Exhibit 10.8
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of the 2nd day of July, 1996,
is made and entered into on the terms and conditions hereinafter set forth, by
and between FACTORY CARD OUTLET OF AMERICA LTD., an Illinois corporation
("Borrower"), and PETRA CAPITAL, LLC. a Georgia limited liability company
("Lender").
RECITALS:
WHEREAS, Borrower has requested that Lender make available to Borrower a
term loan in the original principal amount of Three Million and No/100ths
Dollars ($3,000,000) (the "Loan") on the terms and conditions hereinafter set
forth, and for the purpose(s) hereinafter set forth, and
WHEREAS, in order to induce Lender to make the Loan to Borrower, Borrower
has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements of
Borrower, has agreed to make the Loan upon the terms and conditions hereinafter
set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loan, the mutual covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
ARTICLE I
THE LOAN
1.1 Evidence of Loan Indebtedness and Repayment. Subject to the terms and
conditions hereof, the Lender shall make the Loan to Borrower by wire transfer
in immediately available funds. The Loan shall be evidenced by a Secured
Promissory Note in the original principal amount of Three Million and No/100ths
Dollars ($3,000,000), substantially in the form of Exhibit A attached hereto and
incorporated herein by this reference (the "Note"), dated as of the date hereof,
executed by Borrower, in favor of Lender. The Loan shall be payable in
accordance with the terms of the Note. The Note, this Agreement and any other
instruments and documents executed by Borrower, now or hereafter evidencing,
securing or in any way related to the indebtedness evidenced by the Note are
herein individually referred to as a "Loan Document" and collectively referred
to as the "Loan Documents."
1.2 Processing Fee. Borrower shall pay a processing fee of $60,000 to
Lender in one or more installments at or prior to closing.
1.3 Purpose(s) of Loan and Use of Proceeds. The purposes of the Loan shall
be (i) to provide working capital to Borrower, (ii) to pay all costs and
expenses incurred by the parties hereto in connection with the making and
documenting of the Loan, including attorneys' fees and expenses, and (iii) for
other general corporate purposes.
1.4 Prepayment. Borrower may prepay the indebtedness evidenced by
the Note in whole or in part at any time and from time to time without
premium or penalty.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Borrower's Representations. Borrower hereby represents and warrants to
Lender as follows:
(a) Corporate Status. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Illinois; and has the corporate power to own and operate its properties,
to carry on its business as now conducted and to enter into and to perform
its obligations under this Agreement and the other Loan Documents to which
it is a party. Except as set forth on Schedule 2.1(a), Borrower is duly
qualified to do business and in good standing in each state in which a
failure to be so qualified and in good standing would have a material
adverse effect on Borrower's financial position or its ability to conduct
its business in the manner now conducted.
(b) Other Business Organizations. Borrower neither owns nor has an
interest in, directly or indirectly, any other corporation, partnership,
joint venture or other business organization ("Subsidiaries").
(c) Authorization. Borrower has full legal right, power and
authority to conduct its business and affairs as they are presently
conducted. Borrower has full legal right, power and authority to enter
into and perform its obligations under the Loan Documents, without the
consent or approval of any other person, firm, governmental agency or
other legal entity, except such consents and approvals as have already
been given to Borrower. The execution and delivery of this Agreement, the
borrowing hereunder, the execution and delivery of each Loan Document to
which Borrower is a party, and the performance by Borrower of its
obligations thereunder (i) are within the corporate powers of Borrower,
(ii) have been duly authorized by all necessary corporate action properly
taken, and (iii) do not and will not contravene or conflict with (A) any
provision of law, (B) any judgment, ordinance, regulation or order of any
court or governmental agency that is applicable to Borrower or its
property, (C) the articles of incorporation or bylaws of Borrower, or (D)
any agreement binding upon Borrower. The officer(s) executing this
Agreement, the Note and all of the other Loan
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Documents to which Borrower is a party are duly authorized to act on
behalf of Borrower.
(d) Validity and Binding Effect. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to
limitations imposed by bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally or the application of
general equitable principles.
(e) Capitalization. The authorized capital stock of Borrower
consists solely of 100,000 shares of common stock, no par value per share
("Borrower Common Stock"). of which 2,500 shares (the "Borrower Shares")
are issued and outstanding. The authorized capital stock of FCOA
Acquisition Corp., a Delaware corporation and parent corporation of
Borrower ("Guarantor"), consists of (i) 1,000,000 shares of common stock,
no par value per share ("Parent Common Stock"), of which 216,000 shares
("Parent Common Shares") are issues and outstanding; (ii) 20,000 shares of
Series A convertible preferred stock, $.01 par value per share ("Parent
Series A Preferred Stock"), of which 20,000 shares ("Series A Shares") are
issued and outstanding; and (iii) 34,750 shares of Series B convertible
preferred stock, $.01 par value per share ("Series B Preferred Stock"), of
which 31,214 shares ("Series B Shares") are issued and outstanding (the
Borrower Shares, the Parent Common Shares, the Series A Shares and the
Series B Shares are sometimes collectively referred to herein as the
"Shares"). All of the Shares are duly authorized, validly issued and
outstanding, fully paid and nonassessable and free of preemptive rights.
Except for the Shares, there are no shares of capital stock or other
securities of Borrower or Guarantor issued or outstanding. Except as set
forth on Schedule 2.1(e) hereto, there are no outstanding options,
warrants or rights to purchase or acquire from Borrower or Guarantor any
securities of Borrower or Guarantor, and there are no contracts,
commitments, agreements, understandings, arrangements or restrictions as
to which Borrower or Guarantor is a party or by which it is bound relating
to any shares of capital stock or other securities of Borrower or
Guarantor (including the Shares), whether or not outstanding.
(f) Trademarks, Patents, Etc. Schedule 2.1(f) is an accurate and
complete list of all patents, trademarks, trade names, trademark
registrations, service names, service marks, copyrights, licenses,
formulas and applications therefor owned by Borrower or used by Borrower
in the operation of its business, title to each of which is, except as set
forth in Schedule 2.1(f) hereto, held by Borrower free and clear of all
adverse claims, liens, security agreements, restrictions or other
encumbrances. There is no infringement action, lawsuit, claim or complaint
pending against Borrower which asserts that Borrower's operations violate
or infringe the rights or the trade names, trademarks, trademark
registration, service name, service xxxx or copyright of others with
respect to any apparatus or method of Borrower, nor is Borrower in any way
making use of any confidential information or trade secrets of any person
except with the consent of such person.
