LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (as it may be amended, this "AGREEMENT") is
entered into on December ___, 1997 between NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION ("LENDER"), having an
address at 1177 Avenue of the Americas, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 and
BIG XXXXX BRANDS, INC. ("BORROWER"), whose chief executive office is located at
0000 Xxxx Xxxxxx Xxxx, Xxxx Xxxxx, Xxxxxxx 00000 ("BORROWER'S ADDRESS"). The
Schedules to this Agreement are an integral part of this Agreement and are
incorporated herein by reference. Terms used, but not defined elsewhere, in this
Agreement are defined in Schedule B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 AMOUNT. Subject to the terms and conditions contained in this Agreement,
Lender will:
(A) REVOLVING LOANS AND CREDIT ACCOMMODATIONS. From time to time
during the Term at Borrower's request, make revolving loans to Borrower
("REVOLVING LOANS"), and make letters of credit, bankers acceptances and other
credit accommodations ("CREDIT ACCOMMODATIONS") available to Borrower, in each
case to the extent that there is sufficient Availability at the time of such
request to cover, dollar for dollar, the requested Revolving Loan or Credit
Accommodation; PROVIDED, that after giving effect to such Revolving Loan or
Credit Accommodation, (x) the outstanding balance of all monetary Obligations
(INCLUDING the principal balance of any Term Loan and, solely for the purpose of
determining compliance with this provision, the Credit Accommodation Balance)
will not exceed the Maximum Facility Amount set forth in Section 1(a) of
Schedule A and (y) none of the other Loan Limits set forth in Section 1 of
Schedule A will be exceeded. For this purpose, "AVAILABILITY" means:
(i) the aggregate amount of Eligible Accounts (less maximum
existing or asserted taxes, discounts, credits and allowances)
multiplied by the Accounts Advance Rate set forth in Section 1(b)(i) of
Schedule A but subject to the Accounts Sublimit set forth in Section
1(c) of Schedule A;
PLUS
(ii) the lower of cost or market value of Eligible Inventory
multiplied by the Inventory Advance Rate(s) set forth in Section
1(b)(ii) of Schedule A, but not to exceed the Inventory Sublimit(s) set
forth in Section 1(d) of Schedule A;
PLUS
(iii) the amount of any additional advances available under
Sections 1(e)(i), (iii) and (iii) of Schedule A, if any;
MINUS
(iv) all Reserves which Lender has established pursuant to
Section 1.2 (including those to be established in connection with the
requested Revolving Loan or Credit Accommodation);
MINUS
(v) the outstanding balance of all of the monetary
Obligations (EXCLUDING the Credit Accommodation Balance and the
principal balance of the Term Loan); and
PLUS
(vi) the Overadvance Amount, if any, set forth in Section
1(h) of Schedule A.
(B) TERM LOAN. On the date of this Agreement, make (i) an advance to
Borrower computed with respect to the value of Borrower's Eligible Equipment
(the ("EQUIPMENT ADVANCE") in the principal amount, if any, set forth in Section
2(a) of Schedule A, and (ii) an advance to Borrower computed with respect to the
value of Borrower's Eligible Real Property (the "REAL PROPERTY ADVANCE") in the
principal amount, if any, set forth in Section 2(a) of Schedule A. The Equipment
Advance and the Real Property Advance are collectively referred to as the "TERM
LOAN."
1.2 RESERVES. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in its sole discretion ("RESERVES") to
reflect (i) events, conditions, contingencies or risks which affect or may
affect (A) the Collateral or its value, or the security interests and other
rights of Lender in the Collateral or (B) the assets, business or prospects of
Borrower or any Obligor, (ii) Lender's good faith concern that any Collateral
report or financial information furnished by or on behalf of Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect, (iii) any fact or circumstance which Lender determines in
good faith constitutes, or could constitute, a Default or Event of Default or
(iv) any other events or circumstances which Lender determines in good faith
make the establishment or revision of a Reserve prudent. Without limiting the
foregoing, Lender shall (x) in the case of each Credit Accommodation issued for
the purchase of Inventory (a) which meets the criteria for Eligible Inventory
set forth in clauses (i), (ii), (iii), (v) and (vi) of the definition of
Eligible Inventory, (b) which is or will be in transit to one of the locations
set forth in Section 9(d) of Schedule A, (c) which is fully insured in a manner
satisfactory to Lender and (d) with respect to which Lender is in possession of
all bills of lading and all other documentation which Lender has requested, all
in form and substance satisfactory to Lender in its sole discretion, establish a
Reserve equal to the cost of such Inventory (plus all duties, freight, taxes,
insurance, costs and other charges and expenses relating to such Credit
Accommodation or such Eligible Inventory) multiplied by a percentage equal to
100% minus
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the Inventory Advance Rate applicable to Eligible Inventory and (y) in the case
of any other Credit Accommodation issued for any purpose, establish a Reserve
equal to the full amount of such Credit Accommodation plus all costs and other
charges and expenses relating to such Credit Accommodation. In addition, (x)
Lender shall establish a permanent Reserve in the amount set forth in Section
1(g) of Schedule A, and (y) if the outstanding principal balance of the Term
Loan advance with respect to Eligible Equipment exceeds the percentage set forth
in Section 2(a) of Schedule A of the appraised value of such Eligible Equipment,
Lender may establish an additional Reserve in the amount of such excess (and,
for this purpose, if payments of principal on the Term Loan advances against
Eligible Equipment and Real Property are not calculated separately, payments of
principal of the Term Loan made by Borrower shall be deemed to apply to the Term
Loan advance with respect to Eligible Equipment and Real Property, respectively,
in proportion to the original principal amounts of such advances). Lender may,
in its discretion, establish and revise Reserves by deducting them in
determining Availability or by reclassifying Eligible Accounts or Eligible
Inventory as ineligible. In no event shall the establishment of a Reserve in
respect of a particular actual or contingent liability obligate Lender to make
advances hereunder to pay such liability or otherwise obligate Lender with
respect thereto.
1.3 OTHER PROVISIONS APPLICABLE TO CREDIT ACCOMMODATIONS. Lender may, in its
sole discretion and on terms and conditions acceptable to Lender, make Credit
Accommodations available to Borrower either by issuing them, or by causing other
financial institutions to issue them supported by Lender's guaranty or
indemnification; PROVIDED, that after giving effect to each Credit
Accommodation, the Credit Accommodation Balance will not exceed the Credit
Accommodation Limit set forth in Section 1(f) of Schedule A. Any amounts paid by
Lender in respect of a Credit Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable, in the same manner as a Revolving Loan. Borrower agrees to execute
all documentation reasonably required by Lender or the issuer of any Credit
Accommodation in connection with any such Credit Accommodation.
1.4 REPAYMENT. Accrued interest on all monetary Obligations shall be payable
on the first day of each month. Principal of the Term Loan shall be repaid as
set forth in Section 2(b) of Schedule A. If at any time any of the Loan Limits
are exceeded, Borrower will immediately pay to Lender such amounts (or provide
cash collateral to Lender with respect to the Credit Accommodation Balance in
the manner set forth in Section 7.3), as shall cause Borrower to be in full
compliance with all of the Loan Limits. Notwithstanding the foregoing, Lender
may, in its sole discretion, make or permit Revolving Loans, the Term Loan, any
Credit Accommodations or any other monetary Obligations to be in excess of any
of the Loan Limits; PROVIDED, that Borrower shall, upon Lender's demand, pay to
Lender such amounts as shall cause Borrower to be in full compliance with all of
the Loan Limits. All unpaid monetary Obligations shall be payable in full on the
Maturity Date (as defined in Section 7.1) or, if earlier, the date of any early
termination pursuant to Section 7.2.
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1.5 MINIMUM BORROWING. Subject to the terms and conditions of this
Agreement, Borrower agrees to (i) borrow sufficient amounts to cause the
outstanding principal balance of the Loans to equal or exceed, at all times
prior to the Maturity Date, the Minimum Loan Amounts set forth in Section 4 of
Schedule A and (ii) maintain Availability sufficient to enable Borrower to do
so. However, Lender shall not be obligated to loan Borrower the Minimum Loan
Amounts other than in accordance with all of the terms and conditions of this
Agreement.
2. INTEREST AND FEES.
2.1 INTEREST. All Loans and other monetary Obligations shall bear interest
at the Interest Rate(s) set forth in Section 3 of Schedule A, except where
expressly set forth to the contrary in this Agreement or another Loan Document;
PROVIDED, that after the occurrence of an Event of Default, all Loans and other
monetary Obligations shall, at Lender's option, bear interest at a rate per
annum equal to two percent (2%) in excess of the rate otherwise applicable
thereto (the "DEFAULT RATE") until paid in full (notwithstanding the entry of
any judgment against Borrower or the exercise of any other right or remedy by
Lender), and all such interest shall be payable on demand. Changes in the
Interest Rate shall be effective as of the date of any change in the Prime Rate.
Notwithstanding anything to the contrary contained in this Agreement, the
aggregate of all amounts deemed to be interest hereunder and charged or
collected by Lender is not intended to exceed the highest rate permissible under
any applicable law, but if it should, such interest shall automatically be
reduced to the extent necessary to comply with applicable law and Lender will
refund to Borrower any such excess interest received by Lender.
2.2 FEES AND WARRANTS. Borrower shall pay Lender the following fees, and
issue Lender the following warrants, which are in addition to all interest and
other sums payable by Borrower to Lender under this Agreement, and are not
refundable:
(A) CLOSING FEE. A closing fee in the amount set forth in Section
6(a) of Schedule A, which shall be deemed to be fully earned as of, and payable
on, the date hereof.
(B) FACILITY FEES. A facility fee for the Initial Term in the amount
set forth in Section 6(b)(i) of Schedule A (which shall be fully earned as of
the date of this Agreement and shall be payable in equal installments due,
respectively, on each anniversary of the date of this Agreement during the
Initial Term, other than the Maturity Date), and a facility fee for each Renewal
Term in the amount set forth in Section 6(b)(ii) of Schedule A (which shall be
fully earned as of the first day of such Renewal Term and shall be payable in
equal installments due, respectively, on the first day of such Renewal Term and
on each anniversary thereof during such Renewal Term, other than the Maturity
Date).
