EXHIBIT 10.3
[EXECUTION COPY]
LOAN AND SECURITY AGREEMENT
DATED AS OF NOVEMBER 14, 1996
between
THE RIGHT START, INC.,
as Borrower,
and
XXXXXX FINANCIAL, INC.,
as Lender
TABLE OF CONTENTS
SECTION 1 DEFINITIONS............................................... 1
1.1 Certain Defined Terms....................................... 1
1.2 Accounting Terms............................................ 11
1.3 Other Definitional Provisions............................... 12
SECTION 2 LOANS AND COLLATERAL...................................... 12
2.1 Loans....................................................... 12
(A) Revolving Loan......................................... 12
(B) Eligible Collateral.................................... 13
(C) CAPEX Line............................................. 13
(D) Borrowing Mechanics.................................... 14
(E) CAPEX Note............................................. 14
(F) Evidence of Revolving Loan Obligations................. 15
(G) Letters of Credit...................................... 15
(1) Maximum Amount.................................... 15
(2) Reimbursement..................................... 15
(3) Conditions of Issuance............................ 15
(4) Request for Letters of Credit..................... 16
(H) Other Letter of Credit Provisions...................... 16
(1) Obligations Absolute.............................. 16
(2) Nature of Duties.................................. 17
2.2 Interest.................................................... 17
(A) Rate of Interest....................................... 17
(B) Interest Periods....................................... 18
(C) Computation and Payment of Interest.................... 19
(D) Interest Laws.......................................... 19
(E) Conversion or Continuation............................. 20
2.3 Fees........................................................ 20
(A) Closing Fee............................................ 20
(B) Unused Line Fee........................................ 20
i
(C) Letter of Credit Fees.................................. 21
(D) Prepayment Fees........................................ 21
(E) Audit Fees............................................. 21
(F) Other Fees and Expenses................................ 21
2.4 Payments and Prepayments.................................... 21
(A) Manner and Time of Payment............................. 21
(B) Mandatory Prepayments.................................. 22
(1) Overadvance...................................... 22
(2) Proceeds of Asset Dispositions................... 22
(C) Voluntary Prepayments and Repayments................... 22
(D) Payments on Business Days.............................. 22
2.5 Term of this Agreement...................................... 22
2.6 Statements.................................................. 23
2.7 Grant of Security Interest.................................. 23
2.8 Capital Adequacy and Other Adjustments...................... 23
2.9 Taxes....................................................... 24
(A) No Deductions.......................................... 24
(B) Changes in Tax Laws.................................... 24
2.10 Required Termination and Prepayment........................ 25
2.11 Compensation............................................... 25
2.12 Booking of LIBOR Loans..................................... 25
2.13 Assumptions Concerning Funding of LIBOR Loans.............. 25
SECTION 3 CONDITIONS TO LOANS....................................... 26
3.1 Conditions to Loans......................................... 26
(A) Closing Deliveries..................................... 26
(B) Security Interests..................................... 26
(C) Closing Date Availability.............................. 26
(D) Representations and Warranties......................... 26
(E) Fees................................................... 26
(F) No Default............................................. 27
(G) Performance of Agreements.............................. 27
ii
(H) No Prohibition........................................ 27
(I) No Litigation......................................... 27
(J) Appraisals............................................ 27
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES................ 27
4.1 Organization, Powers, Capitalization....................... 27
(A) Organization and Powers............................... 27
(B) Capitalization........................................ 28
4.2 Authorization of Borrowing, No Conflict.................... 28
4.3 Financial Condition........................................ 28
4.4 Indebtedness and Liabilities............................... 29
4.5 Account Warranties......................................... 29
4.6 Names...................................................... 29
4.7 Locations; FEIN............................................ 29
4.8 Title to Properties; Liens................................. 29
4.9 Litigation; Adverse Facts.................................. 29
4.10 Payment of Taxes.......................................... 30
4.11 Performance of Agreements................................. 30
4.12 Employee Benefit Plans.................................... 30
4.13 Intellectual Property..................................... 30
4.14 Broker's Fees............................................. 30
4.15 Environmental Compliance.................................. 31
4.16 Solvency.................................................. 31
4.17 Disclosure................................................ 31
4.18 Insurance................................................. 31
4.19 Compliance with Laws...................................... 31
4.20 Bank Accounts............................................. 32
4.21 Subsidiaries.............................................. 32
4.22 Employee Matters.......................................... 32
4.23 Governmental Regulation................................... 32
SECTION 5 AFFIRMATIVE COVENANTS.................................... 33
5.1 Financial Statements and Other Reports..................... 33
iii
(A) Monthly Financials...................................... 33
(B) Quarterly Financials.................................... 33
(C) Year-End Financials..................................... 33
(D) [intentionally omitted]................................. 34
(E) Compliance Certificate.................................. 34
(F) Weekly Borrowing Base Certificates and Inventory Reports 34
(G) Listings and Agings..................................... 34
(H) [intentionally deleted]................................. 34
(I) Appraisals.............................................. 34
(J) Government Notices...................................... 35
(K) SEC Filings............................................. 35
(L) Events of Default, etc.................................. 35
(M) Trade Names............................................. 35
(N) Locations............................................... 35
(O) Bank Accounts........................................... 35
(P) Litigation.............................................. 35
(Q) Projections............................................. 36
(R) Subordinated Debt and Other Indebtedness Notices........ 36
(S) Other Information....................................... 36
5.2 Access to Accountants........................................ 36
5.3 Inspection................................................... 36
5.4 Collateral Records........................................... 36
5.5 [intentionally deleted]...................................... 37
5.6 Collection of Accounts and Payments.......................... 37
5.7 Endorsement.................................................. 37
5.8 Corporate Existence.......................................... 37
5.9 Payment of Taxes............................................. 38
5.10 Maintenance of Properties; Insurance........................ 38
5.11 Compliance with Laws........................................ 38
5.12 Further Assurances.......................................... 38
5.13 Collateral Locations........................................ 39
iv
5.14 Bailees.................................................... 39
5.15 Mortgages; Title Insurance; Surveys........................ 39
(A) Title Insurance........................................ 39
(B) Additional Mortgaged Property.......................... 39
(C) Surveys................................................ 39
5.16 Use of Proceeds and Margin Security........................ 40
SECTION 6 FINANCIAL COVENANTS....................................... 40
6.1 Net Worth................................................... 40
6.2 Interest Coverage........................................... 40
SECTION 7 NEGATIVE COVENANTS........................................ 40
7.1 Indebtedness and Liabilities................................ 40
7.2 Guaranties.................................................. 41
7.3 Transfers, Liens and Related Matters........................ 41
(A) Transfers.............................................. 41
(B) Liens.................................................. 41
(C) No Negative Pledges.................................... 42
(D) No Restrictions on Subsidiary Distributions to Borrower 42
7.4 Investments and Loans....................................... 42
7.5 Restricted Junior Payments.................................. 42
7.6 Restriction on Fundamental Changes.......................... 42
7.7 Changes Relating to Subordinated Debt....................... 43
7.8 Transactions with Affiliates................................ 43
7.9 Environmental Liabilities................................... 43
7.10 Conduct of Business........................................ 43
7.11 Compliance with ERISA...................................... 43
7.12 Tax Consolidations......................................... 43
7.13 Subsidiaries............................................... 44
7.14 Fiscal Year................................................ 44
7.15 Press Release; Public Offering Materials................... 44
7.16 Bank Accounts.............................................. 44
SECTION 8 DEFAULT, RIGHTS AND REMEDIES.............................. 44
v
8.1 Event of Default............................................ 44
(A) Payment................................................ 44
(B) Default in Other Agreements............................ 44
(C) Breach of Certain Provisions........................... 44
(D) Breach of Warranty..................................... 45
(E) Other Defaults Under Loan Documents.................... 45
(F) Change in Control...................................... 45
(G) Involuntary Bankruptcy; Appointment of Receiver, etc... 45
(H) Voluntary Bankruptcy; Appointment of Receiver, etc..... 45
(I) Liens.................................................. 46
(J) Judgment and Attachments............................... 46
(K) Dissolution............................................ 46
(L) Solvency............................................... 46
(M) Injunction............................................. 46
(N) Invalidity of Loan Documents........................... 46
(O) Failure of Security................................... 46
(P) Damage, Strike, Casualty............................... 47
(Q) Licenses and Permits................................... 47
(R) Forfeiture............................................. 47
8.2 Suspension of Commitments................................... 47
8.3 Acceleration................................................ 47
8.4 Remedies.................................................... 48
8.5 Appointment of Attorney-in-Fact............................. 48
8.6 Limitation on Duty of Lender with Respect to Collateral..... 49
8.7 Application of Proceeds..................................... 49
8.8 License of Intellectual Property............................ 49
8.9 Waivers, Non-Exclusive Remedies............................. 50
SECTION 9 MISCELLANEOUS............................................. 50
9.1 Assignments and Participations.............................. 50
9.2 Set Off..................................................... 50
9.3 Expenses and Attorneys' Fees................................ 51
vi
9.4 Indemnity................................................... 51
9.5 Amendments and Waivers...................................... 52
9.6 Notices..................................................... 52
9.7 Survival of Warranties and Certain Agreements............... 53
9.8 Indulgence Not Waiver....................................... 53
9.9 Marshaling; Payments Set Aside.............................. 53
9.10 Entire Agreement........................................... 53
9.11 Independence of Covenants.................................. 54
9.12 Severability............................................... 54
9.13 Headings................................................... 54
9.14 APPLICABLE LAW............................................. 54
9.15 Successors and Assigns..................................... 54
9.16 No Fiduciary Relationship; Limitation of Liabilities....... 54
9.17 CONSENT TO JURISDICTION.................................... 55
9.18 WAIVER OF JURY TRIAL....................................... 55
9.19 Construction............................................... 55
9.20 Counterparts; Effectiveness................................ 55
9.21 No Duty.................................................... 56
9.22 Confidentiality............................................ 56
EXHIBITS............................................................. i
SCHEDULES............................................................ ii
vii
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of November 14, 1996 and
entered into by and between THE RIGHT START, INC., a California corporation
("Borrower"), with its principal place of business at 0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000, and XXXXXX FINANCIAL, INC., a
Delaware corporation ("Lender"), with offices at 000 Xxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx, 00000. All capitalized terms used herein are defined in Section 1 of
---------
this Agreement.
WHEREAS, Borrower desires that Lender extend a credit facility to provide
working capital financing and to provide funds for other general corporate
purposes; and
WHEREAS, Borrower desires to secure its obligations under the Loan
Documents by granting to Lender a security interest in and lien upon certain of
Borrower's property;
NOW, THEREFORE, in consideration of these premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms. The following terms used in this Agreement
---------------------
shall have the following meanings:
"Accounts" means, all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by Borrower arising or
resulting from the sale of goods or the rendering of services.
"Affiliate" means any Person (other than Lender): (a) directly or
indirectly controlling, controlled by, or under common control with any Loan
Party; (b) directly or indirectly owning or holding five percent (5%) or more of
any equity interest in Borrower; or (c) five percent (5%) or more of whose
voting stock or other equity interest having ordinary voting power for the
election of directors or the power to direct or cause the direction of
management, is directly or indirectly owned or held by Borrower; or (d) which
has a senior executive officer who is also a senior executive officer of
Borrower. For purposes of this definition, "control" (including with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with") means the possession directly or indirectly of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities or other equity interest, or by contract or
otherwise.
"Agreement" means this Loan and Security Agreement as it may be amended,
restated supplemented or otherwise modified from time to time.
1
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the assets of Borrower or any of its Subsidiaries other than sales of Inventory
in the ordinary course of business.
"Bank Letter of Credit" means each letter of credit issued by a bank
acceptable to and approved by Lender for the account of Borrower and supported
by a Risk Participation Agreement.
"Base Rate" means a variable rate of interest per annum equal to the higher
of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent, or (b) the Federal Funds Effective Rate. The
statistical release generally sets forth a Bank Prime Loan rate for each
Business Day. In the event the Board of Governors of the Federal Reserve System
ceases to publish a Bank Prime Loan rate or its equivalent, the term "Base Rate"
shall mean a variable rate of interest per annum equal to the highest of the
"prime rate", "reference rate", "base rate", or other similar rate announced
from time to time by any of Bankers Trust Company, or The Chase Manhattan Bank,
N.A., or their successors (with the understanding that any such rate may merely
be a reference rate and may not necessarily represent the lowest or best rate
actually charged to any customer by any such bank).
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate.
"Blocked Accounts" has the meaning assigned to that term in subsection 5.6.
--------------
"Borrower" has the meaning assigned to that term in the preamble to this
Agreement.
"Borrowing Base" has the meaning assigned to that term in subsection
----------
2.1(A).
------
"Borrowing Base Certificate" means a certificate and assignment schedule
duly executed by an officer of Borrower appropriately completed and in
substantially the form of Exhibit A.
---------
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of Illinois, Pennsylvania or
California, or is a day on which banking institutions located in any such state
are closed or, for the purposes of LIBOR Loans only, a day on which commercial
banks are open for dealings in Dollar deposits in the London, England (UK)
market.
"CAPEX Advance" means each advance made by Lender under the CAPEX Loan
Commitment pursuant to subsection 2.1(C).
-----------------
"CAPEX Loan" means the outstanding balance of all CAPEX Advances.
2
"CAPEX Loan Commitment" means the commitment of Lender to make CAPEX
Advances pursuant to subsection 2.1(C).
-----------------
"CAPEX Note" or "CAPEX Notes" means each promissory note of Borrower in
substantially the form of Exhibit B, issued pursuant to subsection 2.1(E).
--------- -----------------
"Capital Lease" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P-1 from Xxxxx'x Investors Service, Inc.; and (c)
certificates of deposit or bankers' acceptances maturing within six (6) months
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank.
"Closing Date" means November 18, 1996.
"Collateral" has the meaning assigned to that term in subsection 2.7.
--------------
"Collecting Bank" has the meaning assigned to that term in subsection 5.6.
--------------
"Commitment" or "Commitments" means the commitment or commitments of Lender
to make Loans as set forth in subsections 2.l(A) and 2.1(B) and to provide
-----------------------------
Lender Letters of Credit as set forth in subsection 2.1(G).
-----------------
"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in substantially the form of Exhibit C.
---------
"Default" means a condition, act or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable grace or cure period.
"Default Rate" has the meaning assigned to that term in subsection 2.2.
--------------
"EBITDA" means, for any period, without duplication, the total of the
following for Borrower and its Subsidiaries on a consolidated basis, each
calculated for such period: (1) net
3
income determined in accordance with GAAP; plus, to the extent included in the
calculation of net income, (2) the sum of (a) income and franchise taxes paid or
accrued; (b) Interest Expenses, net of interest income, paid or accrued; (c)
interest paid in kind; (d) amortization and depreciation and (e) other non-cash
charges (excluding accruals for cash expenses made in the ordinary course of
business); less, to the extent included in the calculation of net income, (3)
the sum of (a) the income of any Person other than wholly-owned Subsidiaries of
Borrower in which Borrower or a wholly owned Subsidiary of Borrower has an
ownership interest except to the extent such income is received by Borrower or
such wholly-owned Subsidiary in a cash distribution during such period; and (b)
gains or losses from sales or other dispositions of assets (other than Inventory
in the normal course of business), each of the foregoing to exclude
extraordinary or non-recurring gains or losses.
"Eligible Inventory" has the meaning assigned to that term in subsection
----------
2.1(B).
------
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party
------------
or any ERISA Affiliate or (b) has at any time within the preceding six (6) years
been maintained for the employees of any Loan Party or any current or former
ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"Environmental Laws" means any present or future federal, state or local
law, rule, regulation or order relating to pollution, waste, disposal or the
protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all "equipment" (as defined in the UCC), including,
without limitation, all furniture, furnishings, fixtures, machinery, motor
vehicles, trucks, trailers, vessels, aircraft and rolling stock and all parts
thereof and all additions and accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to any Loan Party, means any Person who is a
member of a group which is under common control with any Loan Party, who
together with any Loan Party is treated as a single employer within the meaning
of Section 414(b) and (c) of the IRC.
----------------------
"Event of Default" means each of the events set forth in subsection 8.1.
--------------
"Federal Funds Effective Rate" means, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Federal
4
Reserve Bank of New York or, if such rate is not published for any Business Day,
the average of the quotations for the day of the requested Loan received by
Lender from three Federal funds brokers of recognized standing selected by
Lender.
"Fiscal Year" means each fifty-two or fifty-three week period ending on the
Saturday which is nearest the end of May in each year.
"Funding Date" means the date of each funding of a Loan or issuance of a
Lender Letter of Credit.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"Hazardous Material" means all or any of the following: (a) substances that
are defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, or toxicity; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which contains
any oil or dielectric fluid containing polychlorinated biphenyls.
"Indebtedness", as applied to any Person, means without duplication: (a)
all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; (e) all indebtedness secured by any Lien
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is non
recourse to the credit of that Person; (f) obligations in respect of letters of
credit and (g) any advances under any factoring arrangement.
"Intellectual Property" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the
5
foregoing, and proceeds of all of the foregoing, including, without limitation,
proceeds of insurance policies thereon.
"Interest Coverage" means, for any period, EBITDA divided by Interest
----------
Expenses.
"Interest Expenses" means, without duplication, for any period, the
following, for Borrower and its Subsidiaries each calculated for such period:
interest expenses deducted in the determination of net income (excluding (i) the
amortizati on of fees and costs with respect to the transactions contemplated by
this Agreement which have been capitalized as transaction costs in accordance
with the provisions of subsection 1.2; and (ii) interest paid in kind).
"Interest Period" has the meaning assigned to that term in subsection
----------
2.2(B).
------
"Interest Rate" has the meaning assigned to that term in subsection 2.2(A).
-----------------
"Inventory" means all "inventory" (as defined in the UCC) including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.
"Inventory Report" means a report duly executed by an officer of Borrower
appropriately completed and in substantially the form of Exhibit D.
---------
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder. "
"Xxxxx Xxxxxxxx" means Xxxxx Xxxxxxxx Investment Management, Inc., KAIM
Non-Traditional, L.P., Xxxxx Xxxxxxxx Non-Traditional Investments, L.P., ARBCO
Associates, L.P., Offense Group Associates, L.P., and Opportunity Associates,
L.P. and each of their affiliates.
"Landlord Lien" means a Lien on Collateral of Borrower in favor of a
lessor, sublessor, landlord or owner, as the case may be, pursuant to a lease,
sublease or other agreement, existing as of the date hereof or hereafter,
entered into by Borrower as lessee, sublessee or tenant, as the case may be, or
pursuant to applicable laws, which Lien is prior to or will prime the Lien of
Lender on such Collateral.
"Landlord Waiver" means an agreement whereby the lessor, sublessor,
landlord or owner, as the case may be, of real property leased or rented by
Borrower waives in favor of Lender certain of its rights created under the
respective lease, sublease or other agreement, or by operation of law, including
without limitation Landlord Liens, and grants Lender access to the Collateral,
such agreement to be in form and substance acceptable to Lender.
"Lender" means Xxxxxx Financial, Inc., together with its successors and
permitted assigns pursuant to subsection 9.1.
--------------
6
"Lender Letter of Credit" has the meaning assigned to that term in
subsection 2.1(G).
-----------------
"Lender's Account" means ABA No. 0000-0000-0, Account No. 52-98695 at First
National Bank of Chicago, Xxx Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, XX 00000,
Reference: Xxxxxx Business Credit for the benefit of The Right Start, Inc.
"Letter of Credit Inventory" has the meaning set forth in subsection
----------
2.1(A)(1).
---------
"Letter of Credit Liability" means, at any time, all reimbursement and
other liabilities of Borrower or any of its Subsidiaries with respect to each
Lender Letter of Credit, whether contingent or otherwise, including: (a) the
amount available to be drawn or which may become available to be drawn; (b) all
amounts which have been paid or made available by Lender issuing a Lender Letter
of Credit or any bank issuing a Bank Letter of Credit to the extent not
reimbursed; and (c) all unpaid interest, fees and expenses related thereto.
"Letter of Credit Reserve" means, at any time, an amount equal to (a) the
aggregate amount of Letter of Credit Liability with respect to all Lender
Letters of Credit outstanding at such time plus, without duplication, (b) the
----
aggregate amount theretofore paid by Lender under Lender Letters of Credit and
not debited to the Loan Account pursuant to subsection 2.1(G)(2) or otherwise
--------------------
reimbursed by Borrower.
"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"LIBOR" means, for each Interest Period, a rate of interest equal to:
(a) the rate of interest determined by Lender at which deposits in Dollars
for the relevant Interest Period are offered based on information presented on
the Reuters Screen LIBOR Page as of 11:00 A.M. (London time) on the day which is
two (2) Business Days prior to the first day of such Interest Period; provided
that if at least two such offered rates appear on the Reuters Screen LIBOR Page
in respect of such Interest Period, the arithmetic mean of all such rates (as
determined by Lender) will be the rate used; provided further that if Reuters
ceases to provide LIBOR quotations, such rate shall be the average rate of
interest determined by Lender at which deposits in Dollars are offered for the
relevant Interest Period by Bankers Trust Company, The Chase Manhattan Bank,
N.A., or its successors, to prime banks in the London interbank market as of
11:00 A.M. (London time) on the applicable interest rate determination date,
divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication) of
the rates (expressed as a decimal fraction) of reserve requirements in effect on
the day which is two (2) Business Days prior to the beginning of such Interest
Period (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as
7
"Eurocurrency Liabilities" in Regulation D of such Board) which are required to
be maintained by a member bank of the Federal Reserve System;
(such rate to be adjusted to the nearest one sixteenth of one percent (1/16 of
1%) or, if there is not a nearest one sixteenth of one percent (1/16 of 1%), to
the next higher one sixteenth of one percent (1/16 of 1%).
"LIBOR Loans" means at any time that portion of the Loans bearing interest
at rates determined by reference to LIBOR.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" or "Loans" means an advance or advances under the Revolving Loan
Commitment or the CAPEX Loan Commitment.
"Loan Documents" means this Agreement, the CAPEX Note, the Trademark
Security Agreement and all other instruments, documents and agreements executed
by or on behalf of Borrower and delivered concurrently herewith or at any time
hereafter to or for Lender in connection with the Loans, the CAPEX Loan, any
Lender Letter of Credit, and other transactions contemplated by this Agreement,
all as amended, restated, supplemented or modified from time to time.
"Loan Party" means, each of Borrower, Borrower's Subsidiaries and any other
Person (other than Lender) which is or becomes a party to any Loan Document.
"Loan Year" means each period of twelve (12) consecutive months commencing
on the Closing Date and on each anniversary thereof.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of any Loan Party on an individual basis or taken as a whole or (b)
the ability of any Loan Party to perform its obligations under any Loan Document
to which it is a party or Lender to enforce or collect any of the Obligations.
"Maximum Revolving Loan Amount" has the meaning assigned to that term in
subsection 2.1(A).
-----------------
"Mortgage" means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by any Loan Party to Lender, with
respect to Mortgaged Property, all in form and substance satisfactory to Lender.
8
"Mortgaged Property" has the meaning assigned to that term in subsection
----------
5.15.
