LOAN AND SECURITY AGREEMENT
BETWEEN
PARAGON CAPITAL LLC
AND
XXXXXX ELECTRONICS, INC.
TABLE OF CONTENTS
ARTICLE 1 - THE REVOLVING CREDIT
1-1. Establishment of Revolving Credit
1-2. Advances in Excess of Maximum Loan Exposure
1-3. Risks of Value of Inventory
1-4. Procedures Under Revolving Credit
1-5. The Loan Account
1-6. The Master Note
1-7. Pavment of Loan Account
1-8. Interest
1-9. Fees
1-10. Lender's Discretion
1-11. Fees For L/C's
1-12. Concerning L/C's
ARTICLE 2 - GRANT OF SECURITY INTEREST
2-1. Grant of Security Interest
2-2. Extent and Duration of Security Interest
ARTICLE 3 - DEFINITIONS.
ARTICLE 4 - CONDITIONS PRECEDENT.
4-1. Corporate Due Diligence
4-2. Opinion
4-3. Additional Documents
4-4. Key Life Policies
4-5. Officers' Certificates
4-6. Representations and Warranties
4-7. Minimum Excess Availability
4-8. No Event of Default
4-9. No Adverse Change
ARTICLE 5 - GENERAL REPRESENTATIONS. WARRANTIES AND COVENANTS
5-1. Pavment and Performance of Liabilities
5-2. Due Organization - Corporate Authorization - No Conflicts
5-3. Trade Names
5-4. Locations. Landlord's Waivers
5-5. Title to Assets
5-6. Indebtedness
5-7. Insurance Policies
5-8. Licenses
5-9. Leases
5-10. Requirements of Law
5-11. Maintain Properties
5-12. Pay Taxes
5-13. No Margin Stock
5-14. ERISA
5-15. Hazardous Materials
5-16. Litigation
5-17. Dividends or Investments
5-18. Loans
5-19. Protection of Assets
5-20. Line of Business
5-21. Affiliate Transactions
5-22. Executive Pay
5-23. Additional Assurances
5-24. Adequacy of Disclosure
5-25. Other Covenants
ARTICLE 6 - USE AND COLLECTION OF COLLATERAL.
6-1. Use of Inventory Collateral
6-2. Inventory Quality
6-3. Adjustments and Allowances
6-4. Validity of Accounts
6-5. Notification to Account Debtors
ARTICLE 7 - CASH MANAGEMENT
7-1. Depository Accounts
7-2. Credit Card Receipts
7-3. The Transfer and the Funding Accounts
7-4. Proceeds and Collection of Accounts
7-5. Payment of Liabilities
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7-6. The Funding Account
ARTICLE 8 - LENDER AS BORROWER'S ATTORNEY-IN-FACT
8-1. Appointment as Attorney-In-Fact
8-2. No Obligation to Act
ARTICLE 9 - FINANCIAL AND OTHER REPORTING REQUIREMENTS/FINANCIAL
COVENANTS
9-1. Maintain Records
9-2. Access to Records
9-3. Immediate Notice to Lender
9-4. Borrowing Base Certificate
9-5. Weekly Reports
9-6. Monthly Reports
9-7. Quarterly Reports
9-8. Annual Reports
9-9. Officers' Certificates
9-10. Inventories. Appraisals. and Audits
9-11. Additional Financial Information
9-12. Financial Performance Covenants
9-13. Electronic Reporting
ARTICLE 10 - EVENTS OF DEFAULT
10-1. Failure to Pay Revolving Credit
10-2. Failure To Make Other Payments
10-3. Failure to Perform Covenant or Liability (No Grace Period)
10-4. Failure to Perform Covenant or Liability (Grace Period)
10-5. Misrepresentation
10-6. Acceleration of Other Debt. Breach of Lease
10-7. Default Under Other Agreements
10-8. Casualty Loss. Non-Ordinary Course Sales
10-9. Judgment. Restraint of Business
10-10. Business Failure
10-11. Bankruptcy
10-12. Insecurity
10-13. Default by Guarantor or Related Entity
10-14. Indictment - Forfeiture
10-15. Termination of Guaranty
10-16. Challenge to Loan Documents
10-17. Executive Management
10-18. Change in Control
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ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT
11-1. Rights of Enforcement
11-2. Sale of Collateral
11-3. Occupation of Business Location
11-4. Grant of Nonexclusive License
11-5. Assembly of Collateral
11-6. Rights and Remedies
ARTICLE 12 - NOTICES.
12-1. Notice Addresses
12-2. Notice Given
ARTICLE 13 - TERM
13-1. Termination of Revolving Credit
13-2. Effect of Termination
13-3. Prepayment Premium
ARTICLE 14 - GENERAL
14-1. Protection of Collateral
14-2. Successors and Assigns
14-3. Severability
14-4. Amendments. Course of Dealing
14-5. Power of Attorney
14-6. Application of Proceeds
14-7. Lender's Costs and Expenses
14-8. Copies and Facsimiles
14-9. Massachusetts Law
14-10. Consent to Jurisdiction
14-11. Indemnification
14-12. Rules of Construction
14-13. Intent
14-14. Right of Set-Off
14-15. Maximum Interest Rate
14-16. Waivers
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EXHIBITS
1-6 Master Note
3 Definitions
5-2 Related Entities
5-3 Trade Names.
5-4 Locations.
5-5 Encumbrances.
5-6 Indebtedness.
5-7 Insurance Policies.
5-12 Taxes
7-1 DDA's.
7-2 Credit Card Arrangements
9-4 Borrowing Base Certificate
9-12(a) Financial Performance Covenants
9-12(b) Business Plan.
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THIS AGREEMENT is made between Paragon Capital LLC (hereinafter,
"Paragon"), a Delaware limited liability company with its principal executive
offices at Paragon Towers, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 and
Xxxxxx Electronics, Inc. (hereinafter, the "Borrower"), a New York corporation
with its principal executive offices at 000 Xxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx
00000, in consideration of the mutual covenants contained herein and benefits to
be derived herefrom,
WITNESSETH:
ARTICLE 1 - THE REVOLVING CREDIT
1-1. Establishment of Revolving Credit
(a) The Lender hereby establishes a revolving line of credit (the
"Revolving Credit") in the Borrower's favor pursuant to which the Lender,
subject to, and in accordance with, the within Agreement, shall make loans and
advances and otherwise provide financial accommodations to and for the account
of the Borrower as provided herein. The amount of each advance under the
Revolving Credit shall be determined by the Lender by reference to Availability,
as determined by the Lender from time to time hereafter. All loans made by the
Lender under this Agreement, and all of the Borrower's other Liabilities to the
Lender under or pursuant to this Agreement, are payable as provided herein.
(b) The Lender hereby agrees, subject to the terms and conditions of this
Agreement, to make loans to the Borrower in an amount outstanding not to exceed
at any one time the lesser of (i) the Credit Limit, or (ii) the Borrowing Base.
(c) Availability shall be based upon Borrowing Certificates furnished as
provided in Section 9-4, below.
(d) The proceeds of borrowings under the Revolving Credit shall be used
solely in accordance with the Business Plan for working capital purposes of the
Borrower and for its Capital Expenditures, all solely to the extent permitted by
the within Agreement.
1-2. Advances in Excess of Maximum Loan Exposure. The Lender does not have
any obligation to make any loan or advance, or otherwise to provide any credit
for the benefit of the Borrower such that the outstanding principal balance of
the Loan Account exceeds Maximum Loan Exposure. The making of loans, advances,
and credits and the providing of financial accommodations in excess of Maximum
Loan Exposure is for the benefit of the Borrower and does not affect the
obligations of the Borrower hereunder; such loans, advances, credits, and
financial accommodations constitute Liabilities. The making of any such loans,
advances, and credits and the providing of financial accommodations, on any one
occasion such that Maximum Loan Exposure is exceeded shall not obligate the
Lender to make any such loans, credits, or advances or to provide any financial
accommodation on any other occasion nor to permit such loans, credits, or
advances to remain outstanding.
1-3. Risks of Value of Inventory. The Lender's reference to a given asset
in connection with the making of loans, credits, and advances and the providing
of financial accommodations under the Revolving Credit and/or the monitoring of
compliance with the provisions hereof shall not be deemed a determination by the
Lender relative to the actual value of the asset in question. All risks
concerning the saleability of the Borrower's Inventory are and remain upon the
Borrower. All Collateral secures the prompt, punctual, and faithful performance
of the Liabilities whether or not relied upon by the Lender in connection with
the making of loans, credits, and advances and the providing of financial
accommodations under the Revolving Credit.
1-4. Procedures Under Revolving Credit.
(a) The Borrower may request loans and advances under the Revolving Credit,
each in an amount of not less than Ten Thousand ($10,000.00) Dollars. Each such
request shall be in such manner as may from time to time be acceptable to the
Lender.
(b) (i) The Lender, subject to the terms and conditions of the within
Agreement, will provide the Borrower with the loan so requested, if such request
is received by 12:00 Noon on a Banking Day, by the end of business on that
Banking Day; otherwise, by the end of the then next Banking Day.