(C) SERVICING FEE. A monthly servicing fee in the amount set forth
in Section 6(c)
4
of Schedule A, in consideration of Lender's administration and other services
for each month (or part thereof), which shall be fully earned as of, and payable
in advance on, the date of this Agreement and on the first day of each month
thereafter so long as any of the Obligations are outstanding.
(D) UNUSED LINE FEE. An unused line fee at a rate equal to the
percentage per annum set forth in Section 6(d) of Schedule A of the amount by
which the Maximum Facility Amount exceeds the average daily outstanding
principal balance of the Loans and the Credit Accommodation Balance during the
immediately preceding month (or part thereof), which fee shall be payable, in
arrears, on the first day of each month so long as any of the Obligations are
outstanding and on the Maturity Date.
(E) MINIMUM BORROWING FEE. A minimum borrowing fee equal to the
excess, if any, of (i) interest which would have been payable in respect of each
period set forth in Section 6(e)(i) of Schedule A if, at all times during such
period, the principal balance of the Loans was equal to the Minimum Loan Amount
over (ii) the actual interest payable in respect of such period, which fee shall
be fully earned as of the last day of such period and payable on the date set
forth in Section 6(e)(ii) of Schedule A and on the Maturity Date, commencing
with the immediately following period.
(F) SUCCESS FEE. A success fee in the amount set forth in Section
6(f) of Schedule A, which shall be fully earned as of the date of this Agreement
and payable as set forth in Section 6(f) of Schedule A.
(G) WARRANTS. Warrants to acquire the capital stock of Borrower, as
summarized in Section 6(g) of Schedule A and as more fully set forth in a
separate warrant agreement executed by Borrower contemporaneously with this
Agreement.
(H) CREDIT ACCOMMODATION FEES. The fees relating to Credit
Accommodations set forth in Section 6(i) of Schedule A, payable, in arrears, on
the first day of each month so long as any of the Obligations are outstanding
and on the Maturity Date, plus all costs and fees charged by the issuer, payable
as and when such costs and fees are charged.
2.3 COMPUTATION OF INTEREST AND FEES. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily principal balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.
2.4 LOAN ACCOUNT; MONTHLY ACCOUNTINGS. Lender shall maintain a loan account
for Borrower reflecting all advances, charges, expenses and payments made
pursuant to this Agreement (the "LOAN ACCOUNT"), and shall provide Borrower with
a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct,
5
accurate and binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by Lender),
unless Borrower notifies Lender in writing to the contrary within sixty days
after such account is rendered, describing the nature of any alleged errors or
omissions. However, Lender's failure to maintain the Loan Account or to provide
any such accounting shall not affect the legality or binding nature of any of
the Obligations. Interest, fees and other monetary Obligations due and owing
under this Agreement (including fees and other amounts paid by Lender to issuers
of Credit Accommodations) may, in Lender's discretion, be charged to the Loan
Account, and will thereafter be deemed to be Revolving Loans and will bear
interest at the same rate as other Revolving Loans.
3. SECURITY INTEREST.
3.1 To secure the full payment and performance of all of the Obligations,
Borrower hereby grants to Lender a continuing security interest in all of
Borrower's property and interests in property, whether tangible or intangible,
now owned or in existence or hereafter acquired or arising, wherever located,
including Borrower's interest in all of the following, whether or not eligible
for lending purposes: (i) all Accounts, Chattel Paper, Instruments, Documents,
Goods (including Inventory, Equipment, farm products and consumer goods),
Investment Property, General Intangibles, Deposit Accounts and money, (ii) all
proceeds and products of all of the foregoing (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties for
loss or any destruction of any of the foregoing) and (iii) all books and records
relating to any of the foregoing.
4. ADMINISTRATION.
4.1 LOCK BOXES AND BLOCKED ACCOUNTS. Borrower will, at its expense,
establish (and revise from time to time as Lender may require) collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks, wire transfers and other proceeds of Accounts ("ACCOUNT PROCEEDS"),
which may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's option,
in the name of Lender (a "LOCK BOX") or (ii) depositing all Account Proceeds
received by Borrower into one or more bank accounts maintained in Lender's name
(each, a "BLOCKED ACCOUNT"), under an arrangement acceptable to Lender with a
depository bank acceptable to Lender, pursuant to which all funds deposited into
each Blocked Account are to be transferred to Lender in such manner, and with
such frequency, as Lender shall specify or (iii) a combination of the foregoing.
Borrower agrees to execute, and to cause its depository banks to execute, such
Lock Box and Blocked Account agreements and other documentation as Lender shall
require from time to time in connection with the foregoing.
4.2 REMITTANCE OF PROCEEDS. Except as provided in Section 4.1, all proceeds
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arising from the sale or other disposition of any Collateral shall be delivered,
in kind, by Borrower to Lender in the original form in which received by
Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrower's other funds and property in an express trust for Lender.
Nothing in this Section 4.2 shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 APPLICATION OF PAYMENTS. Lender may, in its sole discretion, apply,
reverse and re-apply all cash and non-cash proceeds of Collateral or other
payments received with respect to the Obligations, in such order and manner as
Lender shall determine, whether or not the Obligations are due, and whether
before or after the occurrence of a Default or an Event of Default. For purposes
of determining Availability, such amounts will be credited to the Loan Account
and the Collateral balances to which they relate upon Lender's receipt of advice
from Lender's Bank (set forth in Section 11 of Schedule A) that such items have
been credited to Lender's account at Lender's Bank (or upon Lender's deposit
thereof at Lender's Bank in the case of payments received by Lender in kind), in
each case subject to final payment and collection. However, for purposes of
computing interest on the Obligations, such items shall be deemed applied by
Lender two Business Days after Lender's receipt of advice of deposit thereof at
Lender's Bank.
4.4 NOTIFICATION; VERIFICATION. Lender or its designee may, from time to
time, whether or not a Default or Event of Default has occurred: (i) verify
directly with the Account Debtors the validity, amount and other matters
relating to the Accounts and Chattel Paper, by means of mail, telephone or
otherwise, either in the name of Borrower or Lender or such other name as Lender
may choose; (ii) notify Account Debtors that Lender has a security interest in
the Accounts and that payment thereof is to be made directly to Lender; and
(iii) demand, collect or enforce payment of any Accounts and Chattel Paper (but
without any duty to do so).
4.5 POWER OF ATTORNEY. Borrower hereby grants to Lender an irrevocable power
of attorney, coupled with an interest, authorizing and permitting Lender (acting
through any of its officers, employees, attorneys or agents), at any time
(whether or not a Default or Event of Default has occurred and is continuing,
except as expressly provided below), at Lender's option, but without obligation,
with or without notice to Borrower, and at Borrower's expense, to do any or all
of the following, in Borrower's name or otherwise: (i) execute on behalf of
Borrower any documents that Lender may, in its sole discretion, deem advisable
in order to perfect and maintain Lender's security interests in the Collateral,
to exercise a right of Borrower or Lender, or to fully consummate all the
transactions contemplated by this Agreement and the other Loan Documents
(including such financing statements and continuation financing statements, and
amendments thereto, as Lender shall deem necessary or appropriate) and to file
as a financing statement any copy of this Agreement or any financing statement
signed by Borrower; (ii) execute on behalf of
7
Borrower any document exercising, transferring or assigning any option to
purchase, sell or otherwise dispose of or lease (as lessor or lessee) any real
or personal property which is part of the Collateral or in which Lender has an
interest; (iii) execute on behalf of Borrower any invoices relating to any
Accounts, any draft against any Account Debtor, any proof of claim in
bankruptcy, any notice of Lien or claim, and any assignment or satisfaction of
mechanic's, materialman's or other Lien; (iv) execute on behalf of Borrower any
notice to any Account Debtor; (v) receive and otherwise take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral; (vi)
endorse Borrower's name on all checks and other forms of remittances received by
Lender; (vii) pay, contest or settle any Lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (viii)
after the occurrence of a Default or Event of Default, grant extensions of time
to pay, compromise claims relating to, and settle Accounts, Chattel Paper and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (ix) pay any sums required on account of
Borrower's taxes or to secure the release of any Liens therefor; (x) pay any
amounts necessary to obtain, or maintain in effect, any of the insurance
described in Section 5.12; (xi) settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (xii) instruct any third party having custody or control of any
Collateral or books or records belonging to, or relating to, Borrower to give
Lender the same rights of access and other rights with respect thereto as Lender
has under this Agreement; and (xiii) after the occurrence of a Default or Event
of Default, change the address for delivery of Borrower's mail and receive and
open all mail addressed to Borrower. Any and all sums paid, and any and all
costs, expenses, liabilities, obligations and reasonable attorneys' fees
incurred, by Lender with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
Borrower agrees that Lender's rights under the foregoing power of attorney or
any of Lender's other rights under this Agreement or the other Loan Documents
shall not be construed to indicate that Lender is in control of the business,
management or properties of Borrower.
4.6 DISPUTES. Borrower shall promptly notify Lender of all disputes or
claims relating to Accounts and Chattel Paper. Borrower will not, without
Lender's prior written consent, compromise or settle any Account or Chattel
Paper for less than the full amount thereof, grant any extension of time of
payment of any Account or Chattel Paper, release (in whole or in part) any
Account Debtor or other person liable for the payment of any Account or Chattel
Paper or grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any Account or Chattel Paper; except
that prior to the occurrence of an Event of Default, Borrower may take any of
such actions in the ordinary course of its business, PROVIDED that Borrower
promptly reports the same to Lender.
4.7 INVOICES. At Lender's request, Borrower will cause all invoices and
statements
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which it sends to Account Debtors or other third parties to be marked, in a
manner satisfactory to Lender, to reflect Lender's security interest therein.