----
"Net Worth" means, as of any date, the sum of the capital stock and
additional paid-in capital plus retained earnings (or minus accumulated deficit)
calculated in conformity with GAAP.
"Notice of Borrowing" has the meaning assigned to that term in subsection
----------
2.1(D).
------
"Obligations" means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Lender under the Loan
Documents including the principal amount of all debts, claims and indebtedness
(whether incurred before or after the Termination Date), accrued and unpaid
interest and all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable including, without limitation, all interest,
fees, costs and expenses accrued or incurred after the filing of any petition
under any bankruptcy or insolvency law.
"Permitted CAPEX Expenditures" means costs and expenses, including the
purchase of Equipment, incurred in connection with the opening of new retail
stores of Borrower opening on or after June 1, 1996, but excluding all costs and
expenses relating to Inventory.
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Claims or ERISA) for taxes,
assessments or other governmental charges not yet due and payable; (b) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business (1) for sums not more than thirty (30) days delinquent or (2) that are
being diligently contested in good faith, provided that adequate reserves with
--------
respect thereto are maintained on the books of Borrower in conformity with GAAP
and, if required by Lender, a reserve is established against the Borrowing Base;
(c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in
the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, statutory
obligations, surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money); (d) easements,
rights-of-way, restrictions, and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business of
any Loan Party or any of its Subsidiaries; (e) Liens for purchase money
obligations, provided that (1) the Indebtedness secured by any such Lien is
permitted under subsection 7.1, and (2) such Lien encumbers only the asset so
--------------
purchased; (f) Liens in favor of Lender; (g) Landlord Liens; (h) cash collateral
for letters of credit outstanding on the Closing Date and issued pursuant to
that certain Loan Agreement dated as of June 12, 1995, by and between The Right
Start, Inc., as borrower and Xxxxx Fargo Bank, National Association, as lender,
in an amount not to exceed $300,000; and (i) Liens set forth on Schedule 1.1(A).
---------------
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations,
9
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Projections" means Borrower's forecasted consolidated and consolidating:
(a) balance sheets; (b) profit and loss statements; (c) cash flow statements;
and (d) capitalization statements, all prepared on a division by division and
Subsidiary by Subsidiary basis and otherwise consistent with Borrower's
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.
"Rent Reserve" means a reserve against the Borrowing Base for a store
located in a Statutory Landlord Lien State where Eligible Inventory is located,
in such amount as Lender, in its reasonable discretion, may require, but in no
event in excess of the maximum amount which could be secured under any Landlord
Lien arising under the laws or any other applicable authority of the respective
Statutory Landlord Lien State.
"Restricted Junior Payment" means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Borrower
or any of its Subsidiaries now or hereafter outstanding, except a dividend
payable solely with shares of the class of stock on which such dividend is
declared; (b) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any Subordinated Debt or any shares of any class of stock of
Borrower or any of its Subsidiaries now or hereafter outstanding, or the
issuance of a notice of an intention to do any of the foregoing; (c) any payment
made to retire, or to obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of stock of Borrower or any of
its Subsidiaries now or hereafter outstanding; and (d) any payment by Borrower
or any of its Subsidiaries of any management, consulting or similar fees to any
Affiliate, whether pursuant to a management agreement or otherwise.
"Revolving Advance" means each advance made by Lender pursuant to
subsection 2.1(A).
-----------------
"Revolving Loan" means the outstanding balance of all Revolving Advances
and any amounts added to the principal balance of the Revolving Loan pursuant to
this Agreement.
"Revolving Loan Commitment" means the commitment of Lender to make
Revolving Advances and to issue Lender Letters of Credit pursuant to subsection
----------
2.1 (G), in the aggregate not to exceed at anytime $10,000,000.
-------
"Risk Participation Agreement" has the meaning assigned to that term in
subsection 2.1(G).
-----------------
"Statutory Landlord Lien State" means each jurisdiction which, by operation
of statute or other law, may give rise to Landlord Liens.
10
"Subordinated Debt" means the Indebtedness of Borrower under that certain
Convertible Debenture dated as of October 11, 1996, in the principal amount of
$2,842,000, made by Borrower in favor of Xxxxxx Xxxxxxx Strategic Partners,
L.P., and that certain Convertible Debenture, dated as of October 11, 1996, in
the principal amount of $158,000, made by Borrower in favor of Strategic
Associates, L.P.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.
"Termination Date" means the date this Agreement is terminated as set forth
in subsection 2.5.
--------------
"Total Loan Commitment" means the aggregate commitment of Lender with
respect to the Revolving Loan Commitment and the CAPEX Loan Commitment.
"Trademark Security Agreement" means the confirmation and grant of security
interest in trademark and trademark applications by Borrower in a form
reasonably acceptable to Lender, as such agreement may be amended, restated,
supplemented or otherwise modified from time to time.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of Illinois, as amended from time to time, and any successor statute.
"Warehouse Agreement" means an agreement and related documents in favor of
Lender executed by each consignee, warehouseman, third-party distribution
service, bailee or other Person retained by Borrower to store, transfer,
distribute or otherwise handle Inventory of Borrower, including without
limitation the Xxx Group, Inc., and USCO Distribution Services, Inc., such
agreement and related documents to be in form and substance acceptable to
Lender.
1.2 Accounting Terms. For purposes of this Agreement, all accounting terms
----------------
not otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP. Financial statements and other information furnished to
Lender pursuant to subsection 5.1 shall be prepared in accordance with GAAP (as
in effect at the time of such preparation) on a consistent basis. In the event
any "Accounting Changes" (as defined below) shall occur and such changes affect
financial covenants, standards or terms in this Agreement, then Borrower and
Lender agree to enter into negotiations in order to amend such provisions of
this Agreement so as to equitably reflect such Accounting Changes with the
desired result that the criteria for evaluating the financial condition of
Borrower shall be the same after such Accounting Changes as if such Accounting
Changes had not been made, and until such time as such an amendment
11
shall have been executed and delivered by Borrower and Lender, (A) all financial
covenants, standards and terms in this Agreement shall be calculated and/or
construed as if such Accounting Changes had not been made, and (B) Borrower
shall prepare footnotes to each Compliance Certificate and the financial
statements required to be delivered hereunder that show the differences between
the financial statements delivered (which reflect such Accounting Changes) and
the basis for calculating financial covenant compliance (without reflecting such
Accounting Changes). "Accounting Changes" means: (a) changes in accounting
principles required by GAAP and implemented by Borrower; and (b) changes in
accounting principles recommended by Borrower's certified public accountants.
All such adjustments resulting from expenditures made subsequent to the Closing
Date (including, but not limited to, capitalization of costs and expenses or
payment of pre-Closing Date liabilities) shall be treated as expenses in the
period the expenditures are made and deducted as part of the calculation of
EBITDA in such period.
1.3 Other Definitional Provisions. References to "Sections", "subsections",
-----------------------------
"Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and
Schedules, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. In this Agreement, words importing any gender include the other
genders; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to agreements and other
contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
SECTION 2 LOANS AND COLLATERAL
2.1 Loans.
-----
(A) Revolving Loan. Subject to the terms and conditions of this
--------------
Agreement and in reliance upon the representations and warranties of Borrower
and the other Loan Parties set forth herein and in the other Loan Documents,
Lender agrees to lend to Borrower from time to time an aggregate amount not to
exceed at any time $10,000,000, as reduced by Section 2.4(B). Amounts borrowed
--------------
under this subsection 2.1(A) may be repaid and reborrowed at any time prior to
-----------------
the earlier of (i) the termination of the Revolving Loan Commitment pursuant to
subsection 8.3 or (ii) the Termination Date. Lender shall have no obligation to
--------------
make a Revolving Advance to the extent any requested advance would cause the
Revolving Loan (after giving effect to any immediate application of the proceeds
thereof) to exceed the Maximum Revolving Loan Amount; provided that Lender may,
in its sole discretion, elect from time to time to make Loans in excess of the
Maximum Revolving Loan Amount.
12
(1) "Maximum Revolving Loan Amount" means, as of any date of
determination, the lesser of (a) the Revolving Loan Commitment minus the Letter
of Credit Reserve or (b) the Borrowing Base minus the Letter of Credit Reserve.
(2) "Borrowing Base" means, as of any date of determination, an
amount equal to (a) sixty percent (60%) of Eligible Inventory plus (b)(i) sixty
----
percent (60%) of Inventory ordered but not received, the payment for which is to
be made under documentary Lender Letters of Credit ("Letter of Credit
Inventory") less (ii) duty and freight due with respect to the Letter of Credit
----
Inventory, less in each case such reserves as Lender, in its reasonable
discretion, may elect to establish, including, but not limited to, a Rent
Reserve.
(B) Eligible Collateral.
-------------------
"Eligible Inventory" means, as at any date of determination, the value
(determined at the lower of cost or market on a first-in, first-out basis) of
all finished goods Inventory owned by and in the possession of Borrower and
located in the United States of America or Canada that Lender, in its reasonable
credit judgment, deems to be eligible for borrowing purposes. Without limiting
the generality of the foregoing, unless otherwise agreed by Lender, the
following is not Eligible Inventory: (a) raw materials or work-in-process that
is not readily marketable in its current form; (b) finished goods which do not
meet the specifications of the purchase order for such goods; (c) Inventory
which Lender determines, is unacceptable for borrowing purposes due to age,
quality, type, category and/or quantity; (d) Inventory returned as defective or
otherwise unsuitable for its intended use; (e) Inventory with respect to which
Lender does not have a valid, first priority and fully perfected security
interest; (f) Inventory with respect to which there exists any Lien in favor of
any Person other than Lender, except Permitted Encumbrances; (g) Inventory
produced in violation of the Fair Labor Standards Act and subject to the so-
called "hot goods" provisions contained in Title 29 U.S.C. (S) 215(a)(i); (h)
Inventory located at a store in a Statutory Landlord Lien State, unless (1) an
enforceable Landlord Waiver in form and substance reasonably acceptable to
Lender has been obtained with respect to such location or (2) a Rent Reserve has
been established with respect to such location and such Rent Reserve is less
than the value of Eligible Inventory at such location; and (i) Inventory stored,
transferred, distributed or otherwise handled by a consignee, warehouseman,
third-party distribution service, bailee or other Person who has not executed
and delivered a Warehouse Agreement.
(C) CAPEX Line. Subject to the terms and conditions of this
----------
Agreement and in reliance upon the representations and warranties of Borrower
and the other Loan Parties set forth herein and in the other Loan Documents,
Lender agrees to lend to Borrower each CAPEX Advance from time to time requested
by Borrower prior to the second anniversary of the Closing Date, the aggregate
amount of which shall not exceed $3,000,000. The principal amount of each CAPEX
Advance shall not (i) exceed an amount equal to one hundred percent (100%) of
the Permitted CAPEX Expenditures to be paid with the proceeds of such CAPEX
Advance or (ii) be less than $50,000. Amounts borrowed under this subsection
----------
2.1(C) and prepaid may not be reborrowed. On the second anniversary of the
------
Closing Date, the then outstanding CAPEX Loan shall convert to a term loan,
payable in three equal quarterly installments of principal equal to
13
1/12th of the outstanding principal balance of the CAPEX Loan on the second
anniversary of the Closing Date, with the remaining outstanding balance due and
payable on the Termination Date.
(D) Borrowing Mechanics. (1) LIBOR Loans made on any Funding Date
-------------------
shall be in an aggregate minimum amount of $500,000 and integral multiples of
$100,000 in excess of such amount. (2) On any day Borrower desires an advance
under this subsection 2.1, Borrower shall give Lender telephonic notice of the
--------------
proposed borrowing by 11:00 a.m. (Central time) on the Funding Date of a Base
Rate Loan and three (3) Business Days in advance of the Funding Date of a LIBOR
Loan, which notice (a "Notice of Borrowing") shall also specify the proposed
Funding Date (which shall be a Business Day), whether such Loans shall consist
of Base Rate Loans or LIBOR Loans, and for LIBOR Loans the Interest Period
applicable thereto. Any such telephonic notice shall be confirmed in writing on
the same day. Lender shall not incur any liability to Borrower for acting upon
any telephonic notice Lender believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.1(D). Lender will not
-----------------
make any advance pursuant to any telephonic notice unless Lender has also
received the most recent Borrowing Base Certificate and all other documents
required under subsection 5.1 by 11:00 a.m. (Chicago time). Each Revolving
--------------
Advance shall be deposited by wire transfer in immediately available funds in
such account as Borrower may from time to time designate to Lender in writing.
The becoming due of any amount required to be paid under this Agreement or any
of the other Loan Documents as principal, accrued interest and fees shall be
deemed irrevocably to be a request by Borrower for a Revolving Advance on the
due date of, and in the amount required to pay, such principal, accrued interest
and fees, and the proceeds of each such Revolving Loan if made by Lender shall
be disbursed by Lender by way of direct payment of the relevant obligation. (3)
When Borrower desires a CAPEX Advance pursuant to subsection 2.1(B), Borrower
-----------------
shall give Lender written notice of the proposed borrowing no less than three
(3) days prior to the requested Funding Date thereof. Prior to making any CAPEX
Advance, Lender shall have received a certification by an officer of Borrower
that (a) Permitted CAPEX Expenditures have been incurred in conjunction with the
opening of a new retail store or stores of Borrower (as identified in such
certification) and (b) they have not been incurred for any improper purpose or
in violation of this Agreement or any Loan Documents, and such other
documentation as Lender shall reasonably request. Each CAPEX Advance shall be
deposited in immediately available funds in such account as Borrower may from
time to time designate to Lender in writing.
(E) CAPEX Note. Borrower shall execute and deliver to Lender with
----------
appropriate insertions a CAPEX Note to evidence the CAPEX Loan Commitment. In
the event of an assignment under subsection 9.1, Borrower shall, upon surrender
of the assigning Lender's CAPEX Notes, issue new CAPEX Notes to reflect the
interest held by the assigning Lender and its assignee.
(F) Evidence of Revolving Loan Obligations. Each Revolving Advance
--------------------------------------
shall be evidenced by this Agreement and notations made from time to time by
Lender in its books and records, including computer records. Lender's books and
records shall constitute presumptive
14
evidence, absent manifest error, of the accuracy of the information contained
therein. Failure by the Lender to make any such notation or record shall not
affect the obligations of Borrower to Lender with respect to the Revolving
Loans.
(G) Letters of Credit. Subject to the terms and conditions of this
-----------------
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, the Revolving Loan Commitment may, in addition to Revolving
Advances, be utilized, upon the request of Borrower, for (i) the issuance of
letters of credit by Lender or (ii) the issuance by Lender of risk
participations (a "Risk Participation Agreement") to banks to induce the bank to
issue letters of credit for the account of Borrower (each of (i) and (ii) above,
a "Lender Letter of Credit"). In no event shall any Lender Letter of Credit be
issued to the extent that the issuance of such Lender Letter of Credit would
cause the sum of the Letter of Credit Reserve (after giving effect to such
issuance) plus the Revolving Loan to exceed the lesser of (x) the Borrowing Base
and (y) the Revolving Loan Commitment.
(1) Maximum Amount. The aggregate amount of Letter of Credit
--------------
Liability with respect to all Lender Letters of Credit outstanding at any time
shall not exceed $1,000,000.
(2) Reimbursement. Borrower shall be irrevocably and
-------------
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse Lender for any amounts paid by
Lender with respect to a Lender Letter of Credit including all fees, costs and
expenses paid by Lender to any bank that issues a Bank Letter of Credit.
Borrower hereby authorizes and directs Lender, at Lender's option, to debit
Borrower's account (by increasing the Revolving Loan) in the amount of any
payment made by Lender with respect to any Lender Letter of Credit. All amounts
paid with respect to any Lender Letter of Credit that are not immediately repaid
by Borrower with the proceeds of a Revolving Advance or otherwise shall bear
interest at the Default Rate applicable to Base Rate Revolving Loans.
(3) Conditions of Issuance. In addition to all other terms and
----------------------
conditions set forth in this Agreement, the issuance of any Lender Letter of
Credit shall be subject to the satisfaction of all conditions applicable to
Revolving Advances, and the conditions that the letter of credit which Borrower
requests be in such form, be for such amount, contain such terms and support
such transactions as are reasonably satisfactory to Lender. The expiration date
of each Lender Letter of Credit shall be on a date which is at least thirty (30)
days prior to the Termination Date.
(4) Request for Letters of Credit. Borrower shall give Lender at
-----------------------------
least three (3) Business Days prior notice specifying the date a Lender Letter
of Credit is to be issued, identifying the beneficiary and describing the nature
of the transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the letter of credit being requested.
(H) Other Letter of Credit Provisions.
---------------------------------
15
(1) Obligations Absolute. The obligation of Borrower to
--------------------
reimburse Lender for payments made under, and other amounts payable in
connection with, any Lender Letter of Credit shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including the following circumstances:
(a) any lack of validity or enforceability of any Lender
Letter of Credit, Bank Letter of Credit or any other agreement;
(b) the existence of any claim, set-off, defense or other
right which Borrower, any of its Affiliates, or Lender, on the one hand, may at
any time have against any beneficiary or transferee of any Lender Letter of
Credit or Bank Letter of Credit (or any Persons for whom any such transferee may
be acting), Lender or any other Person, on the other hand, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Borrower or any of its
Affiliates and the beneficiary of the letter of credit);
(c) any draft, demand, certificate or any other document
presented under any Lender Letter of Credit or Bank Letter of Credit is alleged
to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(d) payment under any Lender Letter of Credit, or Bank
Letter of Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Lender Letter of Credit
provided that, in the case of any payment by Lender under any Lender Letter of
Credit, Lender has not acted with gross negligence or willful misconduct (as
determined by a court of competent jurisdiction) in determining that the demand
for payment under such Lender Letter of Credit complies on its face with any
applicable requirements for a demand for payment under such Lender Letter of
Credit;
(e) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(f) the fact that a Default or an Event of Default shall
have occurred and be continuing.
(2) Nature of Duties. As between Lender and Borrower, Borrower assumes
----------------
all risks of the acts and omissions of, or misuse of any Lender Letter of Credit
by the beneficiary thereof. In furtherance and not in limitation of the
foregoing, Lender shall not be responsible: (a) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document by any party
in connection with the application for and issuance of any Lender Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (b) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Lender Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or
16
ineffective for any reason; (c) for failure of the beneficiary of any Lender
Letter of Credit to comply fully with conditions required in order to demand
payment thereunder; provided that, in the case of any payment by Lender under
any Lender Letter of Credit, Lender has not acted with gross negligence or
willful misconduct (as determined by a court of competent jurisdiction) in
determining that the demand for payment under such Lender Letter of Credit
complies on its face with any applicable requirements for a demand for payment
thereunder; (d) for errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (e) for errors in interpretation of technical
terms; (f) for any loss or delay in the transmission or otherwise of any
document required in order to make a payment under any Lender Letter of Credit;
(g) for the credit of the proceeds of any drawing under any Lender Letter of
Credit; and (h) for any consequences arising from causes beyond the control of
Lender. None of the above shall affect, impair, or prevent the vesting of any of
Lender's rights or powers hereunder.
2.2 Interest
--------
(A) Rate of Interest. The Loans and all other Obligations shall bear
----------------
interest from the date such Loans are made or such other Obligations become due
to the date paid at a rate per annum equal to (i) in the case of Base Rate Loans
and other Obligations for which no other interest rate is specified, the Base
Rate plus (a) one percent (1.0%) with respect to the Revolving Loan and such
other Obligations and (b) one-and-one-half percent (1.5%) with respect to the
CAPEX Loan and (ii) in the case of LIBOR Loans, LIBOR plus (a) three-and-one-
quarter percent (3.25%) with respect to the Revolving Loan, and (b) three-and-
three quarters percent (3.75%) with respect to the CAPEX Loan (the "Interest
Rate"). The applicable basis for determining the rate of interest shall be
selected by Borrower initially at the time a Notice of Borrowing is given
pursuant to subsection 2.1(D). The basis for determining the interest rate with
-----------------
respect to any Loan or a portion of any Loan may be changed from time to time
pursuant to subsection 2.2(E). If on any day a Loan or a portion of any Loan is
-----------------
outstanding with respect to which notice has not been delivered to Lender in
accordance with the terms of this Agreement specifying the basis for determining
the rate of interest, then for that day that Loan or portion thereof shall bear
interest determined by reference to the Base Rate.
After the occurrence and during the continuance of an Event of Default (i) the
Loans and all other Obligations shall, at Lender's option, bear interest at a
rate per annum equal to two percent (2.0%) plus the applicable Interest Rate
(the "Default Rate"), (ii) each LIBOR Loan shall automatically convert to a Base
Rate Loan at the end of any applicable Interest Period and (iii) no Loans may be
converted to LIBOR Loans.
(B) Interest Periods. In connection with each LIBOR Loan, Borrower
----------------
shall elect an interest period (each an "Interest Period") to be applicable to
such Loan, which Interest Period shall be either a one, two, three or six month
period; provided that:
(1) the initial Interest Period for any LIBOR Loan shall commence
on the Funding Date of such Loan;
17
(2) in the case of successive Interest Periods, each successive
Interest Period shall commence on the day on which the immediately preceding
Interest Period expires;
(3) if an Interest Period expiration date is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day; provided
that if any Interest Period expiration date is not a Business Day but is a day
of the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the immediately preceding Business Day;
(4) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall, subject to part
(5), below, end on the last Business Day of a calendar month;
(5) no Interest Period shall extend beyond the Termination Date;
(6) no Interest Period may extend beyond a scheduled principal
payment date unless the sum of (a) the aggregate principal amount of Loans that
are Base Rate Loans or that have Interest Periods expiring on or before such
date and (b) the available, unused Revolving Loan Commitment or Borrowing Base
equals or exceeds the principal amount required to be paid on the Loans on such
date; and
(7) there shall be no more than three (3) Interest Periods
relating to LIBOR Loans outstanding at any time.
(C) Computation and Payment of Interest. Interest on the Loans and all
-----------------------------------
other Obligations shall be computed on the daily principal balance on the basis
of a 360 day year for the actual number of days elapsed in the period during
which it accrues. In computing interest on any Loan, the date of funding of the
Loan or the first day of an Interest Period applicable to such Loan or, with
respect to a Base Rate Loan being converted from a LIBOR Loan, the date of
conversion of such LIBOR Loan to such Base Rate Loan, shall be included; and the
date of payment of such Loan or the expiration date of an Interest Period
applicable to such Loan, or with respect to a Base Rate Loan being converted to
a LIBOR Loan, the date of conversion of such Base Rate Loan to such LIBOR Loan,
shall be excluded; provided that if a Loan is repaid on the same day on which it
--------
is made, one day's interest shall be paid on that Loan. Interest on Base Rate
Loans and all other Obligations other than LIBOR Loans shall be payable to
Lender monthly in arrears on the first day of each month, on the date of any
prepayment of Loans, and at maturity, whether by acceleration or otherwise.
Interest on LIBOR Loans shall be payable to Lender on the last day of the
applicable Interest Period for such Loan, on the date of any prepayment of the
Loans, and at maturity, whether by acceleration or otherwise. In addition, for
each LIBOR Loan having an Interest Period longer than three (3) months, interest
accrued on such Loan shall also be payable on the last day of each three (3)
month interval during such Interest Period.