(ii) The Lender may revise the time of day for requests set forth above by
which loans shall be requested, from time to time.
(c) Provided that Maximum Loan Exposure will not be exceeded (but subject,
however, to Subsection 1-4(i), below (which deals with the effect of a
Suspension Event)), a loan or advance under the Revolving Credit so requested by
the Borrower shall be made by the transfer of the proceeds of such loan or
advance to the Funding Account or as otherwise instructed by the Borrower.
(d) A loan or advance shall be deemed to have been made under the Revolving
Credit upon:
(i) The Lender's initiation of the transfer of the proceeds of such
loan or advance in accordance with the Borrower's instructions (if such
loan or advance is of funds requested by the Borrower).
(ii) The charging of the amount of such loan to the Loan Account (in
all other circumstances).
(e) There shall not be any recourse to, nor liability of, the Lender on
account of:
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(i) any delay in the making of any loan or advance requested under the
Revolving Credit;
(ii) any delay in the proceeds of any such loan or advance
constituting collected funds; or
(iii) any delay in the receipt, and/or any loss, of funds which
constitute a loan or advance under the Revolving Credit, the wire transfer
of which was properly initiated by the Lender in accordance with wire
instructions provided to the Lender by the Borrower.
(f) The Lender may rely on any request for a loan or advance or financial
accommodation which the Lender, in good faith, believes to have been made by a
person duly authorized to act on behalf of the Borrower and may decline to make
any such requested loan or advance or to provide any such financial
accommodation pending the Lender's being furnished with such documentation
concerning that person's authority to act as may be satisfactory to the Lender.
(g) A request by the Borrower for any financial accommodation under the
Revolving Credit or of the issuance of an L/C shall be irrevocable and shall
constitute certification by the Borrower that as of the date of such request,
each of the following is true and correct, unless written notice is delivered to
Lender stating otherwise:
(i) There has been no material adverse change in the Borrower's
financial condition from the most recent financial information furnished
Lender pursuant to this Agreement.
(ii) The Borrower is in compliance with, and is not then in breach of,
its covenants contained in this Agreement.
(iii) Each material representation which is made herein or in any of
the Loan Documents is then true and complete as of and as if made on the
date of such request.
(iv) No Suspension Event is then extant.
(h) The Borrower shall immediately become indebted to the Lender for the
amount of each loan under or pursuant to this Agreement when such loan is deemed
to have been made.
(i) Upon the occurrence from time to time of any Suspension Event, the
Lender may suspend the Revolving Credit immediately and shall not be obligated,
during such suspension, to make any loans or to provide any financial
accommodation hereunder.
(j) The Borrower may request that the Lender cause the issuance of L/C's
for the account of the Borrower.
(i) Each such request shall be in such manner as may from time to time
be acceptable to the Lender.
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(ii) The Lender will endeavor to cause the issuance of any L/C so
requested by the Borrower, provided that the requested L/C is in form
satisfactory to the Lender and if so issued:
(A) The aggregate Stated Amount of all L/C's then outstanding,
does not exceed Two Hundred Thousand ($200,000.00) Dollars.
(B) The expiry of the L/C is not later than the earlier of thirty
(30) days prior to the Maturity Date or the following:
(I) Standby's: One (1) year from initial issuance.
(II) Documentary's: sixty (60) days from issuance.
(C) Maximum Loan Exposure would not be exceeded.
(iii) The Borrower shall execute such documentation to apply for and
support the issuance of an L/C as may be required by the Issuer.
(iv) There shall not be any recourse to, nor liability of, the Lender
on account of:
(A) any delay or refusal by an Issuer to issue an L/C;
(B) any action or inaction of an Issuer on account of or in
respect to, any L/C;
(v) The Borrower shall reimburse the Issuer, immediately upon the
drawing under any L/C, for the amount of such drawing. In the event that
the Borrower fails to so reimburse the Issuer, the Borrower immediately
shall reimburse the Lender for the amount of such drawing. To the extent
which the Borrower fails to so reimburse the Issuer or the Lender, the
Lender, without the request of the Borrower, may advance under the
Revolving Credit any amount which the Borrower is so obligated to pay to
the Lender or the Issuer, or for which the Borrower, the Issuer, or the
Lender becomes obligated on account of, or in respect to, any L/C. Such
advance shall be made whether or not a Suspension Event is then in
existence or such advance would result in Maximum Loan Exposure's being
exceeded. Such action shall not constitute a waiver of the Lender's rights
under Section 1-7(b), below.
1-5. The Loan Account.
(a) An account ("Loan Account") shall be opened on the books of the Lender
in which Loan Account a record may be kept of all loans made under or pursuant
to this Agreement and of all payments thereon.
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(b) The Lender shall also keep a record (either in the Loan Account or
elsewhere, as the Lender may from time to time elect) of all interest, fees,
service charges, costs, expenses, and other debits owed the Lender on account of
the Liabilities and of all credits against such amounts so owed.
(c) All credits against the Liabilities shall be conditional upon final
payment to the Lender of the items giving rise to such credits. The amount of
any item credited against the Liabilities which is charged back against the
Lender for any reason or is not so paid shall be a Liability and shall be added
to the Loan Account, whether or not the item so charged back or not so paid is
returned.
(d) Except as otherwise provided herein, all fees, service charges, costs,
and expenses for which the Borrower is obligated hereunder are payable on
demand. In the determination of Availability, the Lender may deem fees, service
charges, accrued interest, and other payments as having been advanced under the
Revolving Credit if such amounts are then due and payable.
(e) The Lender , without the request of the Borrower, may advance under the
Revolving Credit any interest, fee, service charge, or other payment to which
the Lender is entitled from the Borrower pursuant hereto and may charge the same
to the Loan Account notwithstanding that such amount so advanced may result in
Availability's being exceeded. The Borrower shall be advised of such advance.
Such action on the part of the Lender shall not constitute a waiver of the
Lender's rights under Section 1-7(b), below. Any amount which is added to the
principal balance of the Loan Account as provided in this Section shall bear
interest at the interest rate applicable from time to time to the unpaid
principal balance of the Loan Account.
(f) After the end of each month, Lender will render to Borrower a statement
of Borrower's Loan Account with Lender, showing all applicable credits, debits
and Liabilities. Any statement rendered by the Lender to the Borrower concerning
the Liabilities shall be considered correct and accepted by the Borrower and
shall be conclusively binding upon the Borrower unless the Borrower provides the
Lender with written objection thereto within thirty (30) days from the mailing
of such statement, which written objection shall indicate, with particularity,
the reason for such objection. The Loan Account and the Lender's books and
records concerning the loan arrangement contemplated herein and the Liabilities
shall be prima facie evidence of the items described therein.
1-6. The Master Note. The obligation to repay loans and advances under the
Revolving Credit, with interest as provided herein, shall be evidenced by a note
(the "Master Note") in the form of EXHIBIT 1-6, annexed hereto, executed by the
Borrower. Neither the original nor a copy of the Master Note shall be required,
however, to establish or prove any Liability. In the event that the Master Note
is ever lost, mutilated, or destroyed, the Borrower shall execute a replacement
thereof and deliver such replacement to the Lender and the Lender will defend
and indemnify the Borrower with respect to the execution of the replacement
Master Note.
1-7. Payment of Loan Account.
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(a) The Borrower may repay all or any portion of the principal balance of
the Loan time to time until the Termination Date.
(b) The Borrower, without notice or demand from the Lender, shall pay the
Lender that amount, from time to time, which is necessary so that the principal
balance of the Loan Account does not exceed Maximum Loan Exposure.
(c) The Borrower shall repay the then entire unpaid balance of the Loan
Account and all other Liabilities on the Termination Date.
1-8. Interest.
(a) The unpaid principal balance of the Loan Account up to $2,500,000 shall
bear interest, until repaid (calculated based upon a 360-day year and actual
days elapsed), at the aggregate of Base plus one (1%) percent per annum but in
no event less than eight (8%) percent per annum or in excess of the maximum rate
permitted by applicable law. The unpaid principal balance of the Loan Account in
excess of $2,500,000 shall bear interest at the aggregate of Base plus one and
three quarters (1 :%) percent per annum.
(b) Following the occurrence of any Event of Default (and whether or not
the Lender exercises any of the Lender's rights on account of such Event of
Default), all loans and advances made under the Revolving Credit shall bear
interest, through the End Date, at a rate which is the aggregate of that
provided for in Section 1-8(a), above, plus four (4%) percent per annum.
(c) Accrued interest shall be payable:
(i) Monthly in arrears, on the first banking day of the month next
following the month during which such interest accrued.
(ii) On the Termination Date.
(iii) On the End Date.
1-9. Fees. Borrower shall pay to the Lender the following fees:
(a) Commitment Fee. On the date of execution hereof, a one time fully
earned commitment fee shall be due and payable in an amount equal to one and one
half (1.5%) percent of the Credit Limit ($49,500.00).
