LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made and entered into
as of the day of acceptance by and between the DEBTOR GROUP and BANK ONE, TEXAS,
NATIONAL ASSOCIATION:
W I T N E S S E T H
1. Definitions. The following definitions shall apply:
(a) "Affiliate" shall mean any individual or entity directly
or indirectly controlling, controlled by, or under common control with,
or otherwise related to any member of the Debtor Group or any Obligated
Party and shall include but not be limited to any partnership, joint
venture, joint stock company, corporation, parent company or subsidiary
or other company or person in which any Obligated Party or any person
related to any Obligated Party by blood, adoption or marriage no more
remotely than two degrees of relationship shall own, directly or
indirectly, of record or beneficially, or hold, directly or indirectly,
the power to control the vote of, more than 10% of the voting stock of,
or other equity interest in, such entity.
(b) "Bank" shall mean BANK ONE, TEXAS, NATIONAL ASSOCIATION,
of Dallas, Texas, whose mailing address is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇.
(c) "Borrower" shall mean The Great Train Store Partners,
L.P., a limited partnership organized and existing under the laws of
the State of Missouri, whose chief executive office is located at
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
(d) "Borrowing Base" shall mean, as of any date of
determination, the lesser of (i) $3,000,000, or (ii) the sum of (1) the
product of (A) the Inventory Advance Rate, and (B) Borrower's Eligible
Inventory, less (2) the Reserve, and less (3) the Letter of Credit
Exposure, all determined as of such date of determination.
(e) "Business Day" shall mean any calendar day except
Saturday, Sunday and those legal public holidays specified in 5 U.S.C.
ss.6103(a), as may be amended from time to time.
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(f) "Code" shall mean the Uniform Commercial Code as in effect
in the State of Texas on the date of this Agreement or as it may
hereafter be amended from time to time.
(g) "Collateral" shall mean all that certain property
described in Addendum II attached hereto and incorporated herein by
reference; provided, however, the property described in Schedule 10 (g)
shall be subject to the liens described in Schedule 10 (g) securing the
indebtedness described in such schedule.
(h) "Company" shall mean The Great Train Store Company, a
Delaware corporation.
(i) "Contract Rate" shall mean a rate calculated on the basis
of actual days elapsed but computed as if each year consisted of 360
days, equal to the sum of (i) the Base Rate (the "Base Rate") of
interest as established from time to time by Bank as its commercial
base rate of interest publicly announced from time to time (which may
not be the lowest, best or most favorable rate of interest which Bank
may charge on loans to its customers), plus (ii) one and one-half
percent (1.50%) per annum.
(j) "Current Ratio" shall mean the ratio of Company's
consolidated current assets to its consolidated current liabilities
(including any amounts funded under the Revolving Loans) determined in
accordance with GAAP.
(k) "Debtor Group" shall mean Company, GTS Partner, Inc., GTS
Limited Partner, Inc. and Borrower, jointly, severally, collectively
and individually.
(l) "Default" shall mean any of the events specified in
Section 14, regardless of whether there shall have occurred any passage
of time or giving of notice or both that would be necessary in order to
constitute such event an Event of Default.
(m) "Default Rate" shall mean at the time in question a per
annum rate equal to the lesser of (i) the Base Rate then in effect plus
four percent (4.0%), or (ii) the Maximum Rate.
(n) "Distributions" shall mean, in respect of any corporation,
cash distributions or dividends or any other distributions of property
on, or in respect of, any class of capital stock of such corporation,
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except for distributions made solely in shares of stock of the same
class, and means, in respect of any partnership or other unincorporated
entity, cash distributions or any other distributions of property on,
or in respect of, any capital or profits interest in such partnership
or other entity.
(o) "Eligible Inventory" shall mean, as of any date of
determination (the value determined at the lower of cost or market on a
first-in, first-out basis) of all inventory owned by and in the
possession of Borrower and located in the United States of America that
Secured Party, in its sole credit judgment, deems to be eligible for
borrowing purposes. Without limiting the generality of the foregoing,
unless otherwise agreed by Secured Party, the following is not Eligible
Inventory: (a) work-in-progress; (b) finished goods which do not meet
the specifications of the purchase order for such goods; (c) inventory
which Secured Party determines, in its sole discretion, to be
unacceptable for borrowing purposes due to age, quality, type,
category, category margin deterioration and/or quantity; (d) inventory
with respect to which Secured Party does not have a valid, first
priority and fully perfected security interest; (e) inventory with
respect to which there exists any Lien in favor of any Person other
than Secured Party (unless such Lien has been subordinated upon terms
and conditions acceptable to Secured Party in its sole discretion); and
(f) inventory situated at a location for which there is no landlord
waiver or mortgagee waiver, as appropriate, in each instance in form
and substance acceptable to Secured Party in its sole discretion.
(p) "Fixed Charge Coverage Ratio" means, as of any date for
Company on a consolidated basis, the ratio of (i) Net Income, plus
depreciation and amortization expense, plus interest expense, plus
operating lease expense, to (ii) required principal payments made on
Funded Debt (excluding principal payments on the Revolving Loans but
including without limitation the principal portion of required payments
made on capital leases), plus operating lease expense, plus interest
expense, plus Unfunded Capital Expenditures.
(q) "Funded Debt" means, as of any date, the sum of the
following (without duplication) for Company on a consolidated basis:
(i) the aggregate of all indebtedness for borrowed money as of such
date, other than current liabilities, (ii) all indebtedness which would
be classified as "funded indebtedness" or "long-term indebtedness" (or
other similar classification) on a consolidated balance sheet of
Company prepared as of such date in accordance with GAAP, (iii) the
aggregate of all indebtedness outstanding under any revolving credit or
similar agreement providing for borrowing (and renewals and extensions
thereof) over a period of more than one year, notwithstanding the fact
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that any such indebtedness is created within one year of the expiration
of such agreement, and (iv) the amount of all obligations in respect of
capital leases booked in accordance with GAAP.
(r) "GAAP" means generally accepted accounting principles and
practices, consistently applied.
(s) "Guarantors" means Company, GTS Partner, Inc. and GTS
Limited Partner, Inc., each of whom will execute unconditional
guarantees of the Obligations.
(t) "Indemnified Persons" collectively means Secured Party and
its officers, directors, shareholders, employees, agents, attorneys and
representatives, and any Person owned or controlled by, or which owns
or controls or is under common control or is otherwise affiliated with,
Secured Party, and any other Person, if any, who acquires a portion of
the Collateral in any manner through Secured Party's exercise of rights
and remedies under the Loan Documents.
(u) "Inventory Advance Rate" shall mean the percentage of
Borrower's Eligible Inventory that may be used in determining the
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Borrowing Base. The Inventory Advance Rate for each type of Eligible
Inventory shall be the percentage set forth opposite such type below:
Type of Eligible Inventory: Inventory Advance Rate:
--------------------------- ----------------------
Model and toy trains 55%
Apparel, gifts, souvenirs, books
videos and other items 45%
Notwithstanding the foregoing, the advance rate for inventory
purchased with the proceeds of a commercial Letter of Credit shall not
exceed forty percent (40%) until such time as such inventory has been
delivered to Borrower and is located at one or more of the locations
described on Addendum IV.
(v) "Letter of Credit" means, individually, any commercial or
standby letter of credit issued by Secured Party pursuant hereto, and
any renewal or extension of any of the foregoing, and "Letters of
Credit" means all such letters of credit collectively.
(w) "Letter of Credit Exposure" means, as of any date, the
aggregate undrawn maximum face amount of all Letters of Credit
outstanding on such date.
(x) "Letter of Credit Obligations" means any obligations of
Borrower under this Agreement in connection with the Letters of Credit.
(y) "Loan Documents" shall mean this Agreement and all other
documents and instruments executed in connection herewith (including
without limitation, all notes, documents, agreements and instruments
evidencing, securing, governing, guaranteeing and/or pertaining to the
indebtedness created or arising hereunder and all documents and
agreements relating to any Letter of Credit), as the same may be
amended, restated, renewed, extended, or otherwise modified.
(z) "Maturity Date" shall mean April 30, 1998.
(aa) "Maximum Rate" shall mean at any particular time in
question the maximum rate of interest which, under applicable law
(including federal laws), may then be charged on the sums advanced
hereunder.
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(bb) "Net Income" shall mean, with respect to any period,
consolidated net earnings of the Company for such period, determined in
accordance with GAAP.
(cc) "Obligated Party" shall mean any party other than
Borrower who secures, guarantees and/or is otherwise obligated to pay
all or any portion of the Obligations.
(dd) "Obligations" shall mean (i) all loans or other advances
made by Secured Party to Borrower pursuant to this Agreement or
otherwise (including without limitation, all notes, documents,
agreements and instruments evidencing, securing, governing,
guaranteeing and/or pertaining to the indebtedness created or arising
hereunder and all documents and agreements relating to any Letter of
Credit); (ii) all future advances or other value, of whatever class or
for whatever purpose, at any time hereafter made or given by Secured
Party to Borrower, whether or not the advances or value are given
pursuant to commitment and whether or not Borrower is indebted to
Secured Party at the time of such advance; (iii) any and all other
debts, liabilities and duties of every kind and character of Borrower
to Secured Party, whether now or hereafter existing, and regardless of
whether such present or future debts, liabilities or duties are direct
or indirect, primary or secondary, joint, several, or joint and
several, fixed or contingent, and regardless of whether such present or
future debts, liabilities or duties may, prior to their acquisition by
Secured Party, be or have been payable to, or be or have been in favor
of, some other person or have been acquired by Secured Party in a
transaction with one other than Borrower (it being contemplated that
Secured Party may make such acquisitions from others), howsoever such
indebtedness shall arise or be incurred or evidenced; (iv) interest on
all of the debts, liabilities and duties set forth in (i), (ii), and
(iii) above; and (v) any and all renewals and extensions of such debts,
liabilities and duties set forth in (i), (ii), (iii) and (iv) above, or
any part thereof.
(ee) "Person" means an individual, corporation, partnership,
joint venture, association, governmental entity, court or any other
entity.
(ff) "Reserve" at any time shall mean (i) an amount from time
to time established by Secured Party in its sole discretion as a
reserve in reduction of the Borrowing Base in respect of contingencies
or other potential factors which, in the event they should occur, could
adversely affect or otherwise reduce the anticipated amount of proceeds
which could be realized upon liquidation of Eligible Inventory, plus
(ii) a shrinkage reserve equal to five percent (5%); provided, however
that Secured Party may, in its sole discretion, change the shrinkage
reserve by notice to Borrower. The "Reserve," if any from time to time,
does not represent cash funds.
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(gg) "Revolving Line" means $3,000,000.00.
(hh) "Revolving Loans" shall mean all loans and advances made
by Secured Party to Borrower pursuant to Section 2 herein.