18
(D) Interest Laws. Notwithstanding any provision to the contrary
-------------
contained in this Agreement or any other Loan Document, Borrower shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by applicable law
("Excess Interest"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Agreement or
in any other Loan Document, then in such event: (1) the provisions of this
subsection shall govern and control; (2) neither Borrower nor any other Loan
Party shall be obligated to pay any Excess Interest; (3) any Excess Interest
that Lender may have received hereunder shall be, at Lender's option, (a)
applied as a credit against the outstanding principal balance of the Obligations
or accrued and unpaid interest (not to exceed the maximum amount permitted by
law), (b) refunded to the payor thereof, or (c) any combination of the
foregoing; (4) the interest rate(s) provided for herein shall be automatically
reduced to the maximum lawful rate allowed from time to time under applicable
law (the "Maximum Rate"), and this Agreement and the other Loan Documents shall
be deemed to have been and shall be, reformed and modified to reflect such
reduction; and (5) neither Borrower nor any Loan Party shall have any action
against Lender for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligations is calculated at the Maximum Rate rather than the
applicable rate under this Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such
Obligations shall remain at the Maximum Rate until Lender shall have received
the amount of interest which Lender would have received during such period on
such Obligations had the rate of interest not been limited to the Maximum Rate
during such period.
(E) Conversion or Continuation. Subject to the provisions of
--------------------------
subsection 2.2, Borrower shall have the option to (1) convert at any time all or
--------------
any part of outstanding Loans equal to $500,000 and integral multiples of
$100,000 in excess of that amount from Base Rate Loans to LIBOR Loans or (2)
upon the expiration of any Interest Period applicable to a LIBOR Loan, to (a)
continue all or any portion of such LIBOR Loan equal to $500,000 and integral
multiplies of $100,000 in excess of that amount as a LIBOR Loan or (b) convert
all or any portion of such LIBOR Loan to a Base Rate Loan. The succeeding
Interest Period(s) of such continued or converted Loan commence on the last day
of the Interest Period of the Loan to be continued or converted; provided that
no outstanding Loan may be continued as, or be converted into, a LIBOR Loan,
when any Event of Default or Default has occurred and is continuing.
Borrower shall deliver a notice of conversion/continuation to Lender
no later than 11:00 a.m. (Central time) at least three (3) Business Days in
advance of the proposed conversion/ continuation date ("Notice of
Conversion/Continuation"). A Notice of Conversion/Continuation shall certify:
(1) the proposed conversion/continuation date (which shall be a Business Day);
(2) the amount of the Loan to be converted/continued; (3) the nature of the
proposed conversion/continuation; (4) in the case of conversion to, or a
continuation of, a LIBOR Loan, the requested Interest Period; and (5) that no
Default or Event of Default has occurred and is continuing or would result from
the proposed conversion/continuation.
19
In lieu of delivering the Notice of Conversion/Continuation, Borrower
may give Lender telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2(E); provided that such notice
-----------------
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Lender on or before the proposed
conversion/continuation date.
Lender shall not incur any liability to Borrower in acting upon any
telephonic notice referred to above that Lender believes in good faith to have
been given by a duly authorized officer or other person authorized to act on
behalf of Borrower or for otherwise acting in good faith under this subsection
----------
2.2(E) and upon conversion/continuation by Lender in accordance with this
------
Agreement pursuant to any telephonic notice, Borrower shall have effected such
conversion or continuation, as the case may be, hereunder.
2.3 Fees.
----
(A) Closing Fee. Borrower shall pay to Lender on the Closing Date a
-----------
closing fee in the amount of $25,000.
(B) Unused Line Fee. Borrower shall pay to Lender a fee in an amount
---------------
equal to the Revolving Loan Commitment less the sum of the average daily balance
of the Revolving Loan plus the average daily face amount of the Letter of Credit
Reserve during the preceding month multiplied by one-half percent (0.5%) per
annum, such fee to be calculated on the basis of a 360 day year for the actual
number of days elapsed and to be payable monthly in arrears on the first day of
the first month following the Closing Date and the first day of each month
thereafter.
(C) Letter of Credit Fees. Borrower shall pay to Lender a fee with
---------------------
respect to Lender Letters of Credit in the amount of the average daily amount of
Letter of Credit Liability outstanding during such month multiplied by one-and
one-half percent (1.5%) per annum. Such fees will be calculated on the basis of
a 360 day year for the actual number of days elapsed and will be payable monthly
in arrears on the first day of each month. Borrower shall also reimburse Lender
for any and all fees, costs and expenses, if any, paid by Lender to the issuer
of any Bank Letter of Credit.
(D) Prepayment Fees. If Borrower voluntarily prepays the Obligations
---------------
in full (rather than voluntary prepayments of the Revolving Loan which do not
terminate the Revolving Loan Commitment) prior to the Termination Date, Borrower
at the time of prepayment shall pay to Lender, as compensation for the costs of
being prepared to make funds available to Borrower under this Agreement, and not
as a penalty, an amount determined by multiplying the percentage set forth below
by the Total Loan Commitment: (i) three percent (3.0%) upon a prepayment during
the first Loan Year; (ii) one percent (1.0%) upon a prepayment during the second
Loan Year; and (iii) none thereafter.
20
(E) Audit Fees. Borrower agrees to pay Lender an audit fee for each
----------
inspection equal to $650.00 per auditor per day or any portion thereof,
excluding all full days spent by Lender traveling to or from Borrower's
locations, together with out-of-pocket expenses.
(F) Other Fees and Expenses. Borrower shall pay to Lender, for its own
-----------------------
account, all charges for returned items and all other bank charges incurred by
Lender, as well as Lender's standard wire transfer charges for each wire
transfer made under this Agreement.
2.4 Payments and Prepayments.
------------------------
(A) Manner and Time of Payment. In its sole discretion, Lender may
--------------------------
charge interest and other amounts payable hereunder to the Revolving Loan, all
as set forth on Lender's books and records. If Lender elects to xxxx Borrower
for any amount due hereunder, such amount shall be immediately due and payable
with interest thereon as provided herein. All payments made by Borrower with
respect to the Obligations shall be made without deduction, defense, setoff or
counterclaim. All payments to Lender hereunder shall, unless otherwise directed
by Lender, be made in accordance with subsection 5.6. Proceeds remitted to
--------------
Lender's Account shall be credited to the Obligations on the Business Day good
funds were received in such account.
(B) Mandatory Prepayments.
---------------------
(1) Overadvance. At any time that the Revolving Loan exceeds the
-----------
Maximum Revolving Loan Amount, Borrower shall immediately repay the Revolving
Loan to the extent necessary to reduce the principal balance to an amount that
is equal to or less than the Maximum Revolving Loan Amount.
(2) Proceeds of Asset Dispositions. Immediately upon receipt by
------------------------------
Borrower or any of its Subsidiaries of proceeds of any Asset Disposition (in one
or a series of related transactions), which proceeds exceed $10,000 (it being
understood that if the proceeds exceed $10,000, the entire amount and not just
the portion above $10,000 shall be subject to this subsection 2.4(B)(2)),
---------------------
Borrower shall prepay the Revolving Loan in an amount equal to such proceeds.
(C) Voluntary Prepayments and Repayments. Borrower may, at any time
------------------------------------
upon not less than three (3) Business Days' prior notice to Lender, prepay the
CAPEX Loan or terminate the Revolving Loan Commitment; provided, however, the
--------
Revolving Loan Commitment may not be terminated by Borrower until the CAPEX Loan
is paid in full. Upon termination of the Revolving Loan Commitment, Borrower
shall cause Lender to be released from all liability under any Lender Letters of
Credit, or, at Lender's option, Borrower will deposit cash collateral with
Lender in an amount equal to one-hundred percent (100%) of the Letter of Credit
Liability that will remain outstanding after prepayment or repayment plus
----
estimated costs.
(D) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the
21
next succeeding Business Day and such extension of time shall be included in the
computation of the amount of interest or fees due hereunder.
2.5 Term of this Agreement. This Agreement shall be effective until the
----------------------
third anniversary of the Closing Date (the "Termination Date"). The Commitments
shall (unless earlier terminated) terminate upon the earlier of (i) the
occurrence of an event specified in subsection 8.3 or (ii) the Termination Date.
--------------
Upon termination in accordance with subsection 8.3 or on the Termination Date,
--------------
all Obligations shall become immediately due and payable without notice or
demand. Notwithstanding any termination, until all Obligations have been fully
paid and satisfied, Lender shall be entitled to retain security interests in and
liens upon all Collateral, and even after payment of all Obligations hereunder,
Borrower's obligation to indemnify Lender in accordance with the terms hereof
shall continue.
2.6 Statements. Lender shall render a monthly statement of account to
----------
Borrower within twenty (20) days after the end of each month. Such statement of
account shall constitute a final and definitive statement of account unless
Borrower makes written objection thereto within thirty (30) days from the date
such statement is mailed to Borrower. Borrower promises to pay all of its
Obligations as such amounts become due or are declared due pursuant to the terms
of this Agreement.
2.7 Grant of Security Interest. To secure the payment and performance of
--------------------------
the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, Borrower hereby grants to Lender
a continuing security interest, lien and mortgage in and to all right, title and
interest of Borrower in the following property of Borrower, whether now owned or
existing or hereafter acquired or arising and regardless of where located (all
being collectively referred to as the "Collateral"): (A) Accounts, and all
guaranties and security therefor, and all goods and rights represented thereby
or arising therefrom including the rights of stoppage in transit, replevin and
reclamation; (B) Inventory; (C) general intangibles (as defined in the UCC); (D)
documents (as defined in the UCC) or other receipts covering, evidencing or
representing goods; (E) instruments (as defined in the UCC); (F) chattel paper
(as defined in the UCC); (G) Equipment; (H) Mortgaged Property; (I) Intellectual
Property; (J) all deposit accounts of Borrower maintained with any bank or
financial institution; (K) all cash and other monies and property of Borrower in
the possession or under the control of Lender or any participant; (L) all
investment property (as defined in the UCC); (M) all books, records, ledger
cards, files, correspondence, computer programs, tapes, disks and related data
processing software that at any time evidence or contain information relating to
any of the property described above or are otherwise necessary or helpful in the
collection thereof or realization thereon; and (N) proceeds of all or any of the
property described above, including, without limitation, the proceeds of any
insurance policies covering any of the above described property.
2.8 Capital Adequacy and Other Adjustments. In the event Lender shall have
--------------------------------------
determined that the adoption after the date hereof of any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by Lender or any corporation controlling
22
Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) from any central
bank or governmental agency or body having jurisdiction does or shall have the
effect of increasing the amount of capital, reserves or other funds required to
be maintained by Lender or any corporation controlling Lender and thereby
reducing the rate of return on Lender's or such corporation's capital as a
consequence of its obligations hereunder, then Borrower shall from time to time
within fifteen (15) days after notice and demand from Lender (together with the
certificate referred to in the next sentence) pay to Lender additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to the
amount of such cost and showing the basis of the computation of such cost
submitted by Lender to Borrower shall, absent manifest error, be final,
conclusive and binding for all purposes.
2.9 Taxes.
-----
(A) No Deductions. Any and all payments or reimbursements made
-------------
hereunder or under the CAPEX Notes shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto; excluding, however, the
following: taxes imposed on the net income of Lender by the jurisdiction under
the laws of which Lender is organized or doing business or any political
subdivision thereof and taxes imposed on its net income by the jurisdiction of
Lender's applicable lending office or any political subdivision thereof (all
such taxes, levies, imposts, deductions, charges or withholdings and all
liabilities with respect thereto excluding such taxes imposed on net income,
herein "Tax Liabilities"). If Borrower shall be required by law to deduct any
such Tax Liabilities from or in respect of any sum payable hereunder to Lender,
then the sum payable hereunder shall be increased as may be necessary so that,
after making all required deductions, Lender receives an amount equal to the sum
it would have received had no such deductions been made.
(B) Changes in Tax Laws. In the event that, subsequent to the Closing
-------------------
Date, (i) any changes in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (ii) any new law, regulation, treaty
or directive enacted or any interpretation or application thereof, or (iii)
compliance by Lender with any request or directive (whether or not having the
force of law) from any governmental authority, agency or instrumentality:
(1) does or shall subject Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any Loans
made or Lender Letters of Credit issued hereunder, or change the basis of
taxation of payments to Lender of principal, fees, interest or any other amount
payable hereunder (except for net income taxes, or franchise taxes imposed in
lieu of net income taxes, imposed generally by federal, state or local taxing
authorities with respect to interest or commitment or other fees payable
hereunder or changes in the rate of tax on the overall net income of Lender); or
23
(2) does or shall impose on Lender any other condition or
increased cost in connection with the transactions contemplated hereby or
participations herein; and the result of any of the foregoing is to increase the
cost to Lender of issuing any Lender Letter of Credit or making or continuing
any Loan hereunder, as the case may be, or to reduce any amount receivable
hereunder, then, in any such case, Borrower shall promptly pay to Lender, upon
its demand, any additional amounts necessary to compensate Lender, on an after-
tax basis, for such additional cost or reduced amount receivable, as determined
by Lender with respect to this Agreement or the other Loan Documents. If Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall promptly notify Borrower of the event by reason of which Lender has become
so entitled. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Lender to Borrower shall, absent manifest error,
be final, conclusive and binding for all purposes.
2.10 Required Termination and Prepayment. If on any date any Lender shall
-----------------------------------
have reasonably determined (which determination shall be final and conclusive
and binding upon all parties) that the making or continuation of its LIBOR Loans
has become unlawful or impossible by compliance by Lender in good faith with any
law, governmental rule, regulation or order (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful), then, and
in any such event, that Lender shall promptly give notice (by telephone
confirmed in writing) to Borrower of that determination. Subject to prior
withdrawal of a Notice of Borrowing or a Notice of Conversion/Continuation or
prepayment of LIBOR Loans as contemplated by subsection 2.11, the obligation of
---------------
Lender to make or maintain its LIBOR Loans during any such period shall be
terminated at the earlier of the termination of the Interest Period then in
effect or when required by law and Borrower shall no later than the termination
of the Interest Period in effect at the time any such determination pursuant to
this subsection 2.10 is made or, earlier when required by law, repay or prepay
---------------
LIBOR Loans together with all interest accrued thereon or convert LIBOR Loans to
Base Rate Loans.
2.11 Compensation. Borrower shall compensate Lender, upon written request
------------
by Lender (which request shall set forth in reasonable detail the basis for
requesting such amounts and which shall, absent manifest error, be conclusive
and binding upon all parties hereto), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss sustained by Lender in
connection with the re-employment of such funds), (i) if for any reason (other
than a default by Lender) a borrowing of any LIBOR Loan does not occur on a date
specified therefor in a Notice of Borrowing, a Notice of Conversion/Continuation
or a telephonic request for borrowing or Conversion/Continuation; (ii) if any
prepayment of any of its LIBOR Loans occurs on a date that is not the last day
of an Interest Period applicable to that Loan; (iii) if any prepayment of any of
its LIBOR Loans is not made on any date specified in a notice of prepayment
given by Borrower; or (iv) as a consequence of any other default by Borrower to
repay its LIBOR Loans when required by the terms of this Agreement; provided
that during the period while any such amounts have not been paid, Lender shall
reserve an equal amount from amounts otherwise available to be borrowed under
the Revolving Loan.
24
2.12 Booking of LIBOR Loans. Lender may make, carry or transfer LIBOR Loans
----------------------
at, to, or for the account of, any of its branch offices or the office of an
affiliate of Lender.
2.13 Assumptions Concerning Funding of LIBOR Loans. Calculation of all
---------------------------------------------
amounts payable to Lender under subsection 2.11 shall be made as though Lender
---------------
had actually funded its relevant LIBOR Loan through the purchase of a LIBOR
deposit bearing interest at LIBOR in an amount equal to the amount of that LIBOR
Loan and having maturity comparable to the relevant Interest Period and through
the transfer of such LIBOR deposit from an offshore office to a domestic office
in the United States of America; provided, however, that Lender may fund each of
its LIBOR Loans in any manner it sees fit and the foregoing assumption shall be
utilized only for the calculation of amounts payable under subsection 2.11.
---------------
SECTION 3 CONDITIONS TO LOANS
3.1 Conditions to Loans. The obligations of Lender to make Loans and to
-------------------
issue Lender Letters of Credit on the Closing Date and on each Funding Date are
subject to satisfaction of all of the conditions set forth below:
(A) Closing Deliveries. Lender shall have received, in form and
------------------
substance satisfactory to Lender and, where applicable, duly executed, all
documents, instruments and information identified on Schedule 3.1(A) and all
---------------
other agreements, notes, certificates, orders, authorizations, consents,
opinions, reports, approvals, financing statements, mortgages and other
documents which Lender may at any time reasonably request.
(B) Security Interests. Lender shall have received satisfactory
------------------
evidence that all security interests and liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute first priority liens on the Collateral, subject only to Permitted
Encumbrances.
(C) Closing Date Availability. After giving effect to the consummation
-------------------------
of the transactions contemplated hereunder on the Closing Date and the payment
by Borrower of all costs, fees and expenses relating thereto, the Maximum
Revolving Loan Amount on the Closing Date shall exceed the principal balance of
the Revolving Loan plus the Letter of Credit Reserve by at least $1,000,000.
(D) Representations and Warranties. The representations and warranties
------------------------------
contained herein and in the Loan Documents shall be true, correct and complete
in all material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except for any representation or warranty
limited by its terms to a specific date and taking into account any amendments
to the Schedules or Exhibits as a result of any disclosures made by Borrower to
Lender after the Closing Date and approved by Lender.
25
(E) Fees. With respect to Loans or Lender Letters of Credit to be made
----
or issued on the Closing Date, Borrower shall have paid the fees payable on the
Closing Date referred to in subsection 2.3(A).
-----------------
(F) No Default. No event shall have occurred and be continuing or
----------
would result from the consummation of the requested borrowing or notice
requesting issuance of a Lender Letter of Credit that would constitute an Event
of Default or a Default.
(G) Performance of Agreements. Each Loan Party shall have performed in
-------------------------
all material respects all agreements and satisfied all conditions which any Loan
Document provides shall be performed by it on or before that Funding Date.
(H) No Prohibition. No order, judgment or decree of any court,
--------------
arbitrator or governmental authority shall purport to enjoin or restrain Lender
from making any Loans or issuing any Lender Letters of Credit.
(I) No Litigation. There shall not be pending or, to the knowledge of
-------------
Borrower, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration by, against or affecting any
Loan Party or any of its Subsidiaries or any property of any Loan Party or any
of its Subsidiaries that has not been disclosed by Borrower in writing, and
there shall have occurred no development in any such action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
that, in the opinion of Lender, would reasonably be expected to have a Material
Adverse Effect.
(J) Appraisals. Lender shall have received from appraisers
----------
satisfactory to Lender all appraisals that Lender, in its sole discretion,
requires as of the Closing Date, including, but not limited to, appraisals of
Borrower's inventory and catalog business, and such appraisals are in form and
substance reasonably satisfactory to Lender.
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, to make Loans and to issue
Lender Letters of Credit, Borrower represents and warrants to Lender that the
following statements are and will be true, correct and complete:
4.1 Organization, Powers, Capitalization.
------------------------------------
(A) Organization and Powers. Each of the Loan Parties is a corporation
-----------------------
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and qualified to do business in all states where
such qualification is required except where failure to be so qualified could not
be reasonably expected to have a Material Adverse Effect. Each of the Loan
Parties has all requisite corporate power and authority to own and
26
operate its properties, to carry on its business as now conducted and proposed
to be conducted and to enter into each Loan Document.
(B) Capitalization. The authorized capital stock of each of the Loan
--------------
Parties is as set forth on Schedule 4.1(B)(1). All issued and outstanding shares
------------------
of capital stock of each of the Loan Parties are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens and such shares
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities. The capital stock of each of the Loan Parties is
owned by the stockholders and in the amounts set forth on Schedule 4.1(B)(1). No
------------------
shares of the capital stock of any Loan Party, other than those described above,
are issued and outstanding. There are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition from any Loan Party, of any shares of capital stock
or other securities of any such entity, except as set forth on Schedule
4.1(B)(2).
4.2 Authorization of Borrowing, No Conflict. Borrower has the corporate
---------------------------------------
power and authority to incur the Obligations and to grant security interests in
the Collateral. On the Closing Date, the execution, delivery and performance of
the Loan Documents by each Loan Party signatory thereto will have been duly
authorized by all necessary corporate and shareholder action. The execution,
delivery and performance by each Loan Party of each Loan Document to which it is
a party and the consummation of the transactions contemplated by this Agreement
and the other Loan Documents by each Loan Party do not contravene and will not
be in contravention of any applicable law, the corporate charter or bylaws of
any Loan Party or any agreement or order by which any Loan Party or any Loan
Party's property is bound. This Agreement is, and the other Loan Documents,
including the CAPEX Note, when executed and delivered will be the legally valid
and binding obligations of the applicable Loan Parties respectively, each
enforceable against the Loan Parties, as applicable, in accordance with their
respective terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally and subject to the availability of
equitable remedies.
4.3 Financial Condition. All financial statements concerning Borrower and
-------------------
its Subsidiaries which have been or will hereafter be furnished by Borrower and
its Subsidiaries to Lender pursuant to this Agreement have been or will be
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as disclosed therein) and do or will present fairly the
financial condition of the Persons covered thereby as at the dates thereof and
the results of their operations for the periods then ended. The Projections
delivered and to be delivered have been and will be prepared by Borrower in
light of the past operations of the business of Borrower and its Subsidiaries,
and such Projections represent and will represent the good faith estimate of
Borrower and its senior management concerning the most probable course of its
business as of the date such Projections are prepared and delivered.
4.4 Indebtedness and Liabilities. As of the Closing Date, Borrower does not
----------------------------
have (a) any Indebtedness except (i) as reflected on the financial statements
for the period ended August 31, 1996, previously delivered to Lender, (ii) the
Subordinated Debt or (iii) Indebtedness existing
27
on the Closing Date and identified on Schedule 7.1, or (b) any Liabilities other
------------
than as reflected on such financial statements or as incurred in the ordinary
course of business following the date of such financial statements.
4.5 Account Warranties. Borrower represents, warrants and covenants as to
------------------
each Account that, at the time of its creation, the Account is a valid, bona
fide account, representing an undisputed indebtedness incurred by the named
account debtor for goods actually sold and delivered or for services completely
rendered; there are no setoffs, offsets or counterclaims, genuine or otherwise,
against the Account; the Account does not represent a sale to an Affiliate or a
consignment, sale or return or a xxxx and hold transaction; no agreement exists
permitting any deduction or discount (other than the discount stated on the
invoice); Borrower is the lawful owner of the Account and has the right to
assign the same to Lender; the Account is free of all security interests, liens
and encumbrances other than those in favor of Lender, and the Account is due and
payable in accordance with its terms.
4.6 Names. Schedule 4.6 sets forth all names, trade names, fictitious names
----- ------------
and business names under which Borrower currently conducts business or has at
any time during the past five years conducted business.