(b) Annual Facility Fee. On the first anniversary of the date of execution
hereof, a facility fee in an amount equal to three quarters of one (.75%)
percent of the Credit Limit which shall have been fully earned at the date of
execution hereof, shall be due and payable, and on each anniversary of the date
of execution hereof, a facility fee in an amount equal to three quarters of one
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(.75%) percent of the Credit Limit, which shall have been fully earned as of the
applicable anniversary of the date of the execution hereof, shall be due and
payable.
(c) Loan Maintenance Fee. On the date of execution hereof and on each
anniversary of the date of execution hereof, a loan maintenance fee equal to one
(1%) percent of the Credit Limit. Such fee shall have been fully earned as of
the date hereof and as of each anniversary of the date of execution hereof and
shall be payable in twelve (12) monthly installments as follows: 1/12th of such
fee shall be payable as of the date hereof and on each anniversary of the date
of execution hereof, and 1/12th of such fee shall be payable on the same day of
each month hereafter until paid in full.
(d) Financial Examination, Documentation, and Appraisal Fees. Lender's
actual charges paid or incurred for each financial analysis and examination
(i.e., audits) of Borrower performed by personnel employed by Lender; Lender's
actual charges paid or incurred for each appraisal of the Collateral performed
by personnel employed by Lender; and, the actual charges paid or incurred by
Lender if it elects to employ the services of one or more third Persons to
perform such financial analysis and examinations (i.e., audits) of Borrower or
to appraise the Collateral; and, on each anniversary of the date of execution
hereof.
(e) In addition to any other right to which the Lender is then entitled on
account thereof, the Lender may assess an additional fee payable by the Borrower
on account of the accommodation, from time to time, of Lender to the Borrower's
request that the Lender depart or dispense with one or more of the
administrative provisions of the within Agreement and/or the Borrower's failure
to comply with any of such provisions.
(i) By way of non-exclusive example, the Lender may assess a fee on account
of any of the following:
(A) The Borrower's failure to pay that amount which is necessary so
that the principal balance of the Loan Account does not exceed Maximum
Permitted Exposure (as required under Section 1-7(b), above).
(B) The providing of a loan or advance under the Revolving Credit such
that Maximum Loan Exposure would be exceeded.
(C) The providing of a same Banking Day loan requested after the time
set forth in Section 1-4(b)(i), above.
(D) The Borrower's failure to provide a financial statement or report
within the applicable time-frame provided for such report under Article 9,
below.
(ii) The inclusion of the foregoing right on the part of the Lender to
assess a fee does not constitute an obligation, on the part of the Lender , to
waive any provision of the
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within Agreement under any circumstances. The assessment of any such fee in any
particular circumstance shall not constitute the Lender's waiver of any breach
of the within Agreement on account of which such fee was assessed nor a course
of action on which the Borrower may rely.
(f) The Borrower shall not be entitled to any credit, rebate or repayment
of any Commitment Fee, Facility Fee, Loan Maintenance Fee, or other fee
previously earned by the Lender pursuant to this Section notwithstanding any
termination of the within Agreement or suspension or termination of the Lender's
obligation to make loans and advances hereunder.
1-10. Lender's Discretion
(a) Each reference in the Loan Documents to the exercise of discretion or
the like by the Lender shall be to that Person's exercise of its judgement, in
good faith (which shall be presumed), based upon that Person's consideration of
any such factor as the Lender, taking into account information of which that
Person then has actual knowledge, believes:
(i) Will or reasonably could be expected to affect the value of the
Collateral, the enforceability of the Lender's security and collateral
interests therein, or the amount which the Lender would likely realize
therefrom (taking into account delays which may possibly be encountered in
the Lender's realizing upon the Collateral and likely Costs of Collection).
(ii) Indicates that any report or financial information delivered to
the Lender by or on behalf of the Borrower is incomplete, inaccurate, or
misleading in any material manner or was not prepared in accordance with
the requirements of the within Agreement.
(iii) Constitutes a Suspension Event.
(b) In the exercise of such judgement, the Lender also may take into
account any of the following factors:
(i) Those included in, or tested by, the definitions of "Acceptable
Inventory", "Retail", and "Cost".
(ii) The current financial and business climate of the industry in
which the Borrower competes (having regard for the Borrower's position in
that industry).
(iii) General economic conditions which have a material effect on cost
structure.
(iv) Material changes in or to the mix of the Borrower's Inventory.
(v) Seasonality with respect to the Borrower's Inventory and patterns
of the Borrower's retail sales.
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(vi) Such other factors as the Lender determines as having a material
bearing on credit risks associated with the providing of loans and
financial accommodations to the Borrower.
(c) The burden of establishing the failure of the Lender to have acted in a
reasonable manner in such Person's exercise of discretion shall be the
Borrower's.
1-11. Fees for L/C's.
(a) Prior to the issuance of any L/C, the Borrower shall pay to the Lender
a fee for each L/C equal to the greater of (i) Two Hundred Fifty ($250.00)
Dollars, or (ii) thirty-five (35) Basis Points per month times the Stated Amount
of that L/C.
(b) In addition to the fee to be paid as provided in Subsection 1-11(a),
above, the Borrower shall pay to the Lender (or to the Issuer, if so requested
by the Lender ), on demand, all issuance, processing, negotiation, amendment,
and administrative fees and other amounts charged by the Issuer on account of,
or in respect to, any L/C.
1-12. Concerning L/C's.
(a) None of the Issuer, the Issuer's correspondents, or any advising,
negotiating, or paying bank with respect to any L/C shall be responsible in any
way for:
(i) The performance by any beneficiary under any L/C of that
beneficiary's obligations to the Borrower.
(ii) The form, sufficiency, correctness, genuineness, authority of any
person signing; falsification; or the legal effect of; any documents called
for under any L/C if (with respect to the foregoing) such documents on
their face appear to be in order.
(b) The Issuer may honor, as complying with the terms of any L/C and of any
drawing thereunder, any drafts or other documents otherwise in order, but signed
or issued by an administrator, executor, conservator, trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, liquidator,
receiver, or other legal representative of the party authorized under such L/C
to draw or issue such drafts or other documents.
(c) Unless otherwise agreed to, in the particular instance, the Borrower
hereby authorizes any Issuer to:
(i) Select an advising bank, if any.
(ii) Select a paying bank, if any.
(iii) Select a negotiating bank.
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(d) All directions, correspondence, and funds transfers relating to any L/C
are at the risk of the Borrower. The Issuer shall have discharged the Issuer's
obligations under any L/C which, or the drawing under which, includes payment
instructions, by the initiation of the method of payment called for in, and in
accordance with, such instructions (or by any other commercially reasonable and
comparable method). Neither the Lender nor the Issuer shall have any
responsibility for any inaccuracy, interruption, error, or delay in transmission
or delivery by post, telegraph or cable, or for any inaccuracy of translation.
(e) The Lender's and the Issuer's rights, powers, privileges and immunities
specified in or arising under this Agreement are in addition to any heretofore
or at any time hereafter otherwise created or arising, whether by statute or
rule of law or contract.
(f) Except to the extent otherwise expressly provided hereunder or agreed
to in writing by the Issuer and the Borrower, the L/C will be governed by the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce, Publication No.500, and any subsequent
revisions thereof.
(g) If any change in any law, executive order or regulation, or any
directive of any administrative or governmental authority (whether or not having
the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, shall either:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirements against letters of credit heretofore or hereafter
issued by any Issuer or with respect to which the Lender or any Issuer has
an obligation to lend to fund drawings under any L/C; or
(ii) impose on any Issuer any other condition or requirements relating
to any such letters of credit; and the result of any event referred to in
Section 1-12(g)(i) or 1-12(g)(ii), above, shall be to increase the cost to
any Issuer of issuing or maintaining any L/C (which increase in cost shall
be the result of such Issuer's reasonable allocation among that Issuer's
letter of credit customers of the aggregate of such cost increases
resulting from such events), then, upon demand by the Lender and delivery
by the Lender to the Borrower of a certificate of an officer of the subject
Issuer describing such change in law, executive order, regulation,
directive, or interpretation thereof, its effect on such Issuer, and the
basis for determining such increased costs and their allocation, the
Borrower shall immediately pay to the Lender , from time to time as
specified by the Lender , such amounts as shall be sufficient to compensate
such Issuer for such increased cost. Any Issuer's determination of costs
incurred under Section 1-12(g)(i) or 1-12(g)(ii), above, and the
allocation, if any, of such costs among the Borrower and other letter of
credit customers of such Issuer, if done in good faith and made on an
equitable basis and in accordance with the officer's certificate, shall be
conclusive and binding on the Borrower.
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(h) The obligations of the Borrower under the within Agreement with respect
to L/C's are absolute, unconditional, and irrevocable and shall be performed
strictly in accordance with the terms hereof under all circumstances, whatsoever
including, without limitation, the following:
(i) Any lack of validity or enforceability or restriction, restraint,
or stay in the enforcement of the within Agreement, any L/C, or any other
agreement or instrument relating thereto.
(ii) Any amendment or waiver of, or consent to the departure from, any
L/C.