(ii) "Secured Party" shall mean the Bank, and its successors
and assigns, including specifically, any party to whom the Bank, or its
successors or assigns, may assign its rights and interests under this
Agreement.
(jj) "Tangible Leverage Ratio" means the ratio of Total
Liabilities to Tangible Net Worth.
(kk) "Tangible Net Worth" means, as of any date, the total
shareholders' equity or partners' capital, as appropriate, (including
additional paid-in capital and retained earnings) which would appear on
a balance sheet of any Person prepared as of such date in accordance
with GAAP, less the aggregate book value of intangible assets shown on
such balance sheet, less amounts due from Affiliates.
(ll) "Total Liabilities" means, as of any date, consolidated
Funded Debt, plus consolidated current liabilities, plus all other
liabilities which would be reflected on a consolidated balance sheet
prepared in accordance with GAAP, of the Company.
(mm) "Unfunded Capital Expenditures" means, as of each fiscal
year end of Company, the amount of consolidated capital expenditures
for such year that are not financed by either (i) landlord contractual
adjustments and allowances, (ii) the proceeds of an equity infusion
used for capital expenditures during such period, or (iii) capital
leases or loans.
(nn) "Validity Guarantors" means ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇, each of whom shall execute validity guarantees.
All words and phrases used herein which are expressly defined in Section 1.201
or in Chapter 9 of the Code shall have the meaning provided for therein. Other
such words and phrases defined elsewhere in the Code shall have the meanings
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1.201 or Chapter 9.
2. Revolving Loans.
(a) Revolving Loans. Subject to the terms and provisions hereof and
provided that no Default or Event of Default has occurred and is continuing and
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that the aggregate principal outstanding on the Revolving Loans does not then
exceed the Borrowing Base, Secured Party shall, from time to time, make loans to
Borrower secured by the Collateral and evidenced by one or more promissory notes
in the form of Exhibit A hereto. The maximum aggregate principal balance
outstanding at any one time under this Section 2 (a) shall not exceed the
Borrowing Base as then determined by the Bank in its sole discretion. Unless
accelerated in accordance with the terms hereof, all outstanding principal and
unpaid accrued interest constituting Revolving Loans shall be due and payable in
full on the Maturity Date.
(b) Letters of Credit. Subject to the terms hereof, Secured Party will,
from time to time, upon request by Borrower, issue Letters of Credit for the
account of Borrower provided that (i) the Letter of Credit Exposure at any time
(including the amount of the requested Letter of Credit) does not exceed
$500,000.00, (ii) Borrower would be entitled to an advance under Section 2(a) in
the amount of the requested Letter of Credit, (iii) the Letter of Credit is for
the importation of inventory by Borrower, and (iv) any Letter of Credit issued
hereunder shall terminate on or before the Maturity Date. As a condition to the
issuance of any Letter of Credit, Borrower shall execute and deliver to Secured
Party its customary application and agreement for Letter of Credit and shall pay
to Secured Party, in addition to clerical issuance and transaction costs charged
by Secured Party, a Letter of Credit fee as provided therein, in an amount equal
to one sixth (1/6) of one percent (1%) per month of the unfunded face amount
thereof. Each Letter of Credit and each application and agreement for Letter of
Credit shall be issued in form satisfactory to Secured Party. The amount, if
any, from time to time funded by Secured Party for the account of Borrower under
any Letter of Credit shall be reimbursed and paid by Borrower to Secured Party
on demand, or, at Secured Party's option, charged to Borrower as a Revolving
Loan, whether or not Borrower would be entitled to an advance for such amount
pursuant to Section 2(a).
3. Security Interest. As security for all Obligations, Borrower, for
value received, hereby transfers and assigns, and grants to Secured Party a
continuing security interest in, all of Borrower's right, title and interest in
and to the Collateral, whether now owned or hereafter acquired. Secured Party
may hold for security any property, securities, guaranties or monies of Borrower
which may at any time come into the possession of Secured Party and may apply
same or the proceeds thereof to payment of any Obligations then due, as the
Secured Party shall elect. To the extent that a security interest in the
inventory and/or the equipment of Borrower is granted to Secured Party
hereunder, such security interest shall continue through all stages of
manufacture and shall, without further act, attach to the accounts or other
proceeds resulting from the sale or other disposition thereof and to all such
Collateral as may be returned to Borrower by its account debtors. The
designation of proceeds does not authorize Borrower to sell, transfer or
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otherwise convey any of the Collateral except finished goods inventory intended
for sale in the ordinary course of Borrower's business.
4. Interest. (a) Contract Rate. Borrower agrees to pay, in addition to
all other amounts payable hereunder, interest on the principal amount of all
sums now or hereafter loaned or advanced by Secured Party to Borrower hereunder,
irrespective of whether such indebtedness of Borrower to Secured Party be
evidenced by promissory notes, drafts, acceptances or otherwise, at a
fluctuating rate per annum from the date any such indebtedness is created in
favor of Secured Party until maturity, which shall from day to day be equal to
the lesser of (a) the Maximum Rate, or (b) the Contract Rate, each change in the
rate to be charged hereunder to be effective without notice to Borrower on the
effective date of each change in the Maximum Rate or the Base Rate, as the case
may be; provided, however, that if at any time the Contract Rate shall exceed
the Maximum Rate, thereby causing the interest on the Revolving Loans to be
limited to the Maximum Rate, then any subsequent reduction in the Contract Rate
shall not reduce the rate of interest on the Revolving Loans below the Maximum
Rate until the total amount of interest accrued on the Revolving Loans equals
the amount of interest which would have accrued thereon if the Contract Rate had
at all times been in effect.
(b) General. If applicable law ceases to provide for such a maximum
rate of interest, the Maximum Rate shall be equal to eighteen percent (18%) per
annum. Interest accrued hereunder shall be payable monthly on the first day of
each calendar month. To the extent that any interest due by Borrower is not paid
on the first day of each month, Secured Party may, at its option, add such
accrued interest to the principal indebtedness due by Borrower under the
Revolving Loans. After the occurrence and during the continuance of an Event of
Default, the outstanding principal balance of the Revolving Loans shall bear
interest at a rate of interest equal to the Default Rate. Notwithstanding any
provisions contained iuments, the Secured Party shall never be entitled to
receive, collect or apply, as interest on the indebtedness arising hereunder,
any amount in excess of the Maximum Rate and, in the event the Secured Party
ever receives, collects or applies as interest any such excess, such amount
which could be excessive interest shall be applied to the reduction of the
unpaid principal balance of the indebtedness arising hereunder, and, if the
principal balance of such indebtedness is paid in full, any remaining excess
shall forthwith be paid to the Borrower. In determining whether or not the
interest paid or payable under any specific contingency exceeds the Maximum
Rate, Borrower and the Secured Party shall, to the maximum extent permitted
under applicable law, (i) characterize any non-principal payment as a standby
fee, commitment fee, prepayment charge, delinquency charge or reimbursement for
a third party expense, (ii) exclude voluntary prepayments and the effect
thereof, and (iii) amortize, prorate, allocate and spread in equal parts
throughout the entire period during which the indebtedness was outstanding the
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total amount of interest at any time contracted for, charged or received.
Subject to the terms of this section, all non-credit card inventory sales
proceeds received by Secured Party in payment of the Obligations shall be
subject to a clearance period of two (2) Business Days.
5. Conditions to Closing. Prior to or simultaneous with the execution
and delivery hereof and as conditions precedent to the obligation of Bank to
make any loan hereunder, Debtor Group shall deliver, or cause to be delivered,
to Bank, the following, all in form and substance satisfactory to Bank and its
counsel or the following shall be fulfilled to the satisfaction of Bank, as the
case may be:
(a) A Revolving Loan note in the form of Exhibit A executed by
Borrower.
(b) Unconditional guaranties of all Obligations executed by
the Guarantors and collateral validity guarantees executed by the
Validity Guarantors.
(c) An opinion of legal counsel for the Debtor Group
satisfactorily addressing such matters as may be required by Bank and
its counsel.
(d) A copy of the partnership agreement, and all amendments
thereto, forming Borrower accompanied by a certificate of limited
partnership for Borrower duly filed in the state of Borrower's
formation together with a certificate of the Secretary of State of such
state bearing a date no more than thirty (30) days prior to the date
hereof, to the effect that Borrower is a partnership, validly existing
in such state.
(e) A copy of the articles of incorporation, and all
amendments thereto, of each member of the Debtor Group (other than
Borrower), accompanied by the certificate of the Secretary of State of
the state of incorporation of such member of the Debtor Group bearing a
date no more than thirty (30) days prior to the date hereof, to the
effect that each such copy is correct and complete and that such member
of the Debtor Group is a corporation duly incorporated and validly
existing in such state, and certified by the corporate secretary or
assistant secretary of such member of the Debtor Group dated the date
hereof, as being correct and complete as of the date hereof.
(f) A copy of the bylaws, and all amendments thereto, of each
member of the Debtor Group (other than Borrower) accompanied by a
certificate from such Person's corporate secretary or assistant
secretary, dated the date hereof, to the effect that such copy is
correct and complete as of the date hereof.
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(g) Certification of incumbency of officers of each member of
the Debtor Group (other than Borrower) executed by such Person's
president or vice president and corporate secretary or assistant
secretary, as of the date hereof, certifying the name and signature of
each such officer.
(h) A copy of corporate resolutions of each member of the
Debtor Group approving this Agreement, authorizing the transactions
contemplated hereby, and authorizing and directing a named officer or
officers of each member of the Debtor Group to sign and deliver all
Loan Documents to be executed by such Person (or by such Person on
behalf of Borrower), duly adopted by such Person's board of directors,
accompanied by the certificate of the corporate secretary, dated the
date hereof, that such copy is a true and complete copy of resolutions
duly adopted by the board of directors, and that such resolutions have
not been amended, modified, or revoked in any respect and are in full
force and effect as of the date hereof.
(i) All financing statements required by Secured Party in
connection with perfection of Secured Party's security interests in the
Collateral and all termination statements and other amendments to
financing statements required by Secured Party to make Secured Party's
security interest in the Collateral a first priority security interest.
(j) Evidence of insurance in compliance with the requirements
of Section 11(g) and such loss payable endorsements as may be required
by Secured Party.
(k) Executed landlord's waivers and consents for each location
leased by Borrower to the extent reasonably obtainable.
(l) Receipt and satisfactory review by Secured Party of an
acceptable orderly liquidation value analysis of the inventory,
machinery, equipment, furniture, and fixtures of Borrower, completed by
an analyst acceptable to Secured Party.
(m) Borrower shall have implemented administrative procedures
reasonably satisfactory to Secured Party, including, but not limited
to, matters relating to financial statements, cash concentrations,
inventory summaries, customer and employee lists, collections,
borrowing base reporting, projections, and eligibility determination.
(n) Complete, current financial statements of each Guarantor
including cash flow and contingent liabilities.