4.8 INVENTORY.
(A) RETURNS. Provided that no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower will promptly determine the reason for
such return and promptly issue a credit memorandum to the Account Debtor in the
appropriate amount (sending a copy to Lender). After the occurrence of an Event
of Default, Borrower will not accept any return without Lender's prior written
consent. Regardless of whether an Event of Default has occurred, Borrower will
(i) hold the returned Inventory in trust for Lender; (ii) segregate all returned
Inventory from all of Borrower's other property; (iii) conspicuously label the
returned Inventory as Lender's property; and (iv) immediately notify Lender of
the return of such Inventory, specifying the reason for such return, the
location and condition of the returned Inventory and, at Lender's request,
deliver such returned Inventory to Lender at an address specified by Lender;
provided that should no Event of Default have occurred and be continuing,
Borrower can sell such Inventory in the ordinary course of its business.
(B) OTHER COVENANTS. Borrower will not, without Lender's prior
written consent, (i) store any Inventory with any warehouseman or other third
party other than as set forth in Section 9(d) of Schedule A or (ii) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis. All of the Inventory has been produced only in accordance with the Fair
Labor Standards Act of 1938 and all rules, regulations and orders promulgated
thereunder.
4.9 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on one
Business Day's notice, prior to the occurrence of a Default or an Event of
Default, and at any time and with or without notice after the occurrence of a
Default or an Event of Default, Lender or its agents shall have the right to
inspect the Collateral, and the right to examine and copy Borrower's books and
records. Lender shall take reasonable steps to keep confidential all information
obtained in any such inspection or examination, but Lender shall have the right
to disclose any such information to its auditors, regulatory agencies, attorneys
and participants, and pursuant to any subpoena or other legal process. Borrower
agrees to give Lender access to any or all of Borrower's premises to enable
Lender to conduct such inspections and examinations. Such inspections and
examinations shall be at Borrower's expense and the charge therefor shall be
$650 per person per day (or such higher amount as shall represent Lender's then
current standard charge), plus reasonable out-of-pocket expenses. Lender may, at
Borrower's expense, use Borrower's personnel, computer and other equipment,
programs, printed output and computer readable media, supplies and premises for
the collection, sale or other disposition of Collateral to the extent Lender, in
its sole discretion, deems appropriate. Borrower hereby irrevocably authorizes
all
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accountants and third parties to disclose and deliver to Lender, at Borrower's
expense, all financial information, books and records, work papers, management
reports and other information in their possession regarding Borrower. Borrower
will not enter into any agreement with any accounting firm, service bureau or
third party to store Borrower's books or records at any location other than the
address set forth in Section 9(e) of Schedule A without first obtaining Lender's
written consent (which consent may be conditioned upon such accounting firm,
service bureau or other third party agreeing to give Lender the same rights with
respect to access to books and records and related rights as Lender has under
this Agreement).
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents, warrants
and covenants as follows (it being understood that (i) each such representation
and warranty will be deemed remade as of the date on which each Loan is made and
each Credit Accommodation is provided and shall not be affected by any knowledge
of, or any investigation by, Lender, and (ii) the accuracy of each such
representation, warranty and covenant will be a condition to each Loan and
Credit Accommodation):
5.1 EXISTENCE AND AUTHORITY. Borrower is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
formation. Borrower is qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse effect
on Borrower. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents to which Borrower is a party have
been duly and validly authorized, do not violate Borrower's articles or
certificate of incorporation, by-laws or other organizational documents, or any
law or any agreement or instrument or any court order which is binding upon
Borrower or its property, do not constitute grounds for acceleration of any
indebtedness or obligation under any agreement or instrument which is binding
upon Borrower or its property, and do not require the consent of any Person.
This Agreement and such other Loan Documents have been duly executed and
delivered by, and are enforceable against, Borrower, and all other Obligors who
have signed them, in accordance with their respective terms. Sections 9(g) and
9(h) of Schedule A set forth the names and ownership of Borrower's Subsidiaries
as of the date of this Agreement.
5.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names. Borrower shall
give Lender at least thirty days' prior written notice before changing its name
or doing business under any other name. Borrower has complied with all laws
relating to the conduct of business under a fictitious business name. Borrower
represents and warrants that (i) each trade name does not refer to
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another corporation or other legal entity; (ii) all Accounts invoiced under any
such trade names are owned exclusively by Borrower and are subject to the
security interest of Lender and the other terms of this Agreement and (iii) all
schedules of Accounts, including any sales made or services rendered using any
trade name shall show Borrower's name as assignor.
5.3 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower has good and marketable
title to the Collateral. The Collateral now is and will remain free and clear of
any and all liens, charges, security interests, encumbrances and adverse claims,
except for Permitted Liens. Lender now has, and will continue to have, a
first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend Lender and the Collateral against all claims of others. None of the
Collateral which is Equipment is or will be affixed to any real property in such
a manner, or with such intent, as to become a fixture. Except for leases or
subleases as to which Borrower has delivered to Lender a landlord's waiver in
form and substance satisfactory to Lender, Borrower is not a lessee or sublessee
under any real property lease or sublease pursuant to which the lessor or
sublessor may obtain any rights in any of the Collateral, and no such lease or
sublease now prohibits, restrains, impairs or conditions, or will prohibit,
restrain, impair or condition, Borrower's right to remove any Collateral from
the premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by Lender,
cause each such third party to execute and deliver to Lender, in form and
substance acceptable to Lender, such waivers and subordinations as Lender shall
specify, so as to ensure that Lender's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party. Borrower will
keep in full force and effect, and will comply with all the terms of, any lease
of real property where any of the Collateral now or in the future may be
located.
5.4 ACCOUNTS AND CHATTEL PAPER. As of each date reported by Borrower, all
Accounts which Borrower has reported to Lender as being Eligible Accounts comply
in all respects with the criteria for eligibility established by Lender and in
effect at such time. All Accounts and Chattel Paper are genuine and in all
respects what they purport to be, arise out of a completed, bona fide and
unconditional and non-contingent sale and delivery of goods or rendition of
services by Borrower in the ordinary course of its business and in accordance
with the terms and conditions of all purchase orders, contracts or other
documents relating thereto, each Account Debtor thereunder had the capacity to
contract at the time any contract or other document giving rise to such Accounts
and Chattel Paper were executed, and the transactions giving rise to such
Accounts and Chattel Paper comply with all applicable laws and governmental
rules and regulations.
5.5 INVESTMENT PROPERTY. Borrower will take any and all actions required or
requested by Lender, from time to time, to (i) cause Lender to obtain exclusive
control of any Investment Property in a manner acceptable to Lender and (ii)
obtain from any issuers
11
of Investment Property and such other Persons as Lender shall specify, for the
benefit of Lender, written confirmation of Lender's exclusive control over such
Investment Property and take such other actions as Lender may request to perfect
Lender's security interest in such Investment Property. For purposes of this
Section 5.5, Lender shall have exclusive control of Investment Property if (A)
such Investment Property consists of certificated securities and Borrower
delivers such certificated securities to Lender (with appropriate endorsements
if such certificated securities are in registered form); (B) such Investment
Property consists of uncertificated securities and either (x) Borrower delivers
such uncertificated securities to Lender or (y) the issuer thereof agrees,
pursuant to documentation in form and substance satisfactory to Lender, that it
will comply with instructions originated by Lender without further consent by
Borrower, and (C) such Investment Property consists of security entitlements and
either (x) Lender becomes the entitlement holder thereof or (y) the appropriate
securities intermediary agrees, pursuant to documentation in form and substance
satisfactory to Lender, that it will comply with entitlement orders originated
by Lender without further consent by Borrower.
5.6 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
Section 9(e) of Schedule A is Borrower's chief executive office and the location
of its books and records. In addition, except as provided in the immediately
following sentence, Borrower has places of business and Collateral located only
at the locations set forth on Sections 9(d) and 9(e) of Schedule A. Borrower
will give Lender at least thirty days' prior written notice before opening any
additional place of business, changing its chief executive office or the
location of its books and records, or moving any of the Collateral to a location
other than Borrower's Address or one of the locations set forth in Sections 9(d)
and 9(e) of Schedule A, and will execute and deliver all financing statements
and other agreements, instruments and documents which Lender shall require as a
result thereof.
5.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
delivered to Lender by or on behalf of Borrower have been prepared in conformity
with GAAP and completely and fairly reflect the financial condition of Borrower,
at the times and for the periods therein stated. Between the last date covered
by any such financial statement provided to Lender and the date hereof (or, with
respect to the remaking of this representation in connection with the making of
any Loan or the providing of any Credit Accommodation, the date such Loan is
made or such Credit Accommodation is provided), there has been no material
adverse change in the financial condition or business of Borrower. Borrower is
solvent and able to pay its debts as they come due, and has sufficient capital
to carry on its business as now conducted and as proposed to be conducted. All
schedules, reports and other information and documentation delivered by Borrower
to Lender with respect to the Collateral are, or will be, when delivered, true,
correct and complete as of the date delivered or the date specified therein.
5.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
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filed all tax returns and reports required by applicable law, has timely paid
all applicable taxes, assessments, deposits and contributions owing by Borrower
and will timely pay all such items in the future as they became due and payable.
Borrower may, however, defer payment of any contested taxes; PROVIDED, that
Borrower (i) in good faith contests Borrower's obligation to pay such taxes by
appropriate proceedings promptly and diligently instituted and conducted; (ii)
notifies Lender in writing of the commencement of, and any material development
in, the proceedings; (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a Lien upon any of the Collateral and (iv)
maintains adequate reserves therefor in conformity with GAAP. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay, all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not withdrawn from
participation in, permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency.
5.9 COMPLIANCE WITH LAWS. Borrower has complied in all material respects
with all provisions of all applicable laws and regulations, including those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, the payment and withholding of taxes, ERISA
and other employee matters, safety and environmental matters.
5.10 LITIGATION. Section 9(f) of Schedule A discloses all material claims,
proceedings, litigation or investigations pending or (to the best of Borrower's
knowledge) threatened against Borrower. There is no claim, suit, litigation,
proceeding or investigation pending or (to the best of Borrower's knowledge)
threatened by or against or affecting Borrower in any court or before any
governmental agency (or any basis therefor known to Borrower) which may result,
either separately or in the aggregate, in any material adverse change in the
financial condition or business of Borrower, or in any material impairment in
the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Lender in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower.