(iii) The existence of any claim, set-off, defense, or other right
which the Borrower may have at any time against the beneficiary of any L/C.
(iv) Any honoring of a drawing under any L/C, which drawing possibly
could have been dishonored based upon a strict construction of the terms of
the L/C.
ARTICLE 2 - GRANT OF SECURITY INTEREST
2-1. Grant of Security Interest. To secure the Borrower's prompt, punctual,
and faithful performance of all and each of the Borrower's Liabilities, the
Borrower hereby grants to the Lender a continuing security interest in and to,
and assigns to the Lender, the following, and each item thereof, whether now
owned or now due, or in which the Borrower has an interest, or hereafter
acquired, arising, or to become due, or in which the Borrower obtains an
interest, and all products, Proceeds, substitutions, and accessions of or to any
of the following (all of which, together with any other property in which the
Lender may in the future be granted a security interest, is referred to herein
as the "Collateral"):
(a) all Inventory, including all goods, merchandise, raw materials,
goods and work in process, finished goods, and other tangible personal
property now owned or hereafter acquired and held for sale or lease or
furnished or to be furnished under contracts of service or used or consumed
in Borrower's business;
(b) all Accounts, accounts receivable, contracts, contract rights,
notes, bills, drafts, acceptances, General Intangibles (including without
limitation registered and unregistered tradenames, copyrights, customer
lists, goodwill, computer programs, computer records, computer software,
computer data, trade secrets, trademarks, patents, ledger sheets, files,
records, data processing records relating to any Accounts and all tax
refunds of every kind and nature to which Borrower is now or hereafter may
become entitled to, no matter how arising), Instruments, Documents,
Document of Title, Chattel Paper, securities, security entitlements,
security accounts, Investment Property, choses in action, and all other
debts, obligations and liabilities in whatever form, owing to Borrower from
any person, firm or corporation or any other legal entity, whether now
existing or hereafter arising, now or hereafter received by or belonging or
owing to Borrower, for goods sold by it or for services rendered by it, or
however otherwise same may have been established
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or created, all guarantees and securities therefor, all right, title and
interest of Borrower in the merchandise or services which gave rise
thereto, including the rights of reclamation and stoppage in transit, all
rights to replevy goods, and all rights of an unpaid seller of merchandise
or services;
(c) all machinery, Equipment, Fixtures and other Goods whether now
owned or hereafter acquired by the Borrower and wherever located, all
replacements and substitutions therefor or accessions thereto and all
proceeds thereof;
(d) all leasehold interests; and
(e) all proceeds and products of all of the foregoing in any form,
including, without limitation, all proceeds, refunds and premium rebates of
credit, fire or other insurance, and also including, without limitation,
rents and profits resulting from the temporary use of any of the foregoing.
2-2. Extent and Duration of Security Interest. The within grant of a
security interest is in addition to, and supplemental of, any security interest
previously granted by the Borrower to the Lender and shall continue in full
force and effect applicable to all Liabilities until all Liabilities have been
paid and/or satisfied in full and the security interest granted herein is
specifically terminated in writing by a duly authorized officer of the Lender
ARTICLE 3 - DEFINITIONS.
All capitalized terms used in this agreement which are not otherwise
defined herein or in the UCC shall have the meanings assigned to them in EXHIBIT
3, annexed hereto.
ARTICLE 4 - CONDITIONS PRECEDENT
Precedent to the effectiveness of this Agreement, the establishment of the
Revolving Credit, and the making of the first loan under the Revolving Credit,
the documents respectively described in Sections 4-1 through and including 4-5,
each in form and substance satisfactory to the Lender shall have been delivered
to the Lender , and the conditions respectively described in Sections 4-6
through and including 4-9, shall have been satisfied:
4-1. Corporate Due Diligence.
(a) A Certificate issued by the Secretary of State of New York stating that
the Borrower is a subsisting corporation.
(b) Certificates of due qualification, in good standing, issued by the
Secretary(ies) of State of each State in which the nature of the Borrower's
business conducted or assets owned could require such qualification.
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(c) A Certificate of the Borrower's secretary or clerk attesting to the due
adoption, continued effectiveness, and setting forth the texts of, each
corporate resolution adopted in connection with the establishment of the loan
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.
4-2. Opinion. An opinion of counsel to the Borrower in form and substance
satisfactory to the Lender.
4-3. Additional Documents. Such additional instruments and documents as the
Lender or its counsel reasonably may require or request.
4-4. Key Life Policies. At such time as the Borrower obtains key man life
insurance on Xxxxxxxx Xxxx, it shall notify Lender and shall collaterally assign
such key man life insurance policies to the Lender.
4-5. Officers' Certificates. Certificates executed by the President and the
Chief Financial Officer of the Borrower and stating that the representations and
warranties made by the Borrower to the Lender in the Loan Documents are true and
complete as of the date of such Certificate, and that no event has occurred
which is or which, solely with the giving of notice or passage of time (or both)
would be an Event of Default.
4-6. Representations and Warranties. Each of the material representations
made by or on behalf of the Borrower in this Agreement or in any of the other
Loan Documents or in any other report, statement, document, or paper provided by
and or on behalf of the Borrower shall be true and complete as of the date as of
which such representation or warranty was made.
4-7. Minimum Excess Availability. Availability, after giving effect to the
first loans and advances to be made under the Revolving Credit; any charges to
the Loan Account made in connection with the establishment of the credit
facility contemplated hereby; and L/C's to be issued at, or immediately
subsequent to, the establishment of such establishment, is not less than
Seventy-Five Thousand ($75,000.00) Dollars.
4-8. No Event of Default. No event shall have occurred, or failed to occur,
which occurrence or which failure constitutes, or which, solely with the passage
of time or the giving of notice (or both) would constitute, an Event of Default.
4-9. No Adverse Change. No event shall have occurred or failed to occur,
which occurrence or failure is or could have a materially adverse effect upon
the Borrower's financial condition, operating results, or cash flows from the
Borrower's financial condition at August 2, 1997.
No document shall be deemed delivered to the Lender until received and accepted
by the Lender at its head offices in Newton, Massachusetts. Under no
circumstances will the within Agreement take effect until executed and accepted
by the Lender at said head office.
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ARTICLE 5 - GENERAL REPRESENTATIONS. WARRANTIES AND COVENANTS
To induce the Lender to establish the loan arrangement contemplated herein
and to make loans and advances and to provide financial accommodations under the
Revolving Credit (each of which loans shall be deemed to have been made in
reliance thereupon) the Borrower, in addition to all other representations,
warranties, and covenants made by the Borrower in any other Loan Document, makes
those representations, warranties, and covenants included in the within
Agreement. If the Borrower has any dispute with any person with respect to any
Liability, the Borrower shall give the Lender notice of said dispute.
5-1. Payment and Performance of Liabilities. The Borrower shall pay each
Liability when due (or when demanded if payable on demand) and shall promptly,
punctually, and faithfully perform each other Liability.
5-2. Due Organization - Corporate Authorization - No Conflicts. (a) The
Borrower presently is and shall hereafter remain a subsisting corporation and is
and shall hereafter remain duly qualified and in good standing in every other
State in which, by reason of the nature or location of the Borrower's assets or
operation of the Borrower's business, such qualification may be necessary.
(b) Each Related Entity is listed on EXHIBIT 5-2, annexed hereto. Each
Related Entity is and shall hereafter remain a subsisting corporation in the
State in which incorporated and is and shall hereafter remain duly qualified in
which other State in which, by reason of that entity's assets or the operation
of such entity's business, such qualification may be necessary. The Borrower
shall provide the Lender with prior written notice of any entity's becoming or
ceasing to be a Related Entity.
(c) The Borrower has all requisite corporate power and authority to execute
and deliver all and singular the Loan Documents to which the Borrower is a party
and has and will hereafter retain all requisite corporate power to perform all
and singular the Liabilities.
(d) The execution and delivery by the Borrower of each Loan Document to
which it is a party; the Borrower's consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of security interests by the Borrower as contemplated hereby); the Borrower's
performance under those of the Loan Documents to which it is a party; the
borrowings hereunder; and the use of the proceeds thereof:
(i) Have been duly authorized by all necessary corporate action.
(ii) Do not, and will not, contravene in any material respect any
provision of any Requirement of Law or obligation of the Borrower.
(iii) Will not result in the creation or imposition of, or the
obligation to create or impose, any Encumbrance upon any assets of the
Borrower pursuant to any Requirement of Law or obligation, except pursuant
to the Loan Documents.
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(e) The Loan Documents have been duly executed and delivered by Borrower
and are the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms, subject to
applicable bankruptcy, insolvency and other laws and rules of general
application affecting the rights and remedies of creditors.
5-3. Trade Names.
(a) EXHIBIT 5-3, annexed hereto, is a listing of:
(i) All names under which the Borrower has conducted its business
during the last ten (10) years.
(ii) All entities and/or persons with whom the Borrower ever
consolidated or merged, or from whom the Borrower ever acquired in a single
transaction or in a series of related transactions substantially all of
such entity's or person's assets.