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(g) No Conflicts. Consummation of the transactions hereby
contemplated and the performance of the obligations of Borrower under and
by virtue of the Loan Documents will not result in any breach of, or
constitute a default under, any mortgage. security deed or agreement, deed
of trust, lease, bank loan or credit agreement, articles of incorporation
or bylaws, agreement or certificate of limited partnership, partnership
agreement. license, franchise or any other instrument or agreement to
which Borrower is a party or by which Borrower or its properties may be
bound or affected, except such agreements and other documents as to which
Borrower has obtained an effective waiver.
(h) Litigation. There are no actions, suits or proceedings pending,
or. to the knowledge of Borrower, threatened, against or affecting
Borrower involving the validity or enforceability of any of the Loan
Documents at law or in equity, and there are no proceedings pending, or,
to the knowledge of Borrower, threatened, against or affecting Borrower
before any governmental or administrative agency; and to Borrower's
knowledge, Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority.
(i) Financial Statements. The consolidated financial statements of
Borrower and Guarantor, attached hereto as Schedule 2.1(i)(A), are true
and correct in all material respects have been prepared on the basis of
accounting principles consistently applied, and fairly present the
financial condition of Borrower and Guarantor as of the date(s) thereof No
material adverse change has occurred in the financial condition of
Borrower or Guarantor since the date(s) thereof; and no additional
borrowings have been made by Borrower or Guarantor since the date(s)
thereof other than as set forth on Schedule 2.1(i)(B).
(j) Other Agreements; No Defaults. Borrower is not a party to
indentures, loan or credit agreements, leases or other agreements or
instruments, or subject to any articles of incorporation or corporate
restrictions that could have a material adverse effect on the ability of
Borrower to carry out its obligations under the Loan Documents to which it
is a party. Borrower is not in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument material to its
business to which it is a party, including but not limited to this
Agreement and the other Loan Documents, and to Borrower's knowledge, no
other default or event has occurred and is continuing that with notice or
the passage of time or both would constitute a default or event of default
under any of same.
(k) Compliance With Law. Borrower has obtained all material
licenses, permits and approvals and authorizations necessary or required
in order to conduct its business and affairs as heretofore conducted and
as intended to be conducted as of the date of this Agreement. To
Borrower's knowledge, Borrower is in compliance with all laws,
regulations, decrees and orders applicable to it (including but not
limited to laws, regulations, decrees and orders relating to
environmental, occupational and health standards and controls, antitrust,
monopoly, restraint of trade or unfair competition), to the extent that
noncompliance, in the aggregate, cannot reasonably be expected to have a
material adverse effect on its business,
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operations, property or financial condition or to affect materially
adversely Borrower's ability to perform its obligations under the Loan
Documents.
(l) Debt. Schedule 2.1(l) is a complete and correct list of all
credit agreements, indentures, purchase agreements, promissory notes and
other evidences of indebtedness, guaranties, capital leases and other
instruments, agreements and arrangements presently in effect providing for
or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in
respect of which Borrower or Guarantor, or any of the properties thereof
is in any manner directly or contingently obligated; and the maximum
principal or face amounts of the credit in question that are outstanding
and that are available pursuant to the terms of such agreements are
correctly stated, and all liens of any nature given or agreed to be given
as security therefor are correctly described or indicated in such
Schedule.
(m) Taxes. Borrower and Guarantor have filed or caused to be filed
all tax returns that to Borrower's knowledge are required to be filed
(except for returns that have been appropriately extended), and has paid,
or will pay when due, all taxes shown to be due and payable on said
returns and all other taxes, impositions, assessments, fees or other
charges imposed on them by any governmental authority, agency or
instrumentality, prior to any delinquency with respect thereto (other than
taxes, impositions, assessments, fees and charges currently being
contested in good faith by appropriate proceedings, for which appropriate
amounts have been reserved). To Borrower's knowledge, no tax liens have
been filed against Borrower or Guarantor or any of Borrower's or
Guarantor's properties.
(n) Certain Transactions. Except as set forth on Schedule 2.1(o)
hereto, Borrower is not indebted, directly or indirectly, to any of its
shareholders, officers, or directors or to their respective spouses or
children, in any amount whatsoever; none of said shareholders, officers or
directors or any members of their immediate families, are indebted to
Borrower or have any direct or indirect ownership interest in any firm or
corporation with which Borrower has a business relationship, or any firm
or corporation which competes with Borrower, except that shareholders,
officers and/or directors of Borrower may own no more than 4.9% of
outstanding stock of publicly traded companies which may compete with
Borrower. No officer or director of Borrower or any member of their
immediate families is, directly or indirectly, interested in any material
contract with Borrower. Borrower is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
(o) Statements Not False or Misleading. To Borrower's knowledge
after reasonable investigation, no representation or warranty given as of
the date hereof by Borrower contained in this Agreement or any schedule
attached hereto or any statement in any document, certificate or other
instrument furnished or to be furnished by Borrower to Lender pursuant
hereto, taken as a whole, contains or will (as of the time so furnished)
contain any untrue statement of a material fact, or omits or will (as of
the time so furnished) omit to state any material fact which is necessary
in order to make the statements contained therein not misleading.
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(p) Margin and Government Regulations. Borrower is not engaged in
the business of extending credit for the purposes of purchasing or
carrying margin stock, and no proceeds of the Loan will be used for a
purpose which violates, or would be inconsistent with, Regulations G, T, U
or X of the Board of Governors of the Federal Reserve System Borrower is
not an "investment company" within the meaning of the Investment Company
Act of 1940, as amended, or a "holding company" or a "subsidiary company"
of a "holding company" or an "affiliate" of a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or
subject to regulation under the Federal Power Act, the Interstate Commerce
Act or any other federal law or laws of Illinois limiting its ability to
incur indebtedness or to execute, deliver or perform the Loan Documents.
(q) Significant Contracts. Schedule 2.1(r) is a complete and correct
list of all contracts, agreements and other documents pursuant to which
Borrower receives revenues in excess of $25,000 per fiscal year. Each such
contract, agreement and other document is in full force and effect; as of
the date hereof and Borrower knows of no reason why such contracts,
agreements and other documents would not remain in full force and effect
pursuant to the terms thereof.