4.7 Locations; FEIN. Schedule 4.7 sets forth the location of Borrower's
--------------- ------------
principal place of business, the location of Borrower's books and records, the
location of all other offices of Borrower and all Collateral locations, and such
locations are Borrower's sole locations for its business and the Collateral.
Borrower's federal employer identification number is set forth on the signature
page hereof.
4.8 Title to Properties; Liens. Borrower and each of its Subsidiaries has
--------------------------
good, sufficient and legal title, subject to Permitted Encumbrances, to all its
respective material properties and assets. Except for Permitted Encumbrances,
all such properties and assets are free and clear of Liens. To the best
knowledge of Borrower after due inquiry, there are no actual, threatened or
alleged defaults with respect to any leases of real property under which
Borrower or any of its Subsidiaries is lessee or lessor which would have a
Material Adverse Effect.
4.9 Litigation; Adverse Facts. There are no judgments outstanding against
-------------------------
any Loan Party or affecting any property of any Loan Party nor is there any
action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration now pending or, to the best knowledge of Borrower
after due inquiry, threatened against or affecting any Loan Party or any
property of any Loan Party which could reasonably be expected to result in any
Material Adverse Effect. No Loan Party has received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed to any
liability which could reasonably be expected to result in any Material Adverse
Effect.
4.10 Payment of Taxes. All material tax returns and reports of Borrower and
----------------
each of its Subsidiaries required to be filed by any of them have been timely
filed, and all taxes, assessments, fees and other governmental charges upon such
Persons and upon their respective
28
properties, assets, income and franchises which are shown on such returns as due
and payable have been paid when due and payable. As of the Closing Date, none of
the United States income tax returns of Borrower are under audit. No tax liens
have been filed and no claims (except as otherwise permitted by Section 5.9) are
-----------
being asserted with respect to any such taxes. The charges, accruals and
reserves on the books of Borrower and each of its Subsidiaries in respect of any
taxes or other governmental charges are in accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties and none of their
-------------------------
respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
contractual obligation of any such Person which individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default.
4.12 Employee Benefit Plans. Borrower, each of its Subsidiaries and each
----------------------
ERISA Affiliate is in compliance in all material respects with all applicable
provisions of ERISA, the IRC and all other applicable laws and the regulations
and interpretations thereof with respect to all Employee Benefit Plans. No
material liability has been incurred by Borrower, any of its Subsidiaries or any
ERISA Affiliate which remains unsatisfied for any funding obligation, taxes or
penalties with respect to any Employee Benefit Plan.
4.13 Intellectual Property. Borrower and each of its Subsidiaries owns, is
---------------------
licensed to use or otherwise has the right to use all Intellectual Property used
in or necessary for the conduct of its business as currently conducted, and all
such Intellectual Property is identified on Schedule 4.13.
-------------
4.14 Broker's Fees. No broker's or finder's fee or commission will be
-------------
payable with respect to any of the transactions contemplated hereby.
4.15 Environmental Compliance. Each Loan Party has been and is currently in
------------------------
compliance with all applicable Environmental Laws, including obtaining and
maintaining in effect all permits, licenses or other authorizations required by
applicable Environmental Laws. There are no claims, liabilities, investigations,
litigation, administrative proceedings, whether pending or threatened, or
judgments or orders relating to any Hazardous Materials asserted or threatened
against any Loan Party or relating to any real property currently or formerly
owned, leased or operated by any Loan Party.
4.16 Solvency. After giving effect to the transactions contemplated by the
--------
Loan Documents, including the payment of all applicable fees, costs and
expenses, and as of, from and after the date of this Agreement, Borrower: (a)
owns and will own assets the fair salable value of which are (i) greater than
the total amount of its liabilities (including contingent liabilities) and (ii)
greater than the amount that will be required to pay the probable liabilities of
Borrower as they mature; (b) has capital that is not unreasonably small in
relation to its business as presently
29
conducted or any contemplated or undertaken transaction; and (c) does not intend
to incur and does not believe that it will incur debts beyond its ability to pay
such debts as they become due.
4.17 Disclosure. No representation or warranty of Borrower, any of its
----------
Subsidiaries or any other Loan Party contained in this Agreement, the financial
statements, the other Loan Documents or any other document, certificate or
written statement furnished to Lender by or on behalf of any such Person for use
in connection with the Loan Documents contains any untrue statement of a
material fact or omitted, omits or will omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances in which the same were made. The Projections and pro
forma financial information contained in such materials are based upon good
faith estimates and assumptions believed by such Persons to be reasonable at the
time made, it being recognized by Lender that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. There is no material fact known to Borrower that has had or could have
a Material Adverse Effect and that has not been fully disclosed herein or in
such other documents, certificates and statements furnished to Lender for use in
connection with the transactions contemplated hereby.
4.18 Insurance. Borrower and each of its Subsidiaries maintains adequate
---------
insurance policies for public liability, property damage for its business and
properties, product liability, and business interruption, no notice of
cancellation has been received with respect to such policies and Borrower and
each of its Subsidiaries is in compliance with all material conditions contained
in such policies.
4.19 Compliance with Laws. Neither Borrower nor any of its Subsidiaries is
--------------------
in violation of any law, ordinance, rule, regulation, order, policy, guideline
or other requirement of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of its
business or the ownership of its properties, including, without limitation, any
violation relating to any use, release, storage, transport or disposal of any
Hazardous Material, which violation would subject Borrower or any of its
Subsidiaries, or any of their respective officers to criminal liability or have
a Material Adverse Effect and no such violation has been alleged.
4.20 Bank Accounts. Schedule 4.20 sets forth the account numbers and
------------- -------------
locations of all bank accounts of Borrower and its Subsidiaries.
4.21 Subsidiaries. Borrower has no Subsidiaries other than as set forth on
------------
Schedule 4.21.
-------------
4.22 Employee Matters. Except as set forth on Schedule 4.22, (a) no Loan
---------------- -------------
Party nor any of such Loan Party's employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Loan Party and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no strikes,
slowdowns, work
30
stoppages or controversies pending or, to the best knowledge of Borrower after
due inquiry, threatened between any Loan Party and its respective employees,
other than employee grievances arising in the ordinary course of business which
could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Except as set forth on Schedule 4.22, neither Borrower
-------------
nor any of its Subsidiaries is subject to an employment contract.
4.23 Governmental Regulation. None of the Loan Parties is, or after giving
-----------------------
effect to any loan will be, subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act or the Investment Company Act
of 1940 or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.
Borrower may, at any time and from time to time and subject to subsection
----------
5.13, amend any one or more of the Schedules referred in this Section 4 and any
---- ---------
representation or warranty contained herein which refers to any such Schedule
shall from and after the date of any such amendment refer to such Schedule as so
amended, provided, however, that in no event may the Borrower amend any such
--------
Schedule if such amendment would reflect or evidence a Default or Event of
Default.
SECTION 5 AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall be in effect and until payment in full of all Obligations and
termination of all Lender Letters of Credit, unless Lender shall otherwise give
its prior written consent, Borrower shall perform, and shall cause each of its
Subsidiaries to perform, all covenants in this Section 5 applicable to such
Person.
5.1 Financial Statements and Other Reports. Borrower will maintain, and
--------------------------------------
cause each of its Subsidiaries to maintain, a system of accounting established
and administered in accordance with sound business practices to permit
preparation of financial statements in conformity with GAAP. Borrower will
deliver to Lender the financial statements and other reports described below.
(A) Monthly Financials. As soon as available and in any event within
------------------
twenty-five (25) days after the end of each month, Borrower will deliver (1) the
consolidated and consolidating balance sheet of Borrower and its Subsidiaries as
at the end of such month and the related consolidated and consolidating
statements of income, stockholders' equity and cash flow for such month and for
the period from the beginning of the then current Fiscal Year to the end of such
month, (2) a schedule of the outstanding Indebtedness for borrowed money of
Borrower and its Subsidiaries describing in reasonable detail each such debt
issue or loan outstanding and the principal amount and amount of accrued and
unpaid interest with respect to each such debt issue or loan, and (3) a
perpetual inventory report by store location and distribution center along with
the reconciliation of the perpetual to the general ledger.
31
(B) Quarterly Financials. As soon as available and in any event within
--------------------
forty-five (45) days after the end of each quarter of a Fiscal Year, Borrower
will deliver the consolidated and consolidating balance sheet of Borrower and
its Subsidiaries as at the end of such period and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow for such
quarter of a Fiscal Year and for the period from the beginning of the then
current Fiscal Year to the end of such quarter of a Fiscal Year.
(C) Year-End Financials. As soon as available and in any event within
-------------------
ninety (90) days after the end of each Fiscal Year, Borrower will deliver: (1)
the consolidated balance sheet of Borrower and its Subsidiaries as at the end of
such year and the related consolidated statements of income, stockholders'
equity and cash flow for such Fiscal Year; (2) a schedule of the outstanding
Indebtedness of Borrower and its Subsidiaries describing in reasonable detail
each such debt issue or loan outstanding and the principal amount and amount of
accrued and unpaid interest with respect to each such debt issue or loan; and
(3) a report with respect to the financial statements from a firm of independent
certified public accountants selected by Borrower, and acceptable to Lender,
which report shall be unqualified as to going concern and scope of audit of
Borrower and its Subsidiaries and shall state that (a) such consolidated
financial statements present fairly the consolidated financial position of
Borrower and its Subsidiaries as at the dates indicated and the results of their
operations and cash flow for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years and (b) that the examination by
such accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards; and (4)
copies of the consolidating financial statements of Borrower and its
Subsidiaries, including (a) consolidating balance sheets of Borrower and its
Subsidiaries as at the end of such Fiscal Year showing intercompany eliminations
and (b) related consolidating statements of earnings of Borrower and its
Subsidiaries showing intercompany eliminations.
(D) [intentionally omitted]
(E) Compliance Certificate. Together with the delivery of each set of
----------------------
financial statements referenced in subparts (A), (B) and (C) of this subsection
-----------
5.1, Borrower will deliver to Lender a Compliance Certificate, together with
---
copies of the calculations and work-up employed to determine Borrower's
compliance or noncompliance with the financial covenants set forth in Section 6.
---------
(F) Weekly Borrowing Base Certificates and Inventory Reports. Borrower
--------------------------------------------------------
will deliver to Lender on a weekly basis, on or before 2:00 p.m. (Chicago time)
on the second Business Day of each week, or more frequent basis, as reasonably
requested by Lender, a Borrowing Base Certificate and an Inventory Report as of
close of business on the previous Friday.
(G) Listings and Agings. As soon as available and in any event within
-------------------
five (5) Business Days after the last day of each month, and from time to time
upon the request of
32
Lender, Borrower will deliver to Lender an aged trial balance of all then
existing accounts payable, such report to be in form and substance satisfactory
to Lender.
(H) [intentionally deleted]
(I) Appraisals. From time to time, upon the request of Lender,
----------
Borrower will obtain and deliver to Lender, or will cooperate with Lender to
provide, appraisal reports in form and substance and from appraisers
satisfactory to Lender, stating the then current fair market and orderly
liquidation values of all or any portion of the Collateral; provided, however,
--------
that upon and during the continuation of an Event of Default, such appraisals
shall be performed at Borrower's expense.
(J) Government Notices. Borrower will deliver to Lender promptly after
------------------
receipt copies of all notices, requests, subpoenas, inquiries or other writings
received from any governmental agency concerning any Employee Benefit Plan, the
violation or alleged violation of any Environmental Laws, the storage, use or
disposal of any Hazardous Material, the violation or alleged violation of the
Fair Labor Standards Act or Borrower's payment or non-payment of any taxes
including any tax audit.
(K) SEC Filings. Borrower will deliver to Lender, promptly after the
-----------
sending or filing of, and in any event within ten (10) days of such sending or
filing, copies of all reports and registration statements which Borrower or any
Subsidiary of Borrower files with the Securities and Exchange Commission or any
national securities exchange.
(L) Events of Default, etc. Promptly upon any officer of Borrower
----------------------
obtaining knowledge of any of the following events or conditions, Borrower shall
deliver a certificate of Borrower's chief executive officer specifying the
nature and period of existence of such condition or event and what action
Borrower has taken, is taking and proposes to take with respect thereto: (1) any
condition or event that constitutes an Event of Default or Default; (2) any
notice of default that any Person has given to Borrower or any of its
Subsidiaries or any other action taken with respect to a claimed default; or (3)
any Material Adverse Effect.
(M) Trade Names. Borrower and each of its Subsidiaries will give
-----------
Lender at least thirty (30) days advance written notice of any change of name or
of any new trade name or fictitious business name. Borrower's use of any trade
name or fictitious business name will be in compliance with all laws regarding
the use of such names.
(N) Locations. Borrower will give Lender at least thirty (30) days
---------
advance written notice of any change in Borrower's principal place of business
or any change in the location of its books and records or the Collateral or of
any new location for its books and records or the Collateral.
(O) Bank Accounts. Borrower will give Lender prompt notice of any new
-------------
bank accounts Borrower or any of its Subsidiaries intends to establish prior to
their opening same.
33
(P) Litigation. Promptly upon any officer of Borrower or its
----------
subsidiaries obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrower to Lender or (2) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan Party which
could reasonably be expected to have a Material Adverse Effect, Borrower will
promptly give notice thereof to Lender and provide such other information as may
be reasonably available to them to enable Lender and its counsel to evaluate
such matter.
(Q) Projections. As soon as available and in any event no later than
-----------
the first day of each new Fiscal Year of Borrower, Borrower will deliver
consolidated and consolidating Projections of Borrower and its Subsidiaries for
the forthcoming Fiscal Year, month by month.
(R) Subordinated Debt and Other Indebtedness Notices. Borrower shall
------------------------------------------------
promptly deliver copies of all notices given or received by Borrower and any of
its Subsidiaries with respect to noncompliance with any term or condition
related to any Subordinated Debt or other Indebtedness having an individual
principal amount of $50,000 or more, and shall promptly notify Lender of any
potential or actual event of default with respect to any Subordinated Debt or
other Indebtedness.
(S) Other Information. With reasonable promptness, Borrower will
-----------------
deliver such other information and data with respect to any Loan Party, any
Subsidiary of any Loan Party or the Collateral as Lender may reasonably request
from time to time.
5.2 Access to Accountants. Borrower authorizes Lender to discuss the
---------------------
financial condition and financial statements of Borrower and its Subsidiaries
with Borrower's independent public accountants upon reasonable notice to
Borrower of its intention to do so, and authorizes such accountants to respond
to all of Lender's inquiries.
5.3 Inspection. Borrower shall permit Lender and any authorized
----------
representatives designated by Lender to visit and inspect any of the properties
of Borrower or any of its Subsidiaries, including its and their financial and
accounting records, and in conjunction with such inspection, to make copies and
take extracts therefrom, and to discuss its and their affairs, finances and
business with its and their officers and independent public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested. Borrower acknowledges that Lender intends to make such inspections on
at least a quarterly basis.
5.4 Collateral Records. Borrower shall keep full and accurate books and
------------------
records relating to the Collateral and shall xxxx such books and records to
indicate Lender's security interests in the Collateral.
34
5.5 [intentionally deleted]
5.6 Collection of Accounts and Payments. Borrower shall establish a blocked
-----------------------------------
concentration account (the "Blocked Account") in Borrower's name with such bank
("Collecting Bank") as is acceptable to Lender (subject to irrevocable
instructions acceptable to Lender as hereinafter set forth) in which Borrower
will immediately deposit or cause to be promptly deposited all payments made for
Inventory or other payments constituting proceeds of Collateral in the identical
form in which such payment was made, whether by cash or check, other than
deposits in deposit accounts for retail stores, where funds in excess of the
minimum deposit of $2,000 required for each such account shall be transferred no
less often than weekly to the Blocked Account. The Collecting Bank shall
acknowledge and agree, in a manner satisfactory to Lender, that all payments
made to the Blocked Account are the sole and exclusive property of Lender, and
that the Collecting Bank has no right of setoff against the Blocked Account and
that all such payments received will be promptly transferred to Lender's
Account. Borrower hereby agrees that all payments received by Lender, whether by
cash, check, wire transfer or any other instrument, made to such Blocked Account
or otherwise received by Lender and whether on the Accounts or as proceeds of
other Collateral or otherwise will be the sole and exclusive property of Lender.
Borrower shall irrevocably instruct the Collecting Bank to promptly transfer all
payments or deposits to the Blocked Account into Lender's Account. Borrower, and
any of its Affiliates, employees, agents or other Persons acting for or in
concert with Borrower, shall, acting as trustee for Lender, receive, as the sole
and exclusive property of Lender, any monies, checks, notes, drafts or any other
payments relating to and/or proceeds of Accounts or other Collateral which come
into the possession or under the control of Borrower or any of Borrower's
Affiliates, employees, agents or other Persons acting for or in concert with
Borrower, and Borrower or such Persons shall remit the same or cause the same to
be remitted, in kind, to the Blocked Account or to Lender at its address set
forth in subsection 9.6 below no less often than weekly. Borrower hereby further
--------------
agrees that any bank accounts opened after the date hereof shall comply fully
with the provisions of this subsection 5.6, including, but not limited to, the
--------------
requirement that all funds in any such accounts be transferred no less often
than weekly to the Blocked Accounts.
5.7 Endorsement. Borrower hereby constitutes and appoints Lender and all
-----------
Persons designated by Lender for that purpose as Borrower's true and lawful
attorney-in-fact, with power to endorse Borrower's name to any of the items of
payment or proceeds described in subsection 5.6 above and all proceeds of
--------------
Collateral that come into Lender's possession or under Lender's control. Both
the appointment of Lender as Borrower's attorney and Lender's rights and powers
are coupled with an interest and are irrevocable until payment in full and
complete performance of all of the Obligations.
5.8 Corporate Existence. Borrower will, and will cause each of its
-------------------
Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business.
Borrower will promptly notify Lender of any change in its or its Subsidiaries'
ownership or corporate structure.
35
5.9 Payment of Taxes. Borrower will, and will cause each of its
----------------
Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty accrues thereon
provided that no such tax need be paid if Borrower or one of its Subsidiaries is
--------
contesting same in good faith by appropriate proceedings promptly instituted and
diligently conducted and if Borrower or such Subsidiary has established
appropriate reserves as shall be required in conformity with GAAP.
5.10 Maintenance of Properties; Insurance. Borrower will maintain or cause
------------------------------------
to be maintained in good repair, working order and condition all material
properties used in the business of Borrower and its Subsidiaries and will make
or cause to be made all appropriate repairs, renewals and replacements thereof.
Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers, public liability and property damage insurance with respect
to its business and properties and the business and properties of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts acceptable to Lender. Borrower shall cause Lender to
be named as loss payee on all insurance policies relating to any Collateral and
as additional insured under all liability policies, in each case pursuant to
appropriate endorsements in form and substance satisfactory to Lender and shall
collaterally assign to Lender as security for the payment of the Obligations all
business interruption insurance of Borrower. Borrower shall apply any proceeds
received from any policies of insurance relating to any Collateral to the
Obligations as set forth in subsection 2.4(B).
-----------------
5.11 Compliance with Laws. Borrower will, and will cause each of its
--------------------
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower or any of
its Subsidiaries is now doing business or may hereafter be doing business, other
than those laws the noncompliance with which would not have a Material Adverse
Effect.
5.12 Further Assurances. Borrower shall, and shall cause each of its
------------------
Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Lender such instruments, certificates of title or other
documents as Lender at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents. At Lender's request, Borrower shall cause
any Subsidiaries of Borrower promptly to guaranty the Obligations and to grant
to Lender security interests in the real, personal and mixed property of such
Subsidiary to secure the Obligations.
5.13 Collateral Locations. Borrower will keep the Collateral at the
--------------------
locations specified on Schedule 4.7. With respect to any new location (which in
------------
any event shall be within the United States or Canada), Borrower will (a)
execute such documents and take such actions as Lender deems necessary to
perfect and protect the security interests of the Lender in the
36
Collateral prior to the transfer or removal of any Collateral to such new
location and (b) use its best efforts to timely obtain a Landlord Waiver with
respect to such new location.
5.14 Bailees. If any Collateral is at any time in the possession or control
-------
of any warehouseman, bailee or any of Borrower's agents or processors, Borrower
shall, upon the request of Lender, notify such warehouseman, bailee, agent or
processor of the security interests in favor of Lender created hereby and shall
instruct such Person to hold all such Collateral for Lender's account subject to
Lender's instructions.
5.15 Mortgages; Title Insurance; Surveys.
-----------------------------------
(A) Title Insurance. Within thirty (30) days following delivery of any
---------------
Mortgage required by subsection 5.15(B), Borrower shall deliver or cause to be
------------------
delivered to Lender ALTA lender's title insurance policies issued by title
insurers reasonably satisfactory to Lender (the "Mortgage Policies") in form and
substance and in amounts reasonably satisfactory to Lender assuring Lender that
the Mortgages are valid and enforceable first priority mortgage liens on the
respective Mortgaged Property, free and clear of all defects and encumbrances
except Permitted Encumbrances. The Mortgage Policies shall be in form and
substance reasonably satisfactory to Lender and shall include an endorsement
insuring against the effect of future advances under this Agreement, for
mechanics' liens and for any other matter that Lender may reasonably request,
and shall provide for affirmative insurance and such reinsurance as Lender may
reasonably request.
(B) Mortgaged Property. Lender may from time to time designate real
------------------
property of any Loan Party after the date hereof as "Mortgaged Property", in
which case Borrower shall as promptly as possible (and in any event within sixty
(60) days after such designation) deliver to Lender a fully executed Mortgage,
in form and substance satisfactory to Lender together with title insurance
policies and surveys as required by this subsection 5.15. Borrower agrees that,
---------------
following the taking of the actions with respect to any Mortgaged Property
required by the immediately preceding sentence, Lender shall have a valid and
enforceable first priority mortgage on the respective Mortgaged Property, free
and clear of all defects and encumbrances except for Permitted Encumbrances.
(C) Surveys. Within thirty (30) days following delivery of any
-------
Mortgage, Borrower shall deliver or cause to be delivered to Lender current
surveys, certified by a licensed surveyor, for all real property that is the
subject of the Mortgage Policies. All such surveys shall be sufficient to allow
the issuer of the mortgage policy to issue an ALTA lender's policy.
5.16 Use of Proceeds and Margin Security. Borrower shall use the proceeds
-----------------------------------
of all Loans for proper business purposes (as described in the recitals to this
Agreement) consistent with all applicable laws, statutes, rules and regulations.
No portion of the proceeds of any Loan shall be used by Borrower or any of its
Subsidiaries for the purpose of purchasing or carrying of margin stock within
the meaning of Regulation G or Regulation U, or in any manner that might cause
the borrowing or the application of such proceeds to violate Regulation T or
Regulation X
37
or any other regulation of the Board of Governors of the Federal Reserve System,
or to violate the Exchange Act.
SECTION 6 FINANCIAL COVENANTS
Borrower covenants and agrees that so long as any of the Commitments remain
in effect and until payment in full of all Obligations and termination of all
Lender Letters of Credit, Borrower shall comply with and shall cause each of its
Subsidiaries to comply with all covenants in this Section 6 applicable to such
---------
Person.