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(o) A subordination agreement, in form and substance
acceptable to Secured Party in its sole discretion, executed by
Company, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇
subordinating payment of all indebtedness and obligations of Borrower
to such Persons to the payment by Borrower of the Obligations.
(p) Such other agreements, instruments, certificates and
financing statements as Secured Party may reasonably request in order
to perfect or protect its interests and rights in the Collateral and
under the Loan Documents.
(q) There shall have occurred no material adverse change in
the financial condition of any member of the Debtor Group.
(r) There shall not have occurred any default or event of
default by any member of the Debtor Group on any of their obligations
to Secured party or to any third parties.
(s) No litigation or other legal proceedings shall be pending
or threatened against any member of the Debtor Group which Secured
Party determines, in its sole discretion, might materially and
adversely affect the financial condition of such Person. A list, and
brief explanation, of all currently pending litigation is set forth in
Schedule 5(s).
(t) A life insurance policy issued by The Travelers Insurance
Company for the benefit of Borrower insuring the life of ▇▇▇▇▇ ▇. ▇▇▇▇
in the amount of $1,000,000.00.
(u) Collateral Assignment of Life Insurance Policy, executed
by Borrower and acknowledged by the issuer of the policies described in
clause (t) above.
(v) Security agreements and assignments executed by each
Guarantor granting to Secured Party a security interest in all property
described therein (including, without limitation, all agreements
between Borrower and such Persons) together with all financing
statements and other documents necessary or appropriate to perfect such
security interests and assignments.
(w) Evidence that the Company has converted to equity at least
$2,000,000.00 in intercompany indebtedness owed by Borrower to Company.
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(x) Evidence that immediately after closing and giving effect
to the initial advance under the Revolving Loan, there remains at least
$600,000.00 in availability under the Revolving Loan.
(y) A trademark collateral assignment and security agreement
executed by Company.
(z) UCC-3 partial releases that release all security interests
held by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇ except
for a subordinate security interest in furniture, fixtures and
equipment.
(aa) A copy of each license agreement, royalty agreement,
management agreement, fee agreement or other agreement between Borrower
and any member of the Debtor Group.
(bb) A payment account agreement, in form an substance
acceptable to Secured Party in its sole discretion, from each bank or
other financial institution where Borrower maintains any bank accounts
or with whom Borrower has a merchants service agreement relative to
credit cards accepted by Borrower.
6. Unused Facility Fee; Collateral Administration Fee. Borrower agrees
to pay to Secured Party an unused facility fee equal to one-half percent (0.50%)
per annum of the average daily unused portion of the Revolving Line in effect
from time to time, payable monthly in arrears, beginning July 1, 1996 and
continuing on the first (1st) day of each month thereafter during the term of
this Agreement and upon the termination hereof. Further, on the first (1st) day
of each calendar month Borrower shall pay to Secured Party a collateral
administration fee equal to $1,250.00 per month.
7. Assignment of Accounts. The execution and delivery of this Agreement
shall constitute, with respect to the accounts hereby assigned and pledged, an
agreement, representation and warranty by Borrower to Secured Party that, except
for the security interest of Secured Party therein:
(a) Borrower is the sole owner of and has full unrestricted
power and right to assign and pledge such accounts free from any lien,
security interest or encumbrance.
(b) Each account is in existence, unconditional and valid, and
arose from a bona fide outright sale of personal property usually sold
by Borrower, or for services usually performed by Borrower, in the
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ordinary course of its business, for liquidated amounts and maturing as
set forth on its face and that such personal property has been shipped
to respective account debtors or such services have been performed for
respective account debtors.
(c) No account is subject to any sale, assignment, claim or
security interest of any character and Borrower will not make any sale
or other assignment thereof or create any other security interest
therein.
(d) No account is subject to any claim for credit, deduction,
allowance or adjustment by an account debtor, or to any defense,
dispute, set-off or counterclaim, and there is no extension or
indulgence with respect thereto.
(e) Each account will be paid in full at maturity and if not
paid, Borrower will, upon demand, promptly pay the amount represented
to be owing thereon to Secured Party for application against the
Obligations in such manner as Secured Party may elect, or at Secured
Party's option such unpaid amount may be deducted from any payment then
or thereafter due from Secured Party to Borrower, and Secured Party may
retain such account as collateral for any of the Obligations.
8. Establishment of Lock Box. So long as this Agreement shall be in
effect or any Obligations shall be outstanding, Borrower agrees that, at the
request of Secured Party, all sums payable by any account debtor to Borrower in
payment or on account of any of Borrower's accounts shall be deposited in a
payment account (the "Payment Account") established pursuant to Secured Party's
standard form of Lock Box Agreement ("Lock Box Agreement") and maintained with
Secured Party in the name of Borrower, marked "Payment Account," over which
Secured Party alone has power of withdrawal. Such sums shall be deposited in the
form received, except for the endorsement of Borrower where necessary to permit
collection of items, which endorsement Borrower agrees to make, and which
Secured Party is also hereby authorized to make on Borrower's behalf. Borrower
hereby agrees, at the request of Secured Party, immediately upon receipt of
checks, drafts, cash and other remittances and payment of or on account of any
of Borrower's accounts, to immediately deposit all of the same into the Payment
Account. Borrower hereby also agrees, upon request by Secured Party, to notify
all of Borrower's present and future account debtors to send all amounts payable
to Borrower to the address indicated in the Lock Box Agreement. Secured Party is
authorized, empowered and directed to apply any and all funds in the Payment
Account toward the payment of the outstanding principal amount of, and interest
on, the Obligations then due in such order as Secured Party may determine in its
sole discretion, with any balance remaining after payment in full of the
Obligations to be deposited into an account maintained with Secured Party in the
name of Borrower, marked "Operating Account" and over which Borrower has the
right of withdrawal.
Page 14
9. Establishment of Blocked Account; Collection Account.
(a) Blocked Account. So long as this Agreement shall be in
effect or any of the Obligations shall be outstanding, Borrower agrees
that, at the request of Secured Party, all funds payable by any account
debtor to Borrower shall be deposited in special deposit accounts (each
a "Blocked Account") of Borrower set up in one or more banks acceptable
to Secured Party. In addition, all funds payable to Borrower under any
merchants service agreements with any such bank relating to credit
cards accepted by Borrower shall also be deposited into the Blocked
Account maintained at such bank. Each Blocked Account shall be
established pursuant to a tri-party agreement among Borrower, Secured
Party, and such bank (each a "Blocked Account Agreement"), in form and
substance satisfactory to Secured Party, which Blocked Account
Agreements shall include the following provisions:
(1) Agreement by Borrower that it has no power of
withdrawal over the funds in the Blocked Account;
(2) Agreement by the bank that it shall neither claim
nor exercise any right of off-set or banker's lien against the
funds in the Blocked Account;
(3) Waiver and release by the bank to Secured Party
of any right or claim which such bank may have in or to the
funds in the Blocked Account;
(4) Agreement by the bank to forward daily to Secured
Party by wire transfer (or by such other manner of transfer
acceptable to Secured Party) all funds in the Blocked Account
to the Collections Account (hereinafter defined) maintained by
Borrower with Secured Party;
(5) Assignment and pledge by Borrower to Secured
Party, as additional collateral security for the Obligations,
of all funds in each Blocked Account, and direction by
Borrower to each bank maintaining a Blocked Account (i) to
hold such funds as bailee for Secured Party, and (ii) to
distribute the funds daily to Secured Party in the manner
specified by Secured Party from time to time;
(6) Agreement by Borrower to pay directly to each
bank maintaining a Blocked Account all costs and expenses
associated with such Blocked Account; and
Page 15
(7) Agreement by Borrower that it may not
unilaterally terminate any Blocked Account or any Blocked
Account Agreement.
All funds forwarded to Secured Party from a Blocked Account pursuant to
this Section shall be deposited in the Collections Account and applied
as set forth in Section 9 (b). The provisions of this Section are in
addition to and not in limitation of the provisions of Section 8.
(b) Collection Account. So long as this Agreement shall be in
effect or any Obligations shall be outstanding, all funds in each
Blocked Account shall be wire transferred to (or transferred by other
manner of transfer acceptable to Secured Party), and all collections
and proceeds of Collateral shall be deposited in, a special account
(the "Collections Account") maintained with Secured Party in the name
of Borrower, marked "Collections Account," over which Secured Party
alone has power of withdrawal. Such sums shall be deposited in the form
received, except for the endorsement of Borrower where necessary to
permit collection of items, which endorsement Borrower agrees to make,
and which Secured Party is also hereby authorized to make on Borrower's
behalf. Borrower hereby agrees immediately upon receipt of checks,
drafts, cash and other remittances and payment of or on account of any
of Borrower's accounts, to immediately deposit all of the same into the
Collections Account. Borrower hereby also agrees, upon request by
Secured Party, to notify all of Borrower's present and future account
debtors to send to Secured Party any and all amounts payable to
Borrower for deposit in the Collections Account. Secured Party is
authorized, empowered and directed to apply any and all funds in the
Collections Account toward the payment of the outstanding principal
amount of, and interest on, the Obligations then due in such order as
Secured Party may determine in its sole discretion, with any balance
remaining after payment in full of the Obligations to be deposited into
an account maintained with Secured Party in the name of Borrower,
marked "Operating Account" and over which Borrower has the right of
withdrawal.
10. Other Representations and Warranties of Borrower. Each member of
the Debtor Group, jointly and severally, represents and warrants to Secured
Party that:
(a) Borrower is conducting, transacting, and carrying on its
business under the name shown above, or such other names as may be
specified in Addendum III attached hereto and incorporated herein by
reference, and is not engaged in business under any other name; and
Borrower's chief executive office is that set forth in Section 1(c)
above, at which office Borrower keeps, and will continue to keep, its
records concerning accounts. Borrower will promptly notify Secured
Page 16
Party in writing of any change in (i) the name of Borrower or any of
the names under which it is carrying on its business as specified on
Addendum III attached hereto, (ii) the address of Borrower, (iii)
Borrower's primary place of business, (iv) the location of the office
where records concerning accounts are kept, (v) the opening of any new
place of business, or (vi) the closing of any of its existing places of
business.
(b) Borrower is duly organized and validly existing under the
laws of the State of Missouri, is duly qualified and is in good
standing in each and every state in which it is doing business, and has
all the requisite power and authority to execute this Agreement and the
other Loan Documents to be executed by Borrower.
(c) The execution, delivery and performance of this Agreement
and all of the other Loan Documents by each member of the Debtor Group
have been duly authorized by all necessary corporate or partnership, as
the case may be, action by such member of the Debtor Group, and
constitute the legal, valid and binding obligations of each member of
the Debtor Group, enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors' rights
and except to the extent specific remedies may generally be limited by
equitable principles.