(r) Environment. Borrower has duly complied with, and its business,
operations. assets, equipment, property, leaseholds or other facilities
are in compliance with, the applicable provisions of all applicable
federal, state and local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder, except
to the extent that failure to so comply would not have a material adverse
effect on its business. Borrower has been issued and will maintain all
required federal, state and local permits, licenses, certificates and
approvals relating to (1) air emissions; (2) discharges to surface water
or groundwater; (3) noise emissions; (4) solid or liquid waste disposal;
(5) the use, generation, storage, transportation or disposal of toxic or
hazardous substances or wastes (which shall include any and all such
materials listed in any federal, state or local law, code or ordinance and
all rules and regulations promulgated thereunder as hazardous or
potentially hazardous); or (6) other environmental, health or safety
matters, except to the extent that failure to do so would not have a
material adverse effect on its business. Borrower has not received notice
of, and is not otherwise aware of facts which constitute material
violations of any applicable federal, state or local environmental, health
or safety laws, codes or ordinances, and any rules or regulations
promulgated thereunder with respect to Borrower's businesses, operations,
assets, equipment, property, leaseholds, or other facilities. In
connection with property owned or leased by Borrower, and except in
accordance with a valid governmental permit, license, certificate or
approval, there has not been (during the period of Borrowers ownership or
lease thereof) any emission, spill, release or discharge into or upon (1)
the air; (2) soils, or any improvements located thereon; (3) surface water
or groundwater; or (4) the sewer, septic system or waste treatment,
storage or disposal system servicing the premises, of any toxic or
hazardous substances or wastes at or from the premises. Borrower has not
received any complaint, order, directive, claim, citation or notice by any
governmental authority or any person or entity against or respecting
Borrower with respect to (1) air emissions; (2) spills, releases or
discharges to soils or improvements located
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thereon, surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing the premises; (3) noise
emissions; (4) solid or liquid waste disposal; (5) the use, generation,
storage, transportation or disposal of toxic or hazardous substances or
waste; or (6) other environmental, health or safety matters affecting
Borrower or its business, operations, assets, equipment, property,
leaseholds or other facilities Borrower has no indebtedness, obligation
or liability (absolute or contingent, matured or not matured), with
respect to the storage, treatment, cleanup or disposal of any solid
wastes, hazardous wastes or other toxic or hazardous substances
(including without limitation any such indebtedness, obligation, or
liability with respect to any current regulation, law or statute
regarding such storage, treatment, cleanup or disposal).
ARTICLE 3
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this Agreement:
3.1 Payment of Obligations. Borrower shall pay the indebtedness evidenced
by the Note according to the terms thereof; and shall timely pay or perform, as
the case may be, all of the other obligations of Borrower to Lender, direct or
contingent, described in the Loan Documents, together with interest thereon, and
any extensions, modifications, consolidations and/or renewals thereof and any
notes given in payment thereof.
3.2 Financial Statements and Reports. Borrower shall furnish to Lender (i)
as soon as practicable and in any event within one hundred twenty (120) days
after the end of each fiscal year of Borrower, a consolidated balance sheet of
Guarantor as of the close of such fiscal year, a consolidated statement of
earnings and retained earnings of Guarantor as of the close of such fiscal year
and a consolidated statement of cash flows for Guarantor for such fiscal year,
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), audited by an independent certified public
accountant reasonably acceptable to Lender (it being understood that any "Big 6"
accounting firm would be acceptable to Lender) and certified by an officer of
Borrower and accompanied by a certificate of the President of Borrower, stating
that to the best of the knowledge of such officer, Borrower has kept, observed,
performed and fulfilled each covenant, term and condition of this Agreement and
the other Loan Documents during the preceding fiscal year and that no Event of
Default, as herein defined, has occurred and is continuing (or if an Event of
Default has occurred and is continuing, specifying the nature of same, the
period of existence of same and the action Borrower has taken or proposes to
take in connection therewith), (ii) within thirty-five (35) days of the end of
each calendar month, a consolidated balance sheet of Guarantor as of the close
of such month and a consolidated statement of earnings and retained earnings of
Guarantor as of the close of such month, all in reasonable detail (including
financial information for the preceding six (6) months), and prepared
substantially in accordance with GAAP (except for the absence of footnotes and
subject to year-end adjustments), and (iii) with reasonable promptness, such
other financial data as Lender may reasonably request.
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3.3 Maintenance of Books and Records, Inspection. Borrower and Guarantor
shall maintain their books, accounts and records in accordance with GAAP, and
five (5) days after written notice from Lender, shall permit Lender, its
officers, employees and any professionals designated by Lender in writing, at
Borrower's expense, to visit, inspect and/or audit any of Borrower's or
Guarantor's properties, books and financial records, and to discuss Borrower's
and Guarantor's accounts, affairs and finances with Borrower or Guarantor or the
principal officers of Borrower and/or Guarantor during reasonable business
hours, all at such times as Lender may reasonably request; provided that (i)
prior to an Event of Default, Lender shall not engage in an audit more than once
per six months, (ii) no such visit, inspection and/or audit shall materially
interfere with the conduct of Borrower's or Guarantor's business, and (iii) that
prior to an Event of Default, the expenses to be incurred by Borrower in
connection with any such visit, inspection or audit shall not exceed $25,000 in
any calendar year.
3.4 Insurance. Without limiting any of the requirements of any of the
other Loan Documents, Borrower shall maintain in amounts customary for entities
engaged in comparable business activities, (i) to the extent required by
applicable law, worker's compensation insurance (or maintain a legally
sufficient amount of self insurance against worker's compensation liabilities,
with adequate reserves, under a plan approved by Lender, such approval not to be
unreasonably withheld or delayed), and (ii) fire and "all risk" casualty
insurance on its properties against such hazards and in at least such amounts as
are customary in Borrower's business. Borrower will make commercially reasonable
efforts to obtain and maintain public liability insurance in an amount, and at a
cost, deemed reasonable to the Borrower's Board of Directors. At the reasonable
request of Lender, Borrower will promptly deliver a certificate specifying the
details of such insurance in effect.
3.5 Taxes and Assessments. Borrower and Guarantor shall (i) file all tax
returns and appropriate schedules thereto that are required to be filed under
applicable law, prior to the date of delinquency, (ii) pay and discharge all
taxes, assessments and governmental charges or levies imposed upon Borrower and
Guarantor upon their income and profits or upon any properties belonging to
them, prior to the date on which penalties attach thereto, and (iii) pay all
taxes, assessments and governmental charges or levies that, if unpaid, might
become a lien or charge upon any of their properties; provided, however, that
Borrower or Guarantor in good faith may contest any such tax, assessment,
governmental charge or levy described in the foregoing clauses (ii) and (iii) so
long as appropriate reserves are maintained with respect thereto.
3.6 Corporate Existence. Borrower and Guarantor shall maintain their
corporate existences and good standings in the states of their incorporation,
and their qualifications and good standings as foreign corporations in each
jurisdiction in which failure to be so qualified would have a material adverse
effect on Borrower's or Guarantor's financial position or their abilities to
conduct their businesses at a given time.