6.1 Net Worth. Borrower shall at all times maintain Net Worth of at least
---------
$8,000,000.
6.2 Interest Coverage. Borrower shall not permit Interest Coverage for (a)
-----------------
the fiscal quarter ending March 1, 1997; (b) each multi-month rolling fiscal
period beginning with the rolling four (4) month fiscal period ending April 5,
1997, through the close of each monthly fiscal period thereafter up to a rolling
twelve (12) month fiscal period; or (c) each rolling twelve (12) month fiscal
period thereafter, to be less than 2:1.
SECTION 7 NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any of the Commitments remain
in effect and until payment in full of all Obligations and termination of all
Lender Letters of Credit, unless Borrower has received the prior written consent
of Lender, Borrower shall not and will not permit any of its Subsidiaries to:
7.1 Indebtedness and Liabilities. Directly or indirectly create, incur,
----------------------------
assume, guaranty, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any Indebtedness except: (a) the
Obligations; (b) Indebtedness (excluding capital leases) not to exceed $250,000
in the aggregate at any time outstanding secured by purchase money Liens; (c)
Indebtedness under Capital Leases not to exceed $200,000 outstanding at any time
in the aggregate; (d) operating Leases; (e) the Subordinated Debt; and (f)
Indebtedness existing on the Closing Date and identified on Schedule 7.1. Except
------------
for Indebtedness described permitted in the preceding sentence, Borrower will
not, and will not permit any of its Subsidiaries to, incur any Liabilities
except for trade payables and normal accruals in the ordinary course of business
not yet due and payable or with respect to which Borrower or any of its
Subsidiaries is contesting in good faith the amount or validity thereof by
appropriate proceedings and then only to the extent that Borrower or any of its
Subsidiaries has established adequate reserves therefor, if appropriate under
GAAP.
7.2 Guaranties. Except for endorsements of instruments or items of payment
----------
for collection in the ordinary course of business, guaranty, endorse, or
otherwise in any way become or be responsible for any obligations of any other
Person, whether directly or indirectly by
38
agreement to purchase the indebtedness of any other Person or through the
purchase of goods, supplies or services, or maintenance of working capital or
other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance or loan for the purpose of paying or discharging
any indebtedness or obligation of such other Person or otherwise.
7.3 Transfers, Liens and Related Matters.
------------------------------------
(A) Transfers. Sell, assign (by operation of law or otherwise) or
---------
otherwise dispose of, or grant any option with respect to any of the Collateral
or the assets of such Person, except that Borrower and its Subsidiaries may (i)
sell inventory in the ordinary course of business; and (ii) make Asset
Dispositions if all of the following conditions are met: (1) the market value of
assets sold or otherwise disposed of in any single transaction or series of
related transactions does not exceed $50,000 and the aggregate market value of
assets sold or otherwise disposed of in any Fiscal Year does not exceed
$100,000; (2) the consideration received is at least equal to the fair market
value of such assets; (3) the consideration received is cash or notes, which
notes shall be promptly pledged to Lender; (4) the net proceeds of such Asset
Disposition are applied as required by subsection 2.4(B); (5) after giving
-----------------
effect to the sale or other disposition of the assets included within the Asset
Disposition and the repayment of the Obligations with the proceeds thereof,
Borrower is in compliance on a pro forma basis with the covenants set forth in
Section 6 recomputed for the most recently ended month for which information is
---------
available and is in compliance with all other terms and conditions contained in
this Agreement; and (6) no Default or Event of Default shall then exist or
result from such sale or other disposition.
(B) Liens. Except for Permitted Encumbrances, directly or indirectly
-----
create, incur, assume or permit to exist any Lien on or with respect to any of
the Collateral or the assets of such Person or any proceeds, income or profits
therefrom.
(C) No Negative Pledges. Enter into or assume any agreement (other than the
-------------------
Loan Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
(D) No Restrictions on Subsidiary Distributions to Borrower. Except as
-------------------------------------------------------
provided herein, directly or indirectly create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any such Subsidiary to: (1) pay dividends or make any other
distribution on any of such Subsidiary's capital stock owned by Borrower or any
Subsidiary of Borrower: (2) subject to subordination provisions, pay any
indebtedness owed to Borrower or any other Subsidiary; (3) make loans or
advances to Borrower or any other Subsidiary; or (4) transfer any of its
property or assets to Borrower or any other Subsidiary.
7.4 Investments and Loans. Make or permit to exist investments in or loans
---------------------
to any other Person, except: (a) Cash Equivalents; (b) loans and advances to
employees for moving, entertainment, travel and other similar expenses in the
ordinary course of business in an
39
aggregate outstanding amount not in excess of $50,000 at any time; and (c)
investments or loans existing on the Closing Date and identified on Schedule
--------
7.4.
---
7.5 Restricted Junior Payments. Directly or indirectly declare, order, pay,
--------------------------
make or set apart any sum for any Restricted Junior Payment, except that (a)
Subsidiaries of Borrower may make Restricted Junior Payments with respect to
their common stock to the extent necessary to permit Borrower to pay the
Obligations and to permit Borrower to pay expenses incurred in the ordinary
course of business, and (b) Borrower may (i) pay management fees not in excess
of $400,000 per annum to Xxxxx Xxxxxxxx pursuant to an arm's length agreement
upon fair and reasonable terms which are fully disclosed to Lender and (ii) so
long as no Default or Event of Default has occurred and is continuing, make
payments of interest on the Subordinated Debt in accordance with the terms
thereof.
7.6 Restriction on Fundamental Changes. (a) Enter into any transaction of
----------------------------------
merger or consolidation; (b) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, or the capital stock of any of its
Subsidiaries, whether now owned or hereafter acquired; or (d) acquire by
purchase or otherwise all or any substantial part of the business or assets of,
or stock or other evidence of beneficial ownership of, any Person.
7.7 Changes Relating to Subordinated Debt. Change or amend the terms of the
-------------------------------------
Subordinated Debt if the effect of such amendment is to: (a) increase the
interest rate on such Indebtedness; (b) change the dates upon which payments of
principal or interest are due on such Indebtedness; (c) change any event of
default or add any covenant with respect to such Indebtedness; (d) change the
payment provisions of such Indebtedness; (e) change the subordination provisions
thereof; or (f) change or amend any other term if such change or amendment would
materially increase the obligations of the obligor or confer additional material
rights on the holder of such Indebtedness in a manner adverse to Borrower, any
of its Subsidiaries, or Lender.
7.8 Transactions with Affiliates. Directly or indirectly, enter into or
----------------------------
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of any Loan Party, except for (a) transactions in
the ordinary course of and pursuant to the reasonable requirements of
Borrower's business and upon fair and reasonable terms which are fully disclosed
to Lender and which are no less favorable to Borrower than it would obtain in an
arm's length transaction with an unaffiliated Person, (b) management agreements
with Xxxxx Xxxxxxxx permitted under subsection 7.5 and (c) the Subordinated
--------------
Debt.
7.9 Environmental Liabilities. (a) Violate any applicable Environmental
-------------------------
Law; (b) dispose of any Hazardous Materials (except in accordance with
applicable law) into or onto or from, any real property owned, leased or
operated by any Loan Party; or (c) permit any Lien
40
imposed pursuant to any Environmental Law to be imposed or to remain on any real
property owned, leased or operated by any Loan Party.
7.10 Conduct of Business. From and after the Closing Date, engage in any
-------------------
business other than businesses of the type engaged in by Borrower or any
Subsidiary on the Closing Date.
7.11 Compliance with ERISA. Establish any new Employee Benefit Plan or
---------------------
amend any existing Employee Benefit Plan if the liability or increased liability
resulting from such establishment or amendment is material. Neither Borrower nor
any Subsidiary shall fail to establish, maintain and operate each Employee
Benefit Plan in compliance in all material respects with the provisions of
ERISA, the IRC and all other applicable laws and the regulations and
interpretations thereof.
7.12 Tax Consolidations. File or consent to the filing of any consolidated
------------------
income tax return with any Person other than Borrower or any of its
Subsidiaries.
7.13 Subsidiaries. Establish, create or acquire any new Subsidiaries
------------
without the prior written consent of Lender, which consent shall not be
unreasonably withheld.
7.14 Fiscal Year. Change its Fiscal Year.
-----------
7.15 Press Release; Public Offering Materials. Disclose the name of Lender
----------------------------------------
in any press release or in any prospectus, proxy statement or other materials
filed with any governmental entity relating to a public offering of the capital
stock of any Loan Party except as may be required by law.
7.16 Bank Accounts. (a) Fail to give Lender written notice thereof within
-------------
fifteen (15) days after establishing any new bank accounts, which notice shall
identify the bank or other financial institution, the account number and the
respective store of Borrower establishing and/or making deposits to such bank
account, or (b) amend or terminate the Blocked Account or any agreement relating
hereto without Lender's prior written consent.
SECTION 8 DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default. "Event of Default" shall mean the occurrence or
----------------
existence of any one or more of the following:
(A) Payment. Failure to make payment of any of the Obligations when
-------
due and in the case of interest, such failure shall not be cured within five (5)
days of the applicable due date; or
(B) Default in Other Agreements. (1) Failure of Borrower or any of its
---------------------------
Subsidiaries to pay when due any principal or interest on any Indebtedness
(other than the
41
Obligations) or (2) breach or default of Borrower or any of its Subsidiaries
with respect to any Indebtedness (other than the Obligations); if such failure
to pay, breach or default entitles the holder to cause such Indebtedness having
an individual principal amount in excess of $100,000 or having an aggregate
principal amount in excess of $200,000 to become or be declared due prior to its
stated maturity; or
(C) Breach of Certain Provisions. Failure of Borrower to perform or
----------------------------
comply with any term or condition contained in subsections 5.1, 5.3 or 5.6 or
contained in Section 6 or Section 7; or
(D) Breach of Warranty. Any representation, warranty, certification or
------------------
other statement made by any Loan Party in any Loan Document or in any statement
or certificate at any time given by such Person in writing pursuant or in
connection with any Loan Document is false in any material respect on the date
made; or
(E) Other Defaults Under Loan Documents. Borrower or any other Loan
-----------------------------------
Party defaults in the performance of or compliance with any term contained in
this Agreement or the other Loan Documents and such default is not remedied or
waived within ten (10) days after receipt by Borrower of notice from Lender of
such default (other than occurrences described in other provisions of this
subsection 8.1 for which a different grace or cure period is specified or which
--------------
constitute immediate Events of Default); or
(F) Change in Control. (1) Xxxxx Xxxxxxxx ceases to beneficially own
-----------------
and control, directly or indirectly, at least twenty-five percent (25%) of the
issued and outstanding shares of each class of capital stock of Borrower
entitled (without regard to the occurrence of any contingency) to vote for the
election of a majority of the members of the board of directors of Borrower; or
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court
----------------------------------------------------
enters a decree or order for relief with respect to Borrower or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, which
decree or order is not stayed or other similar relief is not granted under any
applicable federal or state law; or (2) the continuance of any of the following
events for sixty (60) days unless dismissed, bonded or discharged: (a) an
involuntary case is commenced against Borrower or any of its Subsidiaries, under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (b) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over Borrower or any of its Subsidiaries, or over all or a substantial
part of their respective property, is entered; or (c) an interim receiver,
trustee or other custodian is appointed without the consent of Borrower or any
of its Subsidiaries, for all or a substantial part of the property of Borrower
or any such Subsidiary; or
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) An order
--------------------------------------------------
for relief is entered with respect to Borrower or any of its Subsidiaries or
Borrower or any of its
42
Subsidiaries commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case or to the conversion of an
involuntary case to a voluntary case under any such law or consents to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or (2) Borrower or any of its
Subsidiaries makes any assignment for the benefit of creditors; or (3) the board
of directors of Borrower or any of its Subsidiaries adopts any resolution or
otherwise authorizes action to approve any of the actions referred to in this
subsection 8.1(H); or
-----------------
(I) Liens. Any lien, levy or assessment is filed or recorded with
-----
respect to or otherwise imposed upon all or any part of the Collateral or the
assets of Borrower or any of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state, county, municipality or
other governmental agency (other than Permitted Encumbrances) and such lien,
levy or assessment is not stayed, vacated, paid or discharged within ten (10)
days; or
(J) Judgment and Attachments. Any money judgment, writ or warrant of
------------------------
attachment, or similar process involving (1) an amount in any individual case in
excess of $25,000 or (2) an amount in the aggregate at any time in excess of
$50,000 (in either case not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against
Borrower or any of its Subsidiaries or any of their respective assets and
remains undischarged, unvacated, unbonded or unstayed for a period of thirty
(30) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
(K) Dissolution. Any order, judgment or decree is entered against
-----------
Borrower or any of its Subsidiaries decreeing the dissolution or split up of
Borrower or that Subsidiary and such order remains undischarged or unstayed for
a period in excess of twenty (20) days; or
(L) Solvency. Borrower ceases to be solvent (as represented by
--------
Borrower in subsection 4.17) or admits in writing its present or prospective
---------------
inability to pay its debts as they become due; or
(M) Injunction. Borrower or any of its Subsidiaries is enjoined,
----------
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for more than thirty (30) days; or
(N) Invalidity of Loan Documents. Any of the Loan Documents for any
----------------------------
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or any Loan Party denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or
(O) Failure of Security. Lender does not have or ceases to have a
-------------------
valid and perfected first priority security interest in the Collateral (subject
to Permitted Encumbrances), in each case, for any reason other than the failure
of Lender to take any action within its control; or
43
(P) Damage, Strike, Casualty. Any material damage to, or loss, theft
------------------------
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive days beyond
the coverage period of any applicable business interruption insurance, the
cessation or substantial curtailment of revenue producing activities at any
facility of Borrower or any of its Subsidiaries if any such event or
circumstance could reasonably be expected to have a Material Adverse Effect.
(Q) Licenses and Permits. The loss, suspension or revocation of, or
--------------------
failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could reasonably be expected to have a Material Adverse Effect.
(R) Forfeiture. There is filed against Borrower any civil or criminal
----------
action, suit or proceeding under any federal or state racketeering statute
(including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not dismissed
within one-hundred-twenty (120) days; and (2) could reasonably be expected to
result in the confiscation or forfeiture of any material portion of the
Collateral.
8.2 Suspension of Commitments. Upon the occurrence of any Default or Event
-------------------------
of Default, notwithstanding any grace period or right to cure, Lender, without
notice or demand, may immediately cease making additional Loans and the
Commitments shall be suspended; provided that, in the case of a Default, if the
subject condition or event is waived or cured within any applicable grace or
cure period, the Commitments shall be reinstated.
8.3 Acceleration. Upon the occurrence of any Event of Default described in
------------
the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall automatically
------------------ ------
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by
Borrower, and the Commitments shall thereupon terminate. Upon the occurrence and
during the continuance of any other Event of Default, Lender may, by written
notice to Borrower, (a) declare all or any portion of the Obligations to be, and
the same shall forthwith become, immediately due and payable and the Commitment
s shall thereupon terminate and (b) demand that Borrower immediately deposit
with Lender an amount equal to one-hundred percent (100%) of the Letter of
Credit Reserve to enable Lender to make payments under the Lender Letters of
Credit when required and such amount shall become immediately due and payable.
8.4 Remedies. If any Event of Default shall have occurred and be
--------
continuing, in addition to and not in limitation of any rights or remedies
available to Lender at law or in equity, Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and may also (a) notify any or all obligors on the Accounts to make
all payments directly to Lender; (b) require
44
Borrower to, and Borrower hereby agrees that it will, at its expense and upon
request of Lender forthwith, assemble all or part of the Collateral as directed
by Lender and make it available to Lender at a place to be designated by Lender
which is reasonably convenient to both parties; (c) withdraw all cash in the
Blocked Accounts and apply such monies in payment of the Obligations in the
manner provided in subsection 8.7; (d) without notice or demand or legal
process, enter upon any premises of Borrower and take possession of the
Collateral; and (e) without notice, except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Lender's offices or elsewhere, at such time or times, for cash, on
credit or for future delivery, and at such price or prices and upon such other
terms as Lender may deem commercially reasonable. Borrower agrees that, to the
extent notice of sale shall be required by law, at least ten (10) days notice to
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. At any sale
of the Collateral, if permitted by law, Lender may bid (which bid may be, in
whole or in part, in the form of cancellation of indebtedness) for the purchase
of the Collateral or any portion thereof for the account of Lender. Lender shall
not be obligated to make any sale of Collateral regardless of notice of sale
having been given. Borrower shall remain liable for any deficiency. Lender may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. To the extent permitted by law,
Borrower hereby specifically waives all rights of redemption, stay or appraisal
which it has or may have under any law now existing or hereafter enacted. Lender
shall not be required to proceed against any Collateral but may proceed against
Borrower directly.
8.5 Appointment of Attorney-in-Fact. Borrower hereby constitutes and
-------------------------------
appoints Lender as Borrower's attorney-in-fact with full authority in the place
and stead of Borrower and in the name of Borrower, Lender or otherwise, from
time to time in Lender's discretion while an Event of Default is continuing to
take any action and to execute any instrument that Lender may deem necessary or
advisable to accomplish the purposes of this Agreement, including: (a) to ask,
demand, collect, xxx for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; (b) to adjust, settle or compromise the amount or payment of any
Account, or release wholly or partly any customer or obligor thereunder or allow
any credit or discount thereon; (c) to receive, endorse, and collect any drafts
or other instruments, documents and chattel paper, in connection with clause (a)
above; (d) to file any claims or take any action or institute any proceedings
that Lender may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Lender with respect to any of
the Collateral; and (e) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral. The appointment of Lender as Borrower's attorney and
Lender's rights and powers are coupled with an interest and are irrevocable
until payment in full and complete performance of all of the Obligations.
8.6 Limitation on Duty of Lender with Respect to Collateral. Beyond the
-------------------------------------------------------
safe custody thereof, Lender shall have no duty with respect to any Collateral
in its possession or control (or in the possession or control of any agent or
bailee) or with respect to any income thereon or the
45
preservation of rights against prior parties or any other rights pertaining
thereto. Lender shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which Lender accords its own
property. Lender shall not be liable or responsible for any loss or damage to
any of the Collateral, or for any diminution in the value thereof, by reason of
the act or omission of any warehouseman, carrier, forwarding agency, consignee
or other agent or bailee selected by Lender in good faith.
8.7 Application of Proceeds. Upon the occurrence and during the continuance
-----------------------
of an Event of Default, (a) Borrower irrevocably waives the right to direct the
application of any and all payments at any time or times thereafter received by
Lender from or on behalf of Borrower, and Borrower hereby irrevocably agrees
that Lender shall have the continuing exclusive right to apply and to reapply
any and all payments received at any time or times after the occurrence and
during the continuance of an Event of Default against the Obligations in such
manner as Lender may deem advisable notwithstanding any previous entry by Lender
upon any books and records and (b) the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied: first, to
-----
all fees, costs and expenses incurred by Lender with respect to this Agreement,
the other Loan Documents or the Collateral; second, to all fees due and owing to
------
Lender; third, to accrued and unpaid interest on the Obligations; fourth, to the
----- ------
principal amounts of the Obligations outstanding; and fifth, to any other
-----
indebtedness or obligations of Borrower owing to Lender.
8.8 License of Intellectual Property. Borrower hereby assigns, transfers
--------------------------------
and conveys to Lender, effective upon the occurrence and during the continuance
of any Event of Default hereunder, the non-exclusive right and license to use
all Intellectual Property owned or used by Borrower together with any goodwill
associated therewith, all to the extent necessary to enable Lender to realize on
the Collateral and any successor or assign to enjoy the benefits of the
Collateral. This right and license shall inure to the benefit of all successors,
assigns and transferees of Lender and its successors, assigns and transferees,
whether by voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is
granted free of charge, without requirement that any monetary payment whatsoever
be made to Borrower by Lender.
8.9 Waivers, Non-Exclusive Remedies. No failure on the part of Lender to
-------------------------------
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement or the other Loan Documents shall operate as a
waiver thereof; nor shall any single or partial exercise by Lender of any right
under this Agreement or any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The rights in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other remedies provided by law.
46
SECTION 9 MISCELLANEOUS
9.1 Assignments and Participations. Lender may assign its rights and
------------------------------
delegate its obligations under this Agreement and further may assign, or sell
participations in, all or any part of the Loans, the Commitments or any other
interest herein to an Affiliate or to another Person. In the case of an
assignment authorized under this subsection 9.1, the assignee shall have, to the
--------------
extent of such assignment, the same rights, benefits and obligations as it would
if it were a Lender hereunder. Lender shall be relieved of its obligations
hereunder with respect to the Commitments or assigned portion thereof. Borrower
hereby acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a "Lender". Lender may furnish any information concerning Borrower and its
Subsidiaries in its possession from time to time to assignees and participants
(including prospective assignees and participants).
9.2 Set Off. In addition to any rights now or hereafter granted under
-------
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, Lender, each assignee of Lender's interest,
and each participant is hereby authorized by Borrower at any time or from time
to time, without notice to Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all balances held by it at any of its offices for the account of Borrower or
any of its Subsidiaries (regardless of whether such balances are then due to
Borrower or its Subsidiaries) and any other property at any time held or owing
by that Lender or assignee to or for the credit or for the account of Borrower
against and on account of any of the Obligations then outstanding; provided,
that no participant shall exercise such right without the prior written consent
of Lender.
Borrower hereby agrees, to the fullest extent permitted by law, that any
Lender, assignee or participant may exercise its right of setoff with respect to
amounts in excess of its pro rata share of the Obligations (or, in the case of a
participant, in excess of its pro rata participation interest in the
Obligations) and that such Lender, assignee or participant, as the case may be,
shall be deemed to have purchased for cash in the amount of such excess,
participations in each other Lender's or holder's share of the Obligations.
9.3 Expenses and Attorneys' Fees. Whether or not the transactions
----------------------------
contemplated hereby shall be consummated, Borrower agrees to promptly pay all
fees, costs and expenses incurred by Lender in connection with any matters
contemplated by or arising out of this Agreement or the other Loan Documents
including the following, and all such fees, costs and expenses shall be part of
the Obligations, payable on demand and secured by the Collateral: (a) fees,
costs and expenses (including attorneys' fees, allocated costs of internal
counsel and fees of environmental consultants, accountants and other
professionals retained by Lender) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents, other than the appraisal of
Borrower's catalog business, and subject to the limitations on reimbursements
set forth in Lender's proposal letter dated September 10, 1996; (b) fees, costs
and expenses (including attorneys' fees, allocated costs of internal counsel and
fees of environmental consultants,
47
accountants and other professionals retained by Lender) incurred in connection
with the review, negotiation, preparation, documentation, execution and
administration of the Loan Documents, the Loans, and any amendments, waivers,
consents, forbearances and other modifications relating thereto or any
subordination or intercreditor agreements; (c) fees, costs and expenses incurred
in creating, perfecting and maintaining perfection of Liens in favor of Lender;
(d) fees, costs and expenses incurred in connection with forwarding to Borrower
the proceeds of Loans including Lender's standard wire transfer fee; (e) fees,
costs, expenses and bank charges, including bank charges for returned checks,
incurred by Lender in establishing, maintaining and handling lock box accounts,
blocked accounts or other accounts for collection of the Collateral; (f) fees,
costs, expenses (including attorneys' fees and allocated costs of internal
counsel) and costs of settlement incurred in collecting upon or enforcing rights
against the Collateral or incurred in any action to enforce this Agreement or
the other Loan Documents or to collect any payments due from Borrower or any
other Loan Party under this Agreement or any other Loan Document or incurred in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement, whether in the nature of a "workout" or in
connection with any insolvency or bankruptcy proceedings or otherwise.