5.11 USE OF PROCEEDS. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 INSURANCE. Borrower will at all times carry property, liability and
other insurance, with insurers acceptable to Lender, in such form and amounts,
and with such deductibles and other provisions, as Lender shall require, and
Borrower will provide
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evidence of such insurance to Lender, so that Lender is satisfied that such
insurance is, at all times, in full force and effect. Each property insurance
policy shall name Lender as loss payee and shall contain a lender's loss payable
endorsement in form acceptable to Lender, each liability insurance policy shall
name Lender as an additional insured, and each business interruption insurance
policy shall be collaterally assigned to Lender, all in form and substance
satisfactory to Lender. All policies of insurance shall provide that they may
not be cancelled or changed without at least thirty days' prior written notice
to Lender, shall contain breach of warranty coverage, and shall otherwise be in
form and substance satisfactory to Lender. Upon receipt of the proceeds of any
such insurance, Lender shall apply such proceeds in reduction of the Obligations
as Lender shall determine in its sole discretion. Borrower will promptly deliver
to Lender copies of all reports made to insurance companies.
5.13 FINANCIAL AND COLLATERAL REPORTS. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender):
(A) COLLATERAL REPORTS. On or before the fifteenth day of each
month, an aging of Borrower's Accounts, Chattel Paper and notes receivable, and
weekly Inventory reports, all in such form, and together with such additional
certificates, schedules and other information with respect to the Collateral or
the business of Borrower or any Obligor, as Lender shall request; PROVIDED, that
Borrower's failure to execute and deliver the same shall not affect or limit
Lender's security interests and other rights in any of the Accounts, nor shall
Lender's failure to advance or lend against a specific Account affect or limit
Lender's security interest and other rights therein. Together with each such
schedule, Borrower shall furnish Lender with copies (or, at Lender's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave
rise to such Accounts, and Borrower warrants the genuineness of all of the
foregoing. In addition, Borrower shall deliver to Lender the originals of all
Instruments, Chattel Paper, security agreements, guaranties and other documents
and property evidencing or securing any Accounts, immediately upon receipt
thereof and in the same form as received, with all necessary endorsements.
Lender may destroy or otherwise dispose of all documents, schedules and other
papers delivered to Lender pursuant to this Agreement (other than originals of
Instruments, Chattel Paper, security agreements, guaranties and other documents
and property evidencing or securing any Accounts) six months after Lender
receives them, unless Borrower requests their return in writing in advance and
arranges for their return to Borrower at Borrower's expense.
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(B) ANNUAL STATEMENTS. Not later than one hundred twenty days after
the close of each fiscal year of Borrower, unqualified (except for a
qualification for a change in accounting principles with which the accountant
concurs) audited financial statements of Borrower as of the end of such year,
certified by a firm of independent certified public accountants of recognized
standing selected by Borrower but acceptable to Lender (with Lender hereby
acknowledging that Xxxxx Xxxxx & Xxxxxx is acceptable), together with a copy of
any management letter issued in connection therewith and a letter from such
accountants acknowledging that Lender is relying on such financial statements;
(C) INTERIM STATEMENTS. Not later than twenty days after the end of
each month hereafter, including the last month of Borrower's fiscal year,
unaudited interim financial statements of Borrower and its Subsidiaries as of
the end of such month and of the portion of Borrower's fiscal year then elapsed,
on a consolidated and consolidating basis, certified by the principal financial
officer of Borrower as prepared in accordance with GAAP and fairly presenting
the consolidated financial position and results of operations of Borrower and
its Subsidiaries for such month and period subject only to changes from audit
and year-end adjustments and except that such statements need not contain notes;
(D) PROJECTIONS, ETC. Such business projections, Availability
projections, business plans, budgets and cash flow statements for Borrower and
its Subsidiaries as Lender shall request from time to time;
(E) SHAREHOLDER REPORTS, ETC. Promptly after the sending or filing
thereof, as the case may be, copies of any proxy statements, financial
statements or reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration statements
which Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(F) ERISA REPORTS. Upon request by Lender, copies of any annual
report to be filed pursuant to the requirements of ERISA in connection with each
plan subject thereto; and
(G) OTHER INFORMATION. Such other data and information (financial
and otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or Borrower's and each of its Subsidiary's
financial condition or results of operations.
5.14 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Lender with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Lender, make available
Borrower and its officers, employees and agents, and Borrower's books and
records, without charge, to the
15
extent that Lender may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
5.15 MAINTENANCE OF COLLATERAL, ETC. Borrower will maintain all of its
Equipment in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise Lender in writing of any material loss or damage to the
Collateral and of any investigation, action, suit, proceeding or claim relating
to the Collateral or which may result in an adverse impact upon Borrower's
business, assets or financial condition.
5.16 NOTIFICATION OF CHANGES. Borrower will promptly notify Lender in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of Borrower or the existence of any circumstance which
would make any representation or warranty of Borrower untrue in any material
respect or constitute a material breach of any covenant of Borrower.
5.17 FURTHER ASSURANCES. Borrower agrees, at its expense, to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as Lender may request from time to
time, to perfect and maintain Lender's security interests in the Collateral and
to fully effectuate the transactions contemplated by this Agreement.
5.18 NEGATIVE COVENANTS. Except as set forth in Section 13 of Schedule A,
Borrower will not, without Lender's prior written consent, (i) merge or
consolidate with another Person, form any new Subsidiary or acquire any interest
in any Person; (ii) acquire any assets except in the ordinary course of business
and as otherwise permitted by this Agreement and the other Loan Documents; (iii)
enter into any transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral or other assets, except that Borrower may sell finished
goods Inventory in the ordinary course of its business; (v) make any loans to,
or investments in, any Affiliate or other Person in the form of money or other
assets except for loans or advances to employees in the ordinary course of
business not to exceed $10,000 in the aggregate outstanding at any time; (vi)
incur any debt outside the ordinary course of business; (vii) guaranty or
otherwise become liable (except for endorsements of checks in the ordinary
course of business) with respect to the obligations of another party or entity;
(viii) pay or declare any dividends or other distributions on Borrower's stock,
if Borrower is a corporation (except for dividends payable solely in capital
stock of Borrower) or with respect to any equity interests, if Borrower is not a
corporation; (ix) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's capital stock or other equity interests; (x) make
any change in Borrower's capital structure; (xi) dissolve or elect to dissolve;
(xii) pay any principal or interest on any indebtedness
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owing to an Affiliate, (xiii) enter into any transaction with an Affiliate other
than on arms-length terms; or (xiv) agree to do any of the foregoing.
5.19 FINANCIAL COVENANTS.
(A) CAPITAL EXPENDITURES. Borrower will not expend or commit to
expend, directly or indirectly, for capital expenditures (including capital
lease obligations) in excess of the amount set forth in Section 8(a) of Schedule
A as the Capital Expenditure Limitation in any fiscal year.
(B) NET WORTH. Borrower will at all times maintain a net worth of at
least the amount set forth in Section 8(b) of Schedule A.
(C) TANGIBLE NET WORTH. Borrower will at all times maintain a
minimum tangible net worth of at least the amount set forth in Section 8(c) of
Schedule A.
(D) WORKING CAPITAL. Borrower will at all times maintain working
capital of at least the amount set forth in Section 8(d) of Schedule A.
(E) NET LOSSES. Borrower will not permit its cumulative net loss to
exceed the amount set forth in Section 8(e) of Schedule A.
(F) NET INCOME. Borrower will not permit its cumulative net income
to be less than the amount set forth in Section 8(f) of Schedule A.
(G) LEVERAGE. Borrower will not permit the ratio of its total
liabilities to its net worth to exceed, at any time, the ratio set forth in
Section 8(g) of Schedule A.
(H) OTHER FINANCIAL COVENANTS. Borrower will comply with any
additional financial covenants set forth in Section 8(j) of Schedule A.
6. RELEASE AND INDEMNITY.
6.1 RELEASE. Borrower hereby releases Lender and its Affiliates and their
respective directors, officers, employees, attorneys and agents and any other
Person affiliated with or representing Lender (the "RELEASED PARTIES") from any
and all liability arising from acts or omissions under or pursuant to this
Agreement, whether based on errors of judgment or mistake of law or fact, except
for those arising from willful misconduct. However, in no circumstance will any
of the Released Parties be liable for lost profits or other special or
consequential damages. Such release is made on the date hereof and remade upon
each request for a Loan or Credit Accommodation by Borrower. Without limiting
the foregoing:
(a) Lender shall not be liable for (i) any shortage or discrepancy
in, damage to, or loss or destruction of, any goods, the sale or other
disposition of which gave rise to an
17
Account; (ii) any error, act, omission, or delay of any kind occurring in the
settlement, failure to settle, collection or failure to collect any Account;
(iii) settling any Account in good faith for less than the full amount thereof;
or (iv) any of Borrower's obligations under any contract or agreement giving
rise to an Account; and
(b) In connection with Credit Accommodations or any underlying
transaction, Lender shall not be responsible for the conformity of any goods to
the documents presented, the validity or genuineness of any documents, delay,
default or fraud by Borrower, shippers and/or any other Person. Borrower agrees
that any action taken by Lender, if taken in good faith, or any action taken by
an issuer of any Credit Accommodation, under or in connection with any Credit
Accommodation, shall be binding on Borrower and shall not create any resulting
liability to Lender. In furtherance thereof, Lender shall have the full right
and authority to clear and resolve any questions of non-compliance of documents,
to give any instructions as to acceptance or rejection of any documents or
goods, to execute for Borrower's account any and all applications for steamship
or airway guaranties, indemnities or delivery orders, to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
6.2 INDEMNITY. Borrower hereby agrees to indemnify the Released Parties and
hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every nature, character and description, which
the Released Parties may sustain or incur based upon or arising out of any of
the transactions contemplated by this Agreement or the other Loan Documents or
any of the Obligations, including any transactions or occurrences relating to
the issuance of any Credit Accommodation, the Collateral relating thereto, any
drafts thereunder and any errors or omissions relating thereto (including any
loss or claim due to any action or inaction taken by the issuer of any Credit
Accommodation) (and for this purpose any charges to Lender by any issuer of
Credit Accommodations shall be conclusive as to their appropriateness and may be
charged to the Loan Account), or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Lender relating to Borrower or
the Obligations (except any such amounts sustained or incurred as the result of
the willful misconduct of the Released Parties). Notwithstanding any provision
in this Agreement to the contrary, the indemnity agreement set forth in this
Section shall survive any termination of this Agreement.