(d) The execution, delivery and performance of this Agreement
and the other Loan Documents, and the consummation of the transactions
contemplated hereby and thereby, do not (i) conflict with, result in a
violation of, or constitute a default under any provision of any member
of the Debtor Group's partnership agreement or Articles of
Incorporation or Bylaws, as appropriate, or any agreement or other
instrument binding upon such member of the Debtor Group, or any law,
governmental regulation, court decree, or order applicable to such
member of the Debtor Group, or (ii) require the consent, approval or
authorization of any third party.
(e) There are no actions, suits or proceedings, pending or, to
the knowledge of any member of the Debtor Group, threatened against or
affecting any member of the Debtor Group or the properties of any
member of the Debtor Group, before any court or governmental
department, commission or board, which, if determined adversely to such
member of the Debtor Group, would have a material adverse effect on the
financial condition, properties, or operations of such member of the
Debtor Group.
Page 17
(f) Borrower has not executed any other security agreement
currently affecting the Collateral or any financing statement regarding
the Collateral, and no financing statement executed by Borrower
regarding the Collateral is now on file.
(g) Except as otherwise set forth on Schedule 10 (g), all
Collateral is and will be owned by Borrower, free and clear of all
other liens, encumbrances, security interests or claims, shall be kept
at Borrower's address noted above and such other addresses as may be
listed in Addendum IV attached hereto and incorporated hereby by
reference, and Borrower shall not (without the prior written approval
of Secured Party) remove the Collateral therefrom except for the
purpose of sale or use in the ordinary course of business.
(h) Each member of the Debtor Group owns all of the assets
reflected on its most recent balance sheet delivered to Secured Party,
free and clear of all liens, security interests or other encumbrances,
except as disclosed in writing to Secured Party on Schedule 10(g).
(i) As of the date hereof, and after giving effect to this
Agreement and the completion of all other transactions contemplated by
Borrower at the time of its execution, (i) Borrower is and will be
solvent, (ii) the fair saleable value of Borrower's assets exceeds and
will continue to exceed Borrower's liabilities (both fixed and
contingent), (iii) Borrower is and will continue to be able to pay its
debts as they mature, and (iv) Borrower has and will have sufficient
capital to carry on its business and all businesses in which it is
about to engage.
(j) Each member of the Debtor Group has filed all federal,
state and local tax reports and returns required by any law or
regulation to be filed by it and has either duly paid all taxes, duties
and charges indicated due on the basis of such returns and reports, or
made adequate provision for the payment thereof, and the assessment of
any material amount of additional taxes in excess of those paid and
reported is not reasonably expected. There is no tax lien notice
against any member of the Debtor Group presently on file, judgment
entered against any member of the Debtor Group or levy on or attachment
of its property outstanding.
(k) Borrower (i) does not maintain or contribute to any
defined benefit pension plan ("Plan") under the Employee Retirement
Income Security Act of 1974, as amended from time to time ("ERISA"), or
(ii) is not in violation of any provisions of ERISA, or any other
applicable state or federal law with respect to any Plan that it
contributes to or maintains.
Page 18
(l) Except as disclosed in writing to Secured Party: (i)
Borrower is conducting Borrower's businesses in material compliance
with all applicable federal, state and local laws, statutes,
ordinances, rules, regulations, orders, determinations and court
decisions, including without limitation, those pertaining to health or
environmental matters such as the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (collectively, together with
any subsequent amendments, hereinafter called "CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980,
and the Hazardous Substance Waste Amendments of 1984 (collectively,
together with any subsequent amendments, hereinafter called "RCRA");
(ii) none of the operations of Borrower is the subject of a federal,
state or local investigation evaluating whether any material remedial
action is needed to respond to a release or disposal of any toxic or
hazardous substance or solid waste into the environment; (iii) Borrower
has not filed any notice under any federal, state or local law
indicating that Borrower is responsible for the release into the
environment, the disposal on any premises in which Borrower is
conducting its businesses or the improper storage, of any material
amount of any toxic or hazardous substance or solid waste or that any
such toxic or hazardous substance or solid waste has been released,
disposed of or is improperly stored, upon any premise on which Borrower
is conducting its businesses; and (iv) Borrower otherwise does not have
any known material contingent liability in connection with the release
into the environment, disposal or the improper storage, of any such
toxic or hazardous substance or solid waste. The terms "hazardous
substance" and "release", as used herein, shall have the meanings
specified in CERCLA, and the terms "solid waste" and "disposal", as
used herein, shall have the meanings specified in RCRA.
(m) There is no fact known to any executive officer of any
member of the Debtor Group that such Person has not disclosed to
Secured Party in writing which may result in any material adverse
change in such member of the Debtor Group's business, properties or
operations.
(n) No certificate or statement herewith or heretofore
delivered by any member of the Debtor Group to Secured Party in
connection herewith, or in connection with any transaction contemplated
hereby, contains any untrue statement of a material fact or fails to
state any material fact necessary to keep the statements contained
therein from being misleading.
(o) The representations, warranties, and covenants of each
member of the Debtor Group set forth in this Agreement are true and
Page 19
correct as of the time of the making of this Agreement, and each
request by Borrower for a loan or advance hereunder shall constitute,
without the necessity of a written certificate or agreement, a
representation and warranty by each member of the Debtor Group that, as
of the date of such request and at and as of the time of the making of
each loan or advance hereunder, (i) all of the representations and
warranties of each member of the Debtor Group contained in this
Agreement are true and correct, (ii) no material adverse change in any
member of the Debtor Group's financial condition since the effective
date of the most recent financial statements furnished to Secured Party
by such member of the Debtor Group shall have occurred and be
continuing, and (iii) no event has occurred and is continuing, or would
result from the requested advance, which constitutes an Event of
Default under this Agreement.
(p) Each financial statement of each member of the Debtor
Group previously supplied to Secured Party was prepared in accordance
with GAAP in effect on the date of such statements were prepared and
truly discloses and fairly presents such member of the Debtor Group's
financial condition as of the date of each statement, and there has
been no material adverse change in such financial condition or results
of operations of any member of the Debtor Group subsequent to March 31,
1996, which is the date of the most recent consolidated financial
statements of the Company supplied to Secured Party.
11. Affirmative Covenants. So long as this Agreement shall be in effect
or any of the Obligations shall be outstanding, the members of the Debtor Group,
jointly and severally, agree and covenant that, unless the Secured Party shall
otherwise consent in writing:
(a) Borrower shall promptly inform Secured Party of (i) any
and all material adverse changes in any member of the Debtor Group's
financial condition, and (ii) all litigation and claims affecting any
member of the Debtor Group which could materially affect the financial
condition of such member of the Debtor Group;
(b) Company and each member of the Debtor Group shall maintain
its books and records in accordance with GAAP, applied on a consistent
basis.
(c) Borrower shall execute and deliver to Secured Party such
financing statement or statements, in form satisfactory to Secured
Party, which Secured Party may at any time desire to file in order to
perfect and preserve its security interest in the Collateral and will
reimburse Secured Party for the costs of filing the same; and Borrower
will take any action and/or execute and deliver to Secured Party any
instrument, document, assignment or other writing which Secured Party
Page 20
in its reasonable discretion may deem necessary or appropriate (i) to
carry out the terms of this Agreement, (ii) to perfect Secured Party's
security interest in the Collateral, (iii) to comply with the Federal
Assignment of Claims Act, as amended, and/or (iv) to facilitate the
collection of Borrower's accounts. Further, each Guarantor shall
execute and deliver to Secured Party such financing statement or
statements, in form satisfactory to Secured Party, which Secured Party
may at any time desire to file in order to perfect and preserve secured
Party's security interest in the collateral in which such Guarantor has
granted a security interest to Secured Party and will reimburse Secured
Party for the costs of filing the same; and each Guarantor will take
any action and/or execute and deliver to Secured Party any instrument,
document, assignment or other writing which Secured Party in its sole
discretion may deem necessary or appropriate (i) to carry out the terms
of this Agreement, (ii) to perfect Secured Party's security interest in
such collateral, (iii) to comply with the Federal Assignment of Claims
Act, as amended, and/or (iv) to facilitate the collection of such
Person's accounts.
(d) Borrower shall, at its sole cost and expense, defend any
action which might affect Secured Party's security interest in or
Borrower's title to the Collateral.
(e) If sales of Collateral are made by Borrower in the
ordinary course of its business for cash, Borrower shall immediately
deliver to Secured Party the identical checks, cash or the forms of
payment which Borrower receives.
(f) Borrower shall perform, at its sole cost and expense, any
and all steps requested by Secured Party to protect Secured Party's
security interest in the Collateral, such as leasing warehouses to
Secured Party or its designee, placing and maintaining signs,
appointing custodians, executing and filing financing or continuation
statements in form and substance satisfactory to Secured Party,
maintaining stock records and transferring Collateral to warehouses. If
any Collateral is in the possession or control of any of Borrower's
agents or processors, Borrower shall notify such agent or processors of
Secured Party's security interest therein, and upon request instruct
them to hold all such Collateral for the account of Secured Party and
subject to Secured Party's instructions. A physical listing of all
Collateral, wherever located, shall be taken by Borrower whenever
requested by Secured Party, and a copy of each such physical listing
shall be supplied to Secured Party. Secured Party may examine and
inspect the Collateral at any time.
(g) Borrower shall keep or cause to be kept adequately insured
by financially sound and reputable insurers all of its property usually
insured by persons or entities engaged in the same or similar
Page 21
businesses. Without limiting the foregoing, Borrower will insure the
Collateral in Secured Party's name against loss or damage by fire,
theft, burglary, pilferage, loss in transit, and such other hazards as
Secured Party may specify in amounts and under policies by insurers
acceptable to Secured Party, and all premiums thereon shall be paid by
Borrower and the policies delivered to Secured Party. If Borrower fails
to do so, Secured Party may procure such insurance and charge the cost
to Borrower's account. Each policy of insurance covering the Collateral
shall provide that at least ten (10) days prior written notice of
cancellation or notice of lapse must be given to Secured Party by the
insurer.
(h) Borrower shall keep the Collateral in good order and
repair and will not waste or destroy the Collateral or any part thereof
and will not use the Collateral in violation of any statute or
ordinance.
(i) Borrower shall use good faith efforts to cause each
mortgagee of real property owned by Borrower and each landlord of real
property leased by Borrower to execute and deliver agreements
satisfactory in form and substance to Secured Party by which such
mortgagee or landlord waives or subordinates any rights it may have in
the Collateral.
(j) If any account debtor rejects, returns or refuses to
accept or receive property represented by any account, Borrower shall
notify Secured Party, and at the request of Secured Party, hold such
property separate and apart from Borrower's property in trust for
Secured Party and subject to its order or immediately deliver such
property to Secured Party. Secured Party may accept a return of
property represented by any account without discharging or affecting
the Obligations. Secured Party may take and sell such property for such
prices and upon such terms at public or private sale in the manner
provided in the Code. At Secured Party's option, Borrower shall
forthwith pay Secured Party the original invoice price of such property
for application against the Obligations in such manner as Secured Party
may elect. In the event such property is resold, any account created
thereby shall be deemed assigned and pledged to Secured Party
hereunder.