9.4 Indemnity. In addition to the payment of expenses pursuant to
---------
subsection 9.3, whether or not the transactions contemplated hereby shall be
--------------
consummated, Borrower agrees to indemnify, pay and hold Lender and any holder of
the CAPEX Notes, and the officers, directors, employees, agents, consultants,
auditors, persons engaged by Lender and any holder of the CAPEX Notes to
evaluate or monitor the Collateral, affiliates and attorneys of Lender and such
holders (collectively called the "Indemnitees") harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) that may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out of this
Agreement or the other Loan Documents, the consummation of the transactions
contemplated by this Agreement, the statements contained in the commitment
letters, if any, delivered by Lender, Lender's agreement to make the Loans
hereunder, the use or intended use of the proceeds of any of the Loans or the
exercise of any right or remedy hereunder or under the other Loan Documents (the
"Indemnified Liabilities"); provided that Borrower shall have no obligation to
--------
an Indemnitee hereunder with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of that Indemnitee as determined by a
court of competent jurisdiction.
9.5 Amendments and Waivers. No amendment, modification, termination or
----------------------
waiver of any provision of this Agreement or of the other Loan Documents, or
consent to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by Lender and Borrower. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given.
48
9.6 Notices. Unless otherwise specifically provided herein, all notices
-------
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. Central time or, if not, on the
next succeeding Business Day; (c) if delivered by overnight courier, two (2)
days after delivery to such courier properly addressed; or (d) if by U.S. Mail,
four (4) Business Days after depositing in the United States mail, with postage
prepaid and properly addressed.
If to Borrower: THE RIGHT START, INC.
Attn: Xxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: 000-000-0000
With a copy to: MILBANK, TWEED, XXXXXX
& XxXXXX
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: 000-000-0000
If to Lender: XXXXXX FINANCIAL, INC.
Attn: HBC Portfolio Manager
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy No.: 000-000-0000
With a copy to: XXXXXX FINANCIAL, INC.
Attn: Legal Department/HBC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy No. 000-000-0000
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this subsection
----------
9.6.
---
9.7 Survival of Warranties and Certain Agreements. All agreements,
---------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in subsections 9.3 and 9.4 shall survive
--------------- ---
the payment of the Loans and the termination of this Agreement.
49
9.8 Indulgence Not Waiver. No failure or delay on the part of Lender in the
---------------------
exercise of any power, right or privilege shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
9.9 Marshaling; Payments Set Aside. Lender shall not be under any
------------------------------
obligation to marshal any assets in favor of any Loan Party or any other party
or against or in payment of any or all of the Obligations. To the extent that
any Loan Party makes a payment or payments to Lender or Lender enforces its
security interests or exercise its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
9.10 Entire Agreement. This Agreement and the other Loan Documents referred
----------------
to herein embody the final, entire agreement among the parties hereto and
supersede any and all prior commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject matter hereof
and may not be contradicted or varied by evidence of prior, contemporaneous, or
subsequent oral agreements or discussions of the parties hereto. There are no
oral agreements among the parties hereto.
9.11 Independence of Covenants. All covenants hereunder shall be given
-------------------------
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
9.12 Severability. The invalidity, illegality or unenforceability in any
------------
jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
9.13 Headings. Section and subsection headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
9.14 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
--------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL
50
LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.15 Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties hereto and their respective successors and assigns
except that Borrower may not assign its rights or obligations hereunder without
the prior written consent of Lender.
9.16 No Fiduciary Relationship; Limitation of Liabilities.
----------------------------------------------------
(A) No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Lender to Borrower.
(B) Neither Lender, nor any affiliate, officer, director, shareholder,
employee, attorney, or agent of Lender shall have any liability with respect to,
and Borrower hereby waives, releases, and agrees not to xxx any of them upon,
any claim for any special, indirect, incidental, or consequential damages
suffered or incurred by Borrower in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
Borrower hereby waives, releases, and agrees not to xxx Lender or any of
Lender's affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
9.17 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE JURISDICTION
-----------------------
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF XXXX, STATE OF
ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS
OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE CAPEX NOTE OR
THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE CAPEX NOTE, THE OTHER
LOAN DOCUMENTS OR THE OBLIGATIONS.
9.18 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE THEIR
--------------------
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE CAPEX NOTE OR THE OTHER LOAN DOCUMENTS.
BORROWER AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER
IN ENTERING
51
INTO THIS AGREEMENT, THE CAPEX NOTE AND THE OTHER LOAN DOCUMENTS AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER
AND LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH
ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
9.19 Construction. Borrower and Lender each acknowledge that it has had the
------------
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement and the other Loan Documents with its legal counsel and
that this Agreement and the other Loan Documents shall be construed as if
jointly drafted by Borrower and Lender.
9.20 Counterparts; Effectiveness. This Agreement and any amendments,
---------------------------
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto. Delivery of an executed counterpart of a signature
page to this Agreement, any amendments, waivers, consents or supplements, or to
any other Loan Document by telecopier shall be as effective as delivery of a
manually executed counterpart thereof.
9.21 No Duty. All attorneys, accountants, appraisers, and other
-------
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to Borrower or any of Borrower's shareholders or any other Person.
9.22 Confidentiality. Lender shall hold all nonpublic information obtained
---------------
pursuant to the requirements hereof and identified as such by Borrower in
accordance with such Person's customary procedures for handling confidential
information of this nature and in accordance with safe and sound business
practices and in any event may make disclosure to such of its respective
Affiliates, officers, directors, employees, agents and representatives as need
to know such information in connection with the Loans. If any Lender is
otherwise a creditor of a Borrower, such Lender may use the information in
connection with its other credits. Agent and Lenders may also make disclosure
reasonably required by a bona fide offeree or assignee (or participation), or as
required or requested by any Governmental Authority or representative thereof,
or pursuant to legal process, or to its accountants, lawyers and other advisors,
and shall require any such offeree or assignee (or participant) to agree (and
require any of its offerees, assignees or participants to agree) to comply with
this Section 9.22. In no event shall Lender be obligated or required to return
------------
any materials furnished by Borrower; provided, however, each Offeree shall be
required to agree that if it does not become a assignee (or participant) it
shall return all materials furnished to it by Borrower in connection herewith.
52
Witness the due execution hereof by the respective duly authorized officers
of the undersigned as of the date first written above.
XXXXXX FINANCIAL, INC. THE RIGHT START, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxx
Title: SVP Title: Chief Financial Officer
FEIN: 00-0000000
EXHIBITS
Exhibit A Form of Borrowing Base Certificate
Exhibit B Form of Secured CAPEX Note
Exhibit C Form of Compliance Certificate
Exhibit D Form of Inventory Report
SCHEDULES
1.1(A) Other Liens
3.1(A) List of Closing Documents
4.1(B)(1) Capitalization of Loan Parties
4.1(B)(2) Securities Agreements
4.6 Trade Names (Present and Past Five Years)
4.7 Location of Principal Place of Business, Books and
Records and Collateral
4.13 Intellectual Property
4.20 Bank Accounts
4.21 Subsidiaries
4.22 Employee Matters
7.1 Other Indebtedness
7.4 Investments and Loans
Exhibit A
to Loan and Security Agreement
FORM OF BORROWING BASE CERTIFICATE
----------------------------------
[LOGO] XXXXXX BUSINESS CREDIT CERTIFICATE: _________
BORROWING BASE CERTIFICATE DATE: _________
INVENTORY:
---------
DESCRIPTION BALANCE INELIGIBLE RATE AVAILABLE
------------------------------------------------------------------------------------------------------
RETAIL INVENTORY 0.00 0.00 60% 0.00
------------------------------------------------------------------------------------------------------
WAREHOUSE INVENTORY 0.00 0.00 60% 0.00
------------------------------------------------------------------------------------------------------
IN-TRANSIT INVENTORY 0.00 0.00 60% 0.00
------------------------------------------------------------------------------------------------------
1 TOTALS 0.00 0.00 0.00
----------------------------------- ---------------
LETTER OF CREDITS:
-----------------
DESCRIPTION BALANCE INELIGIBLE RATE AVAILABLE
------------------------------------------------------------------------------------------------------
2 INVENTORY 0.00 0.00 60% 0.00
------------------------------------------------------------------------------------------------------
LETTER OF CREDIT AVAILABLE
3 TOTAL COLLATERAL AVAILABILITY (Line 1+2) 0.00
---------------
4 REVOLVER LIMIT 10,000,000.00
--------------- ---------------
5 TOTAL AVAILABILITY (Lessor of Line 4 and 3) $0.00
---------------
LOAN ACTIVITY:
---------------
6 BEGINNING LOAN BALANCE (Line 10 of Prior Certificate) $0.00
--------------- ---------------
7 TOTAL COLLECTIONS 0.00
---------------
8 ADVANCE REQUESTS 0.00
---------------
9 INTEREST, FEES, OTHER ADJUSTMENTS 0.00
--------------- ---------------
10 ENDING LOAN BALANCE (Line 6-7+11+9) $0.00
---------------
11 LETTER OF CREDIT BALANCE ---------------
$0.00
---------------
12 RESERVES (Attach Schedule) $0.00
---------------
13 AVAILABILITY REMAINING (Line 5-10-11-12) ---------------
$0.00
---------------
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING INFORMATION
IS TRUE, COMPLETE AND CORRECT, AND THAT THE COLLATERAL, REFLECTED
HEREIN COMPLIES WITH THE CONDITIONS, TERMS, WARRANTIES,
REPRESENTATIONS AND COVENANTS SET FORTH IN THE LOAN AND SECURITY
AGREEMENT BETWEEN THE UNDERSIGNED AND XXXXXX FINANCIAL, INC. AND ANY
SUPPLEMENTS AND AMENDMENTS, IF ANY, THERETO (THE "AGREEMENT").
BORROWER: AUTHORIZED SIGNATURE/TITLE:
Exhibit B
to Loan and Security Agreement
FORM OF SECURED CAPEX NOTE
--------------------------
$3,000,000 November 14, 1996
FOR VALUE RECEIVED, THE RIGHT START, INC., a California corporation
("Borrower"), promises to pay to the order of XXXXXX FINANCIAL, INC., a Delaware
corporation, ("Payee"), on or before November 18, 1999, the lesser of (i) the
principal amount of three million dollars ($3,000,000), or (ii) the unpaid
principal amount of all advances made by Lender as CAPEX Advances under the Loan
Agreement (as hereinafter defined) payable pursuant to the Loan Agreement.
Borrower also promises to pay interest on the unpaid principal amount
of this Secured CAPEX Note (this "Secured CAPEX Note") at the rates and at the
times which shall be determined in accordance with the provisions of the Loan
and Security Agreement (as hereafter amended, supplemented or otherwise modified
from time to time, the "Loan Agreement"), dated as of November 14, 1996, between
Borrower and Xxxxxx Financial, Inc., as Lender. Capitalized terms used herein
without definition shall have the meanings set forth in the Loan Agreement.
This Secured CAPEX Note is subject to mandatory prepayment as provided
in the Loan Agreement and prepayment at the option of Borrower as provided in
the Loan Agreement.
This Secured CAPEX Note is the "CAPEX Note" as such term is defined
and used in the Loan Agreement, is issued pursuant to the Loan Agreement and is
entitled to the benefits of the Loan Agreement, reference to which is hereby
made for a more complete statement of the terms and conditions under which the
term loan evidenced hereby is made and is to be repaid, and the Collateral by
which this Secured CAPEX Note is secured.
All payments of principal and interest due in respect of this Secured
CAPEX Note shall be made without defense, set off or counterclaim, in lawful
money of the United States of America, and in same day funds and delivered to
Payee by wire transfer to Payee's account, ABA No. 0000-0000-0 Account No.
52-98695 at First National Bank of Chicago, Xxx Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx,
XX 00000, Reference: "Xxxxxx Business Credit for the benefit of The Right Start,
Inc.", or at such other place as shall be designated in writing for such purpose
in accordance with the terms of the Loan Agreement.
THE LOAN AGREEMENT AND THIS SECURED CAPEX NOTE SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Secured CAPEX Note may become, or may be declared to
be, due and payable in the manner, upon the conditions and with the effect
provided in the Loan Agreement.
The terms of this Secured CAPEX Note are subject to amendment only in
the manner provided in the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this
Secured CAPEX Note or the Loan Agreement or the other Loan Documents shall alter
or impair the obligation of Borrower, which is absolute and unconditional, to
pay the principal of and interest on this Secured CAPEX Note at the place, at
the respective times, and in the currency herein prescribed.
Borrower promises to pay all fees, costs and expenses incurred in the
collection and enforcement of this Secured CAPEX Note. Borrower and endorsers of
this Secured CAPEX Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind (except such notices as
may be expressly required under the Loan Agreement or the other Loan Documents)
and, to the full extent permitted by law, the right to plead any statute of
limitations as a defense to any demand hereunder.
Whenever possible, each provision of this Secured CAPEX Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Secured CAPEX Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Secured CAPEX Note.
IN WITNESS WHEREOF, Borrower has caused this Secured CAPEX Note to be
executed and delivered by its duly authorized officer, as of the day and year
first written above.
THE RIGHT START, INC.,
a California corporation
By: _______________________________
Name: _____________________________
Title: ____________________________
2
Exhibit C
to Loan and Security Agreement
FORM OF COMPLIANCE CERTIFICATE
------------------------------
[DATE]
Xxxxxx Financial, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: HBC Portfolio
Re: The Right Start, Inc. Compliance Certificate
--------------------------------------------
Ladies and Gentlemen:
This certificate is given in accordance with subsection 5.1(E) of the
Loan and Security Agreement dated as of November 14, 1996, between THE RIGHT
START, INC., and XXXXXX FINANCIAL, INC. (as such agreement may be amended,
restated, supplemented or otherwise modified and in effect from time to time,
the "Loan Agreement"). Capitalized terms used herein without definition shall
have the meanings set forth in the Loan Agreement.
I hereby certify that:
(a) I am the duly elected and acting Chief Financial Officer of
Borrower, and as such am duly authorized to execute and deliver
this certificate on behalf of Borrower.
(b) The financial statements delivered with this certificate in
accordance with subsection [5.1(A)/5.1(B)/5.1(C)] of the Loan
Agreement fairly present in all material respects the financial
condition and results of operations of _________________ as of
the dates of such financial statements.
(c) I have reviewed the terms of the Loan Agreement and have made,
or caused to be made under my supervision, a review in
reasonable detail
Xxxxxx Financial, Inc.
___________________, 19__
Page 2
of the transactions and condition of Borrower and its
Subsidiaries during the accounting period covered by such
financial statements.
(d) Such review has not disclosed the existence during or at the
end of such accounting period, and I have no knowledge,
whether arising out of such review or otherwise, of the
existence during or at the end of such accounting period or
as of the date hereof, of any condition or event that
constitutes a Default or an Event of Default except as set
forth on Schedule 1 hereto, which includes a description of
----------
the nature and period of existence thereof and what action
Borrower has taken, is undertaking and proposes to take with
respect thereto.
(e) Borrower and its Subsidiaries are in compliance with the
covenants contained in Section 6 and subsections 7.1, 7.4
and 7.5 of the Loan Agreement except as set forth below or
described on Schedule 1 attached hereto.
----------
(f) Attached hereto as Schedule 2 is a schedule of each issue of
----------
the outstanding Indebtedness for borrowed money of Borrower
and its Subsidiaries and the Subordinated Debt, showing the
outstanding principal amount thereof and the accrued and
unpaid interest thereon.
In determining compliance with the provisions identified in (e)
above, the following calculations have been made:
1. NET WORTH (subsection 6.1) of Borrower and its Subsidiaries on a
---------
consolidated basis as of ___________________, _____
A. Net Worth in accordance with GAAP $___________
B. Required minimum Net Worth
under subsection 6.1 $ 8,000,000
-----------
C. In Compliance Yes/No
2
Xxxxxx Financial, Inc.
_____________________, 19___
Page 3
2. INTEREST COVERAGE (subsection 6.2)
-----------------
for Borrower and its Subsidiaries
on a consolidated basis
A. [Fiscal quarter] [_______-month fiscal period] covered:
_____________________, 19___ through
_____________________, 19___
1. EBITDA $_________
2. Interest Expenses $_________
3. Actual Interest Coverage
(1 divided by 2) _________
4. Required minimum Interest
Coverage ratio under subsection 6.2 2:1
---------
5. In Compliance Yes/No
B. Twelve-month fiscal period covered:
_____________________, 19___ through
_____________________, 19___
1. EBITDA $_________
2. Interest Expenses $_________
3. Actual Interest Coverage
(1 divided by 2) _________
4. Required minimum Interest
Coverage ratio under subsection 6.2 2:1
---------
5. In Compliance Yes/No
3
Xxxxxx Financial, Inc.
_____________________, 19___
Page 4
3. INDEBTEDNESS (subsection 7.1)
------------
A. Secured purchase money debt (7.1(b))
1. Permitted $ 250,000
----------
2. Actual (excluding capital leases) $__________
3. In Compliance Yes/No
B. Capital Leases (7.1(c))
1. Permitted $ 200,000
----------
2. Actual $__________
3. In Compliance Yes/No
C. Refinancings Of Indebtedness
(7.1(f)) incurred during period
1. [describe debt outstanding]
Balance on Closing Date $__________
2. Amount of refinancing Indebtedness $__________
4. ASSET DISPOSITIONS (subsection 7.3(A))
------------------
Period covered:
____________________, 19___ through
____________________, 19___
A. Describe any sales during period
(other than sales of Inventory in ordinary
course of business ("OCB")) (list each by
market value of assets sold):
_________________________________________
_________________________________________
4
Xxxxxx Financial, Inc.
_____________________, 19___
Page 5
B. Aggregate market value of assets
sold during period (other than
sales of Inventory in OCB $__________
C. Aggregate market value of assets sold
in Fiscal Year (other than sales of
Inventory in OCB) $__________
D. Permitted Assets Dispositions
(individual/aggregate) in any
Fiscal Year $50,000/100,000
--------------
E. In Compliance Yes/No
5. INVESTMENTS (subsection 7.4)
-----------
A. Permitted outstanding employee
Loans and advances $ 50,000
----------
B. Actual outstanding employee
Loans and advances $__________
C. In Compliance Yes/No
6. RESTRICTED JUNIOR PAYMENTS (subsection 7.5)
--------------------------
Period covered:
___________________, 19___ though
___________________, 19___
A. Permitted management fees $ 400,000/yr
-----------
B. Actual management fees paid $___________
C. In Compliance Yes/No
5
Xxxxxx Financial, Inc.
____________________, 19__
Page 6
The foregoing certifications and computations are made as of
____________ [end of fiscal period] and delivered this ____ day of
__________________, 19__.
THE RIGHT START, INC.
By _________________________________
Name _______________________________
Its ________________________________
6
Xxxxxx Financial, Inc.
_____________________, 19__
Page 7
SCHEDULE 1
DEFAULTS AND EVENTS OF DEFAULT
7
Xxxxxx Financial, Inc.
_____________________, 19__
Page 8
SCHEDULE 2
INDEBTEDNESS
8
Exhibit D
to Loan and Security Agreement
FORM OF INVENTORY REPORT
------------------------
Inventory Designation Report and Certification
----------------------------------------------
To: Xxxxxx Financial, Inc. Date Prepared: ________________________
000 Xxxxx Xxxxx Xxxx. Borrower's Name: ________________________
11th Floor Client Number: ________________________
Xxxxxxxx, XX 00000 Address: ________________________
________________________
Pursuant to the terms of our Loan and Security Agreement entered into with
Xxxxxx Financial, Inc. dated _________________ we hereby represent to you that;
(i) all inventory listed below is owned by us free and clear of all encumbrances
except your security agreement; (ii) all inventory is issued for not less than
the amount set forth below and you are named Loss Payee thereunder; (iii) the
inventory values set forth below are based upon the lower of (a) cost on a
first-in first-out basis, or (b) current market; and (iv) the most recent
physical inventory count took place on and was taken by
inventory as of:___________________________
(Done)
Inventory and Reserves Compulation
----------------------------------
GROSS INVENTORY
---------------
------------------
RETAIL STORE INVENTORY (ATTACHED SCHEDULE) $0.00
EAST COAST DISTRIBUTION ------------------
WEST COAST DISTRIBUTION ------------------
INVENTORY IN-TRANSIT ------------------
LETTER OF CREDIT INVENTORY ------------------
OTHER ------------------
GROSS INVENTORY BALANCE ------------------
LESS INELIGIBLE INVENTORY
-------------------------
------------------
DEFECTIVE MERCHANDISE TO BE RETURNED $0.00
LIENED INVENTORY (STATES OF PENNSYLVANIA) ------------------
OTHER INELIGIBLES (PER SECTION 21(B) OF LOAN
AND SECURITY AGREEMENT) ------------------
DUTY AND FREIGHT ON LETTER OF CREDIT INVENTORY ------------------
NET ELIGIBLE INVENTORY ------------------
------------------
RESERVES
--------
------------------
RENTAL RESERVES TO BE TAKEN IN (ATTACHED SCHEDULE) $0.00
EXCESS OF $500,000 PER SECTION ------------------
2.1(A)(2) OF THE LOAN AND
SECURITY AGREEMENT DATED
BORROWER: ____________________________
BY: ____________________________
Authorized Signature
Do Not Use - OFFICE USE ONLY
--------------------------------------------------------------------------------
Received by: Reviewed by: Posted:
--------------------------------------------------------------------------------
SCHEDULE 1.1(A)
to Loan and Security Agreement
OTHER LIENS
1. UCC FILINGS
Debtor Secured Party State Filing No. Date
------ ------------- ----- ---------- ----
The Right Start Pitney Xxxxx Credit Corp. CA 91261914 12/10/91
The Right Start, Inc. AT&T Credit Corp. CA 93092047 5/13/93
dba The Right Start
The Right Start, Inc. AT&T Credit Corp. CA 932422028 12/2/93
dba The Right Start
Catalog
The Right Start STS Systems CA 9613060758 5/8/96
The Right Start Pitney Xxxxx Credit Corp. CA 92099701 5/4/92
Catalog
The Right Start Pitney Xxxxx Credit Corp. CA 92192558 9/3/92
Catalog
The Right Start Pitney Xxxxx Credit Corp. CA 9508960407 3/27/95
Catalog
1
SCHEDULE 3.1(A)
to Loan and Security Agreement
XXXXXX FINANCIAL, INC./THE RIGHT START, INC.
LOAN AND SECURITY AGREEMENT
LIST OF CLOSING DOCUMENTS
1. Loan and Security Agreement (including all exhibits and schedules
thereto)
2. Secured CAPEX Note
3. Initial Borrowing Base Certificate
4. Notice of Initial Borrowing
5. Trademark Security Agreement (including exhibits thereto)
6. Assignment of Insurance Proceeds
7. Blocked Account Agreement
8. Notices of Security Interest in Bank Accounts
9. Warehouse Agreements (plus UCC-1 Financial Statements executed in
conjunction therewith)
a. The Xxx Group, Inc.
b. USCO Distribution Services, Inc.