(b) Except (i) upon not less than twenty-one (21) days prior written notice
given the Lender , and (ii) in compliance with all other provisions of the
within Agreement, the Borrower will not undertake or commit to undertake any
action such that the results of that action, if undertaken prior to the date of
this Agreement, would have been reflected on EXHIBIT 5-3.
(c) The Borrower owns and possesses, or has the right to use all patents,
industrial designs, trademarks, trade names, trade styles, brand names, service
marks, logos, copyrights, trade secrets, know-how, confidential information, and
other intellectual or proprietary property of any third Person necessary for the
Borrower's conduct of the Borrower's business.
(d) The conduct by the Borrower of the Borrower's business does not
infringe on the patents, industrial designs, trademarks, trade names, trade
styles, brand names, service marks, logos, copyrights, trade secrets, know-how,
confidential information, or other intellectual or proprietary property of any
third Person.
5-4. Locations. Landlord's Waivers.
(a) The Collateral, and the books, records, and papers of Borrower
pertaining thereto, are kept and maintained solely at the Borrower's chief
executive offices as set forth in the beginning of this Agreement and at those
locations which are listed on EXHIBIT 5-4, annexed hereto, which EXHIBIT
includes all service bureaus with which any such records are maintained and the
names and addresses of each of the Borrower's landlords. Except (i) to
accomplish sales of Inventory in the ordinary course of business or (ii) to
utilize such of the Collateral as is removed from such locations in the ordinary
course of business (such as motor vehicles), the Borrower shall not remove any
Collateral from said chief executive offices or those locations listed on
EXHIBIT 5-4.
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(b) The Borrower shall use its best efforts to obtain and deliver to the
Lender a waiver or subordination (reasonably satisfactory to the Lender) by the
landlord for each store location (excepting only 0 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx, and 000 Xxxxxxxx & 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx) within thirty (30)
days of the date of execution hereof.
(c) If the Borrower fails to obtain a waiver or subordination for each
store location within said thirty (30) day period, the Lender may establish an
Availability Reserve for up to ninety (90) days rent for each of the Borrower's
locations in a Landlord Lien State or in a One Turn State.
Such Availability Reserve shall be reduced or eliminated as follows (but
only if no Suspension Event is then in existence or has theretofore occurred):
(i) With respect to locations in One Turn States: one hundred twenty
(120) days after the execution of the within Agreement.
(ii) With respect to locations in Landlord Lien States: Upon the
furnishing to the Lender of a waiver or subordination (reasonably
satisfactory to the Lender by the landlord for the subject location.
Without duplication of any Availability Reserve described above, the Lender
may establish an Availability Reserve for unpaid rent.
(d) The Borrower will not:
(i) Execute, alter, modify, or amend any Lease which increases the
Borrower's financial obligations thereunder in a material respect or
modifies the term thereof.
(ii) Commit to, or open or close any location at which the Borrower
maintains, offers for sales, or stores any of the Collateral.
(e) Except as otherwise disclosed pursuant to, or permitted by, this
Section 5-4, no tangible personal property of the Borrower is in the care or
custody of any third party or stored or entrusted with a bailee or other third
party and none shall hereafter be placed under such care, custody, storage, or
entrustment.
5-5. Title to Assets.
(a) The Borrower is, and shall hereafter remain, the owner of the
Collateral free and clear of all Encumbrances with the exceptions of the
following:
(i) The security interest created herein.
(ii) Those Encumbrances (if any) listed on EXHIBIT 5-5, annexed
hereto.
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(iii) Purchase money security interests arising in the ordinary course
of business for the acquisition of equipment so long as the Indebtedness
secured thereby does not exceed the lesser of the cost for fair market
value of the equipment subject thereto and such security interest extends
to no other property.
(b) The Borrower shall separately segregate and report any property on
consignment. The Borrower shall give the Lender written notice of all
consignment arrangements now in existence and shall also give the Lender written
notice of any consignment arrangements established after the date hereof.
5-6. Indebtedness. The Borrower does not and shall not hereafter have any
Indebtedness with the exceptions of:
(a) Any Indebtedness to the Lender.
(b) The Indebtedness (if any) listed on EXHIBIT 5-6, annexed hereto.
(c) Indebtedness which in the aggregate does not exceed the sum of Two
Hundred Fifty Thousand ($250,000.00) Dollars incurred in connection with the
acquisition of equipment or Capital Leases.
5-7. Insurance Policies.
(a) EXHIBIT 5-7, annexed hereto, is a schedule of all insurance policies
owned by the Borrower or under which the Borrower is the named insured. Each of
such policies is in full force and effect. To the best of the Borrower's
knowledge, neither the issuer of any such policy nor the Borrower is in default
or violation of any such policy.
(b) The Borrower shall have and maintain at all times insurance covering
such risks, in such amounts, containing such terms, in such form, for such
periods, and written by such companies as may be reasonably satisfactory to the
Lender . The coverage reflected on EXHIBIT 5-7 presently satisfies the foregoing
requirements, it being recognized by the Borrower, however, that such
requirements may change hereafter to reflect changing circumstances. All
insurance carried by the Borrower shall provide for a minimum of twenty (20)
days' written notice of cancellation to the Lender and all such insurance which
covers the Collateral shall include an endorsement in favor of the Lender, which
endorsement shall provide that the insurance, to the extent of the Lender's
interest therein, shall not be impaired or invalidated, in whole or in part, by
reason of any act or neglect of the Borrower or by the failure of the Borrower
to comply with any warranty or condition of the policy. In the event of the
failure by the Borrower to maintain insurance as required herein, the Lender,
at its option, may obtain such insurance, provided, however, the Lender's
obtaining of such insurance shall not constitute a cure or waiver of any Event
of Default occasioned by the Borrower's failure to have maintained such
insurance. The Borrower shall furnish to the Lender certificates or other
evidence satisfactory to the Lender regarding compliance by the Borrower with
the foregoing insurance provisions.
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(c) The Borrower shall advise the Lender of each claim in excess of Ten
Thousand ($10,000.00) Dollars made by the Borrower under any policy of insurance
which covers the Collateral and will permit the Lender , at the Lender's option
in each instance, to participate in (but not control) the adjustment of each
such claim (and of all claims following the occurrence of any Suspension Event).
Upon the occurrence of any Suspension Event, the Borrower hereby appoints the
Lender as the Borrower's attorney in fact to obtain, adjust, settle, and cancel
any insurance described in this section and to endorse in favor of the Lender
any and all drafts and other instruments with respect to such insurance. The
within appointment, being coupled with an interest, is irrevocable until this
Agreement is terminated by a written instrument executed by a duly authorized
officer of the Lender. The Lender shall not be liable on account of any exercise
pursuant to said power except for any exercise in actual willful misconduct and
bad faith. The Lender may apply any proceeds of such insurance against the
Liabilities, whether or not such have matured, in such order of application as
the Lender may determine.
(d) The Borrower shall maintain at all times those type of policies of
insurance obtained by the Borrower and assigned to the Lender as required by
Section 4-4, above. The Borrower may replace such policies with policies of
similar or greater value.
5-8. Licenses. Each license, distributorship, franchise, and similar
agreement issued to, or to which the Borrower is a party is in full force and
effect. To the best of the Borrower's knowledge, no party to any such license or
agreement is in default or violation thereof. The Borrower has not received any
notice or threat of cancellation of any such license or agreement.
5-9. Leases. EXHIBIT 5-9, annexed hereto, is a schedule of all presently
effective Leases and Capital Leases. Each of such Leases and Capital Leases is
in full force and effect. To the best of the Borrower's knowledge, no party to
any such Lease or Capital Lease is in default or violation of any such Lease or
Capital Lease and the Borrower has not received any notice or threat of
cancellation of any such Lease or Capital Lease. The Borrower hereby authorizes
the Lender at any time and from time to time to contact any of the Borrower's
landlords in order to confirm the Borrower's continued compliance with the terms
and conditions of the Lease(s) between the Borrower and that landlord and to
discuss such issues, concerning the Borrower's occupancy under such Lease(s), as
the Lender may determine.
5-10. Requirements of Law. The Borrower is in compliance with, and shall
hereafter comply with and use its assets in compliance with, all Requirements of
Law. The Borrower has not received any notice of any violation of any
Requirement of Law (whether or not such violation is material), which violation
has not been cured or otherwise remedied.
5-11. Maintain Properties. The Borrower shall:
(a) Keep the Collateral in good order and repair (ordinary reasonable
wear and tear and insured casualty excepted).
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(b) Not suffer or cause the waste or destruction of any material part
of the Collateral.
(c) Not use any of the Collateral in violation of any policy of
insurance thereon.
(d) Not sell, lease, or otherwise dispose of any of the Collateral,
other than the following:
(i) The sale of Inventory in compliance with the within
Agreement.
(ii) The disposal of Equipment which is obsolete, worn out, or
damaged beyond repair, which Equipment is replaced to the extent
necessary to preserve or improve the operating efficiency of the
Borrower.
(iii) The turning over to the Lender of all Receipts as provided
herein.