(k) Borrower shall give Secured Party or any persons
designated by it, at any time and from time to time, full access to all
records available to Borrower from any credit reporting service, bureau
or other similar agency and Secured Party and any persons designated by
it shall have the right to inspect and make and take away copies of any
such records.
(l) Borrower shall furnish such additional information and
statements, lists of assets and liabilities, tax returns, and other
Page 22
reports with respect to each member of the Debtor Group's financial
condition and business operations as Secured Party may request from
time to time.
(m) Secured Party shall have the right without hindrance or
delay to conduct field examinations, to inspect the Collateral and to
inspect, audit and copy each member of the Debtor Group's books,
records, journals, correspondence and other records and data relating
to the Collateral or each member of the Debtor Group's business.
Secured Party is authorized to discuss each member of the Debtor
Group's affairs with any Person, including without limitation employees
of such Person, as Secured Party may deem necessary in relation to the
Collateral, the Debtor Group's financial condition or Secured Party's
rights under the Loan Documents. Prior to the occurrence of an Event of
Default, Secured Party shall not disclose any such information to any
third party other than its accountants, attorneys, potential loan
participants and purchasers, and in response to credit inquiries in the
ordinary course of business and as may otherwise be required by law.
(n) Borrower shall pay and discharge when due all of its
indebtedness and obligations, including without limitation, all
assessments, taxes, governmental charges and levies, of every kind and
nature, imposed upon Borrower or its properties (including, without
limitation, the Collateral), income, or profits, prior to the date on
which penalties would attach, and all lawful claims that, if unpaid,
might become a lien or charge upon any of Borrower's properties,
income, or profits; provided, however, Borrower will not be required to
pay and discharge any such assessment, tax charge, levy or claim so
long as (i) the legality of the same shall be contested in good faith
by appropriate proceedings, and (ii) Borrower shall have established on
its books adequate reserves with respect to such contested assessment,
tax, charge, levy or claim in accordance with GAAP. Borrower, upon
demand of Secured Party, will furnish to Secured Party evidence of
payment of all assessments, taxes, charges, levies and claims against
Borrower or its properties, income or profits and will authorize the
appropriate governmental official to deliver to Secured Party at any
time a written statement of any assessments, taxes, charges, levies and
claims against Borrower or its properties, income or profits.
(o) Borrower shall conduct its business in an orderly and
efficient manner consistent with good business practices, and perform
and comply with all statutes, rules, regulations and/or ordinances
imposed by any governmental unit upon Borrower and its businesses and
operations, including, without limitation, those pertaining to
environmental matters.
Page 23
(p) Borrower shall execute and deliver, or cause to be
executed and delivered, any and all other agreements, instruments or
documents which Secured Party may reasonably request in order to give
effect to the transactions contemplated under this Agreement and the
other Loan Documents.
(q) Each member of the Debtor Group shall do and perform all
acts required of it under this Agreement and the other Loan Documents
and furnish to Secured Party such other information respecting the
business, properties or condition, or the operations, financial or
otherwise, of the Debtor Group as Secured Party may from time to time
reasonably request. Prior to the occurrence of an Event of Default,
Secured Party shall not disclose any such information to any third
party other than its accountants, attorneys and loan participants, and
in response to credit inquiries in the ordinary course of business and
as may otherwise be required by law.
(r) Company shall maintain, as of the end of each fiscal
quarter and at the end of each fiscal year, a consolidated Tangible
Leverage Ratio of no more than 2.0 to 1.0.
(s) Company shall maintain, as of each date set forth below, a
consolidated Tangible Net Worth equal to or greater than the amount set
forth opposite such date below:
Period Tangible Net Worth
------ ------------------
June 29, 1996 $3,600,000.00
September 28, 1996 $3,400,000.00
December 28, 1996 $5,300,000.00
March 29, 1997 $4,300,000.00
June 28, 1997 $3,300,000.00
September 27, 1997 $2,700,000.00
December 27, 1997 $6,000,000.00
March 28, 1998 $5,000,000.00
(t) Borrower shall at all times maintain a positive Tangible
Net Worth.
(u) Company shall maintain a Current Ratio of not less than
1.5 to 1.0 at each fiscal year end and 1.1 to 1.0 at the end of each
fiscal quarter (other than the last) of each fiscal year of Company.
Page 24
(v) At the end of each fiscal quarter of each fiscal year of
Borrower, the ratio of (A) the cost of goods sold by Borrower for the
previous 12 months to (B) Borrower's average inventory at book value
for the same period, shall be greater than or equal to 2.0 to 1.0.
(w) Borrower will furnish to Secured Party:
(1) As soon as possible and in any event within ten
(10) days after the occurrence of each Event of Default or
Default continuing on the date of such statement, the
statement of the President or the Chief Financial Officer of
the general partner of Borrower setting forth the details of
such Event of Default or Default and the action which Borrower
proposes to take with respect thereto.
(2) As soon as available, and in any event within
thirty (30) days after the end of each calendar month, (i) a
balance sheet, income statement and statement of cash flow of
Company as of the end of such month, and (ii) a statement of
all contingent liabilities of Company, all in form and
substance and in reasonable detail satisfactory to Secured
Party and duly certified (subject to year-end audit
adjustments) by the Chief Financial Officer of Company (A) as
being true and correct in all material aspects to the best of
his or her knowledge, and (B) as having been prepared in
accordance with GAAP. Further, as soon as available, and in
any event within thirty (30) days after the end of each
calendar month, (i) a balance sheet, income statement and
statement of cash flow of Borrower as of the end of such
month, and (ii) a statement of all contingent liabilities of
Borrower, all in form and substance and in reasonable detail
satisfactory to Secured Party and duly certified (subject to
year-end audit adjustments) by the Chief Financial Officer of
the general partner of Borrower (A) as being true and correct
in all material aspects to the best of his or her knowledge,
and (B) as having been prepared in accordance with GAAP.
(3) As soon as available, and in any event within
forty-five (45) days after the end of each fiscal quarter of
Company, (i) a consolidated and consolidating balance sheet,
income statement and statement of cash flow of Company as of
the end of such quarter, and (ii) a statement of all
contingent liabilities of Company, all in form and substance
and in reasonable detail satisfactory to Secured Party and
duly certified (subject to year-end audit adjustments) by the
Page 25
Chief Financial Officer of Company (A) as being true and
correct in all material aspects to the best of his or her
knowledge, and (B) as having been prepared in accordance with
GAAP.
(4) As soon as available, and in any event within ten
(10) days after the filing thereof, a copy of each 10Q or 10K
prepared by Company.
(5) As soon as available and in any event within one
hundred and twenty (120) days after the end of each fiscal
year of Company, certified, audited consolidated and
consolidating balance sheet, income statement, statement of
cash flow and reconciliation of capital of Company as of the
end of such fiscal year, together with a certificate of
independent public accountants of recognized standing
acceptable to Secured Party stating that in the course of
their audit of Company, such accountants obtained no knowledge
that an Event of Default or Default, has occurred and is
continuing, or if, in the opinion of such accountants, an
Event of Default or Default has occurred and is continuing, a
statement as to the nature thereof. For purposes hereof, Peat
Marwick shall be deemed satisfactory certified public
accountants.
(6) As soon as the same is received by Company, a
copy of any management letter delivered to Company by its
independent accountants.
(7) As soon as available, and in any event at least
30 days prior to the commencement of each fiscal year of
Company, the following financial statements on a one (1) year
pro forma basis: (i) consolidated and consolidating balance
sheet and income statement of Company, and (ii) cash flow
statement, all in form and substance and in reasonable detail
satisfactory to Secured Party.
(8) Promptly after the commencement thereof, notice
of all actions, suits and proceedings before any court or any
governmental department, commission or board involving any
member of the Debtor Group.
(9) Within forty-five (45) days after the end of each
fiscal quarter of Company, a certificate from the Chief
Financial Officer of Company stating that each member of the
Debtor Group is in full compliance with all of its obligations
under this Agreement and the other Loan Documents, and is not
in default of any term or provision hereof or thereof and
demonstrating compliance (with calculations provided) with all
financial ratios and covenants set forth in this Agreement.
Such certificate shall be in the form of Exhibit B attached
hereto.
Page 26
(10) Within thirty (30) days after the end of each
month (i) if requested by Secured Party, an analysis of
Borrower's accounts showing an aging of accounts as follows:
accounts 30 days old and less; accounts over 30 days and less
than 61 days old; accounts over 60 days old and less than 91
days old; accounts over 90 days old and less than 120 days
old; and accounts 120 days old and older, (ii) an aging of
Borrower's payables, (iii) a listing of Borrower's inventory
and inventory analysis in such form as Secured Party may
request.
(11) Daily during any periods in which any Revolving
Loans or Letters of Credit are outstanding and weekly at all
other times, an activity report setting forth (i) inventory by
store, (ii) inventory by type, (iii) inventory received in
dollars and units by store, and (iv) inventory sold in dollars
and units by store. Such report shall be in form and substance
reasonably acceptable to Secured Party.
(12) With each request for an advance or a Letter of
Credit (but in any event not less often than weekly), a
borrowing base report and certificate signed by the President
or Chief Financial Officer of the general partner of Borrower,
along with supporting documentation, in form and substance
satisfactory to Secured Party.
(13) Upon the request of Secured Party, an appraisal
of all inventory. Such appraisal shall be at the sole expense
of Borrower after the occurrence and during the continuation
of any Event of Default but otherwise shall be at the expense
of Secured Party.
(14) Such additional information and reports
regarding inventory as Secured Party may from time to time
reasonably request.
(x) Company will deliver to its independent public accountants
contemporaneously with the execution hereof the irrevocable
instructions, in the form attached as Addendum V, that such accountants
are to send to Secured Party copies of all financial statements
(whether preliminary or final) and reports which are prepared as a
result of any audit or other review of the operations, business,
finances or internal controls of Company, including, without
limitation, any management reports and any reports concerning improper
accounting practices, defalcations, financial reporting errors or
misstatements or fraud.
Page 27
(y) Borrower will use all advances made by Secured Party
pursuant hereto for working capital purposes only and no part of any
advance shall be used, directly or indirectly, to pay any fees,
royalties or other obligations or indebtedness of Borrower to Company.
(z) Borrower shall give Secured Party written notice
immediately upon the occurrence of a default or event of default under
any real property lease to which the Borrower is a party or the
occurrence of any event or condition which, with the giving of notice
or lapse of time or both, could become a default or event of default.
(aa) Unless he dies or becomes permanently disabled, ▇▇▇▇▇ ▇.
▇▇▇▇ shall at all times be the President and Chief Executive Officer of
the Company.