10. Legal Option of Millbank Tweed Hadley & XxXxxx, special counsel
to Borrower
11. Closing Certificate
12. Accountants Letter
13. Payoff Demands (with wire instructions)
14. Funds Flow Memorandum/Disbursement Instructions
15. Business Plan
16. Projections
1
17. Borrower's Secretary's Certificate (including incumbency)
Exhibit A-Articles of Incorporation
Exhibit B-Bylaws
Exhibit C-Resolutions
18. Certified Charter of Borrower
19. Good Standing Certificates of Borrower for each of the
jurisdictions set forth on Schedule 1 hereto
a. Telephonic confirmation of good standing of the foregoing on
the Closing Date
20. UCC-1s for filing in each of the jurisdictions set forth on
Schedule 2 hereto, each executed by Borrower as Debtor
21. Proof of Insurance conforming with (S) 5.10
22 Proof of termination of existing security interests, including
executed UCC-2s.
2
SCHEDULE 1 TO SCHEDULE 3.1(A)
to Loan and Security Agreement
GOOD STANDING JURISDICTIONS
California
Colorado
Connecticut
Georgia
Illinois
Maryland
Massachusetts
Michigan
Minnesota
Missouri
New Jersey
New York
Pennsylvania
Xxxxxxxx
Xxxxxxxxxx
3
SCHEDULE 2 to SCHEDULE 3.1 (A)
to Loan and Security Agreement
UCC-1 FILING JURISDICTIONS
Office of Secretary of State,
or Jurisdictional Equivalent,
in each of the following:
California
Colorado
Connecticut
Georgia
Illinois
Maryland
Massachusetts
Michigan
Minnesota
Missouri
New Jersey
New York
Pennsylvania
Xxxxxxxx
Xxxxxxxxxx
4
SCHEDULE 4.1(B) (1)
--------------------
Capitalization of Loan Parties
Authorized capital stock of The Right Start, Inc.:
25,000,000 shares of common stock, no par value per share
Principal shareholders of The Right Start, Inc.:
The following table sets forth certain information, as of September 25,
1996, with respect to all those known by the Company to be the beneficial owners
of more than 5% of its outstanding common stock, each director who owns shares
of common stock, certain executive officers of the Company, and all directors
and executive officers of the Company as a group.
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership (1) Percent of Class
------------------------------------ ------------------------ ----------------
KAIM Non-Traditional, L.P. (2) 3,077,709 38.7%
0000 Xxxxxx xx xxx Xxxxx
Xxxxxx Xxxxx
Xxx Xxxxxxx XX 00000
Xxxx Xxxxx (3) 641,693 8.0%
Fortune Fashions
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Primerica Life Insurance Company 631,376 7.9%
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xx 00000
Xxxxxx X. Xxxxxxxx 625,000 7.9%
Xxxxxxxx Co., Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Xxxxxx Xxxxxx 610,000 7.7%
00 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxxx (4) 427,009 5.3%
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Xxxxx X. Xxxxxx (5) 362,300 4.6%
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Xxxxxx X Xxxxxxxxxx (6) 76,193 *
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Xxxxxx Xxxxxxxx (7) 10,317 *
Big Dogs
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxxx (7) 10,317 *
Topa Management
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Xxxxxxx X. Xxxxx (7) 10,317 *
Xxxxx Xxxxxxxx Investment Management, Inc.
0000 Xxxxxx xx xxx Xxxxx
Xxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Xxxxx X. Xxxxx (7)(8) 10,317 *
Xxxxx Xxxxxxxx Investment Management, Inc.
0000 Xxxxxx xx xxx Xxxxx
Xxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxxx (7)(8) 10,317 *
Xxxxx Xxxxxxxx Investment Management, Inc.
1800 Avenue of the Stars
Xxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
All executive offices and directors 4,058,101 51%
as a group (14 persons) (9)
_______________________________
* Less than one percent.
(1) Except as otherwise noted below, the persons named in the table have
sole voting power and investment power with respect to all shares of
common stock shown as beneficially owned by them, subject to community
property laws where applicable.
(2) Xxxxxxx X. Xxxxx is the President, Chief Executive Officer and a
Director of Xxxxx Xxxxxxxx Investment Management, Inc., the general
partner of KAIM Non-Traditional, L.P. ("KAIM"). Xx. Xxxxx has shared
dispositive and voting power with KAIM with respect to the shares. The
shares are held by four investment partnerships for which KAIM serves
as general partner, including 1,261,703 shares held by Kayne, Xxxxxxxx
Non-Traditional Investments, L.P., 861,651 shares held by ARBCO
Associates, L.P., 738,558 shares held by Offense Group Associates,
L.P. and 215,412 shares held by Opportunity Associates, L.P.
(3) Shares include currently exercisable stock options to purchase 10,317
shares of common stock.
(4) Shares include (i) currently exercisable stock options to purchase
388,000 shares held by Xx. Xxxxxxxxx, (ii) 14,939 shares held by the
Company's employee stock ownership plan for the benefit of Xx.
Xxxxxxxxx and (iii) 24,070 shares which vest over time which are held
by the Company's ESPP for the benefit of Xx. Xxxxxxxxx.
(5) Shares include (i) currently exercisable stock options to purchase
333,000 shares held by Xx. Xxxxxx, (ii) 1,204 shares held by the
Company's employee stock ownership plan for the benefit of Xx. Xxxxxx,
- 2 -
(iii) 2,620 shares held by the Company's employee stock ownership plan
for the benefit of Xx. Xxxxxx'x spouse, (iv) 3,991 vested shares held
by the Company's ESPP for the benefit of Xx. Xxxxxx, (v) 695 vested
shares held by the Company's ESPP for the benefit of Xx. Xxxxxx'x
spouse, (vi) 19,020 shares which vest over time which are held by the
Company's ESPP for the benefit of Xx. Xxxxxx and (vii) 2,961 shares
which vest over time which are held by the Company's ESPP for the
benefit of Xx. Xxxxxx'x spouse. Xx. Xxxxxx disclaims beneficial
interest in his spouse's stock in the employee stock ownership plan
and ESPP.
(6) Shares include stock options to purchase 75,000 shares of common stock
and 1,193 shares held by the Company's employee stock ownership plan
for the benefit of Xx. Xxxxxxxxxx.
(7) All shares consist of currently exercisable options to purchase common
stock.
(8) Messrs. Xxxxx and Zelikow are a Senior Vice President and a member of
Xxxxx Xxxxxxxx Investment Management, Inc., respectively; however,
they disclaim beneficial ownership with respect to shares held by KAIM
or any of its affiliates.
(9) Shares include options to purchase common stock beneficially owned by
executive officers and directors, including 75,000 with respect to Xx.
Xxxxxxxxxx, 75,000 with respect to Xx. Xxxxxxxx, 45,000 with respect
to Xx. Xxxxxx, 25,000 with respect to Xx. Xxxxxxxx, 20,000 with
respect to Ms. Mickey, 20,000 with respect to Xx. Xxxxx, 10,317 with
respect to each of Messrs. Feshbach, Hollman, Xxxx Xxxxx, Xxxxxxx
Xxxxx, Xxxxx and Zelikow and 5,000 with respect to Xx. Xxxxxxx. Shares
also include 3,077,709 shares beneficially owned by KAIM for which Xx.
Xxxxxxx X. Xxxxx shares dispositive and voting power.
Authorized capital stock of The Right Start Subsidiary I, Inc.:
1,000 shares of common stock, no par value per share
Sole shareholder of The Right Start Subsidiary I, Inc.:
The Right Start, Inc.: 1000 shares
-3-
SCHEDULE 4.1 (B) (2)
--------------------
Convertible Debenture dated as of October 11, 1996, in the principal amount of
$2,842,000, made in favor of Xxxxxx Xxxxxxx Strategic Partners, L.P.,
convertible into 500,000 shares of common stock of The Right Start, Inc.
Convertible Debenture dated as of October 11, 1996, in the principal amount of
$158,000, made in favor of Strategic Associates, L.P., convertible into
26,333.33 shares of common stock of The Right Start, Inc.
As of November 13, 1996, the following options to purchase the Company's common
stock are issued and outstanding under the Company's various stock plans:
1991 Employee Stock Option Plan: 242,500 shares
1995 Non-employee Director Plan: 61,902 shares (plus shares issued
11/12/96, the number of which has not yet been determined)
As of November 13, 1996, Xxxxxxx Xxxxxxxxx holds options exercisable into
388,000 shares of the Company's common stock.
As of November 13, 1996, Xxxxx Xxxxxx holds options exercisable into 333,000
shares of the Company's common stock.
SCHEDULE 4.6
TRADE NAMES
The Right Start
The Right Start Catalog
The Right Start Store (no longer in use)
The Right Answer (no longer in use)
Children's Wear Digest (sold December 1994)
Markdown Playground (no longer in use)
Weebok Children's Wear Catalog ("Weebok" name used under license agreement with
Reebok dated c.1992; no longer in used since c.1993)
SCHEDULE 4.7
LOCATION OF PRINCIPAL PLACE OF BUSINESS, BOOKS AND RECORDS AND COLLATERAL
Principal place of business and books and records:
Corporate Office-
The Right Start, Inc.
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Collateral locations:
Corporate office (as above)
The Xxx Group (Third Party Distribution Center)
00 Xxxxx Xxxxx Xxxx
Xxxxx, XX 00000
XXXX (Third Party Distribution Center)
00000 Xxxxxxxxxxxx Xxx
Xxxxxxxx, XX 00000
The Right Start stores (see directory for individual locations)
THE RIGHT START, INC. STORE DIRECTORY [LOGO APPEARS HERE]
---------------------------------------
DISTRICT NAME MID-ATLANTIC DISTRICT MANAGER XXXXX NATION
ADDRESS: 0000 Xxxxxx Xxxxxx Xxxxxxxxxx XX 00000
HOME PHONE: 000-000-0000 OFFICE PHONE: 000-000-0000 CELL PHONE:
HOME FAX: V-MAIL EXT: 514 PAGER:
-----------------------------------------------------------------------------------------------------------
STORE # 4 STORE NAME Gwinnett Phone 000 000-0000
- --------
0000 Xxxxxxxx Xxxx Xxxx Xxxxx #00 Fax 000 000-0000
Xxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 12/9/94 Speed Dial 10214
------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxx Store Manager Home Phone 000-000-0000 B-Day Jun 25
Xxxxx Xxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Apr 05
Xxxxxx Xxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Sep 01
------------------------------------------------------------------------------------------------------------
STORE # 5 STORE NAME TOWN CENTER Phone 000 000-0000
- -----------
000 Xxxxxxx Xxxxxxx Xxxxx #000 Fax 000 000-0000
Xxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 11/26/94 Speed Dial 10215
------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxx Area Manager Home Phone B-Day
Xxxx Xxxxxxx Assistant Manager 2 Home Phone B-Day
------------------------------------------------------------------------------------------------------------
STORE # 15 STORE NAME King of Prussia Phone 000 000-0000
-- ---------------
000 Xxxxx Xxxxx Xxxx Xxxxx #0000 Fax 000 000-0000
King of Prussia PA 19406 Modem 000 000-0000
OPEN DATE 11/1/95 Speed Dial 10315
------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxx Store Manager Home Phone 000-000-0000 B-Day Feb 12
Xxxx Xxxxxxxx-Xxxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Jun 30
Xxxxxxx Xxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day
------------------------------------------------------------------------------------------------------------
STORE # 27 STORE NAME Galleria Phone 000 000-0000
-- --------
0000 Xxxxxxxxxx Xxxx Space #1307 Fax 000-000-0000
Xxxxxxxxxx XX 00000 Modem 000-000-0000
OPEN DATE 10/10/96 Speed Dial
------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx Store Manager Home Phone 000-000-0000 B-Day
Xxx Xxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day
Xxxxxxxxx Xxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day
------------------------------------------------------------------------------------------------------------
STORE # 29 STORE NAME Tysons Phone 000 000-0000
-- ------
8030 L Tysons Corner Center Fax 000 000-0000
Mclean VA 22102 Modem 000 000-0000
OPEN DATE 10/10/96 Speed Dial
------------------------------------------------------------------------------------------------------------
Xxxxxxxx Xxxxx Store Manager Home Phone 000-000-0000 B-Day Mar 07
Xxxxxxx Xxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day
------------------------------------------------------------------------------------------------------------
STORE # 33 STORE NAME Fair Oaks Phone 000 000-0000
-- ---------
11835-L Fair Oaks Fax 000 000-0000
Xxxxxxx XX 00000 Modem 000 0000-0000
OPEN DATE 10/31/96 Speed Dial
------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx Store Manager Home Phone 000-000-0000 B-Day
Xxxxx Xxxxxxx Assistant Manager 1 Home Phone B-Day
------------------------------------------------------------------------------------------------------------
---------------------------------------------
Tuesday, October 08, 1996 This is the information as of day of print.
Page 1 of 9 Please forward any revisions to
Xxxxxxx Xxxxxxx via e-mail.
---------------------------------------------
THE RIGHT START, INC. STORE DIRECTORY [LOGO APPEARS HERE]
---------------------------------------
STORE# 38 STORE NAME XXXXXXXXXX MALL Phone 410
-- ---------------
0000 Xxxxxxxxx Xxxxxxxxx #1056 Fax 410
Bethesda MD 20817 Modem 410
OPEN DATE 11/20/96 Speed Dial
.............................................................................................
Xxxxxx Xxxxx Store Manager Home Phone 000-000-0000 B-Day
Xxxxx Xxxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Jan 08
---------------------------------------------------------------------------------------------
-------------------------------------------------
Tuesday, October 08, 1996 This is the information as of day of print.
Page 2 of 9 Please forward any revisions to Xxxxxxx
Xxxxxxx via e-mail.
--------------------------------------------------
THE RIGHT START, INC. STORE DIRECTORY [LOGO APPEARS HERE]
-------------------------------------
District Name Midwest District Manager Xxxxx Xxxxxxxx
Address: 000 Xxxxxx Xxxxxx Xxxx Xxxxx XX 00000
Home Phone: 000-000-0000 Office Phone: 000-000-0000 Cell Phone
Home Fax: 000-000-0000 V-Mail Ext: 331 Pager: 000-000-0000
---------------------------------------------------------------------------------------------------------------------------------
STORE # 0 XXXXX XXXX XXXX XX XXXXXXX Phone 000 000-0000
-- ---------------
X000 Xxxx Xxxxxx Xxx 000 000-0000
Xxxxxxxxxxx XX 00000-0000 Modem 000 000-0000
OPEN DATE 11/5/94 Speed Dial 10217
.................................................................................................................................
Xxx Xxxxxx Training Store Manager Home Phone 000-000-0000 B-Day Jul 22
Xxxxxx Xxxxxx Store Manager In Training Home Phone 000-000-0000 B-Day Sep 24
Xxxxxxxx Xxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Sep 18
---------------------------------------------------------------------------------------------------------------------------------
STORE # 14 STORE NAME WOODFIELD Phone 000 000-0000
-- ---------
F333 Woodfield Mall Fax 000 000-0000
Xxxxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 11/22/95 Speed Dial 10314
.................................................................................................................................
Xxxxx Xxxxxxxxx Store Manager Home Phone 000-000-0000 B-Day May 25
Xxxxxx Xxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Oct 22
Xxxxxxx Xxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Jun 05
---------------------------------------------------------------------------------------------------------------------------------
STORE # 16 STORE NAME OLD ORCHARD Phone 000 000-0000
-- -----------
78 Old Orchard Center Suite #F-78 Fax 000 000-0000
Xxxxxx Xx 00000 Modem 000 000-0000
OPEN DATE 11/8/95 Speed Dial 10316
.................................................................................................................................
Xxxxxx Xxxxxx Store Manager Home Phone 000-000-0000 B-Day Sep 04
Xxxxxx Xxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Feb 15
---------------------------------------------------------------------------------------------------------------------------------
STORE # 19 STORE NAME TWELVE OAKS Phone 000 000-0000
-- -----------
00000 Xxxx Xxxx Xxxxx #X-000 Fax 000 000-0000
Novi MI 48377 Modem 000 000-0000
OPEN DATE 3/28/96 Speed Dial 10319
.................................................................................................................................
Tiffen Long Store Manager Home Phone B-Day
Xxxxx Xxxxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Jan 21
---------------------------------------------------------------------------------------------------------------------------------
STORE # 21 STORE NAME BURNSVILLE Phone 000 000-0000
-- ----------
0000 Xxxxxxxxxx Xxxxxx Fax 000 000-0000
Xxxxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 5/2/96 Speed Dial 10321
.................................................................................................................................
Xxxxxx Xxxxx Store Manager Home Phone 000-000-0000 B-Day Mar 03
Xxxxxxxx Xxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Aug 07
---------------------------------------------------------------------------------------------------------------------------------
STORE # 24 STORE NAME SOMERSET Phone 000 000-0000
-- --------
0000 Xxxx Xxx Xxxxxx Xxxx Xxxxx # X-000 Fax 000 000-0000
Xxxx XX 00000 Modem 000 000-0000
OPEN DATE 8/15/96 Speed Dial
.................................................................................................................................
Xxx Xxxxxx Store Manager Home Phone 000-000-0000 B-Day
Xxxxx Xxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day
---------------------------------------------------------------------------------------------------------------------------------
------------------------------------------
Tuesday, October 08, 1996 This is the information as of day of
Page 3 of 9 print. Please forward any revisions to
Xxxxxxx Xxxxxxx via e-mail.
------------------------------------------
THE RIGHT START, INC. STORE DIRECTORY [LOGO APPEARS HERE]
===============================================
STORE # 26 STORE NAME SAINT LOUIS Phone 000 000-0000
-- -----------
1436 Saint Louis Galleria Fax 000 000-0000
Xxxxx Xxxxx XX 00000 Modem 000 000-0000
OPEN DATE 5/23/96 Speed Dial 10326
..............................................................................................................
Xxxxxx Xxxxxx Store Manager Home Phone 000-000-0000 B-Day Feb 12
Xxxx Xxxxx Store Manager in Training Home Phone 000-000-0000 B-Day
--------------------------------------------------------------------------------------------------------------
STORE # 31 STORE NAME WOODLAND Phone 000 000-0000
-- --------
0000 00xx Xxxxxx, XX Fax 000 000-0000
Xxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 10/24/96 Speed Dial
..............................................................................................................
Xxxxxxx Xxxxxxxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day
Xxxxxxx Xxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day
--------------------------------------------------------------------------------------------------------------
STORE # 34 STORE NAME OAKBROOK CENTER Phone 000 000 0000
-- ---------------
20 Oakbrook Center Fax 000
Xxx Xxxxx XX 00000 Modem 630
OPEN DATE 11/19/96 Speed Dial
..............................................................................................................
Xxx Xxxxxx Store Manager Home Phone 000-000-0000 B-Day Sep 08
--------------------------------------------------------------------------------------------------------------
------------------------------------------------
Tuesday, October 08, 1996 This is the information as of day of print.
Page 4 of 9 Please forward any revisions to
Xxxxxxx Xxxxxxx via e-mail.
------------------------------------------------
The Right Start, Inc. Store Directory [LOGO APPEARS HERE]
==============================================
DISTRICT NAME NORTHEAST DISTRICT MANAGER Xxxxx Xxxxxx
Address: 000 Xxxxxx Xxxxxxx Xxxxxxxxxx XX 00000
Home Phone: 000-000-0000 Office Phone: Cell Phone: 000-000-0000
Home Fax: 000-000-0000 V-Mail Ext.: 478 Pager:
--------------------------------------------------------------------------------------------------------------
STORE # 6 STORE NAME NATICK Phone 000 000-0000
- ------
0000 Xxxxxxxxx Xxxxxx Xxxxx #0000 Fax 000 000-0000
Xxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 10/25/94 Speed Dial 10216
..............................................................................................................
Xxxx Xxxxxxx Store Manager Home Phone 000-000-0000 B-Day Jun 02
Sandreley Xxxxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Oct 22
--------------------------------------------------------------------------------------------------------------
STORE # 10 STORE NAME BURLINGTON Phone 000 000-0000
-- ----------
0 Xxxxxxxxxx Xxxx Xxxxx #0000 Fax 000 000-0000
Xxxxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 11/22/94 Speed Dial 10200
..............................................................................................................
Xxxx Xxxx Training Store Manager Home Phone 000-000-0000 B-Day Feb 01
Xxxxxxx Xxxxxx Store Manager in Training Home Phone 000-000-0000 X-Xxx Xxx 00
Xxxxxxx Xxxxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Aug 09
Xxxxxxx Xxxxx Assistant Manager 2 Home Phone 000-000-0000 B-day Jul 24
--------------------------------------------------------------------------------------------------------------
STORE # 13 STORE NAME SHORT HILLS Phone 000 000-0000
-- -----------
0000 Xxxxxx Xxxxxxxx Fax 000 000-0000
Xxxxx Xxxxx XX 00000 Modem 000 000-0000
OPEN DATE 8/18/95 Speed Dial 10313
..............................................................................................................
Xxx Xxxxxx Store Manager Home Phone 000-000-0000 B-Day Dec 02
Xxx Gorbino Assistant Manager 1 Home Phone 000-000-0000 B-Day Jul 04
Xxxxxx Xxxxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Dec 05
Xxxxx Xxxxxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Jun 04
--------------------------------------------------------------------------------------------------------------
STORE # 17 STORE NAME ROOSEVELT FIELD Phone 000 000-0000
-- --------------
Xxxxx 0 Xxxxx #0000 Fax 000 000-0000
Xxxxxx Xxxx XX 00000 Modem 000 000-0000
OPEN DATE 11/22/95 Speed Dial 10317
..............................................................................................................
Xxxxxxx Xxxxxxx Store Manager Home Phone 000-000-0000 B-Day Jul 27
Xxxxxxxx Xxxxxxx Store Manager in Training Home Phone 000-000-0000 B-Day Sep 08
Xxxxxxxx Xxxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Aug 11
Xxxxx Xxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Nov 06
--------------------------------------------------------------------------------------------------------------
STORE # 18 STORE NAME DANBURY Phone 000 000-0000
-- -------
0 Xxxxxx Xxxxxx Space #B-210 Fax 000 000-0000
Xxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 3/21/96 Speed Dial 10318
..............................................................................................................
Xxxxx Xxxxxxx Store Manager Home Phone 000-000-0000 B-day Sep 27
Xxxxxxxx Xxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-day Jun 25
Xxxxxx Xxxxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-day Apr 16
--------------------------------------------------------------------------------------------------------------
----------------------------------------------
Tuesday, October 08, 1996 This is the information as of day of print.
Page 5 of 9 Please forward any revisions to Xxxxxxx
Xxxxxxx via e-mail.