3.7 Compliance with Law and Other Agreements. Except where the failure to
do so would not materially adversely affect Borrower's operations or its ability
to fulfill its obligations under the Loan Documents, Borrower shall maintain its
business, operations and property owned or used in connection therewith in
compliance with (i) all applicable federal, state and local laws, regulations
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and ordinances governing such business operations and the use and ownership of
such property. and (ii) all agreements, licenses, franchises, indentures and
mortgages to which Borrower is a party or by which Borrower or any of its
properties is bound. Without limiting the foregoing. Borrower shall pay all of
its indebtedness promptly in accordance with the terms thereof
3.8 Notice of Default. Borrower shall give written notice to Lender of the
occurrence of any default, event of default or Event of Default under this
Agreement or any other Loan Document promptly upon Borrower's knowledge of the
occurrence thereof.
3.9 Notice of Litigation. Borrower shall give notice, in writing, to
Lender of (i) any actions, suits or proceedings instituted by any persons
whomsoever against Borrower, or affecting any of the assets of Borrower, wherein
the amount at issue is in excess of Two Hundred Fifty Thousand and No/100ths
Dollars ($250,000.00), and (ii) any dispute, not resolved within sixty (60) days
of the commencement thereof, between Borrower on the one hand and any
governmental regulatory body on the other hand, which dispute, if determined
adversely to Borrower, would have a material adverse effect on the normal
operations of Borrower.
3.10 Conduct of Business. Borrower will continue to engage in a business
of the same general type and manner as conducted by it on the date of this
Agreement.
3.11 ERISA Plan. If Borrower institutes a pension plan that is subject to
the requirements of Title IV of the Employee Retirement Income Security Act of
1974, Pub. L. No. 93-406, September 2, 1974, 00 Xxxx. 000, 00 X.X.X.X. ss. 1001
et seq. (1975), as amended from time to time ("ERISA"), then the following
covenants shall be applicable during such period as any such plan (the "Plan")
shall be in effect: (i) Borrower hereby covenants that throughout the existence
of the Plan, Borrower's contributions under the Plan will meet the minimum
funding standards required by ERISA, and (ii) Borrower covenants that it will
send to Lender a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension Benefit
Guaranty Corporation, at the time that such notice is so filed.
3.12 Dividends, Distributions, Stock Rights, etc. Neither Borrower nor
Guarantor shall declare or pay any dividend of any kind (other than stock
dividends payable to all holders of any class of capital stock), in cash or in
property, on any class of the capital stock of Borrower or Guarantor, or
purchase, redeem, retire or otherwise acquire for value any shares of such
stock, nor make any distribution of any kind in cash or property in respect
thereof, nor make any return of capital of shareholders, nor make any payments
in cash or property in respect of any stock options, stock bonus or similar plan
(except as required or permitted hereunder), nor grant any preemptive rights
with respect to the capital stock of Borrower or Guarantor, without the prior
written consent of Lender. Borrower shall provide Lender with written notice of
any and all requests for redemption pursuant to Article 4 of Guarantor's
Articles of Incorporation made to Guarantor and/or Borrower by the holders of a
majority of the outstanding shares of Guarantor's Series A Preferred Stock, or
the holders of majority of the outstanding shares of Guarantor's Series B
Preferred Stock, within ten (10) days of Guarantor's or Borrower's receipt of
any such requests.
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3.13 Guaranties, Loans, Payment of Debt. Without Lender's prior express
written consent, neither Borrower nor Guarantor shall guarantee nor be liable in
any manner, whether directly or indirectly, or become contingently liable after
the date of this Agreement in connection with the obligations or indebtedness of
any person or entity whatsoever, except for the endorsement of negotiable
instruments payable to Borrower or Guarantor for deposit or collection in the
ordinary course of business. Without Lender's prior express written consent,
neither Borrower nor Guarantor shall (i) make any loan, advance or extension of
credit to any person other than in the normal course of its business, or (ii)
make any payment on any debt that is subordinate to the Loan, if any, except for
trade accounts payable incurred in the ordinary course of Borrower's or
Guarantor's business.
3.14 Debt. Without the express prior written consent of Lender, neither
Borrower nor Guarantor shall create, incur, assume or suffer to exist
indebtedness of any description whatsoever, (excluding (i) the indebtedness
evidenced by the Note, (ii) the endorsement of negotiable instruments payable to
Borrower or Guarantor for deposit or collection in the ordinary course of
business, (iii) indebtedness incurred in the ordinary course of business
(provided that no such debt, individually, exceeds $100,000) and (iv) the
indebtedness listed on Schedule 2.1(1) hereto).
3.15 No Liens. Neither Borrower nor Guarantor shall create, incur, assume
or suffer to exist any lien, security interest, security title, mortgage, deed
of trust or other encumbrance upon or with respect to any of its properties, now
owned or hereafter acquired, except:
a. liens in favor of Lender;
b. liens for taxes or assessments or other governmental charges or
levies if not yet due and payable;
c. liens in connection with the leasing of equipment in favor of the
lessor of such equipment;
d. purchase money security interests for specific equipment in favor
of the seller of such equipment; and
e. liens described on Schedule 2.1(l) hereto.
3.16 Mergers, Consolidations, Acquisitions and Sales. Without the prior
written consent of Lender, neither Borrower nor Guarantor shall (a) be a party
to any merger, consolidation or corporate reorganization, nor (b) purchase or
otherwise acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other person, firm or entity, nor
(c) sell, transfer, convey, grant a security interest in or lease all or any
substantial part of its assets, nor (d) create any Subsidiaries nor convey any
of is assets to any Subsidiary.
3.17 Transactions With Affiliates. Except as described on Schedule 2.1(o)
hereof, Borrower shall not enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any affiliate, except in the ordinary course of and pursuant
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to the reasonable requirements of Borrower's business and upon fair and
reasonable terms approximately no less favorable to Borrower than Borrower would
obtain in a comparable arm's length transaction with a person not an affiliate.
For the purposes of this Section 3.17, "affiliate" shall mean a person.
corporation, partnership or other entity controlling, controlled by or under
common control with Borrower.