12. Negative Covenants. So long as this Agreement shall be in effect or
any of the Obligations shall be outstanding, each member of the Debtor Group,
jointly and severally, agrees that, without the prior written consent of Secured
Party:
(a) Borrower shall not permit any financing statement
regarding the Collateral to be filed other than a financing statement
or statements in favor of Secured Party and those described on Schedule
10 (g).
(b) Borrower shall not liquidate, merge or consolidate with or
into any other entity.
(c) Borrower shall not sell, transfer or otherwise dispose of
its inventory or any of its assets or properties, other than in the
ordinary course of its business.
(d) Borrower shall not grant, create, incur, assume or permit
to exist any security interest, lien or encumbrance on any of its
assets or properties, including the Collateral, except with respect to
capital leases and liens to secure indebtedness for tenant finish-out
of retail stores, not to exceed $2,400,000.00 in the aggregate in any
fiscal year.
(e) Borrower shall not create, incur or assume any
indebtedness for borrowed money or issue or assume any other note,
debenture, bond or other evidences of indebtedness, or enter into any
operating or capital leases, or guarantee any such indebtedness or such
evidences of indebtedness of others, other than (i) borrowing from
Secured Party, (ii) capital leases and indebtedness for tenant finish-
out of retail stores, not to exceed $2,400,000.00 in the aggregate in
any fiscal year, and (iii) other indebtedness (the "Subordinated Debt")
Page 28
that has been subordinated to the Obligations pursuant to subordination
agreements in form and substance acceptable to Secured Party in its
sole discretion.
(f) Borrower shall not change its primary line of business.
(g) Borrower shall not declare or pay any Distributions or
make any other distribution with respect to any payment on account of
the purchase, redemption, or other acquisition or retirement of any
interest in Borrower, or make any payments upon the Subordinated Debt;
provided, however, so long as no Default or Event of Default has
occurred and is continuing or will exist after giving effect to such
payment, Borrower may make Distributions and, subject to the
limitations set forth in the subordination agreements, payments on the
Subordinated Debt.
(h) Except for credit card transactions and accounts
receivable in the ordinary course of business, Borrower shall not make
or permit to exist any loans or advances to any person or entity.
(i) Except in the ordinary course of business, Borrower shall
not pay or cause to be paid any advance rentals for any leased
property, real or personal, utilized by Borrower in the conduct and
operation of its business.
(j) Borrower shall not enter into any transaction with an
Affiliate except on arms-length terms that are as favorable to Borrower
as could have been obtained from a non-Affiliate.
(k) Borrower shall not make any Investments (hereinafter
defined) except for the following:
(i) loans, advances or investments the material
details of which have been set forth in the financial
statements of Borrower heretofore furnished to the Secured
Party;
(ii) investments in direct obligations of the United
States of America or any agency thereof;
(iii) investments in certificates of deposit issued
by Secured Party or certificates of deposit with maturities of
less than one year issued by other commercial banks in the
United States having capital and surplus in excess of
$500,000,000; and
Page 29
(iv) money market accounts established at Secured
Party.
As used herein, "Investment" in any Person means any
investment, whether by means of share purchase, loan, advance, purchase
of debt instrument, extension of credit (other than accounts receivable
arising from the sale of goods or services in the ordinary course of
business), capital contribution or otherwise, in or to such Person, the
guaranty of any indebtedness of such Person or the subordination of any
claim against such Person to other indebtedness of such person or
entity.
(l) Company shall not permit its Fixed Charge Coverage Ratio,
as of the end of any fiscal year of Company, to be less than 1.2 to
1.0.
13. Rights of Secured Party. Secured Party shall have the rights
contained in this Section at all times during the period of time this Agreement
is effective.
(a) Borrower hereby authorizes Secured Party to file, without
the signature of Borrower, one or more financing or continuation
statements, and amendments thereto, relating to the Collateral.
Borrower further agrees that a carbon, photographic or other
reproduction of this Agreement or any financing statement describing
any Collateral is sufficient as a financing statement and may be filed
in any jurisdiction Secured Party may deem appropriate.
(b) Borrower hereby irrevocably appoints Secured Party as
Borrower's attorney-in-fact and proxy, with full authority in the place
and stead of Borrower and in the name of Borrower or otherwise, from
time to time in Secured Party's discretion, to take any action and to
execute any instrument which Secured Party may deem necessary or
appropriate to accomplish the purposes of this Agreement, including
without limitation: (i) to obtain and adjust insurance required by
Secured Party hereunder; (ii) to demand, collect, ▇▇▇ for, recover,
compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of the Collateral; (iii) to receive,
endorse and collect any checks, drafts or other instruments, documents
and chattel paper in connection with clause (i) or (ii) above; and (iv)
to file any claims or take any action or institute any proceedings
which Secured Party may deem reasonably necessary or appropriate for
the collection and/or preservation of the Collateral or otherwise to
enforce the rights of Secured Party with respect to the Collateral.
(c) If Borrower fails to perform any agreement or obligation
provided herein (including without limitation, the payment and
discharge of any taxes, liens or encumbrances affecting the
Page 30
Collateral), Secured Party may itself perform, or cause performance of,
such agreement or obligation, and the expenses of Secured Party
incurred in connection therewith shall be a part of the Obligations,
secured by the Collateral and payable by Borrower on demand.
(d) Secured Party or any persons designated by it shall have
the right to call at each member of the Debtor Group's place or places
of business during normal business hours to inspect, audit, check and
make and take away copies or extracts from such member of the Debtor
Group's books, records, journals, orders, receipts and any
correspondence and other data relating to such member of the Debtor
Group's business or to any other transactions between the parties
hereto, without hindrance or delay. Prior to the occurrence of an Event
of Default, Secured Party shall not disclose any such information to
any third party other than its accountants, attorneys and potential
loan participants and purchasers and in response to credit inquiries in
the ordinary course of business and as may otherwise be required by
law.
(e) All amounts and proceeds (including instruments and
writings) received by Borrower in respect of Borrower's accounts or
general intangibles shall be received in trust for the benefit of
Secured Party hereunder and, upon request of Secured Party, shall be
segregated from other property of Borrower and shall be forthwith
delivered to Secured Party in the same form as so received (with any
necessary endorsement), deposited in the Collections Account and
applied in accordance with Section 9 (b).
(f) Secured Party shall have the right of set-off against each
member of the Debtor Group for all of the Obligations at any and all
times and in any and all proceedings and instances including, but not
limited to, bankruptcy, reorganization, receivership or insolvency of
Borrower.
14. Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder:
(a) The failure, refusal or neglect of Borrower to make
payment of the Obligations or any portion thereof, as the same shall
become due and payable;
(b) The failure of any member of the Debtor Group or any
Obligated Party to timely and properly observe, keep or perform any
covenant, agreement, warranty or condition required (i) in this
Agreement, (ii) in any of the other Loan Documents, or (iii) in any of
the Agreements (as defined hereinbelow); and, with respect to the
covenants set forth in ▇▇▇▇▇▇▇▇ ▇▇ (▇), (▇), (▇), (▇), (▇), (▇), (▇),
(▇), (▇), (▇) (2), (6), (7), (13) and (14), such failure shall not be
Page 31
cured within ten (10) days after the earlier of (A) the date when such
member of the Debtor Group or such Obligated Party knew or should have
known of such failure or (B) Secured Party's notice to Borrower or such
Obligated Party of such failure;
(c) The occurrence of an event of default under (i) any of the
other Loan Documents, or (ii) any of the Agreements;
(d) Any representation made by any member of the Debtor Group
or any Obligated Party contained herein or contained in any of the
other Loan Documents or the Agreements is false or misleading in any
material respect;
(e) Any member of the Debtor Group or any Obligated Party
shall (i) apply for or consent to the appointment of a receiver,
trustee, custodian, intervenor or liquidator of such Person or of all
or a substantial part of such Person's assets, (ii) file a voluntary
petition in bankruptcy, admit in writing that such Person is unable to
pay such Person's debts as they become due, (iii) make a general
assignment for the benefit of creditors, (iv) file a petition or answer
seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy or insolvency proceeding, or (vi) take
corporate or partnership action for the purpose of effecting any of the
foregoing;
(f) An involuntary petition or complaint shall be filed
against any member of the Debtor Group or any Obligated Party seeking
bankruptcy or reorganization of such Person or the appointment of a
receiver, custodian, trustee, intervenor or liquidator of such Person,
or of all or substantially all of such Person's assets, and such
petition or complaint shall not have been dismissed within sixty (60)
days of the filing thereof; or an order, order for relief, judgment or
decree shall be entered by any court of competent jurisdiction or other
competent authority approving a petition or complaint seeking
reorganization of such intervenor or liquidator of such Person, or of
all or substantially all of such Person's assets;
(g) the failure of any member of the Debtor Group or any
Obligated Party to pay any money judgment against such Person at least
thirty (30) days prior to the date on which such Person's assets may be
sold to satisfy such judgment;
(h) the failure, within a period of ten (10) days after the
commencement thereof, to have discharged any attachment, sequestration,
or similar proceedings against any member of the Debtor Group's or any
Obligated Party's assets;
Page 32
(i) the guaranty agreement executed by any Guarantor shall for
any reason cease to be in full force and effect, or be declared null
and void or unenforceable in whole or in part; or the validity or
enforceability of such guaranty agreement shall be challenged or denied
by such Guarantor;
(j) The filing of a tax lien notice by the United States, any
state or any governmental subdivision thereof against any of the
property of any member of the Debtor Group;
(k) The Collateral or any portion thereof is taken on
execution or other process of law in any action against Borrower;
(l) Borrower abandons the Collateral or any portion thereof
except for obsolete or unsalable items of nominal value disposed of in
the ordinary course of Borrower's business;
(m) The holder of any lien or security interest on any of the
assets of Borrower, including without limitation, the Collateral
(without hereby implying the consent of Secured Party to the existence
or creation of any such lien or security interest on the Collateral),
declares a default thereunder or institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder;
(n) The occurrence of a default or event of default under any
other indebtedness of any member of the Debtor Group or the occurrence
of any event or condition which, with the giving of notice or lapse of
time or both, could become a default or event of default under such
other indebtedness;
(o) The liquidation, dissolution, merger or consolidation of
any member of the Debtor Group or any Obligated Party;
(p) Should any party to a subordination agreement that
subordinates any indebtedness to the Obligations fail to fully perform
the terms of such subordination agreement; or
(q) The occurrence of a default or event of default under any
real property lease to which the Borrower is a party or the occurrence
of any event or condition which, with the giving of notice or lapse of
time or both could become a default or event of default.