----------------------------------------------
THE RIGHT START, INC. STORE DIRECTORY [LOGO APPEARS HERE]
--------------------------------------
STORE # 20 STORE NAME BRIDGEWATER Phone 000 000-0000
-- -----------
000 Xxxxxxx Xxx Xxxxx #000 Fax 000 000-0000
Xxxxxxxxxxx XX 00000 Modem 000 000-0000
Open Date 4/17/96 Speed Dial 10320
........................................................................................................................
Xxxxxxx Xxxxxxxx Store Manager Home Phone 000-000-0000 B-Day May 02
Xxxxxxx Xxxxx Store Manager In Training Home Phone 000-000-0000 B-Day Mar 20
Xxxxxxx Xxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Apr 26
------------------------------------------------------------------------------------------------------------------------
STORE # 28 STORE NAME GARDEN STATE Phone 000 000-0000
-- ------------
Routes 4 & 17 Space #C8 Fax 000 000-0000
Xxxxxxx XX 00000 Modem 000 000-0000
Open Date 10/3/96 Speed Dial
........................................................................................................................
Xxxxxxxx Xxxxxxxxxx Store Manager Home Phone 000-000-0000 B-Day Jun 13
Xxxxxxx Xxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Nov 05
Xxxx Xxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Apr 16
------------------------------------------------------------------------------------------------------------------------
STORE # 35 STORE NAME WESTFARMS Phone 310
-- ---------
000 Xxxxxxxxx Xxxx Xxx 000
Xxxxxxxxxx XX 00000 Modem 310
Open Date 11/21/96 Speed Dial
........................................................................................................................
Xxxxx Xxxxxx District Manager Home Phone B-Day
------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------
Tuesday, October 08, 1996 This is the information as of day of print.
Page 6 of 9 Please forward any revisions to Xxxxxxx
Samaligo via e-mail.
-------------------------------------------------
The Right Start, Inc. Store Directory [LOGO APPEARS HERE]
========================================
DISTRICT NAME NORTHWEST DISTRICT MANAGER XXX XXXXXX
Address: 000 00xx Xxxxxx Xxx Xxxxxxxxx XX 00000
Home Phone: 000-000-0000 Office Phone: 000-000-0000 Cell Phone: 000-000-0000
Home Fax: 000-000-0000 V-Mail ext: 350 Pager: 000-000-0000
----------------------------------------------------------------------------------------------------------------------------
STORE # 3 STORE NAME STONERIDGE Phone 000 000-0000
- ----------
0000 Xxxxxxxxxx Xxxx, #X-000 Fax 000 000-0000
Xxxxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 11/14/93 Speed Dial 10213
............................................................................................................................
Xxxxxx Xxxxx Store Manager Home Phone 000-000-0000 B-Day Oct 07
Xxxx Xxxxxx Store Manger In Training Home Phone 000-000-0000 B-Day Feb 16
Xxxxxxxx Xxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Sep 06
---------------------------------------------------------------------------------------------------------------------------
STORE # 11 STORE NAME HILLSDALE Phone 000 000-0000
-- ---------
000 Xxxxxxxxx Xxxx Xxxxx #0000 Fax 000 000-0000
Xxx Xxxxx XX 00000 Modem 000 000-0000
OPEN DATE 12/17/94 Speed Dial 10311
............................................................................................................................
Xxxxx Xxxxx Store Manager Home Phone B-Day
Xxxx Xxxxxx Store Manager In Training Home Phone B-Day
Xxxxxx Xxxxxx-Xxxxxxx Assistant manager 1 Home Phone 000-000-0000 B-day Oct 26
Xxxx Xxxxxxx Assistant manager 2 Home Phone B-Day
----------------------------------------------------------------------------------------------------------------------------
STORE # 12 STORE NAME VALLEY FAIR Phone 000 000-0000
-- ------------
0000 Xxxxxxx Xxxxx Xxxxxxxxx Xxxxx #0000 Fax 000 000-0000
Santa Xxxxx 95050 Modem 000 000-0000
OPEN DATE 12/18/94 Speed Dial 10312
............................................................................................................................
Xxxx Xxxxxxx Store Manager Home Phone B-Day
Xxxxx Xxxxxx Store Manager In Training Home Phone 000-000-0000 B-Day Apr 23
Xxxx Xxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Jun 28
----------------------------------------------------------------------------------------------------------------------------
STORE # 22 STORE NAME BELLEVUE Phone 000 000-0000
-- --------
Bellevue Square Space #168 Fax 000 000-0000
Xxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 5/3/96 Speed Dial 10322
............................................................................................................................
Xxxxxxxx Xxxxxx Store Manager Home Phone 000-000-0000 B-Day Nov 01
Xxxxx Xxxx Store Manager In Training Home Phone 000-000-0000 B-Day Nov 10
Xxxx Xxxxxx Assistant Manager 2 Home Phone B-Day
Xxxxx Xxxxxx Assistant Manager 2 Home Phone B-Day
----------------------------------------------------------------------------------------------------------------------------
STORE # 30 STORE NAME ARDEN FAIR Phone 000 000-0000
-- ----------
0000 Xxxxx Xxx Xxxxx #0000 Fax 000 000-0000
Xxxxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 10/17/96 Speed Dial
............................................................................................................................
Xxxxxxx Xxxxx Store Manager Home Phone 000-000-0000 B-Day
Xxxxxxx Xxxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day
Xxxxx Xxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day
----------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------
Tuesday, October 08, 1996 This is the information as of day of print. Please
Page 7 of 9 forward any revisions to
Xxxxxxx Xxxxxxx via e-mail.
--------------------------------------------------
THE RIGHT START, INC. STORE DIRECTORY [LOGO APPEARS HERE]
-------------------------------------
District Name Southwest District Manager Xxxxxxxxx Xxxxxxx
Address: 0000 Xxxxx Xxxxxx Xxxxx Xxxxxxxx XX 00000
Home Phone: 000-000-0000 Office Phone: 000-000-0000 Cell Phone: 000-000-0000
Home Fax: 000-000-0000 V-Mail Ext: 447 Pager: 000-000-0000
--------------------------------------------------------------------------------------------------------------------
STORE # 1 STORE NAME WESTLAKE VILLAGE Phone 000 000-0000
- ----------------
0000X Xxxxxxxx Xxxxxx Xxxxx Fax 000 000-0000
Xxxxxxxx Xxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 10/21/91 Speed Dial 10211
....................................................................................................................
Xxxxx Xxxx Area Manager Home Phone 000-000-0000 B-Day Oct 11
Xxxxxxx Xxxxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day
Xxxxx Xxxxxx Assistant Manager 2 Home Phone B-Day
Xxxxxxx Xxxxxxx Assistant Manager 2 Home Phone B-Day
--------------------------------------------------------------------------------------------------------------------
STORE # 2 STORE NAME LAGUNA HILLS Phone 000 000-0000
- ------------
00000 Xxxx Xxxxxx Xxxxx, #X-0 Fax 000 000-0000
Xxxxxx Xxxxx XX 00000 Modem 000 000-0000
OPEN DATE 7/1/93 Speed Dial 10212
....................................................................................................................
Xxxx Xxxxxxxxxxx Store Manager Home Phone 000-000-0000 B-Day Sep 16
Xxxxxxxx Xxxxxxx Store Manager In Training Home Phone 000-000-0000 B-Day
Xxxxxxxx Xxxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Jan 11
April Heike Assistant Manager 1 Home Phone 000-000-0000 B-Day Jan 05
--------------------------------------------------------------------------------------------------------------------
STORE # 9 STORE NAME SANTA XXXXX Phone 000 000-0000
- -----------
000 Xxxxx Xxxxxxx Xxxxx #000 Fax 000 000-0000
Xxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 12/4/94 Speed Dial 10219
....................................................................................................................
Xxxxxxxx Xxxxx Store Manager Home Phone 000-000-0000 B-Day
Xxxxxxxx Xxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Sep 22
Kritiya Pokawatana Assistant Manager 2 Home Phone 000-000-0000 B-Day Sep 21
--------------------------------------------------------------------------------------------------------------------
STORE # 23 STORE NAME LOS CERRITOS Phone 000 000-0000
-- ------------
168 Los Cerritos Center Fax 000 000-0000
Xxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 5/23/96 Speed Dial 10323
....................................................................................................................
Xxxx Xxxxx Store Manager Home Phone 000-000-0000 B-Day
--------------------------------------------------------------------------------------------------------------------
STORE # 25 STORE NAME PARK XXXXXXX Phone 000 000-0000
-- ------------
0000 Xxxx Xxxxxxx Xxxxxx Xxxxx Xxxxx #0000 Fax 000 000-0000
Xxxxxxxxx XX 00000 Modem 000 000-0000
OPEN DATE 8/30/96 Speed Dial
....................................................................................................................
Xxxxxx Xxxxxxxxx Training Store Manager Home Phone 000-000-0000 B-Day Nov 09
Xxxxxxxxx XxXxxxx Store manager In Training Home Phone 000-000-0000 B-Day Jan 11
Xxxxxxx Xxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day
Xxxx Xxxxxxx Assistant Manager 2 Home Phone 000-000-0000 B-Day Feb 24
--------------------------------------------------------------------------------------------------------------------
-----------------------------------------------
Tuesday, October 08, 1996 This is the information as of print.
Page 8 of 9 Please forward any revisions to Xxxxxxx
Xxxxxxx via e-mail.
--------------------------------------------
The Right Start, Inc. Store Directory [LOGO APPEARS HERE]
===============================================
STORE # 32 STORE NAME GLENDALE GALLERIA Phone 000-000-0000
-- ----------------
0000 Xxxxxxxx Xxxxxxxx Xxx 000
Xxxxxxxx XX 00000 Modem 818
OPEN DATE 11/7/96 Speed Dial
..............................................................................................................................
Xxxxx Xxxxxx Store Manager Home Phone 000-000-0000 B-Day Oct 09
Xxxxx Xxxxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day
------------------------------------------------------------------------------------------------------------------------------
STORE # 36 STORE NAME WESTSIDE PAVILION Phone 818
-- -----------------
00000 Xxxx Xxxx Xxxxxxxxx Xxxxx 000 Fax 000
Xxxx Xxx Xxxxxxx XX 00000 Modem 818
OPEN DATE 11/21/96 Speed Dial
..............................................................................................................................
Xxxxx Xxxxxx Store Manager Home Phone 000-000-0000 B-Day Jun 17
Xxxx Xxxxx Store Manager In Training Home PhonE 000-000-0000 B-Day
-----------------------------------------------------------------------------------------------------------------------------
STORE # 37 STORE NAME TOPANGA PLAZA Phone 301
-- -------------
0000 Xxxxxxx Xxxxxx Xxxx. #28 Fax 000
Xxxxxx Xxxx XX 00000 Modem 301
OPEN DATE 11/17/96 Speed Dial
............................................................................................................................
Xxxxx Xxxx Area Manager Home Phone 000-000-0000 B-Day Oct 11
Xxxxx Xxxxx Assistant Manager 1 Home Phone 000-000-0000 B-Day Dec 26
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------
Tuesday, October 08, 1996 This is the information as of day of print.
Page 9 of 9 Please forward any revisions to Xxxxxxx Xxxxxxx
via e-mail.
---------------------------------------------------
SCHEDULE 4.13
UNITED STATES TRADEMARK REGISTRATIONS
================================================================================
XXXX INTERNATIONAL REGISTRATION REGISTRATION
CLASS NUMBER DATE
--------------------------------------------------------------------------------
THE RIGHT START 16 1,917,940 9/12/95
--------------------------------------------------------------------------------
THE RIGHT START 42 1,918,619 9/12/95
--------------------------------------------------------------------------------
THE RIGHT START 16 1,919,710 9/19/95
CATALOG
--------------------------------------------------------------------------------
THE RIGHT START 42 1,918,513 9/12/95
PROFESSIONAL
--------------------------------------------------------------------------------
LOOP D' LOOP (28) 28 1,616,864 10/9/90
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
XXXXXX XXXXXX TRADEMARK APPLICATIONS
================================================================================
XXXX INTERNATIONAL APPLICATION FILING DATE
CLASS NUMBER
--------------------------------------------------------------------------------
THE RIGHT START 7 75/067,366 3/4/96
--------------------------------------------------------------------------------
THE RIGHT START 9 75/067,367 3/4/96
--------------------------------------------------------------------------------
THE RIGHT START 20 75/067,374 3/4/96
--------------------------------------------------------------------------------
THE RIGHT START 21 75/067,370 3/4/96
--------------------------------------------------------------------------------
THE RIGHT START 24 75/087,466 4/12/96
--------------------------------------------------------------------------------
THE RIGHT START 25 75/067,371 3/4/96
--------------------------------------------------------------------------------
THE RIGHT START 25 75/067,372 3/4/96
--------------------------------------------------------------------------------
THE RIGHT START 27 75/067,373 3/4/96
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
XXXXXX XXXXXX COPYRIGHT REGISTRATIONS
================================================================================
TITLE REGISTRATION NUMBER REGISTRATION DATE
--------------------------------------------------------------------------------
TWO BABIES/XXXXX START VA 744683 2/29/96
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
XXX XX X XXXX XXXXX XX 000000 3/15/92
================================================================================
CANADIAN TRADEMARK REGISTRATIONS
================================================================================
XXXX INTERNATIONAL REGISTRATION REGISTRATION DATE
CLASS NUMBER
--------------------------------------------------------------------------------
THE RIGHT START 42 TMA434,105 9/30/94
--------------------------------------------------------------------------------
THE RIGHT START 42 TMA434,104 9/30/94
CATALOG
================================================================================
FRENCH TRADEMARK REGISTRATION
================================================================================
XXXX INTERNATIONAL REGISTRATION REGISTRATION DATE
CLASS NUMBER
--------------------------------------------------------------------------------
THE RIGHT START 35 558955 8/24/94
CATALOG
================================================================================
UNREGISTERED MARKS
================================================================================
XXXX GOODS AND SERVICES
--------------------------------------------------------------------------------
THE RIGHT START catalog services in the fields of infant and juvenile
CATALOG furniture, clothing, toys and accessories
--------------------------------------------------------------------------------
DESIGN XXXX (TWO publications, namely booklets, catalogs and magazines,
BABIES) featuring infants' and children's toys and playthings,
furniture, clothing, bedding, sports and transportation
equipment; hygiene, toilet-training and safety
equipment; nutrition and feeding, first aid and health
care equipment, clothing and accessories for expectant
and nursing mothers; and clothing and picture frames
and other memorabilia relating to newborn, parents and
grandparents
--------------------------------------------------------------------------------
mail order and catalog services in the field of
infants' and children's toys and playthings, furniture,
clothing, bedding, sports and transportation equipment;
hygiene, toilet-training and safety equipment; nutrition
and feeding, first aid and health care equipment,
clothing and accessories for expectant and nursing
mothers; and clothing and picture frames and other
memorabilia relating to newborns, parents and
grandparents
================================================================================
The Right Start, Inc
Retail Bank Accounts Fed. Tax ID # 00-0000000 Schedule 4.20
--------------------------------------------------------------------------------------------------------------
Store No. Store Bank & Account No Phone No.
--------------------------------------------------------------------------------------------------------------
002 Laguna Hills Xxxx Niguel Bank (000) 000-0000
00000 Xxxx Xxxxxx Xx. #X-0 000-000000
Xxxxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
000 Xxxxxxxxxx Xxxx xx Xxxxxxx
0000 Xxxxxxxxxx Xxxx #X000 Xxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
000 Xxxxxxxx Xxxxx Xxxx Xxxxx Trust Bank (000) 000-0000*
0000 Xxxxxxxx Xxxx Xx. #000 66-994-944 Press 1,1
Xxxxxx, XX 00000 Last 4
--------------------------------------------------------------------------------------------------------------
005 Town Xxxxxx Nations Bank (800) 299-2265
000 Xxxxxxx Xxxx. #000 01-0674-5582 Press 3,1
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
006 Natick Bay Bank (000) 000-0000*
0000 Xxxxxxxxx Xx. #0000 387-14260 Press 1,1
Xxxxxx, XX 00000 000000-00000000-000 Last 4
--------------------------------------------------------------------------------------------------------------
000 Xxxx xx Xxxxxxx First Bank (000) 000-0000*
X000 Xxxx Xxxxxx 0000-0000-0000 Press 1,1,1
Xxxxxxxxxx, XX 00000 Last 4
--------------------------------------------------------------------------------------------------------------
000 Xxxxx Xxxxx Xxxx xx Xxxxxxx
000 Xxxxx Xxxxxxx #000 Xxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
000 Xxxxxxxxxx Xxx Bank
0 Xxxxxxxxxx Xxxx #0000 See Natick
Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
000 Xxxxxx Xxxx Xxxx xx Xxxxxxx (818) 707-2699*
0000 Xxxxxxx Xxxxx Xxxx. #0000 06689-17603 Last 4
Xxxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
013 Short Hills PNC Bank (000) 000-0000
1200 Xxxxxx Tumpike 00-0000-0000 Press 5
Xxxxx Xxxxx, XX 00000 Customer #8218776875
Pin #
--------------------------------------------------------------------------------------------------------------
000 Xxxxxxxxx Xxxxx Xxxxxxx (000) 000-0000
F333 Woodfield Mall 375001251814
Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
000 Xxxx xx Xxxxxxx XxxxXxxxxx Bank (000) 000-0000
000 Xxxxx Xxxxx Xx. #0000 14106-72322 Press 1,0,1
King Xx Xxxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
016 Old Orchard First American Bank (847) 952-3700
00 Xxx Xxxxxxx Xxxxxx #X00 19671104 Press 2,1
Xxxxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
000 Xxxxxxxxx Xxxxx Xxxxxxxx Bank (000) 000-0000
Xxxxx 0 Xxxxx 0000 9701017304
Xxxxxx Xxxx, XX 00000
--------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
000 Xxxxxxx Xxxx Xxxx First Union (800) 225-5332
0 Xxxxxx Xxx Space B210 3024614723 Press 9,2
Xxxxxxx, XX 00000
------------------------------------------------------------------------------------
000 Xxxxxx Xxxx Xxxx Xxxxxxxx National (000) 000-0000 *
27488 Novi Rd. #C248 5700 94725 1 Press 1
Xxxx, XX 00000 Last 4
------------------------------------------------------------------------------------
000 Xxxxxxxxxxx Xxxxxxx PNC Bank (000) 000-0000 *
000 Xxxxxxx Xxx #000 8010356744 Customer No.
Xxxxxxxxxxx, XX 00000 0953971414
Pin #0755
Press 1,1,1
------------------------------------------------------------------------------------
000 Xxxxxxxxxx Xxxxxx Xxxxxxx Bank (000) 000-0000
0000 Xxxxxxxxxx Xxxxxx 3970122002 Press 0
Xxxxxxxxxx, XX 00000
------------------------------------------------------------------------------------
000 Xxxxxxxx Xxxxxx Seafirst Bank (000) 000-0000 *
Space 000, Xxxxxxxx Xxxxxx 75470302 Press 2,5,1
Xxxxxxxx, XX 00000 1st 5
------------------------------------------------------------------------------------
023 Los Cerritos Bank of America
168 Los Cerritos Center See Valley Xxxx
Xxxxxxxx, XX 00000
------------------------------------------------------------------------------------
000 Xxxxxxxx Xxxxx Xxxxxxxx Xxxxxxx (000) 000-0000
0000 X. Xxx Xxxxx Xxxxxx Xx #X000 2354000132
Xxxx, XX 00000
------------------------------------------------------------------------------------
025 Park Xxxxxxx Security Service (000) 000-0000
0000 Xxxx Xxxxxxx Xxx Xx #0000 Xxxxxxx Credit Union Press 0
Xxxxxxxxx, XX 00000 4304438071
------------------------------------------------------------------------------------
026 St. Louis Galleria Commerce Bank (000) 000-0000 *
1436 St. Louis Galleria 270177733 Press 1,1
Xx. Xxxxx, XX 00000 Access Code 1414
------------------------------------------------------------------------------------
027 Galleria PNC Bank (412) 762-2000
0000 Xxxxxxxxxx Xxxx #0000 0000000000
Xxxxxxxxxx, XX 00000
------------------------------------------------------------------------------------
028 Garden State Summit Bank (000) 000-0000
Xxxxxx 0 & 00 0000 00000 0
Xxxxxxx, XX 00000
------------------------------------------------------------------------------------
029 Tysons Xxxxx Bank (000) 000-0000
8030 L Tysons Corner Center 01816438 Press 1,2,0
XxXxxx, XX 00000
------------------------------------------------------------------------------------
Xxxxx Fargo Bank Accounts
Depository 4737-051888
General 4737-051920
Sweep 4417-828191
Accounts Payable 4759-605827
Payroll 4737-051912
Right Start Refund 4737-051904
Freight 4737-051896
Office Supply 4737-052084
--------------------------------------------------------------------------------------
000 Xxxxxxxx Xxxxxxxx Bank (800)643-4418
0000 00xx Xx. XX 1850291079 Press 0
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------------
000 Xxxxxxx Xxxxx Xxxxxxxxxx Xxxxxxx Bank (818) 883-1550
0000 Xxxxxxx Xxxxxx Xxxx.#00 078 5215795
Xxxxxx Xxxx, XX 00000
--------------------------------------------------------------------------------------
SCHEDULE 4.21
SUBSIDIARIES
The Right Start, Inc. has the following inactive, wholly-owned subsidiary:
The Right Start, Inc. Subsidiary I
SCHEDULE 4.22
-------------
Employee Matters
None.
SCHEDULE 7.1
OTHER INDEBTEDNESS
Loan Agreement between The Right Start, Inc. and Xxxxx Fargo Bank dated June 12,
1995
Finance agreement with Premium Financing Specialists of California, Inc. dated
October 9, 1996; financed amount of $114,554 with eight monthly principal and
interest payments of $14,804.01. Purpose is to pay corporate insurance premiums.
Finance agreement dated April 12, 1996 in the amount of $157,925 with STS
Systems for merchandising system; secured by hardware and operating system.
Letters of credit open as of November 13, 1996 - see attached
THE RIGHT START, INC. 11/14/96
Documentary letters of credit:
Draws
today Balance Expiry Vendor
----- ------- ------ ------
217243 17,205.00 17,205.00 11/30/96 Manhattan Toy
217245 13,888.00 13,888.00 10/20/96 Spectrum
217246 20,730.00 20,730.00 11/2/96 Zak (Xxxx Xxxx) (waiver)
217250 11,904.00 11,904.00 11/4/96 Spectrum
217251 2,556.00 (2,556.00) 0.00 11/16/96 Xxxxxx
000000 90,091.20 90,091.20 12/11/96 Playhut (extended to March 1997)
217253 27,555.00 (26,052.00) 1,503.00 11/11/96 Playtech
-----------------------------------------
183,929.20 (28,608.00) 155,321.20
Standby letters of credit:
228143 50,000.00 50,000.00 4/30/97 Diner's Club
248917 5,467.50 5,467.50 1/23/97 Kingsway Toy (waiver)
-----------------------------------------
55,467.50 55,467.50
239,396.70 210,788.70
========== ==========
Page 1
SCHEDULE 7.4
------------
Investments and Loans
Secured Promissory Note due August 1, 1998 made in favor of the Company by
Blasiar, Inc. (DBA Alert Communications Company) in the initial principal amount
of $248,255. As of November 13, 1996 the current outstanding principal balance
is $219,474.