3.18 Environment. Borrower shall comply with all applicable provisions of
all applicable federal, state and local environmental, health, and safety laws,
codes and ordinances, and all rules and regulations issued thereunder; notify
Lender immediately of the receipt of any written notice of a hazardous discharge
or environmental complaint received from any governmental agency or any other
party; notify Lender immediately of any hazardous discharge from or affecting
Borrower's premises; contain and remove the same, in compliance with all
applicable laws as quickly as practicable; promptly pay any fine or penalty
assessed in connection therewith (provided that Borrower may in good faith
contest any such fine or penalty); and following the receipt of any notice of
hazardous discharge or environmental complaint from any governmental authority
permit Lender to inspect the premises, to conduct tests thereon, and to inspect
all books, correspondence, and records pertaining thereto, and at Lender's
reasonable request, and at Borrower's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to Lender, and
such other and further assurances reasonably satisfactory to Lender that the
condition has been corrected.
ARTICLE 4
CONDITIONS TO CLOSING
4.1 Closing of the Loan. The obligation of Lender to fund the Loan on the
date hereof (the "Closing Date") is subject to the fulfillment, on or prior to
the Closing Date, of each of the following conditions:
(a) Borrower shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and conditions
required by this Agreement.
(b) Lender shall have received an opinion of counsel for Borrower
and Guarantor, Pitney, Xxxxxx, Xxxx & Xxxxx, dated the Closing Date, in
form and substance satisfactory to Lender's counsel, King & Spalding.
(c) Borrower shall have delivered to Lender the Note executed by
Borrower.
(d) Lender shall have received a Stock Purchase Warrant and a
Warrant Valuation Letter both executed by Guarantor, all in form
acceptable to Lender.
(e) Borrower shall have delivered to Lender a Security Agreement
executed by Borrower (in form acceptable to Lender) and related UCC-1
Financing Statement(s) (in form acceptable to Lender) executed by
Borrower.
11
(f) Lender shall have received copies of the articles of
incorporation and other publicly filed organizational documents of
Borrower and Guarantor, certified by the Secretary of State or other
appropriate public official in the jurisdictions in which Borrower and
Guarantor are incorporated.
(g) Lender shall have received certified (as of the date of this
Agreement) copies of all corporate action taken by Borrower and Guarantor,
including resolutions of their Board of Directors, authorizing the
execution, delivery and performance of the Loan Documents.
(h) Lender shall have received a certificate as to the legal
existence and good standing of Borrower and Guarantor, issued by the
Secretary of State or other appropriate public official in the
jurisdictions in which Borrower and Guarantor are incorporated.
(i) Lender shall have received certificates of the Secretaries of
State or other appropriate public officials as to Borrower's and
Guarantor's qualifications to do business and good standings in each
jurisdiction in which a failure to be so qualified would have a material
adverse effect on their financial positions or their ability to conduct
their business in the manner now conducted.
(j) Lender shall have received Intercreditor Estoppel Agreements
executed by Bank One, Chicago, N.A. and Sirrom Capital Corporation and
acknowledged by Borrower.
(k) Lender shall have received a Guaranty Agreement executed by
Guarantor, in form acceptable to Lender.
(l) Lender shall have received the written consent and waivers of
Guarantor's shareholder's to the extent necessary for the execution of the
Loan Documents by Borrower and/or Guarantor (as applicable) (including
without limitation the stock purchase warrant issued by Guarantor in favor
of Lender) and the performance by Borrower and/or Guarantor (as
applicable) of the obligations thereunder.
ARTICLE 5
DEFAULT AND REMEDIES
5.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Default by Borrower in the payment of the principal of or
interest on the indebtedness evidenced by the Note in accordance with the
terms of the Note, which default is not cured within five (5) business
days;
(b) Any misrepresentation by Borrower as to any material matter
hereunder or under any of the other Loan Documents, or delivery by
Borrower of any schedule, statement, resolution,
12
report, certificate, notice or writing to Lender that is untrue in any
material respect on the date as of which the facts set forth therein are
stated or certified;
(c) Failure of Borrower to perform any of its obligations, covenants
or agreements under this Agreement, the Note or any of the other Loan
Documents or failure of Borrower to cause Guarantor to perform any
covenants under this Agreement or any of the other Loan Documents;
(d) Either Borrower or Guarantor (i) shall generally not pay its
debts as such debts become due; or (ii) shall make an assignment for the
benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or (iv) shall have had any such petition or
application filed or any such proceeding commenced against it in which an
order for relief is entered or an adjudication or appointment is made; or
(v) shall indicate, in writing or by failing to respond in writing within
sixty (60) days, its consent to, approval of or acquiescence in any such
petition, application, proceeding or order for relief or the appointment
of a custodian, receiver or trustee for it or a substantial part of its
assets; or (vi) shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of sixty (60) days or
more;
(e) Either Borrower or Guarantor shall be liquidated, dissolved,
partitioned or terminated, or the charter thereof shall expire or be
revoked;
(f) A default or event of default shall occur under any of the other
Loan Documents and, if subject to a cure right, such default or event of
default shall not be cured within the applicable cure period;
(g) Either Borrower or Guarantor shall default in the timely payment
or performance of any obligation now or hereafter owed to Lender in
connection with any other indebtedness of Borrower or Guarantor now or
hereafter owed to Lender taking into account any grace period provided for
such obligation; or
(h) Either Borrower or Guarantor shall have defaulted and continue
to be in default in the timely payment or performance of any other
indebtedness or obligation, which in the aggregate exceeds One Hundred
Thousand and No/100ths Dollars ($100,000.00) or materially adversely
affects Borrower's or Guarantor's financial condition.
With respect to any Event of Default described above that is capable of
being cured and that does not already provide its own cure procedure (a "Curable
Default"), the occurrence of such Curable Default shall not constitute an Event
of Default hereunder if such Curable Default is fully cured and/or corrected
within thirty (30) days (ten (10) days, if such Curable Default may be cured
solely by payment of a sum of money) of notice thereof to Borrower given in
accordance with the provisions hereof; provided, however, that this provision
shall not require notice to Borrower and an opportunity to cure any Curable
13
Default of which Borrower has had actual knowledge for the requisite number of
days set forth in this sentence.
5.2 Acceleration of Maturity Remedies. If Borrower or Guarantor receives
any notice or request from the holders of a majority of the outstanding shares
of Guarantor's Series A Preferred Stock, or the holders of a majority of the
outstanding shares of Guarantor's Series B Preferred Stock, pursuant to which
the notifying shareholder(s) exercise any redemption rights in accordance with
Article 4 of Guarantor's Articles of Incorporation, Lender may immediately
accelerate the indebtedness evidenced by the Note as well as any and all other
indebtedness of Borrower to Lender under the Loan Documents, and upon such
acceleration such indebtedness shall be immediately due and payable in full.