Page 33
15. Remedies. Upon the occurrence of any Event of Default, and at any
time thereafter, Secured Party shall have, in addition to all other rights and
remedies provided herein, in any other agreement between Secured Party and
Borrower or by law, the remedies of a secured party under the Code, including,
but not limited to, the right to take possession of the Collateral, and for that
purpose, Secured Party may, so far as Borrower can give authority therefor,
enter upon any premises on which the Collateral may be situated and remove the
same therefrom. The rights and remedies referred to in this Agreement are
cumulative, and in addition to the general remedies set forth above, Secured
Party shall have the following specific remedies upon the occurrence of an Event
of Default:
(a) At its option, Secured Party may terminate any further
loans or advances to Borrower hereunder and may refuse to issue any
Letters of Credit. Further, Secured Party may require that Borrower
deposit with Secured Party in cash the Letter of Credit Exposure.
(b) The entire unpaid balance of the Obligations then owing by
Borrower to Secured Party (including, without limitation, the Revolving
Loans) shall, at the option of Secured Party, become immediately due
and payable without notice of default, presentment, demand for payment,
notice of intent to accelerate, notice of acceleration or dishonor,
protest or notice of protest or non-payment, or any other notice of any
kind whatsoever, all of which are expressly waived, jointly and
severally, by each member of the Debtor Group; provided, however, upon
the occurrence of any of the Events of Default described in Section 14
(e) or (f), the entire unpaid balance of the Obligations shall, without
any action by Secured Party, immediately become due and payable without
notice of default, presentment, demand for payment, notice of intent to
accelerate, notice of acceleration or dishonor, protest or notice of
protest or non-payment, or any other notice of any kind whatsoever, all
of which are expressly waived, jointly and severally, by each member of
the Debtor Group.
(c) At its option, Secured Party may require Borrower to
assemble the Collateral and make it available to Secured Party at a
place to be designated by Secured Party which is reasonably convenient
to Secured Party. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Secured Party will give Borrower reasonable notice
of the time and place of any public sale thereof or of the time after
which any private sale or any other intended disposition thereof is to
be made. The requirements of reasonable notice shall be met if such
notice is mailed, postage prepaid, to Borrower at least five (5) days
before the time of sale or other intended disposition of the
Collateral.
Page 34
(d) Secured Party may at any time in its discretion transfer
any other property constituting the Collateral into its own name or
that of its nominee and receive the income thereon and hold the same as
security for the Obligations or apply it to the principal or interest
due on the Obligations, as the Secured Party may elect. Secured Party
may demand, collect, receipt for, settle, compromise, adjust, ▇▇▇ for,
foreclose, or realize upon the Collateral as Secured Party may
determine, whether or not any of the Obligations are then due; and for
the purpose of asserting, protecting or enforcing any of Secured
Party's rights therein, Secured Party may receive, open, and dispose of
mail addressed to Borrower and endorse notes, checks, drafts, money
orders, documents of title, or other evidences of payment, shipment, or
storage of any part of the Collateral on behalf of and in the name of
Borrower.
(e) Borrower shall pay to Secured Party on demand any and all
reasonable expenses, including legal expenses, attorneys' fees, court
costs, collection costs, and traveling expenses, incurred or paid by
Secured Party in protecting or enforcing any of its rights hereunder,
including its right to take possession of the Collateral, to hold,
store, prepare for sale, sell, or otherwise dispose of the Collateral,
and in collecting the proceeds thereof. After deducting all of such
expenses, the residue of any proceeds of collection or sale of the
Collateral shall be applied to the payment of the Obligations in such
order of preference as Secured Party may determine, proper allowance
for interest on Obligations not then due being made, and any excess
shall be returned to Borrower, and Borrower shall remain liable for any
deficiency. Secured Party is hereby authorized to add, from time to
time, all such expenses to the balance of indebtedness due by Borrower
to Secured Party, and such expenses shall become a part of the
Obligations.
16. Other Agreements. If at any time any member of the Debtor Group and
Secured Party are parties to any other financing agreements (all of such
agreements, whether one or more, being hereinafter referred to as the
"Agreements"), and if the Agreements (or any of them, if more than one) should
be breached in whole or in part by any member of the Debtor Group or should
terminate for any reason whatsoever, such event shall constitute an Event of
Default hereunder. Any sums due hereunder or under the Agreements, or any one or
more of them, may be collected by Secured Party out of sums or credits due
Secured Party under the terms of this Agreement or the Agreements, or any one or
more of them, and any collateral or security for the performance of this
Agreement or any of the Agreements may be realized upon by Secured Party for the
satisfaction of any indebtedness arising with respect to this Agreement or any
of the Agreements. The Debtor Group and Secured Party hereby agree that all
indebtedness, securities and remedies available to Secured Party under this
Agreement or the Agreements may be utilized by Secured Party for the enforcement
of its rights and the collection of any indebtedness due it under the terms of
Page 35
this Agreement or the Agreements, the rights and remedies of Secured Party
hereunder being cumulative of all other rights and remedies of Secured Party,
and not in substitution thereof or as an alternative thereto.
17. Term.
(a) This Agreement shall become effective upon acceptance by
Secured Party, as of the date hereinafter set forth, and shall continue
in full force and effect until the Maturity Date (the "Initial Term")
unless earlier terminated by Secured Party in connection with the
exercise of its rights and remedies under this Agreement upon the
occurrence of an Event of Default.
(b) If Borrower terminates this Agreement prior to the end of
the Initial Term, Borrower acknowledges that (i) such termination would
result in the loss to Secured Party of the benefits of this Agreement
and that the damages incurred by Secured Party as a result of such
termination are and would be difficult of ascertainment and (ii) no
such termination shall be effective until Borrower has paid to Secured
Party all of the Obligations in immediately available funds, together
with a sum certain as liquidated damages, being Borrower's and Secured
Party's best and fairest estimate of Secured Party's damages caused by
such termination, equal to two percent (2.0%) of the average loan
balance of the Revolving Loans for the twelve consecutive months ending
on the date the Revolving Loans are paid in full if the termination
occurs on or before the first anniversary of this Agreement and one
percent (1.0%) of the average loan balance of the Revolving Loans for
the twelve consecutive months ending on the date the Revolving Loans
are paid in full if the termination occurs after the first anniversary
but before the second anniversary of this Agreement.
(c) Notwithstanding anything to the contrary, any proposed
termination of this Agreement, shall not be effective, and shall not
release or affect the Collateral already assigned to Secured Party or
any Obligations incurred or rights accrued hereunder, unless and until
all Obligations, whether incurred pursuant to this Agreement or
otherwise, have been paid in full and all Letters of Credit have either
expired by their terms or have been returned to Secured Party undrawn.
(d) Upon the payment in full of the Obligations and the
expiration or return of all Letters of Credit, Secured Party shall
release all collateral (including the Collateral) for the Obligations.
Page 36
18. Miscellaneous.
(a) Waiver of Rights. Each member of the Debtor Group waives
notice of default, nonpayment, presentment, notice of demand, demand,
notice of intention to accelerate, notice of acceleration, protest or
notice thereof and all other notices of any kind whatsoever.
(b) Entire Agreement. This Agreement contains the entire
agreement of Secured Party and the Debtor Group. If the parties hereto
are parties to any prior agreement, either written or oral, relating to
the subject matter hereof, the terms of this Agreement shall amend and
supersede the terms of such prior agreements as to transactions on or
after the effective date of this Agreement, but all security
agreements, financing statements, guaranties, other contracts and
notices for the benefit of Secured Party shall continue in full force
and effect to secure all Obligations of Borrower to Secured Party under
the terms hereof or thereof unless Secured Party specifically releases
its rights thereunder by separate release.
(c) Fees and Expenses. Borrower agrees that all reasonable
fees and expenses, including, without limitation, legal, accounting,
audit and field examination fees and expenses, incurred by Secured
Party in connection with the preparation of this Agreement and the
other Loan Documents, the closing of any loan secured hereby, and in
administering this Agreement and the matters referenced herein shall be
paid and borne by Borrower, and Secured Party is hereby authorized by
Borrower to deduct all such fees and expenses from the proceeds of any
loan secured hereby or to add, from time to time, all such fees and
expenses to the balance of the Revolving Loan due by Borrower to
Secured Party hereunder, with such fees and expenses becoming a part of
the Obligations. Field examination expenses will be charged to Borrower
as follows: actual out of pocket expenses for examiner's travel,
lodging and meals plus $500.00 per day per examiner; provided, however,
so long as no Default or Event of Default has occurred and is
continuing, Borrower shall not be required to pay for more than four
(4) field exams in year one nor more than two (2) exams in year two and
fees for exams in year one shall not exceed $20,000.00 and fees for
exams in year two shall not exceed $15,000.00. Secured Party may
conduct such additional examinations as it may desire at the expense of
Secured Party. After the occurrence and during the continuation of an
Event of Default, there is no limit on the number of examinations that
may be conducted by Secured Party and Borrower shall be liable for all
reasonable fees and expenses arising in connection therewith. Actual
costs for the initial field examination conducted prior to the date
hereof shall be reimbursed to Secured Party by Borrower at closing and
shall not be included in examinations fees paid by Borrower in year
one.
Page 37
(d) Account Debtor Notification. Borrower will immediately
notify Secured Party in the event (i) that any account debtor fails to
accept, refuses to accept, returns, offers to return or revokes the
acceptance of any personal property which is the subject of any
account, (ii) of the bankruptcy, insolvency or financial embarrassment
of any account debtor, and (iii) of any claim asserted by any account
debtor for credit, allowance, adjustment, dispute, set-off or
counterclaim. Borrower will immediately, upon receipt thereof, endorse
and deliver to Secured Party any and all checks, notes, trade
acceptances, drafts or other instruments with respect to or in payment
of any account or any chattel paper with respect to personal property
or services performed giving rise to any account.
(e) Effectiveness of Agreement. This Agreement shall become
effective only upon acceptance by Secured Party at its offices in
Dallas, Texas. All transactions hereunder shall take place at Secured
Party's offices in Dallas, Texas.
(f) Waiver. Neither the failure nor any delay on the part of
Secured Party to exercise any right, power or privilege herein or under
any of the Loan Documents shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or privilege
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. No waiver of any provision in this
Agreement or in any of the other Loan Documents and no departure by
Borrower therefrom shall be effective unless the same shall be in
writing and signed by Secured Party, and then shall be effective only
in the specific instance and for the purpose for which given and to the
extent specified in such writing.
(g) Amendment. No modification or amendment to this Agreement
or to any of the other Loan Documents shall be valid or effective
unless the same is signed by the party against whom it is sought to be
enforced.
(h) Parties In Interest. This Agreement shall be binding upon
the parties and their successors or assigns, and shall inure to the
benefit of the parties and the successors or assigns of Secured Party,
but shall not inure to the benefit of any heirs, representatives,
successors or assigns of Borrower.
(i) Venue. All warranties and representations of the Debtor
Group contained herein and any payment on any indebtedness secured
hereby have been or shall be made in Dallas County, Texas, and all
parties hereto agree that venue is proper only in such county, that
such county is a convenient forum in which to decide any dispute
arising hereunder and to submit themselves to the personal jurisdiction
of the courts located in such county.