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7. TERM.
7.1 MATURITY DATE. Lender's obligation to make Loans and to provide Credit
Accommodations under this Agreement shall initially continue in effect until the
Initial Maturity Date set forth in Section 7 of Schedule A (the "INITIAL TERM");
PROVIDED, that such date shall automatically be extended (the Initial Maturity
Date, as it may be so extended, being referred to as the "MATURITY DATE") for
successive additional terms of three years each (each a "RENEWAL TERM"), unless
one party gives written notice to the other, not less than sixty days prior to
the Maturity Date, that such party elects not to extend the Maturity Date. This
Agreement and the other Loan Documents and Lender's security interests in and
Liens upon the Collateral, and all representations, warranties and covenants of
Borrower contained herein and therein, shall remain in full force and effect
after the Maturity Date until all of the monetary Obligations are indefeasibly
paid in full.
7.2 EARLY TERMINATION. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective thirty business days after
written notice of termination is given to Lender or (ii) by Lender at any time
after the occurrence and during the continuance of an Event of Default, without
notice, effective immediately; PROVIDED, that if any Affiliate of Borrower is
also a party to a financing arrangement with Lender, no such early termination
shall be effective unless such Affiliate simultaneously terminates its financing
arrangement with Lender. If so terminated under this Section 7.2, Borrower shall
pay to Lender (i) an early termination fee (the "EARLY TERMINATION FEE") in the
amount set forth in Section 6(h) of Schedule A plus (ii) any earned but unpaid
Facility Fee. Such fee shall be due and payable on the effective date of
termination and thereafter shall bear interest at a rate equal to the highest
rate applicable to any of the Obligations. In addition, if Borrower so
terminates and repays the Obligations without having provided Lender with at
least thirty days' prior written notice thereof, an additional amount equal to
thirty days of interest at the applicable Interest Rate(s), based on the average
outstanding amount of the Obligations for the six month period immediately
preceding the date of termination.
7.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay in full all Obligations, whether or not
all or any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if, on the Maturity Date or on any
earlier effective date of termination, there are any outstanding Credit
Accommodations, then on such date Borrower shall provide to Lender cash
collateral in an amount equal to 110% of the Credit Accommodation Balance to
secure all of the Obligations (including estimated attorneys' fees and other
expenses) relating to said Credit Accommodations or such greater percentage or
amount as Lender reasonably deems appropriate, pursuant to a cash pledge
agreement in form and substance satisfactory to Lender.
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7.4 EFFECT OF TERMINATION. No termination shall affect or impair any right
or remedy of Lender or relieve Borrower of any of the Obligations until all of
the monetary Obligations have been indefeasibly paid in full. Upon indefeasible
payment and performance in full of all of the monetary Obligations (and the
provision of cash collateral with respect to any Credit Accommodation Balance as
required by Section 7.3) and termination of this Agreement, Lender shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be reasonably required to terminate Lender's
security interests in the Collateral.
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8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "EVENT OF DEFAULT" under this Agreement, and Borrower shall give
Lender immediate written notice thereof: (i) if any warranty, representation,
statement, report or certificate made or delivered to Lender by Borrower or any
of Borrower's officers, employees or agents is untrue or misleading; (ii) if
Borrower fails to pay when due any principal or interest on any Loan or any
other monetary Obligation; (iii) if Borrower breaches any covenant or obligation
contained in this Agreement or any other Loan Document or fails to perform any
other non-monetary Obligation; (iv) if any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made or permitted
to exist on all or any part of the Collateral; (v) if one or more judgments
aggregating in excess of $50,000, or any injunction or attachment, is obtained
against Borrower or any Obligor which remains unstayed for more than ten days or
is enforced; (vi) the occurrence of any default under any financing agreement,
security agreement or other agreement, instrument or document executed and
delivered by (A) Borrower with, or in favor of, any Person other than Lender or
(B) Borrower or any Affiliate of Borrower with, or in favor of, Lender or any
Affiliate of Lender; (vii) the dissolution, death, termination of existence in
good standing, insolvency or business failure or suspension or cessation of
business as usual of Borrower or any Obligor (or of any general partner of
Borrower or any Obligor if it is a partnership) or the appointment of a
receiver, trustee or custodian for all or any part of the property of, or an
assignment for the benefit of creditors by Borrower or any Obligor, or the
commencement of any proceeding by Borrower or any Obligor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, or if Borrower makes or sends a notice of a bulk transfer or
calls a meeting of its creditors; (viii) the commencement of any proceeding
against Borrower or any Obligor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect which is not
dismissed within 5 days following commencement provided that Lender shall not be
required to make any Loans or issue any Credit Accommodations during the
pendency of such proceeding; (ix) the actual or attempted revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations, or any security document securing the Obligations, by any Obligor;
(x) if Borrower makes any payment on account of any indebtedness or obligation
which has been subordinated to the Obligations other than as permitted in the
applicable subordination agreement, or if any Person who has subordinated such
indebtedness or obligations attempts to limit or terminate its subordination
agreement; (xi) if there is any actual or threatened indictment of Borrower or
any Obligor under any criminal statute or commencement or threatened
commencement of criminal or civil proceedings against Borrower or any Obligor,
pursuant to which the potential penalties or remedies sought or available
include forfeiture of any property of Borrower or such Obligor;
21
(xii) if there is any change in the chief executive officer or chief financial
officer of Borrower; (xiii) if an Event of Default occurs under any Loan and
Security Agreement between Lender and an Affiliate of Borrower; or (xiv) if
Lender determines in good faith that the Collateral is insufficient to fully
secure the Obligations or that the prospect of payment of performance of the
Obligations is impaired.
8.2 REMEDIES. Upon the occurrence of any Default, and at any time
thereafter, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document. Upon the
occurrence of any Event of Default, and at any time thereafter, Lender, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (i)
cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (ii) accelerate and declare all or any
part of the Obligations to be immediately due, payable and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any of the Obligations; (iii) take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Lender, without judicial process, to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain (or cause a custodian
to remain) on the premises in exclusive control thereof, without charge for so
long as Lender deems it reasonably necessary in order to complete the
enforcement of its rights under this Agreement or any other agreement; PROVIDED,
that if Lender seeks to take possession of any of the Collateral by court
process, Borrower hereby irrevocably waives (A) any bond and any surety or
security relating thereto required by law as an incident to such possession, (B)
any demand for possession prior to the commencement of any suit or action to
recover possession thereof and (C) any requirement that Lender retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(iv) require Borrower to assemble any or all of the Collateral and make it
available to Lender at one or more places designated by Lender which are
reasonably convenient to Lender and Borrower, and to remove the Collateral to
such locations as Lender may deem advisable; (v) complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Lender shall have the right to
use Borrower's premises, vehicles and other Equipment and all other property
without charge; (vi) sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Lender obtains possession of it or after further
manufacturing, processing or repair, at one or more public or private sales, in
lots or in bulk, for cash, exchange or other property, or on credit (a "SALE"),
and to adjourn any such Sale from time to time without notice other than oral
announcement at the time scheduled for Sale (and, in connection therewith, (A)
Lender shall have the right to conduct such Sale on Borrower's premises without
charge, for such times as Lender deems reasonable, on Lender's premises, or
elsewhere, and the Collateral need not be located at the place of Sale; (B)
Lender may directly or through any of its Affiliates
22
purchase or lease any of the Collateral at any such public disposition, and if
permissible under applicable law, at any private disposition and (C) any Sale of
Collateral shall not relieve Borrower of any liability Borrower may have if any
Collateral is defective as to title, physical condition or otherwise at the time
of sale); (vii) demand payment of and collect any Accounts, Chattel Paper,
Instruments and General Intangibles included in the Collateral and, in
connection therewith, Borrower irrevocably authorizes Lender to endorse or sign
Borrower's name on all collections, receipts, Instruments and other documents,
to take possession of and open mail addressed to Borrower and remove therefrom
payments made with respect to any item of Collateral or proceeds thereof and, in
Lender's sole discretion, to grant extensions of time to pay, compromise claims
and settle Accounts, General Intangibles and the like for less than face value;
and (viii) demand and receive possession of any of Borrower's federal and state
income tax returns and the books and records utilized in the preparation thereof
or relating thereto. In addition to the foregoing remedies, upon the occurrence
of any Event of Default resulting from a breach of any of the financial
covenants set forth in Section 5.19, Lender may, at its option, upon not less
than ten days' prior notice to Borrower, reduce any or all of the Advance Rates
set forth in Section 1(b) of Schedule A to the extent Lender, in its sole
discretion, deems appropriate. In addition to the rights and remedies set forth
above, Lender shall have all the other rights and remedies accorded a secured
party after default under the UCC and under all other applicable laws, and under
any other Loan Document, and all of such rights and remedies are cumulative and
non-exclusive. Exercise or partial exercise by Lender of one or more of its
rights or remedies shall not be deemed an election or bar Lender from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of Lender to exercise any rights or remedies shall not operate as a waiver
thereof, but all rights and remedies shall continue in full force and effect
until all of the Obligations have been fully paid and performed. If notice of
any sale or other disposition of Collateral is required by law, notice at least
seven days prior to the sale designating the time and place of sale in the case
of a public sale or the time after which any private sale or other disposition
is to be made shall be deemed to be reasonable notice, and Borrower waives any
other notice. If any Collateral is sold or leased by Lender on credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment is collected by Lender.