5-12. Pay Taxes.
(a) The federal income tax returns of the Borrower have been audited by the
Internal Revenue Service (or closed by applicable statutes) for all fiscal years
through and including the Borrower's taxable year referenced on EXHIBIT 5-12,
annexed hereto, and all deficiencies, assessments, and other amounts asserted as
a result of such examinations have been fully paid or settled. No agreement is
extant which waives or extends any statute of limitations applicable to the
right of the Internal Revenue Service to assert a deficiency or make any other
claim for or in respect to federal income taxes. No issue has been raised in any
such examination which, by application of similar principles, reasonably could
be expected to result in the assertion of a deficiency for any fiscal year open
for examination, assessment, or claim by the Internal Revenue Service.
(b) All returns of the Borrower for state and local income, excise, sales,
and other taxes have been audited (or closed by applicable statutes) for all
fiscal years through and including the Borrower's taxable year referenced on
EXHIBIT 5-12, annexed hereto, and all deficiencies, assessments, and other
amounts asserted as a result of such examinations have been fully paid or
settled or the Borrower has made provisions for adequate reserves therefor. No
agreement is in existence which waives or extends any statute of limitations
applicable to the right of any state taxing authority to assert a deficiency or
make any other claim for or in respect to any such state taxes. No issue has
been raised in any such examination which, by application of similar principles,
reasonably could be expected to result in the assertion of a deficiency for any
fiscal year open for examination, assessment, or claim by any state or local
taxing authority.
(c) To the best of the Borrower's knowledge, except as disclosed on said
EXHIBIT 5-12, there are no examinations of or with respect to the Borrower
presently being conducted by the Internal Revenue Service or any state taxing
authority.
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(d) The Borrower has, and hereafter shall: pay, as they become due and
payable, all taxes and unemployment contributions and other charges of any kind
or nature levied, assessed or claimed against the Borrower or the Collateral by
any person or entity whose claim could result in an Encumbrance upon any asset
of the Borrower or by any governmental authority; properly exercise any trust
responsibilities imposed upon the Borrower by reason of withholding from
employees' pay; timely make all contributions and other payments as may be
required pursuant to any Employee Benefit Plan now or hereafter established by
the Borrower; and timely file all tax and other returns and other reports with
each governmental authority to whom the Borrower is obligated to so file.
(e) After the occurrence of one or more Suspension Events, at its option,
the Lender may, but shall not be obligated to, pay any taxes, unemployment
contributions, and any and all other charges levied or assessed upon the
Borrower or the Collateral by any person or entity or governmental authority,
and make any contributions or other payments on account of the Borrower's
Employee Benefit Plan as the Lender , in the Lender's discretion, may deem
necessary or desirable, to protect, maintain, preserve, collect, or realize upon
any or all of the Collateral or the value thereof or any right or remedy
pertaining thereto, provided, however, the Lender's making of any such payment
shall not constitute a cure or waiver of any Event of Default occasioned by the
Borrower's failure to have made such payment.
5-13. No Margin Stock. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations G, U, T, and X, of the Board of Governors of
the Federal Reserve System of the United States). No part of the proceeds of any
borrowing hereunder will be used at any time to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
5-14. ERISA. Neither the Borrower nor any ERISA Affiliate ever has or
hereafter shall:
(a) Violate or fail to be in full compliance with the Borrower's
Employee Benefit Plan.
(b) Fail timely to file all reports and filings required by ERISA
to be filed by the Borrower.
(c) Engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA).
(d) Engage in, or commit, any act such that a tax or penalty
could be imposed on account thereof pursuant to ERISA.
(e) Accumulate any material funding deficiency within the meaning
of ERISA.
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(f) Terminate any Employee Benefit Plan such that a lien could be
asserted of the Borrower on account thereof pursuant to ERISA.
(g) Be a member of, contribute to, or have any obligation under
any Employee Benefit Plan which is a multiemployer plan within the
meaning of Section 4001(a) of ERISA.
5-15. Hazardous Materials.
(a) The Borrower has never:
(i) been legally responsible for any release or threat of release
of any Hazardous Material; or
(ii) received notification of any release or threat of release of
any Hazardous Material from any site or vessel occupied or operated by
the Borrower and/or of the incurrence of any expense or loss in
connection with the assessment, containment, or removal of any release
or threat of release of any Hazardous Material from any such site or
vessel.
(b) The Borrower shall:
(i) dispose of any Hazardous Material only in compliance with all
Environmental Laws; and
(ii) not store on any site or vessel occupied or operated by the
Borrower and not transport or arrange for the transport of any
Hazardous Material, except if such storage or transport is in the
ordinary course of the Borrower's business and is in compliance with
all Environmental Laws.
(c) The Borrower shall provide the Lender with written notice upon the
Borrower's obtaining knowledge of any incurrence of any expense or loss by
any governmental authority or other Person in connection with the
assessment, containment, or removal of any Hazardous Material, for which
expense or loss the Borrower may be liable.
5-16. Litigation. There is not presently pending or threatened by or
against the Borrower any suit, action, proceeding, or investigation which, if
determined adversely to the Borrower, would have a material adverse effect upon
the Borrower's financial condition or ability to conduct its business as such
business is presently conducted or is contemplated to be conducted in the
foreseeable future.
5-17. Dividends or Investments. The Borrower shall not, without first
obtaining the Lender's prior written consent:
(a) Pay any cash dividend or make any other distribution in respect of
any class of the Borrower's capital stock, except that Borrower may pay
dividends on its preferred stock in an
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aggregate amount not to exceed One Hundred Fifteen ($115,000.00) Dollars in
any twelve (12) month period if such dividends are set forth in the
Business Plan submitted to and approved by the Lender.
(b) Own, redeem, retire, purchase, or acquire any of the Borrower's
capital stock, except that Borrower may own, redeem, retire, purchase or
acquire such stock if the same is set forth in the Business Plan submitted
to and approved by the Lender.
(c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity.
(d) Merge or consolidate or be merged or consolidated with or into any
other corporation or other entity.
(e) Consolidate any of the Borrower's operations with those of any
other corporation or other entity.
(f) Organize or create any Related Entity.
(g) Subordinate any debts or obligations owed to the Borrower by any
third party to any other debts owed by such third party to any other
Person.
5-18. Loans. The Borrower shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, the foregoing does
not prohibit any of the following:
(a) Advance payments made to the Borrower's suppliers in the ordinary
course.
(b) Advances to the Borrower's officers, employees, and salespersons
with respect to reasonable expenses to be incurred by such officers,
employees, and salespersons for the benefit of the Borrower, which expenses
are properly substantiated by the person seeking such advance and properly
reimbursable by the Borrower.
5-19. Protection of Assets. After the occurrence of one or more Suspension
Events, the Lender , in the Lender's discretion, and from time to time, may
discharge any tax or Encumbrance on any of the Collateral, or take any other
action that the Lender may deem necessary or desirable to repair, insure,
maintain, preserve, collect, or realize upon any of the Collateral. The Lender
shall not have any obligation to undertake any of the foregoing and shall have
no liability on account of any action so undertaken except where there is a
specific finding in a judicial proceeding (in which the Lender has had an
opportunity to be heard), from which finding no further appeal is available,
that the Lender had acted in actual bad faith or in a grossly negligent manner.
The Borrower shall pay to the Lender , on demand, or the Lender , in its
discretion, may add to the Loan Account, all amounts paid or incurred by the
Lender pursuant to this section. The obligation of the Borrower to pay such
amounts is a Liability.
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5-20. Line of Business. The Borrower shall not engage in any business other
than the business in which it is currently engaged or a business reasonably
related thereto.
5-21. Affiliate Transactions. The Borrower shall not make any payment, nor
give any value to any Related Entity except for goods and services actually
purchased by the Borrower from, or sold by the Borrower to, such Related Entity
for a price which shall:
(a) be competitive and fully deductible as an "ordinary and necessary
business expense" and/or fully depreciable under the Internal Revenue Code
of 1986 and the Treasury Regulations, each as amended; and
(b) not differ from that which would have been charged in an arms
length transaction.
5-22. Executive Pay.
(a) The only Executive Officers of the Borrower, at the execution of the
within Agreement, are those individuals referenced in the definition of
"Executive Officers".
(b) Prior to the execution of the within Agreement, the Borrower furnished
the Lender with copies of all written Executive Agreements and outlines of the
salient features of all unwritten Executive Agreements (as amended to date) then
extant. There are no unwritten agreements or understandings between the Borrower
and any Executive Officer which relate to Executive Pay, written disclosure of
which has not been made to the Lender.
(c) The Borrower will not, unless approved by its Board of Directors:
(i) Enter into any Executive Agreement not existing at the execution
of the within Agreement.
(ii) Alter, amend, supplement, or otherwise change any Executive
Agreement.
(iii) Pay, provide, or facilitate any Executive Pay other than as
provided in an Executive Agreement or, if not covered by an Executive
Agreement, as permitted pursuant to Section 5-21, above.
5-23. Additional Assurances.