Page 38
(j) Governing Law. The laws of Texas shall govern the
construction of this Agreement and the rights, remedies, duties and
obligations of the parties hereto with respect to all transactions
hereunder and any and all Collateral, to the extent that federal law is
not applicable.
(k) Cumulative Rights. All rights of Secured Party under the
terms of this Agreement shall be cumulative of, and in addition to, the
rights of Secured Party under any and all other agreements between any
member of the Debtor Group and Secured Party (including, but not
limited to, the other Loan Documents and any other agreements
referenced herein), and not in substitution or diminution of any rights
now or hereafter held by Secured Party under the terms of any other
agreement.
(l) Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have
been given when personally delivered or when deposited in the United
States mail, registered or certified, postage prepaid, and addressed as
follows:
If to Borrower or any
member of the Debtor
Group: The Great Train Store Partners, L.P.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Ms. ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Secured Party: BANK ONE, TEXAS, NATIONAL ASSOCIATION
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Asset Based Lending Group
Each of the parties hereto shall be entitled to specify a different
address by giving written notice to the other party hereto in
accordance with this Subsection.
(m) Indemnification. Borrower hereby indemnifies and agrees to
hold harmless and defend all Indemnified Persons from and against any
and all Indemnified Claims. Upon notification and demand, Borrower
Page 39
agrees to provide defense of any Indemnified Claim and pay all costs
and reasonable expenses of counsel selected by any Indemnified Person
in respect thereof. The indemnification provided for in this paragraph
shall survive any termination of this Agreement and shall continue for
the benefit of all Indemnified Persons. Except as specifically provided
in this paragraph, Borrower waives all notices from any Indemnified
Person with respect to such indemnification. As used herein,
"Indemnified Claims" means any and all claims, demands, actions, causes
of action, judgments, obligations, liabilities, losses, damages and
consequential damages, penalties, fines, costs, fees, expenses and
disbursements (including without limitation, reasonable fees and
expenses of attorneys and other professional consultants and experts in
connection with investigation or defense) of every kind, known or
unknown, existing or hereafter arising, foreseeable or unforeseeable,
which may be imposed upon, threatened or asserted against, or incurred
or paid by, any Indemnified Person at any time and from time to time,
because of, resulting from, in connection with, or arising out of any
transaction, act, omission, event or circumstance in any way connected
with the Collateral or the Loan Documents (including enforcement of
Secured Party's rights thereunder or defense of Secured Party's actions
thereunder and specifically including any and all Indemnified Claims
arising from Secured Party's ordinary negligence, but in any event
excluding Secured Party's gross negligence or intentional misconduct or
breach of any Loan Document) or any breach by any member of the Debtor
Group or any Obligated Party of any representation, warranty, covenant,
agreement or condition contained in any Loan Document.
(n) Descriptive Headings. The captions in this Agreement are
for convenience only and shall not define or limit the provisions
hereof.
(o) Participation of Obligations. Each member of the Debtor
Group agrees that Secured Party may, at its option, sell interests in
the Obligations and its rights under this Agreement to a financial
institution or institutions and, in connection with each such sale,
Secured Party may disclose any financial and other information
available to Secured Party concerning the Debtor Group to each
prospective purchaser. Secured Party shall require that any such
purchaser (or potential purchaser) agree to keep such information
confidential to the same extent that Secured Party is required to do so
hereunder; provided, however, Secured Party shall have no liability for
the failure of such Person to comply with such agreement.
(p) Invalid Provisions. If any provision of this Agreement or
any of the other Loan Documents is held to be illegal, invalid or
unenforceable under present or future laws, such provision shall be
fully severable and the remaining provisions of this Agreement or any
Page 40
of the other Loan Documents shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable
provision or by its severance.
IN WITNESS THEREOF, this Agreement is executed, to be effective as of
the date of acceptance by Secured Party.
BORROWER:
The Great Train Store Partners, L.P.
By: GTS Partner, Inc.
By:_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
ADDITIONAL MEMBERS OF THE
DEBTOR GROUP:
The Great Train Store Company
By:_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
GTS Partner, Inc.
By:_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
Page 41
GTS Limited Partner, Inc.
By:_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
ACCEPTED at Dallas, Texas,
this 7th day of June, 1996:
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By:_______________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President
Page 42
ADDENDUM I
TO
LOAN AND SECURITY AGREEMENT
Dated June 7, 1996
By and Between
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
THE GREAT TRAIN STORE PARTNERS, L.P.
This Addendum I intentionally left blank.
Page 43
ADDENDUM II
TO
LOAN AND SECURITY AGREEMENT
Dated June 7, 1996
By and Between
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
THE GREAT TRAIN STORE PARTNERS, L.P.
The Collateral, as defined and referred to in Section 1(g), shall mean:
See Schedule A attached hereto and incorporated herein by reference.
Page 44
SCHEDULE A
TO
LOAN AND SECURITY AGREEMENT
Dated June 7, 1996
By and Between
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
THE GREAT TRAIN STORE PARTNERS, L.P.
All of the following property, whether now owned or hereafter acquired:
1. All present and future accounts, chattel paper, contract rights,
documents, instruments, investment property, security accounts, security deposit
accounts and general intangibles (including, without limitation, any right to
payment for goods sold or services rendered arising out of the sale or delivery
of personal property or work done or labor performed by Borrower and any and all
income tax refunds), now or hereafter owned, held, or acquired by Borrower,
together with any and all books of account, customer lists (including, without
limitation, the Conductors Club database and member list) and other records
relating in any way to the foregoing, and in any case where an account arises
from the sale of goods, the interest of Borrower in such goods; together with
any and all PROCEEDS of any of the foregoing property, including insurance
payable by reason of loss or damage to such property.
2. All present and hereafter acquired inventory (including without
limitation, all raw materials, work-in-process and finished goods) held,
possessed, owned, held on consignment, or held for sale or return, in whole or
in part, by Borrower wherever located, and further including all PRODUCTS and
all PROCEEDS of the foregoing, including insurance payable by reason of loss or
damage to such property. The designation of proceeds does not authorize Borrower
to sell, transfer or otherwise convey any of the property described herein
except finished goods intended for sale in the usual course of Borrower's
business.
3. All equipment and fixtures of whatsoever kind and character now or
hereafter possessed, held, acquired by Borrower and used or usable in Borrower's
business together with all replacements, accessories, additions, substitutions
and accessions to all of the foregoing, and all PROCEEDS thereof, including
insurance payable by reason of loss or damage to such property. The designation
of proceeds does not authorize Borrower to sell, transfer or otherwise convey
any of the property described herein. To the extent that the foregoing property
Page 45
is located on, attached to, annexed to, related to, or used in connection with,
or otherwise made a part of, and is or shall become fixtures upon, real
property, such real property and the record owner thereof is described on
Exhibit B attached hereto.
4. All computer programs, software, management information systems,
firmware, routines, systems, algorithms, codes, printouts and instructions of
any kind, whether now owned or after-acquired, for use on any variety of
computing machinery, whether in machine or human-readable form, and stored in or
on media of any kind, including, without limitation, tape, disk, card, strip or
cartridge (whether paper, magnetic or optical), and electronic circuitry,
together with all instruction manuals or documentation of any kind, stored in or
on media of any kind, pertaining in any way to the property described herein,
and all PROCEEDS thereof, including insurance payable by reason of loss or
damage to such property. The designation of proceeds does not authorize Borrower
to sell, transfer or otherwise convey any of the property described herein.
5. Borrower's merchants service agreement(s) relating to all credit
cards accepted by Borrower.
6. All trademarks, trade names, licenses and other intellectual
property of Borrower.
Page 46
ADDENDUM III
TO
LOAN AND SECURITY AGREEMENT
Dated June 7, 1996
By and Between
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
THE GREAT TRAIN STORE PARTNERS, L.P.
The other names referenced in Section 10(a) are:
The Great Train Store
Page 47
ADDENDUM IV
TO
LOAN AND SECURITY AGREEMENT
Dated June 7, 1996
By and Between
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
THE GREAT TRAIN STORE PARTNERS, L.P.
The other addresses referenced in Section 10(g) are:
St. Louis Union Station
▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Indianapolis Union Station
▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Riverwalk Marketplace
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Union Station
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇.▇., #▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Mall of America
▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Mall at Steamtown
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
North Point Mall
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Page ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Natick Mall
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Great Mall of the Bay Area
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Woodlands Mall
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., #▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Crossgates Mall
#▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇., #▇-▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ramada Express Hotel
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Broadway at the Beach
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇-▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Avenue at Tower City
▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇, #▇▇.▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Valley Mall
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Holyoke Mall at Ingleside
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Page ▇▇
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇., #▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tysons Corner Center
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Oxmoor Center
Louisville, KY
Regency Square
Federal Street Joint Venture
Richmond, VA
Florida Mall Shopping Center
Sand Lake Road and Orange Blossom Trail
Orlando, FL
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇
Country Club Plaza
▇. ▇. ▇▇▇▇▇▇▇
Kansas City, MO
Page 50
ADDENDUM V
TO
LOAN AND SECURITY AGREEMENT
Dated June 7, 1996
By and Between
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
THE GREAT TRAIN STORE PARTNERS, L.P.
[LETTERHEAD OF COMPANY]
[NAME AND ADDRESS OF
Borrower'S OUTSIDE AUDITOR]
Ladies and Gentlemen:
This letter instructs you to send to BANK ONE, TEXAS NATIONAL
ASSOCIATION ("Bank") all financial statements (whether preliminary or
final) and reports which you prepare as a result of any audit or other
review of our operations, business, finances or internal controls,
including without limitation, any management reports and any reports
concerning improper accounting practices, defalcations, financial
reporting errors or misstatements or fraud perpetrated on us or by any
of our employees or agents.
The undersigned further authorizes and instructs you to
communicate and discuss its financial condition and the financial
condition of its subsidiaries (including The Great Train Store
Partners, L.P.), if any, with the Bank and to disclose to the Bank upon
request any information in your possession relating to its financial
condition and the financial condition of its subsidiaries (including
The Great Train Store Partners, L.P.). The undersigned hereby agrees
that such discussions or communications will be without liability to
the Bank or to you.
All of the foregoing which is reduced to writing must be sent
to the Bank at the following address prior to or contemporaneously with
the sending of said written information to us :
BANK ONE, TEXAS, NATIONAL ASSOCIATION
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Secured Lending Group
Page 51
These instructions may only be revoked by the Bank's delivery
to you of a revocation notice signed by an officer of the Bank.
Page 52
EXHIBIT A
TO
LOAN AND SECURITY AGREEMENT
Dated June 7, 1996
By and Between
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
THE GREAT TRAIN STORE PARTNERS, L.P.
[Form of Revolving Loan Note]
Page 53