8.3 APPLICATION OF PROCEEDS. Subject to any application required by law, all
proceeds realized as the result of any Sale shall be applied by Lender to the
Obligations in such order as Lender shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto; but
Borrower shall remain liable to Lender for any deficiency. If Lender, in its
sole discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any Sale, Lender shall have the option,
exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Lender of the cash
therefor.
23
9. GENERAL PROVISIONS.
9.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender or Borrower at the address shown in the heading to this
Agreement, or by facsimile to the facsimile number shown in Section 9(i) of
Schedule A, or at any other address (or to any other facsimile number)
designated in writing by one party to the other party in the manner prescribed
in this Section 9.1. All notices shall be deemed to have been given when
received or when delivery is refused by the recipient.
9.2 SEVERABILITY. If any provision of this Agreement, or the application
thereof to any party or circumstance, is held to be void or unenforceable by any
court of competent jurisdiction, such defect shall not affect the remainder of
this Agreement, which shall continue in full force and effect.
9.3 INTEGRATION. This Agreement and the other Loan Documents represent the
final, entire and complete agreement between Borrower and Lender and supersede
all prior and contemporaneous negotiations, oral representations and agreements,
all of which are merged and integrated into this Agreement. THERE ARE NO ORAL
UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT
SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 WAIVERS. The failure of Lender at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
Loan Documents shall not waive or diminish any right of Lender later to demand
and receive strict compliance therewith. Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent, and whether or
not similar. None of the provisions of this Agreement or any other Loan Document
shall be deemed to have been waived by any act or knowledge of Lender or its
agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, Instrument, Account, General Intangible, Document, Chattel
Paper, Investment Property or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement, and notice of acceptance
hereof.
9.5 AMENDMENT. The terms and provisions of this Agreement may not be amended
or modified except in a writing executed by Borrower and a duly authorized
officer of Lender.
24
9.6 TIME OF ESSENCE. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement and the other Loan Documents.
9.7 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, in
connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and negotiate this Agreement
and the other Loan Documents; to obtain legal advice in connection with this
Agreement and the other Loan Documents or Borrower or any Obligor; to administer
this Agreement and the other Loan Documents (including the cost of periodic
financing statement, tax lien and other searches conducted by Lender); to
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors; to commence, intervene in, or defend any
action or proceeding; to enforce and protect, or to seek to enforce and protect,
any of its rights and interests in any bankruptcy case of Borrower, including,
without limitation, by initiating and prosecuting any motion for relief from the
automatic stay and by initiating, prosecuting or defending any other contested
matter or adversary proceeding in bankruptcy; to file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; to examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
to protect, obtain possession of, lease, dispose of, or otherwise enforce
Lender's security interests in, the Collateral; and to otherwise represent
Lender in any litigation relating to Borrower. If either Lender or Borrower
files any lawsuit against the other predicated on a breach of this Agreement,
the prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys' fees and costs to which Lender may be entitled
pursuant to this Section shall immediately become part of the Obligations, shall
be due on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations.
9.8 BENEFIT OF AGREEMENT; ASSIGNABILITY. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Lender;
PROVIDED, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Lender, and any prohibited
assignment shall be void. No consent by Lender to any assignment shall release
Borrower from its liability for any of the Obligations. Lender shall have the
right to assign all or any of its rights and obligations under the Loan
Documents, and to sell participating interests therein, to one or more other
Persons, and Borrower agrees to execute all agreements, instruments and
documents requested by Lender in connection with each such assignment and
participation.
9.9 HEADINGS; CONSTRUCTION. Section and subsection headings are used in this
25
Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
Sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Lender or Borrower under any rule of construction or
otherwise.
9.10 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND
FEDERAL COURTS IN NEW YORK, NEW YORK OR THE STATE IN WHICH ANY OF THE COLLATERAL
IS LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT
ANY CLAIM OR DISPUTE BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS OF NEW YORK. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER
AND SHALL BE DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE
EXTENT PERMITTED BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
9.11 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT
TO TRIAL BY JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT,
26
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE
LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR
OMISSIONS OF LENDER OR BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS OR AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR
BORROWER, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE; (ii) THE RIGHT TO
INTERPOSE ANY CLAIMS, DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND IN ANY
ACTION OR PROCEEDING INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR
ANY MATTER RELATING THERETO, EXCEPT FOR COMPULSORY COUNTERCLAIMS; (iii) NOTICE
PRIOR TO LENDER'S TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO
EXERCISE ANY OF LENDER'S REMEDIES AND (iv) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND
THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH
BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING
WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
9.12 CONFIDENTIALITY. The Lender agrees that it will use commercially
reasonable efforts to maintain the confidentiality of any information with
respect to the Borrower which is furnished pursuant to this Agreement or any of
the Loan Documents; provided that the Lender may disclose any such information
that (a) has become generally available to the public or has been lawfully
obtained by the Lender from any third party not known by the Lender to be under
any duty of confidentiality to the Borrower; (b) is contained in any documents
filed by Borrower with the Securities and Exchange Commission or documents
mailed by Borrower to its stockholders; (c) may be required or appropriate in
any report, statement or testimony submitted to, or in respect to any inquiry
by, any municipal, state or federal regulatory body having or claiming to have
jurisdiction over the Lender; (d) may be required or appropriate in respect to
any summons or subpoena or in connection with any litigation or in order to
comply with any law, order, regulation or ruling applicable to the Lender; and
(e) as Lender may deem appropriate in its sole and absolute discretion to
endorse its rights under this Agreement and/or any of the Loan Documents.
27
SCHEDULE A
DESCRIPTION OF CERTAIN TERMS
This Schedule is an integral part of the Loan and Security Agreement between
BIG XXXXX BRANDS, INC. and NATIONSCREDIT COMMERCIAL CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
1. Loan Limits for Revolving Loans:
(a) Maximum Facility Amount:
$10,000,000
(a) Advance Rates:
(i) Accounts 85%; PROVIDED, that if the Dilution
Advanced Rate: Percentage exceeds 5%, such advance
rate will be reduced by the full
or partial percentage points of
such excess
(i) Inventory
Advance
Rate(s):
(A) Finished goods: 60%
(A) Raw materials: 60%
A-1
(A) Piece 60%; PROVIDED, that the advance
goods, rate for work in process shall
work in automatically reduce by 1% on the
process first day of each month commencing
and trim: January 1, 1998, until it is
reduced to 0
(a) Accounts Sublimit: $500,000 with respect to Dated
Eligible Accounts
(a) Inventory Sublimit(s):
(i) Overall sublimit $4,000,000
on advances
against Eligible
Inventory
(i) Sublimit on $500,000
advances against
piece goods
(i) Sublimit on N/A
advances against
raw materials
(i) Sublimit on $300,000; PROVIDED, that such
advances sublimit will be reduced to
against work in $150,000 during any time when
process Borrower's cumulative losses
(calculated from the date of the
Agreement according to GAAP but
excluding extraordinary losses)
exceed $750,000
(i) Sublimit on $500,000
advances against
trim
A-2
(i) Sublimit on $250,000
advances against
Inventory in
outlet stores
(a) Additional Advance
Rates
(i) Equipment The lesser of $550,000 and 80% of
Advance Rate: the appraised knockdown value of
Borrower's Eligible Equipment as of
the date of the Agreement, which
advance rate will be reduced to 0 in
60 equal monthly increments on the
first day of each calendar month
commencing with the month following
this Agreement
(i) Real Property The lesser of $275,000 and 60% of
Advance Rate: the appraised quick sale value of
Borrower's Eligible Real Property
as of the date of the Agreement,
which advance rate will be reduced
to 0 in 60 equal monthly increments
on the first day of each calendar
month commencing with the month
following this Agreement
(i) Trademark The lesser of $400,000 and 14% of
Advance Rate: the appraised fair market value of
Borrower's Eligible Trademarks, as
of the date of the Agreement;
PROVIDED, that the sublimit for
Trademark Advances will be reduced
(i) to 0 in 60 equal monthly
increments on the first day of each
calendar month commencing with the
month following the date of this
Agreement and (ii) to $200,000
during any time that Borrower's
cumulative losses (calculated from
the date of the Agreement in
accordance with GAAP but excluding
extraordinary items) exceed
$750,000
A-3
(a) Credit $2,000,000
Accommodation
Limit:
(a) Permanent Reserve Amount: N/A
(a) Overadvance Amount: N/A
2. Loan Limits for Term Loan:
(a) Principal Amount: N/A
(a) Repayment Schedule:
(i) Equipment Advance: N/A
(i) Real Property Advance: N/A
2. Interest Rates:
A-4
(a) Revolving Loans of 1.875% per annum in excess of the
$5,000,000 or less: Prime Rate
(a) Revolving Loans of 1.875% per annum in excess of the
more than Prime Rate for the first $5,000,000
$5,000,000: outstanding and 1.25% per annum in
excess of the Prime Rate for the
amount outstanding in excess of
$5,000,000
A-5
2. Minimum Loan Amounts: $2,500,000 average monthly loan
balance $4,000,000 average annual
loan balance
3. Maximum Days:
(a) Maximum days after 120
original INVOICE DATE
for Eligible Accounts:
(a) Maximum days after 60
original INVOICE DUE
DATE for Eligible
Accounts:
2. Fees:
(a) Closing Fee: $75,000, $37,500 of which has
previously been paid
(a) Facility Fee:
(i) Initial Term: $150,000
(i) Renewal Term(s): $150,000
(a) Servicing Fee: N/A
(a) Unused Line Fee: N/A
A-6
(a) Minimum Borrowing Fee:
(i) Applicable period: Each month with respect to the
average monthly Minimum Loan Amount
and each year with respect to the
average annual Minimum Loan Amount,
respectively, and, in each case, on
the date of any early termination
of the Agreement
(i) Date payable: The first day of each month
commencing with the month after the
date of the Agreement and on each
anniversary of the date of the
Agreement
(a) Success Fee: N/A
(a) Warrants: N/A
(a) Early Termination Fee: 3% of the Maximum Facility Amount
if terminated during the first year
of the Initial Term or any Renewal
Term, 2.50% of the Maximum Facility
Amount if terminated during the
second year of the Initial Term or
any Renewal Term, and 2% of the
Maximum Facility Amount if
terminated thereafter and prior to
the Maturity Date
(a) Fees for letters of credit 1.50% per annum of the face amount
and other Credit of each open Credit Accommodation
Accommodations (or
guaranties thereof by
Lender):
2. Initial Maturity Date: December __, 2000
A-7
3. Financial Covenants:
(a) Capital Expenditure Limitation: $200,000 during the first year of
the term of the Agreement
$100,000 during each year
thereafter
(a) Minimum Net Worth Requirement: N/A
(a) Minimum Tangible N/A
Net Worth:
(a) Minimum Working Capital: N/A
(a) Maximum N/A
Cumulative Net Loss:
(a) Minimum Cumulative N/A
Net Income:
(a) Maximum Leverage Ratio: N/A
(a) Limitation on N/A
Purchase Money
Security Interests:
(a) Limitation on N/A
Equipment Leases:
(a) Additional Financial Covenants: N/A
2. Borrower Information:
A-8
(a) Prior Names of Borrower: Gemini Marketing Associates, Inc.