Upon the occurrence of any Event of Default described in subsection 5.1(d), the
indebtedness evidenced by the Note as well as any and all other indebtedness of
Borrower to Lender under the Loan Documents shall be immediately due and payable
in full; and upon the occurrence of any other Event of Default described above,
Lender at any time thereafter may at its option accelerate the maturity of the
indebtedness evidenced by the Note as well as any and all other indebtedness of
Borrower to Lender under the Loan Documents; all without notice of any kind.
Upon the occurrence of any such Event of Default and the acceleration of the
maturity of the indebtedness evidenced by the Note:
(a) Lender shall be immediately entitled to exercise any and all
rights and remedies possessed by Lender pursuant to the terms of the Note
and all of the other Loan Documents; and
(b) Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
5.3 Remedies Cumulative; No Waiver. No right, power or remedy conferred
upon or reserved to Lender by this Agreement or any of the other Loan Documents
is intended to be exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder, under any
of the other Loan Documents or now or hereafter existing at law, in equity or by
statute. No delay or omission by Lender to exercise any right, power or remedy
accruing upon the occurrence of any Event of Default shall exhaust or impair any
such right, power or remedy or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein, and every right, power and remedy
given by this Agreement and the other Loan Documents to Lender may be exercised
from time to time and as often as may be deemed expedient by Lender.
5.4 Proceeds of Remedies. Any or all proceeds resulting from the exercise
of any or all of the foregoing remedies shall be applied as set forth in the
Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including, without limitation,
reasonable attorney's fees incurred by Lender in connection with the
exercise of its remedies;
Second, to the expenses of curing the default that has occurred, in
the event that Lender elects, in its sole discretion, to cure the default
that has occurred;
14
Third, to the payment of the obligations of Borrower under the Loan
Documents (the "Obligations"), including but not limited to the payment of
the principal of and interest on the indebtedness evidenced by the Note,
in such order of priority as Lender shall determine in its sole
discretion, and
Fourth, the remainder, if any, to Borrower or to any other person
lawfully thereunto entitled.
ARTICLE 6
TERMINATION
6.1 Termination of this Agreement. This Agreement shall remain in full
force and effect until the payment by Borrower of all amounts owed to Lender
hereunder, at which time Lender shall cancel the Note and deliver it to
Borrower.
ARTICLE 7
MISCELLANEOUS
7.1 Performance By Lender. If Borrower shall default in the payment,
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Lender may,
at its option, pay, perform or observe the same, and all payments made or costs
or expenses incurred by Lender in connection therewith (including but not
limited to reasonable attorney's fees), with interest thereon at the highest
default rate provided in the Note (if none, then at the maximum rate from time
to time allowed by applicable law), shall be immediately repaid to Lender by
Borrower and shall constitute a part of the Obligations. Lender shall be the
sole judge of the reasonableness and necessity for any such actions and of the
amounts to be paid.
7.2 Successors and Assigns Included in Parties. Whenever in this Agreement
one of the parties hereto is named or referred to, legal representatives,
successors, successors-in-title and assigns of such parties shall be included,
and all covenants and agreements contained in this Agreement by or on behalf of
Borrower or by or on behalf of Lender shall bind and inure to the benefit of
their respective legal representatives, successors-in-title and assigns, whether
so expressed or not.
7.3 Costs and Expenses. Borrower agrees to pay all reasonable costs and
expenses incurred by Lender in connection with the making of the Loan, including
but not limited to filing fees, recording taxes, indebtedness taxes, and
reasonable attorneys' fees, promptly upon demand of Lender, provided that legal
fees of Lender's counsel exclusive of any out-of-pocket costs or expenses shall
not exceed $15,000. Borrower further agrees to pay all premiums for insurance
required to be maintained by Borrower pursuant to the terms of the Loan
Documents and all of the reasonable out-of-pocket costs and expenses incurred by
Lender in connection with the collection of the Loan, amendment to the Loan
Documents, or prepayment of the Loan, including but not limited to reasonable
attorneys' fees, promptly upon demand of Lender, provided, however, that any
amendment to the Loan Documents made necessary solely
15
because of a ministerial decision on the part of Lender (by way of example, and
not limitation, a name change or an address change of Lender) shall be effected
at Lender's expense, excluding any fees or expenses of Borrower, Guarantor or
counsel for Borrower or Guarantor.
7.4 Assignment. The Note, this Agreement and the other Loan Documents may
be endorsed, assigned and/or transferred in whole or in part by Lender, and any
such holder and/or assignee of the same shall succeed to and be possessed of the
rights and powers of Lender under all of the same to the extent transferred and
assigned; provided, however, that, prior to an Event of Default, Lender may not
transfer or assign any of the Loan Documents to a retailer in the social
expressions business or to a significant equity owner of any such retailer,
without the prior written consent of Borrower. Lender may grant participations
in all or any portion of its interest in the indebtedness evidenced by the Note,
and in such event Borrower shall continue to make payments due under the Loan
Documents to Lender and Lender shall have the sole responsibility of allocating
and forwarding such payments in the appropriate manner and amounts, and the sole
right to exercise the audit and inspection rights under Section 3.3 hereof
Borrower shall not assign any of its rights nor delegate any of its duties
hereunder or under any of the other Loan Documents without the prior express
written consent of Lender.
7.5 Time of the Essence. Time is of the essence with respect to each and
every covenant, agreement and obligation of Borrower hereunder and under all of
the other Loan Documents.
7.6 Severability. If any provision(s) of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
7.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
Anything in this Agreement, the Note or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and loan charges agreed to
be paid to Lender for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of the indebtedness evidenced by the Note shall exceed the
maximum amounts collectible under applicable laws in effect from time to time,
then ipso facto, the obligation to pay such interest and/or loan charges shall
be reduced to the maximum amounts collectible under applicable laws in effect
from time to time, and any amounts collected by Lender that exceed such maximum
amounts shall be applied to the reduction of the principal balance of the
indebtedness evidenced by the Note and/or refunded to Borrower so that at no
time shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced by the Note exceed the maximum amounts permitted from
time to time by applicable law.
7.8 Article and Section Headings; Defined Terms. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
16
7.9 Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement or any of the Loan Documents shall be
in writing, signed by the party giving such notice, election or demand and shall
be delivered personally, telecopied, telexed, or sent by certified mail or
overnight via nationally recognized courier service (such as Federal Express),
to the other party at the address set forth below, or at such other address as
may be supplied in writing and of which receipt has been acknowledged in
writing. The date of personal delivery or delivery by such courier service,
telecopy or telex or four (4) business days after the date of mailing, as the
case may be, shall be the date of such notice, election or demand. For the
purposes of this Agreement:
The Address of Lender is: Petra Capital, LLC
000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telecopy: (000)000-0000
with a copy to: King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Telecopy: (000) 000-0000
The Address of Borrower is: Factory Card Outlet of America Ltd.