(a) The Borrower is not the owner of, nor has it any interest in, any
property or asset which, immediately upon the satisfaction of the conditions
precedent to the effectiveness of the credit facility contemplated hereby
(Article 4) will be not be subject to a perfected security interest in favor of
the Lender (subject only to those Encumbrances (if any) described on EXHIBIT
5-5, annexed hereto) to secure the Liabilities.
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(b) The Borrower will not hereafter acquire any asset or any interest in
property which is not, immediately upon such acquisition, subject to such a
perfected security interest in favor of the Lender to secure the Liabilities
(subject only to Encumbrances (if any) permitted pursuant to Section 5-5,
above).
(c) The Borrower shall execute and deliver to the Lender such instruments,
documents, and papers, and shall do all such things from time to time hereafter
as the Lender may request to carry into effect the provisions and intent of this
Agreement; to protect and perfect the Lender's security interests in the
Collateral; and to comply with all applicable statutes and laws, and facilitate
the collection of the Receivables Collateral. The Borrower shall execute all
such instruments as may be required by the Lender with respect to the
recordation and/or perfection of the security interests created herein.
(d) A carbon, photographic, or other reproduction of this Agreement or of
any financing statement or other instrument executed pursuant to this Section
5-23 shall be sufficient for filing to perfect the security interests granted
herein.
5-24. Adequacy of Disclosure.
(a) All financial statements furnished to the Lender by the Borrower have
been prepared in accordance with GAAP consistently applied and present fairly
the condition of the Borrower at the date(s) thereof and the results of
operations and cash flows for the period(s) covered. There has been no change in
the financial condition, results of operations, or cash flows of the Borrower
since the date(s) of such financial statements, other than changes in the
ordinary course of business, which changes have not been materially adverse,
either singularly or in the aggregate.
(b) The Borrower does not have any contingent obligations or obligation
under any Lease or capital lease which is not noted in the Borrower's financial
statements furnished to the Lender prior to the execution of the within
Agreement.
(c) No document, instrument, agreement, or paper now or hereafter given the
Lender by or on behalf of the Borrower or any guarantor of the Liabilities in
connection with the execution of the within Agreement by the Lender contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements therein not
misleading. There is no fact known to the Borrower which has, or which, in the
foreseeable future could have, a material adverse effect on the financial
condition of the Borrower or any such guarantor which has not been disclosed in
writing to the Lender.
5-25. Other Covenants. The Borrower shall not indirectly do or cause to be
done any act which, if done directly by the Borrower, would breach any covenant
contained in this Agreement.
5-26. Warrants. Concurrently with the execution of this Agreement, Borrower
has issued to Lender warrants to acquire 110,000 shares of Borrower's common
stock at a price of $5.00 per
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share. In the event that borrower has not completed a subsequent offering of its
stock prior to May 31, 1998, the Company will grant to Lender, as additional
compensation for the credit facilities created hereby and not as collateral
security therefor, certain stock appreciation rights ("SAR") entitling Lender to
receive compensation in the event of a stock sale, asset sale or merger (each a
"Triggering Event") occurring prior to April 30, 2001 (the "End Date") in an
amount equal to five percent (5%) (the "Available Percentage") of the
consideration in excess of Three Million ($3,000,000.00) Dollars (the
"Consideration") paid or to be paid in connection with such Triggering Event. In
addition to the SAR, Lender shall have the right from time to time, exercised at
its option, to put in whole or in part at any time until the End Date the
Available Percentage to the Company (the "Put Right") representing a percentage
of the Company's earnings before interest and taxes, depreciation and
amortization ("EBITDA") pursuant to and in accordance with an appreciation
rights agreement (the "Appreciation Rights Agreement") in form and substance
satisfactory to Lender and its counsel. Finally, pursuant to the provisions of
the Appreciation Rights Agreement, in the event that the Company distributes any
dividend or other payment in respect of any issue of the Company's capital
stock, the Company shall distribute to Lender an amount (a "Deemed Dividend")
equal to five percent (5%) of the aggregate amount so distributed. Upon the
execution and delivery of such agreement to the Lender, the Lender will
surrender the warrants described above to the Borrower for cancellation.
ARTICLE 6 - USE AND COLLECTION OF COLLATERAL.
6-1. Use of Inventory Collateral.
(a) The Borrower shall not engage in any sale of the Inventory other than
for fair consideration in the conduct of the Borrower's business in the ordinary
course and shall not engage in sales or other dispositions to creditors; sales
or other dispositions in bulk; and any use of any of the Inventory in breach of
any provision of this Agreement.
(b) No sale of Inventory shall be on consignment, approval, or under any
other circumstances such that, with the exception of the Borrower's customary
return policy applicable to the return of inventory purchased by the Borrower's
retail customers in the ordinary course, such Inventory may be returned to the
Borrower without the consent of the Lender
6-2. Inventory Quality. All Inventory now owned or hereafter acquired by
the Borrower is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances).
6-3. Adjustments and Allowances. The Borrower may grant such allowances or
other adjustments to the Borrower's Account Debtors (exclusive of extending the
time for payment of any Account or Account Receivable, which shall not be done
without first obtaining the Lender's prior written consent in each instance) as
the Borrower may reasonably deem to accord with sound business practice,
provided, however, the authority granted the Borrower pursuant to this Section
6-3 may be limited or terminated by the Lender at any time in the Lender's
discretion.
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6-4. Validity of Accounts.
(a) The amount of each Account shown on the books, records, and invoices of
the Borrower represented as owing by each Account Debtor is and will be the
correct amount actually owing by such Account Debtor and shall have been fully
earned by performance by the Borrower.
(b) As of the date hereof, unless otherwise disclosed to the Lender by the
Borrower, the Borrower has no knowledge of any impairment of the validity or
collectibility of any of the Accounts and shall notify the Lender of any such
fact immediately after Borrower becomes aware of any such impairment.
(c) The Borrower shall not post any bond to secure the Borrower's
performance under any agreement to which the Borrower is a party nor cause any
surety, guarantor, or other third party obligee to become liable to perform any
obligation of the Borrower (other than to the Lender) in the event of the
Borrower's failure so to perform.
6-5. Notification to Account Debtors. The Lender shall have the right at
any time following and during the continuance of a Suspension Event or an Event
of Default to notify any of the Borrower's Account Debtors to make payment
directly to the Lender and to collect all amounts due on account of the
Collateral.
ARTICLE 7 - CASH MANAGEMENT.
7-1. Depository Accounts.
(a) Annexed hereto as EXHIBIT 7-1 is a Schedule of all present DDA's, which
Schedule includes, with respect to each depository (i) the name and address of
that depository; (ii) the account number(s) of the account(s) maintained with
such depository; (iii) a contact person at such depository; and (iv) the
telephone number of the contact person.
(b) The Borrower shall deliver to the Lender, as a condition to the
effectiveness of the within Agreement:
(i) Proof of the mailing, to each depository institution with which
any DDA is maintained (other than the Funding Account or any Local DDA) of
notification (in form satisfactory to the Lender ) of the Lender's interest
in such DDA.
(ii) An agreement (in form satisfactory to the Lender ) with any
depository institution at which a Blocked Account is maintained.
(c) The Borrower will not establish any DDA hereafter (other than a Local
DDA) unless the Borrower, contemporaneous with such establishment, the Borrower
delivers to the Lender
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an agreement (in form satisfactory to the Lender) executed on behalf of the
depository with which such DDA is being established.
7-2. Credit Card Receipts.
(a) Annexed hereto as EXHIBIT 7-2, is a Schedule which describes all
arrangements to which the Borrower is a party with respect to the payment to the
Borrower of the proceeds of all credit card charges for sales by the Borrower.
(b) The Borrower shall deliver to the Lender, as a condition to the
effectiveness of the within Agreement, proof of the mailing to each of the
Borrower's credit card clearinghouses and processors of notice (in form
satisfactory to the Lender), which notice provides that, at the Lender's
option, payment of all credit card charges submitted by the Borrower to that
clearinghouse or other processor and any other amount payable to the Borrower by
such clearinghouse or other processor shall be directed to the Transfer Account.
The Borrower shall not change such direction or designation except upon and with
the prior written consent of the Lender.
7-3. The Transfer and the Funding Accounts.
(a) The following checking accounts have been or will be established (and
are so referred to herein):
(i) The Transfer Account: Established by the Lender with The Chase
Manhattan Bank, N.A.
(ii) The Funding Account: Established by the Borrower with Fleet
National Bank.
(iii) The Blocked Account: Established by the Borrower with Fleet
National Bank over which the Lender alone has the power of application or
withdrawal.
(b) The contents of the Blocked Account constitutes Collateral and Proceeds
of Collateral.
(c) The Borrower:
(i) Contemporaneous with the execution of the within Agreement, shall
provide the Lender with such agreement of the depository with which the
Blocked Account is maintained as may be satisfactory to the Lender; and
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(ii) Shall not establish any Blocked Account hereafter except upon not
less than thirty (30) days prior written notice to the Lender and the
delivery to the Lender of a similar such agreement.