(a) Prior Trade Names of N/A
Borrower:
(a) Existing Trade Names Big Xxxxx Brands, Inc., Big Xxxxx,
of Borrower: Big Xxxxx Mountain Classics, Big
Xxxxx Vintage, Big Xxxxx Kids
A-9
(a) Inventory Locations: Garnett Outlet Store (Outlet Store)
000 Xxxx 0xx Xxxxxx
Xxxxxxx, Xxxxxx 00000
Made in America, Inc. (f/k/a Dallas
Manufacturing) (Processor)
X.X. Xxx 0000
Xxxxx, Xxxxxxx 00000-0000
Century Manufacturing, Inc. (Processor)
0000 Xxxxxxxx Xxxx.
Xxxxxxx Xxxx, Xxxxxxxx 00000
Paramount Headwear, Inc. (Processor)
#0 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Blue Hand, Inc. (Processor)
0000 X. Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
The Lambert Company (Processor)
X.X. Xxx 000
Xxxxxxxxxxx, Xxxxxxxx 00000
Pioneer Textile Treatments, Inc.
(Processor)
0000 Xxxxx Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
XXX Products, Inc. (Processor)
0000 Xxxxx
Xxxxxx, XX 00000
Miami Plant (BSB) (Warehouse)
0000 X. Xxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
X-00
(x) Xxxxx Xxxxxxxxx (XXX) (Warehouse)
0000 Xxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Miami Outlet Store (Outlet Store)
00 Xxxxx Xxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Monettt Outlet Store (Outlet Store)
000 X. Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Big Xxxxx Brands, Inc. (Warehouse, retail,
manufacturing, distribution center)
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
(a) Other Locations: Big Xxxxx Brands, Inc. (Administrative
Office)
000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
(a) Litigation: See attached
(a) Ownership of Borrower: N/A
(a) Subsidiaries (and Big Xxxxx Global, Ltd. (100%)
ownership thereof):
(a) Facsimile Numbers:
Borrower: (000)-000-0000
A-11
Lender: (000) 000-0000
2. Description of Real Property: See attached
3. Lender's Bank: The First National Bank of Chicago
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
4. Other Covenants: None
5. Exceptions to Negative Covenants: None
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as of
the date set forth in the heading to the Agreement.
BORROWER: LENDER:
BIG XXXXX BRANDS, INC. NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL
FUNDING DIVISION
By...................................
Its Authorized Signatory
By...................................
Its.............................
A-14
SCHEDULE B
DEFINITIONS
This Schedule is an integral part of the Loan and Security Agreement
between BIG XXXXX BRANDS, INC. and NATIONSCREDIT COMMERCIAL CORPORATION, THROUGH
ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
As used in the Agreement, the following terms have the following meanings:
"ACCOUNT" means any right to payment for Goods sold or leased or for
services rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.
"ACCOUNT DEBTOR" means the obligor on an Account or Chattel Paper.
"ACCOUNT PROCEEDS" has the meaning set forth in Section 4.1.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, member, manager, director, officer, or employee of such Person, any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person or any other Person affiliated, directly
or indirectly, by virtue of family membership, ownership, management or
otherwise.
"AGREEMENT" and "THIS AGREEMENT" mean the Loan and Security Agreement
of which this Schedule B is a part and the Schedules thereto.
"AVAILABILITY" has the meaning set forth in Section 1.1(a)
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11 X.X.X.xx.
101 et seq.).
"BLOCKED ACCOUNT" has the meaning set forth in Section 4.1.
"BORROWER" has the meaning set forth in the heading to the Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the heading to the
Agreement.
"BUSINESS DAY" means a day other than a Saturday or Sunday or any other
day on which Lender or banks in New York are authorized to close.
"CHATTEL PAPER" has the meaning set forth in the UCC.
"COLLATERAL" means all property and interests in property in or upon
which a security interest or other Lien is granted pursuant to this Agreement or
the other Loan Documents.
B-1
"CREDIT ACCOMMODATION" has the meaning set forth in Section 1.1(a).
"CREDIT ACCOMMODATION BALANCE" means the sum of (i) the aggregate
undrawn face amount of all outstanding Credit Accommodations and (ii) all
interest, fees and costs due or, in Lender's estimation, likely to become due in
connection therewith.
"DATED ELIGIBLE ACCOUNT" means an Account that meets the criteria of an
Eligible Account except for subclause (ii) but which is due more than 60 days
from invoice date but is not past due more than 30 days from due date or 210
days from invoice date.
"DEFAULT" means any event which with notice or passage of time, or
both, would constitute an Event of Default.
"DEFAULT RATE" has the meaning set forth in Section 2.1.
"DEPOSIT ACCOUNT" has the meaning set forth in the UCC.
"DILUTION PERCENTAGE" means the gross amount of all returns,
allowances, discounts, credits, write-offs and similar items relating to
Borrower's Accounts computed as a percentage of Borrower's gross sales,
calculated on a ninety (90) day rolling average.
"DOCUMENT" has the meaning set forth in the UCC.
"EARLY TERMINATION FEE" has the meaning set forth in Section 7.2.
"ELIGIBLE ACCOUNT" means, at any time of determination, an Account
which satisfies the general criteria set forth below and which is otherwise
acceptable to Lender (PROVIDED, that Lender may, in its sole discretion, change
the general criteria for acceptability of Eligible Accounts upon at least
fifteen days' prior notice to Borrower). An Account shall be deemed to meet the
current general criteria if (i) neither the Account Debtor nor any of its
Affiliates is an Affiliate, creditor or supplier of Borrower; (ii) it does not
remain unpaid more than the earlier to occur of (A) the number of days after the
original INVOICE DATE set forth in Section 5(a) of Schedule A or (B) the number
of days after the original INVOICE DUE DATE set forth in Section 5(b) of
Schedule A or more than 180 days after the original invoice date; (iii) the
Account Debtor or its Affiliates are not past due on other Accounts owing to
Borrower comprising more than 25% of all of the Accounts owing to Borrower by
such Account Debtor or its Affiliates; (iv) all Accounts owing by any Account
Debtor or its Affiliates (other than Wal-Mart Stores, Inc.) do not represent
more than 20% of all otherwise Eligible Accounts and all Accounts owing by
Wal-Mart Stores, Inc. do not represent more than 30% of all otherwise Eligible
Accounts so long as Wal-Mart Stores, Inc. has acknowledged and is in compliance
with Lender's notification letter to it concerning payment of such Eligible
Accounts directly to Lender (PROVIDED, that Accounts which are deemed to be
ineligible solely by reason of this clause (iv) shall be considered Eligible
Accounts to the extent of the amount thereof which does not exceed 20% or 30%
(as applicable) of all otherwise Eligible Accounts); (v) no covenant,
representation or warranty contained in this
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Agreement with respect to such Account (including any of the representations set
forth in Section 5.4) has been breached; (vi) the Account is not subject to any
contra relationship, counterclaim, dispute or set-off (PROVIDED, that Accounts
which are deemed to be ineligible solely by reason of this clause (vi) shall be
considered Eligible Accounts to the extent of the amount thereof which is not
affected by such contra relationships, counterclaims, disputes or set-offs);
(vii) the Account Debtor's chief executive office or principal place of business
is located in the United States or Provinces of Canada which have adopted the
Personal Property Security Act or a similar act, unless (A) the sale is fully
backed by a letter of credit, guaranty or acceptance acceptable to Lender in its
sole discretion, and if backed by a letter of credit, such letter of credit has
been issued or confirmed by a bank satisfactory to Lender, is sufficient to
cover such Account, and if required by Lender, the original of such letter of
credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender or
(B) such Account is subject to credit insurance payable to Lender issued by an
insurer and on terms and in an amount acceptable to Lender; (viii) it is
absolutely owing to Borrower and does not arise from a sale on a xxxx-and-hold,
guarantied sale, sale-or-return, sale-on-approval, consignment, retainage or any
other repurchase or return basis or consist of progress xxxxxxxx; (ix) Lender
shall have verified the Account in a manner satisfactory to Lender; (x) the
Account Debtor is not the United States of America or any state or political
subdivision (or any department, agency or instrumentality thereof), unless
Borrower has complied with the Assignment of Claims Act of 1940 (31 U.S.C.
ss.203 et seq.) or other applicable similar state or local law in a manner
satisfactory to Lender; (xi) it is at all times subject to Lender's duly
perfected, first priority security interest and to no other Lien that is not a
Permitted Lien, and the goods giving rise to such Account (A) were not, at the
time of sale, subject to any Lien except Permitted Liens and (B) have been
delivered to and accepted by the Account Debtor, or the services giving rise to
such Account have been performed by Borrower and accepted by the Account Debtor;
(xii) the Account is not evidenced by Chattel Paper or an Instrument of any kind
and has not been reduced to judgment; (xiii) the Account Debtor's total
indebtedness to Borrower does not exceed the amount of any credit limit
established by Borrower or Lender and the Account Debtor is otherwise deemed to
be creditworthy by Lender (PROVIDED, that Accounts which are deemed to be
ineligible solely by reason of this clause (xiii) shall be considered Eligible
Accounts to the extent the amount of such Accounts does not exceed the lower of
such credit limits); (xiv) there are no facts or circumstances existing, or
which could reasonably be anticipated to occur, which might result in any
adverse change in the Account Debtor's financial condition or impair or delay
the collectibility of all or any portion of such Account; (xv) Lender has been
furnished with all documents and other information pertaining to such Account
which Lender has requested, or which Borrower is obligated to deliver to Lender,
pursuant to this Agreement; (xvi) Borrower has not made an agreement with the
Account Debtor to extend the time of payment thereof beyond the time periods set
forth in clause (ii) above; and (xvii) Borrower has not posted a surety or other
bond in respect of the contract under which such Account arose.