000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
with copies to: Xxxxxxx X. Xxxxxxx
000 Xxxxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
and
Pitney, Xxxxxx, Xxxx & Xxxxx
000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
7.10 Entire Agreement. This Agreement and the other written agreements
between Borrower and Lender represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; provided, if there is a conflict between this
17
Agreement and any other document executed contemporaneously herewith with
respect to the Obligations, the provision of this Agreement shall control. The
execution and delivery of this Agreement and the other Loan Documents by the
Borrower were not based upon any fact or material provided by Lender, nor was
the Borrower induced or influenced to enter into this Agreement or the other
Loan Documents by any representation, statement, analysis or promise by Lender.
7.11 Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of Georgia
applicable to contracts to be wholly performed in such State except to the
extent certain rights and privileges may be granted Lender under applicable
federal laws in which event federal law shall control. No amendment or
modification hereof shall be effective except in a writing executed by each of
the parties hereto.
7.12 Survival of Representations and Warranties. All covenants,
representations and warranties contained herein or in any of the Loan Documents,
or made by or furnished on behalf of the Borrower in connection herewith or any
of the Loan Documents, shall survive the execution and delivery of this
Agreement and all other Loan Documents and shall continue in full force and
effect so long as the Obligations are unpaid.
7.13 Jurisdiction and Venue. Borrower hereby consents to the jurisdiction
of the courts of the State of Georgia and the United States District Court for
the Northern District of Georgia, as well as to the jurisdiction of all courts
from which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of any of its obligations arising under
this Agreement or any other Loan Documents or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such court.
7.14 Waiver of Trial by Jury. LENDER AND BORROWER HEREBY WAIVE TRIAL BY
JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT
OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT OR THE LOAN DOCUMENTS.
7.15 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
7.16 Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
PETRA CAPITAL, LLC, a Georgia limited
liability company
By: Petra Capital Management, LLC, Manager
By: /s/ Xxx Xxxxxx
---------------------------------
Name: Xxx Xxxxxx
Title: Manager
BORROWER:
FACTORY CARD OUTLET OF AMERICA LTD., an
Illinois corporation
By:__________________________________
Name:________________________________
Title:_______________________________
ACKNOWLEDGED AND AGREED TO:
FCOA ACQUISITION CORP., a
Delaware corporation
By:__________________________________
Name:_____________________________
Title:____________________________
19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
PETRA CAPITAL, LLC, a Georgia limited
liability company
By: Petra Capital Management, LLC, Manager
By:__________________________________
Name:________________________________
Title:_______________________________
BORROWER.
FACTORY CARD OUTLET OF AMERICA LTD., an
Illinois corporation
By: /s/ Xxxxx Xxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxx
Title: Executive Vice President
ACKNOWLEDGED AND AGREED TO:
FCOA ACQUISITION CORP., a
Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER
PETRA CAPITAL, LLC. a Georgia limited
liability company
By: Petra Capital Management, LLC. Manager
By:_____________________________________
Name:_______________________________
Title:______________________________
BORROWER:
FACTORY CARD OUTLET OF AMERICA LTD. an
Illinois corporation
By:_____________________________________
Name:_______________________________
Title:______________________________
ACKNOWLEDGED AND AGREED TO:
FCOA ACQUISITION CORP., a
Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman
21
Index of Schedules and Attachments
Exhibit A - Form of Note
Schedule 2 1(a) - Foreign Qualification
Schedule 2.1(e) - Options, Warrants, Stock Rights, Etc.
Schedule 2.1(f) - Trademarks, Patents, Etc.
Schedule 2.1(i)(A) and (B) - Financial Statements
Schedule 2.1(l) - Debt and Liens
Schedule 2.1(o) - Shareholder Transactions
Schedule 2.1(r) - Significant Contracts
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY,
WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, MADE SUBJECT TO A SECURITY INTEREST, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.
SECURED PROMISSORY NOTE
$3,000,000 July 2, 1996
FOR VALUE RECEIVED, the undersigned, FACTORY CARD OUTLET OF AMERICA LTD.,
an Illinois corporation ("Maker"), promises to pay to the order of PETRA
CAPITAL, LLC, a Georgia limited liability company ("Payee"; Payee and any
subsequent holder[s] hereof are hereinafter referred to collectively as
"Holder"), to Payee's account number 2080000549194 at First Union National Bank
of Georgia, Perimeter Center, 0000 Xxxxxxx Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx
00000, ABA routing number 000000000, or at such other place as Holder may
designate to Maker in writing from time to time, the principal sum of THREE
MILLION AND NO/100THS DOLLARS ($3,000,000.00), together with interest on the
outstanding principal balance hereof from the date hereof at the rate of twelve
and one-half percent (12.5%) per annum (computed on the basis of a 360-day
year); provided, however, that Holder may charge and receive interest upon any
renewal or extension hereof at the greater of (i) the rate set out above, or
(ii) any rate agreed to by the undersigned that is not in excess of the maximum
rate of interest allowed to be charged under applicable law (the "Maximum Rate")
at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due and
payable monthly, in arrears, with the first installment being payable on the
first (1st) day of August, 1996, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until July 2, 2001 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full; provided, however, that each interest payment prior to February
1, 1997 shall be payable only at a rate of seven and one-half percent (7.5%) per
annum with the remaining five percent (5%) per annum interest due hereunder
accruing from the date hereof until February 1, 1997 at which time all accrued
and unpaid interest shall be due and payable.
