx
X. Xxxxx is the wife of Xx. Xxxxx. Does not include 633,848 shares held
by Dr. and Xxx. Xxxxx'x children or in trusts for the benefit of Dr.
and Xxx. Xxxxx and their children and grandchildren of which Xx. Xxxxx
expressly disclaims beneficial ownership.
(3) Includes 158,668 shares issuable upon the exercise of options. Does not
include 46,000 shares held in trusts for the benefit of Xx. Xxxx'x
children and grandchildren of which Xx. Xxxx expressly disclaims
beneficial ownership.
(4) Includes 382,725 shares held as trustee of various trusts for the
benefit of Dr. and Xxx. Xxxxx and their children and grandchildren, of
which Xx. Xxxxxx has no pecuniary interest. Does not include 522,000
shares held by the Xxxxxxx X. Xxxxx Family Limited Partnership and the
Xxxxx X. Xxxxx Family Limited Partnership over which Xx. Xxxxxx shares
voting and dispositive power and of which Xx. Xxxxxx expressly
disclaims beneficial ownership. Xx. Xxxxxx'x address is 0000 Xxxxxxxxxx
Xxxxx X.X., Xxxxxx, Xxxx 00000.
(5) Based on a Schedule 13G filing dated February 9, 1999. Wellington
Management Company, LLP, a registered investment advisor, is the
beneficial owner of 335,400 shares owned of record by its clients and
has shared power to vote and dispose of the 335,400 shares.
(6) Based on a Schedule 13G filing dated February 11, 1999. Dimensional
Fund Advisors Inc., a registered investment advisor, has sole power to
vote and dispose of 302,800 shares held by investment companies and
other investment vehicles to which Dimensional Fund Advisors Inc.
provides investment advice. Dimensional Fund Advisors Inc. disclaims
beneficial ownership of the 302,800 shares.
(7) Based on a Schedule 13G filing dated January 8, 1999. Kalmar
Investments Inc., a registered investment advisor, has sole power to
dispose of 300,000 shares but does not have the power to vote the
300,000 shares.
-5.2-3-
64
Schedule 7.1 to Credit and Security
Agreement
PERMITTED LIENS
-------------------------------------------------------------------------------------------------------------------------
CREDITOR COLLATERAL JURISDICTION FILING DATE FILING NUMBER
-------------------------------------------------------------------------------------------------------------------------
Computer Sales Leased equipment pursuant Minnesota Secretary of 1/9/1995 1728610
International, Inc. to Master Lease State
-------------------------------------------------------------------------------------------------------------------------
Bank One Leasing Leased equipment pursuant Minnesota Secretary of 1/9/1995 1728611
Corporation (assigned by to Master Lease State
Computer Sales
International, Inc.)
-------------------------------------------------------------------------------------------------------------------------
Bank One Leasing Leased equipment pursuant Minnesota Secretary of 1/24/1995 1732697
Corporation (assigned by to Master Lease State
Computer Sales
International, Inc.)
-------------------------------------------------------------------------------------------------------------------------
Bank One Leasing Leased equipment pursuant Minnesota Secretary of 1/27/1995 1733564
Corporation (assigned by to Master Lease State
Computer Sales
International, Inc.)
-------------------------------------------------------------------------------------------------------------------------
Bank One Leasing Leased equipment pursuant Minnesota Secretary of 2/8/1995 1736473
Corporation (assigned by to Master Lease State
Computer Sales
International, Inc.)
-------------------------------------------------------------------------------------------------------------------------
Bank One Leasing Leased equipment pursuant Minnesota Secretary of 2/8/1995 1736474
Corporation (assigned by to Master Lease State
Computer Sales
International, Inc.)
-------------------------------------------------------------------------------------------------------------------------
Bank One Financial Specific equipment pursuant Minnesota Secretary of 6/6/1995 1766979
Services Corp. to Purchase/Service State
Agreement
-------------------------------------------------------------------------------------------------------------------------
Bank One Financial Specific equipment pursuant Minnesota Secretary of 6/6/1995 1766982
Services Corp. to Purchase/Service State
Agreement
-------------------------------------------------------------------------------------------------------------------------
Computer Sales Leased equipment pursuant Minnesota Secretary of 8/3/1995 1780263
International, Inc. to Master Lease State
-------------------------------------------------------------------------------------------------------------------------
65
-------------------------------------------------------------------------------------------------------------------------
Bank One Leasing Leased equipmentpursuant to Minnesota Secretary of 10/23/1995 1797994
Corporation (assigned by MasterLease State
Computer Sales
International, Inc.)
-------------------------------------------------------------------------------------------------------------------------
Norwest Business Credit, Blanket Minnesota Secretary of 5/3/1996 1845531
Inc. State
-------------------------------------------------------------------------------------------------------------------------
Norwest Bank Minnesota, All inventory, equipment, Minnesota Secretary of 5/31/1996 1853428
National Association, as right to payment of money, State
Agent on behalf of itself general intangibles
and certain other lenders
under one or more
agreements among the
Debtor, the Agent and
such lenders.
-------------------------------------------------------------------------------------------------------------------------
First Bank of Highland Leased equipment pursuant Minnesota Secretary of 11/8/1996 1892201
Park (assigned by Computer to Master Lease State
Sales International, Inc.)
-------------------------------------------------------------------------------------------------------------------------
Crown Credit Company Specific equipment Minnesota Secretary of 3/18/1997 1925517
State
-------------------------------------------------------------------------------------------------------------------------
Crown Credit Company Specific equipment Minnesota Secretary of 3/27/1997 1928003
State
-------------------------------------------------------------------------------------------------------------------------
First American Bank, N.A. Leased computer equipment Minnesota Secretary of 3/31/1997 1928582
(assigned by Carlton State
Financial Corporation)
-------------------------------------------------------------------------------------------------------------------------
SalePoint, Inc. Specific computer equipment Minnesota Secretary of 7/7/1997 1954980
State
-------------------------------------------------------------------------------------------------------------------------
First American Bank, N.A. Leased computer equipment Minnesota Secretary of 9/29/1997 1976570
(assigned by Carlton State
Financial Corporation)
-------------------------------------------------------------------------------------------------------------------------
Community First Financial, Leased computer equipment Minnesota Secretary of 11/21/1997 1990789
Inc. (assigned by Carlton State
Financial Corporation)
-------------------------------------------------------------------------------------------------------------------------
Hampton Bank (assigned by Leased computer equipment Minnesota Secretary of 8/17/1998 2061697
Carlton Financial State
Corporation)
-------------------------------------------------------------------------------------------------------------------------
Xxxxxx Bank, N.A. Leased computer equipment Minnesota Secretary of 5/11/1999 2130192
(assigned by Carlton State
Financial Corporation)
-------------------------------------------------------------------------------------------------------------------------
-7.1-2-
66
-------------------------------------------------------------------------------------------------------------------------
Community First Financial, Leased computer equipment Minnesota Secretary of 11/17/1999 2178407
Inc. (assigned by Carlton State
Financial Corporation)
-------------------------------------------------------------------------------------------------------------------------
-7.1-3-
67
Schedule 7.2 to Credit and Security
Agreement
PERMITTED INDEBTEDNESS AND GUARANTIES
Indebtedness
Creditor Principal Maturity Monthly Collateral
-------- --------- -------- ------- ----------
Amount Date Payment
------ ---- -------
SSP HRA $55,000 10/31/03 $25,000/yr Machinery & equipment
SSP HRA $15,000 10/31/03 None Unsecured
required
Guaranties
None