"ELIGIBLE EQUIPMENT" means, at any time of determination, Equipment
owned by
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Borrower which Lender, in its sole discretion, deems to be eligible for
borrowing purposes.
"ELIGIBLE INVENTORY" means, at any time of determination, Inventory
(other than packaging materials and supplies) which satisfies the general
criteria set forth below and which is otherwise acceptable to Lender (PROVIDED,
that Lender may, in its sole discretion, change the general criteria for
acceptability of Eligible Inventory upon at least fifteen days' prior written
notice to Borrower). Inventory shall be deemed to meet the current general
criteria if (i) it consists of raw materials or finished goods, or
work-in-process; (ii) it is in good, new and saleable condition; (iii) it is not
slow-moving, obsolete, unmerchantable, returned or repossessed (except for
returned or repossessed Inventory that is readily saleable as new product); (iv)
it is not in the possession of a processor, consignee or bailee, or located on
premises leased or subleased to Borrower, or on premises subject to a mortgage
in favor of a Person other than Lender, unless such processor, consignee, bailee
or mortgagee or the lessor or sublessor of such premises, as the case may be,
has executed and delivered all documentation which Lender shall require to
evidence the subordination or other limitation or extinguishment of such
Person's rights with respect to such Inventory and Lender's right to gain access
thereto; (v) it meets all standards imposed by any governmental agency or
authority; (vi) it conforms in all respects to any covenants, warranties and
representations set forth in the Agreement; (vii) it is at all times subject to
Lender's duly perfected, first priority security interest and no other Lien
except a Permitted Lien; and (viii) it is situated at an Inventory Location
listed in Section 9(d) of Schedule A or other location of which Lender has been
notified as required by Section 5.6.
"ELIGIBLE REAL PROPERTY" means, at any time of determination, Real
Property owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.
"EQUIPMENT" means all Goods which are used or bought for use primarily
in business (including farming or a profession) or by a Person who is a
non-profit organization or governmental subdivision or agency and which are not
Inventory, farm products or consumer goods, including all machinery, molds,
machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dies and jigs, and all attachments,
accessories, accessions, replacements, substitutions, additions or improvements
to, or spare parts for, any of the foregoing.
"EQUIPMENT ADVANCE" has the meaning set forth in Section 1.1(b).
"ERISA" means the Employee Retirement Income Security Act of 1974 and
all rules, regulations and orders promulgated thereunder.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.1.
"GAAP" means generally accepted accounting principles as in effect from
time to time, consistently applied.
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"GENERAL INTANGIBLES" has the meaning set forth in the UCC, and
includes all books and records pertaining to the Collateral and other business
and financial records in the possession of Borrower or any other Person,
inventions, designs, drawings, blueprints, patents, patent applications,
trademarks, trademark applications (other than "intent to use" applications
until a verified statement of use is filed with respect to such applications)
and the goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, causes of action and other rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, rights to purchase or sell real or personal property, rights as a
licensor or licensee of any kind, royalties, telephone numbers, internet
addresses, proprietary information, purchase orders, and all insurance policies
and claims (including life insurance, key man insurance, credit insurance,
liability insurance, property insurance and other insurance), tax refunds and
claims, letters of credit, banker's acceptances and guaranties, computer
programs, discs, tapes and tape files in the possession of Borrower or any other
Person, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature.
"GOODS" means all things which are movable at the time the security
interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.
"INITIAL TERM" has the meaning set forth in Section 7.1.
"INSTRUMENT" has the meaning set forth in the UCC.
"INVENTORY" means all Goods held for sale or lease or furnished or to
be furnished under contracts of service, including all raw materials, work in
process, finished goods, goods in transit and materials and supplies which are
or might be used or consumed in a business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such Goods,
and all products of the foregoing, and shall include interests in goods
represented by Accounts, returned, reclaimed or repossessed goods and rights as
an unpaid vendor.
"INVESTMENT PROPERTY" shall mean all of Borrower's securities, whether
certificated or uncertificated, securities entitlements, securities accounts,
commodity contracts and commodity accounts.
"LENDER" has the meaning set forth in the heading to the Agreement.
"LIEN" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on common
B-5
law, statute or contract, including rights of sellers under conditional sales
contracts or title retention agreements and reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrancesaffecting property. For the
purpose of this Agreement, Borrower shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale agreement
or other arrangement pursuant to which title to the property has been retained
by or vested in some other Person for security purposes.
"LOAN ACCOUNT" has the meaning set forth in Section 2.4.
"LOAN DOCUMENTS" means the Agreement and all notes, guaranties,
security agreements, certificates, landlord's agreements, Lock Box and Blocked
Account agreements and all other agreements, documents and instruments now or
hereafter executed or delivered by Borrower or any Obligor in connection with,
or to evidence the transactions contemplated by, this Agreement.
"LOAN LIMITS" means, collectively, the Availability limits and all
other limits on the amount of Loans and Credit Accommodations set forth in this
Agreement.
"LOANS" means, collectively, the Revolving Loans and any Term Loan.
"LOCK BOX" has the meaning set forth in Section 4.1.
"MATURITY DATE" has the meaning set forth in Section 7.1.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Lender, whether evidenced by this Agreement or any
other Loan Document, whether arising from an extension of credit, opening of a
Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, Closing Fees, Facility Fees, Servicing Fees, Unused Line Fees,
Minimum Borrowing Fees, Success Fees, amounts owing under Warrants, Credit
Accommodation Fees and any other sums chargeable to Borrower under this
Agreement or under any other Loan Document.
"OBLIGOR" means any guarantor, endorser, acceptor, surety or other
person liable on, or with respect to, the Obligations or who is the owner of any
property which is security for the Obligations, other than Borrower.
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"PERMITTED LIENS" means: (i) purchase money security interests in
specific items of Equipment in an aggregate amount not to exceed the limit set
forth in Section 8(h) of Schedule A; (ii) leases of specific items of Equipment
in an aggregate amount not to exceed the limit set forth in Section 8(i) of
Schedule A; (iii) Liens for taxes not yet due and payable; (iv) additional Liens
which are fully subordinate to the security interests of Lender and are
consented to in writing by Lender; (v) security interests being terminated
concurrently with the execution of this Agreement; (vi) Liens of materialmen,
mechanics, warehousemen or carriers arising in the ordinary course of business
and securing obligations which are not delinquent; (vii) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clause (i) or (ii) above; PROVIDED,
that any extension, renewal or replacement Lien is limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase; (viii) Liens in favor
of customs and revenue authorities which secure payment of customs duties in
connection with the importation of goods; (ix) security deposits posted in
connection with real property leases or subleases and (x) rights of way,
easements and other encumbrances on Real Property that do not materially
adversely effect the present use of the property by the Borrower or its value.
Lender will have the right to require, as a condition to its consent under
clause (iv) above, that the holder of the additional Lien sign an intercreditor
agreement in form and substance satisfactory to Lender, in its sole discretion,
acknowledging that the Lien is subordinate to the security interests of Lender,
and agreeing not to take any action to enforce its subordinate Lien so long as
any Obligations remain outstanding, and that Borrower agree that any uncured
default in any obligation secured by the subordinate Lien shall also constitute
an Event of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, government or any agency or political division
thereof, or any other entity.
"PRIME RATE" means, at any given time, the prime rate as quoted in The
Wall Street Journal as the base rate on corporate loans posted as of such time
by at least 75% of the nation's 30 largest banks (which rate is not necessarily
the lowest rate offered by such banks).
"REAL PROPERTY" means the real property described in Section 10 of
Schedule A.
"REAL PROPERTY ADVANCE" has the meaning set forth in Section 1.1(b).
"RELEASED PARTIES" has the meaning set forth in Section 6.1.
"RENEWAL TERM" has the meaning set forth in Section 7.1.
"RESERVES" has the meaning set forth in Section 1.2.
"REVOLVING LOANS" has the meaning set forth in Section 1.1(a).
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"SALE" has the meaning set forth in Section 8.2.
"SUBSIDIARY" means any corporation or other entity of which a Person
owns, directly or indirectly, through one or more intermediaries, more than 50%
of the capital stock or other equity interest at the time of determination.
"TERM" means the period commencing on the date of this Agreement and
ending on the Maturity Date.
"TERM LOAN" has the meaning set forth in Section 1.1(b).
"UCC" means, at any given time, the Uniform Commercial Code as adopted
and in effect at such time in the State of New York.
All accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the UCC, to the extent such terms are defined therein. The
term "INCLUDING," whenever used in this Agreement, shall mean "including but not
limited to." The singular form of any term shall include the plural form, and
vice versa, when the context so requires. References to Sections, subsections
and Schedules are to Sections and subsections of, and Schedules to, this
Agreement. All references to agreements and statutes shall include all
amendments thereto and successor statutes in the case of statutes.
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as of
the date set forth in the heading to the Agreement.
BORROWER: LENDER:
BIG XXXXX BRANDS, INC. NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL
FUNDING DIVISION
By...................................
Its Authorized Signatory
By.................................
Its...........................
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