The indebtedness evidenced hereby may be prepaid in whole or in part, at
any time and from time to time, without penalty. Any such prepayments shall be
credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that in
the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) business days; or
in the event that any default or event of default shall occur under that certain
Loan Agreement of even date herewith, between Maker and Payee (as may be amended
from time to time, the "Loan Agreement"), which default or event of default is
not cured following the giving of any applicable notice and within any
applicable cure period set forth in said Loan Agreement; or should any default
by Maker be made in the performance or observance of any covenants or conditions
contained in any other instrument or document now or hereafter evidencing, or
securing or otherwise relating to the indebtedness evidenced hereby (subject to
any applicable notice and cure period provisions that may be set forth therein);
then, and in such event, the entire outstanding principal balance of the
indebtedness evidenced hereby, together with any other sums advanced hereunder,
under the Loan Agreement and/or under any other instrument or document now or
hereafter evidencing. or securing the indebtedness evidenced hereby, together
with all unpaid interest accrued thereon, shall, at the option of Holder and
without notice to Maker, at once become due and payable and may be collected
forthwith, regardless of the stipulated date of maturity. Upon the occurrence of
any Event of Default (as defined in the Loan Agreement), at the option of Holder
and without notice to Maker, all accrued and unpaid interest, if any, shall be
added to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid at
an annual rate (the "Default Rate") equal to the lesser of (i) the rate that is
seven percentage points (7.0%) in excess of the above-specified interest rate,
or (ii) the Maximum Rate in effect from time to time, regardless of whether or
not there has been an acceleration of the payment of principal as set forth
herein. All such interest shall be paid at the time of and as a condition
precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment are hereby waived by Maker and all other parties hereto. No failure
to accelerate the indebtedness evidenced hereby by reason of default hereunder,
acceptance of a past-due installment or other indulgences granted from time to
time, shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable laws. No
extension of the time for payment of the indebtedness evidenced hereby or any
installment due hereunder, made by agreement with any person now or hereafter
liable for payment of the indebtedness evidenced hereby, shall operate to
release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or
2
hereafter liable for payment of the indebtedness evidenced hereby. either in
whole or in part, unless Holder agrees otherwise in writing. This Note may
not be changed orally, but only by an agreement in writing signed by the
party against whom enforcement of any waiver, change. modification or
discharge is sought.
The indebtedness and other obligations evidenced by this Note are further
evidenced by (i) the Loan Agreement and (ii) certain other instruments and
documents, as may be required to protect and preserve the rights of Maker and
Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate, and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Georgia, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law
MAKER
FACTORY CARD OUTLET OF AMERICA LTD., an
Illinois corporation
By:_____________________________________
Name:________________________________
Title:_______________________________
3
SCHEDULE 2.1(a) TO LOAN AGREEMENT
Foreign Qualifications
Borrower and Guarantor are in good standing in all jurisdictions in
which they are incorporated or qualified to do business as a foreign
corporation.
SCHEDULE 2.1(e) TO LOAN AGREEMENT
Capitalization
1. Borrower - none.
2. Guarantor - See attached capitalization table as of March 27, 1996. The
amount of common stock shown as outstanding (231,000) on the attached
table was also the "outstanding" number as of November 15, 1995 (rather
than the 216,000 indicated in Schedule 2.1(a) to the original Loan
Agreement).
SCHEDULE 2.1(f) TO LOAN AGREEMENT
Intellectual Property
1. Patents - none.
2. Trademarks, Trade Names, Registrations, etc.:
PARTY MANIA - Registration Numbers 1,834,212 (logo) and 1,834,213 (name),
dated May 3, 1994.
FACTORY CARD OUTLET - Registration applied for with the U.S.P.T.O. on
May 9, 1994.
3. Copyrights - none.
4. Licenses - none.
5. Formulas - none.
SCHEDULE 2(i) TO LOAN AGREEMENT
Financial Statements
On file with the Lender.
SCHEDULE 2.1(l) TO LOAN AGREEMENT
Debts and Liens
Debt
1. Credit Agreements:
Business Loan Agreement among Borrower, Guarantor and Bank
One, Chicago, N.A. ("Bank One") dated November 10, 1995,
increasing Borrower's current secured line of credit to
$20,000,000.00. Principal amount outstanding as of June 21,
1996 is $12,565,000.00, exclusive of the $1,500,000.00 term
loan described below.
Bank One extended a term loan to Borrower on May 1, 1995 in
the principal amount of $1,500,000.00 to purchase computer
equipment pursuant to the terms of Borrower's prior line of
credit facility.
2. Indentures - none.
3. Purchase Agreements - none.
Promissory Notes and other evidences of indebtedness:
Business Purpose Revolving Promissory Note from Borrower and
Guarantor to Bank One dated November 10, 1995 in the principal
amount of $15,000,000.00 to evidence a portion of the line of
credit described in #1 above.
Business Purpose Revolving Promissory Note from Borrower and
Guarantor to Bank One dated November 10, 1995 in the principal
amount of $5,000,000.00 to evidence a portion of the line of
credit described in #1 above.
Promissory Note from Borrower to Bank One dated May 1, 1995 in
the principal amount of $1,500,000.00 to evidence the
term loan described in #1 above.
Various installment notes payable in connection with purchases
of motor vehicles, due in monthly installments through 1999,
with interest rates ranging from 2.9% to 11%. $118,276
outstanding as of June 21, 1996.
Life insurance policy loans in the amount of $101,165 as of
July 1, 1995.
Secured Promissory Note from Borrower to Sirrom Capital
Corporation ("Sirrom") dated November 15, 1995 in the
principal amount of $4,000,000 to evidence a term loan.
Secured Promissory Note from Borrower to Sirrom dated June
28, 1996 in the principal amount of $1,000,000 to evidence
a term loan.
5. Guaranties:
Guarantor has guaranteed the obligations of Borrower to Bank
One under the term loan described in item #1 above.
Guarantor has guaranteed the obligations of Borrower to Sirrom
under the terms loans described in item #1 above
6. Capital Leases:
Various equipment capital leases with maturities through
2000. $260,369 outstanding as of June 21, 1996.
7 Other - none.
Liens
1. Non-Titled Personal Property Security Agreement between
Borrower and Bank One granting a blanket lien on all of
Borrower's assets to secure the $20,000,000.00 line of credit
described in #1 above.
2. Commercial Security Agreement between Borrower and Bank One
granting a purchase money security interest in certain
computer equipment and software purchased with the proceeds of
the term loan described in #1 above.
3. Security interest granted in certain motor vehicles to
secure the installment notes described in #4 above.
4. Borrower's landlord for Borrower's facility at 0000 Xxxx
Xxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxx, has filed a UCC-1
financing statement in connection with inventory, equipment
and fixtures located at or used in connection with such
facility.
5. Security Agreement between Borrower and Sirrom, dated
November 15, 1995, to secure the promissory notes described in
#4 above.
SCHEDULE 2.1(o) TO LOAN AGREEMENT
Certain Transactions
1. On or about September 1, 1995, Borrower made a loan to Xxxxxxx X.
Xxxxxxx in the principal amount of $175,000.00 to assist with relocation
expenses.
2. Xxxxxxx Xxxxxxx controls TRIWEF Corporation/Triad Sales International
("Triad"). Triad has made its offices, staff and foreign representative offices
available to Borrower and Guarantor for foreign sourcing, buying and freight
consolidation of imported goods. Triad has provided sourcing for such imported
goods and other services in return for a buying commission which is not in
excess of standard industry commissions.
SCHEDULE 2.1(r) TO LOAN AGREEMENT
Significant Contracts
None.