(d) The Borrower shall pay all fees and charges of, and maintain such
impressed balances as may be required by the Lender or by any bank in which any
account is opened as required hereby (even if such account is opened by the
Lender).
7-4. Proceeds and Collection of Accounts.
(a) All Receipts constitute Collateral and proceeds of Collateral and shall
be held in trust by the Borrower for the Lender; shall not be commingled with
any of the Borrower's other funds; and shall be deposited and/or transferred
only to the Blocked Account.
(b) The Borrower shall cause the ACH or wire transfer to the Blocked
Account, no less frequently than daily (and whether or not there is then an
outstanding balance in the Loan Account) of:
(i) the then contents of each DDA (other than (A) any Local DDA and
(B) the Funding Account), each such transfer to be net of any minimum
balance, not to exceed Seven Hundred Fifty ($750.00) Dollars, as may be
required to be maintained in the subject DDA by the bank at which such DDA
is maintained); and
(ii) the proceeds of all credit card charges not otherwise provided
for pursuant hereto.
(c) Whether or not any Liabilities are then outstanding, the Borrower shall
cause the ACH or wire transfer to the Transfer Account, no less frequently than
daily, of then entire closing collected balance of the Blocked Account.
(d) In the event that, notwithstanding the provisions of this Section 7-4,
the Borrower receives or otherwise has dominion and control of any Receipts, or
any proceeds or collections of any Collateral, such Receipts, proceeds, and
collections shall be held in trust by the Borrower for the Lender and shall not
be commingled with any of the Borrower's other funds or deposited in any account
of the Borrower other than as instructed by the Lender.
7-5. Payment of Liabilities.
(a) On each Banking Day, the Lender shall apply, towards the Liabilities,
the then collected balance of the Transfer Account (net of fees charged, and of
such impressed balances as may be required by the bank at which the Transfer
Account is maintained), provided, however, for purposes of the calculation of
interest on the unpaid principal balance of the Loan Account, such payment shall
be deemed to have been made two (2) Banking Days after such transfer.
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(b) The Lender shall transfer to the Funding Account any surplus in the
Transfer Account remaining after the application towards the Liabilities
referred to in Section 7-5(a), above (less those amount which are to be netted
out, as provided therein) provided, however, in the event that both (i) a
Suspension Event has occurred and (ii) one or more L/C's are then outstanding,
the Lender may establish a funded reserve of up to one hundred ten (110%)
percent of the aggregate Stated Amounts of such L/C's.
7-6. The Funding Account. Except as otherwise specifically provided in, or
permitted by, the within Agreement, all checks shall be drawn by the Borrower
upon, and other disbursements made by the Borrower solely from, the Funding
Account.
ARTICLE 8 - LENDER AS BORROWER'S ATTORNEY-IN-FACT.
8-1. Appointment as Attorney-In-Fact. The Borrower hereby irrevocably
constitutes and appoints the Lender as the Borrower's true and lawful attorney,
with full power of substitution, to convert the Collateral into cash at the sole
risk, cost, and expense of the Borrower, but for the sole benefit of the Lender.
Such appointment shall become effective and shall remain in effect upon the
occurrence and continuance of a Suspension Event or an Event of Default. The
rights and powers granted the Lender by the within appointment include but are
not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action relating to
the Collateral.
(b) Sign change of address forms to change the address to which the
Borrower's mail is to be sent to such address as the Lender shall
designate; receive and open the Borrower's mail; remove any Receivables
Collateral and Proceeds of Collateral therefrom and turn over the balance
of such mail either to the Borrower or to any trustee in bankruptcy,
receiver, assignee for the benefit of creditors of the Borrower, or other
legal representative of the Borrower whom the Lender determines to be the
appropriate person to whom to so turn over such mail.
(c) Endorse the name of the Borrower in favor of the Lender upon any
and all checks, drafts, notes, acceptances, or other items or instruments;
sign and endorse the name of the Borrower on, and receive as secured party,
any of the Collateral, any invoices, schedules of Collateral, freight or
express receipts, or bills of lading, storage receipts, warehouse receipts,
or other documents of title respectively relating to the Collateral.
(d) Sign the name of the Borrower on any notice to the Borrower's
Account Debtors or verification of the Receivables Collateral; sign the
Borrower's name on any Proof of Claim in Bankruptcy against Account
Debtors, and on notices of lien, claims of mechanic's liens, or assignments
or releases of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the payment of
any letter of credit and/or banker's acceptance of which the Borrower is a
beneficiary.
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(f) Repair, manufacture, assemble, complete, package, deliver, alter
or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of the Borrower.
(g) Use, license or transfer any or all General Intangibles of the
Borrower.
(h) Sign and file or record any financing or other statements in order
to perfect or protect the Lender's security interest in the Collateral.
8-2. No Obligation to Act. The Lender shall not be obligated to do any of
the acts or to exercise any of the powers authorized by Section 8-1 herein, but
if the Lender elects to do any such act or to exercise any of such powers, it
shall not be accountable for more than it actually receives as a result of such
exercise of power, and shall not be responsible to the Borrower for any act or
omission to act except for any act or omission to act as to which there is a
final determination made in a judicial proceeding (in which proceeding the
Lender has had an opportunity to be heard) which determination includes a
specific finding that the subject act or omission to act had been grossly
negligent or in actual bad faith.
ARTICLE 9 - FINANCIAL AND OTHER REPORTING REQUIREMENTS/FINANCIAL COVENANTS.
9-1. Maintain Records. The Borrower shall:
(a) At all times, keep proper books of account, in which full, true,
and accurate entries shall be made of all of the Borrower's transactions,
all in accordance with GAAP applied consistently with prior periods to
fairly reflect the financial condition of the Borrower at the close of, and
its results of operations for, the periods in question.
(b) Timely provide the Lender with those financial reports,
statements, and schedules required by this Article 9 or otherwise, each of
which reports, statements and schedules shall be prepared, to the extent
applicable, in accordance with GAAP applied consistently with prior periods
to fairly reflect the financial condition of the Borrower at the close of,
and its results of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the Collateral
including, without limitation, accurate current stock, cost, and sales
records of its Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) At all times, retain independent certified public accountants who
are reasonably satisfactory to the Lender and instruct such accountants to
fully cooperate with, and be available to, the Lender to discuss the
Borrower's financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Lender.
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(e) Not change the Borrower's fiscal year.
(f) Not change the Borrower's taxpayer identification number.
9-2. Access to Records.
(a) The Borrower shall accord the Lender and the Lender's representatives
with access from time to time as the Lender and such representatives may require
to all properties owned by or over which the Borrower has control. The Lender
and the Lender's representatives shall have the right, and the Borrower will
permit the Lender and such representatives from time to time as the Lender and
such representatives may request, to examine, inspect, copy, and make extracts
from any and all of the Borrower's books, records, electronically stored data,
papers, and files. The Borrower shall make all of the Borrower's copying
facilities available to the Lender. Unless there has occurred a Suspension Event
or an Event of Default which is continuing, the Lender shall give Borrower
fourteen (14) days notice of any intended audit.
(b) The Borrower hereby authorizes the Lender and the Lender's
representatives to:
(i) Inspect, copy, duplicate, review, cause to be reduced to hard
copy, run off, draw off, and otherwise use any and all computer or
electronically stored information or data which relates to the Borrower, or
any service bureau, contractor, accountant, or other person, and directs
any such service bureau, contractor, accountant, or other person fully to
cooperate with the Lender and the Lender's representatives with respect
thereto.
(ii) Verify at any time the Collateral or any portion thereof,
including verification with Account Debtors, and/or with the Borrower's
computer billing companies, collection agencies, and accountants and to
sign the name of the Borrower on any notice to the Borrower's Account
Debtors or verification of the Collateral.
9-3. Immediate Notice to Lender.
(a) The Borrower shall provide the Lender with written notice immediately
upon its knowledge of the occurrence of any of the following events, which
written notice shall be with reasonable particularity as to the facts and
circumstances in respect of which such notice is being given:
(i) Any change in the Borrower's Executive Officers, officers,
directors, controllers or key employees.
(ii) The completion of any physical count of the Borrower's Inventory
(together with a copy of the certified results thereof).
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(iii) Any ceasing of the Borrower's making of payment, in the ordinary
course, to any of its creditors (including the ceasing of the making of
such payments on account of a dispute with the subject creditor).
(iv) Any failure by the Borrower to pay rent at any of the Borrower's
locations, which failure continues for more than twenty (20) days following
the day on which such rent first came due. If the Borrower has any dispute
with any landlord with respect to rents payable or other matters, the
Borrower shall give written notice of said dispute.
(v) Any material change in the business, operations, or financial
affairs of the Borrower.
(vi) The occurrence of any Suspension Event.
(vii) Any intention on the part of the Borrower to discharge the
Borrower's present independent accountants or any withdrawal or resignation
by such independent accountants from their acting in such capacity (as to
which, see Subsection 9-1(d)).
(viii) Any litigation which, if determined adversely to the Borrower,
might have a material adverse effect on the financial condition of the
Borrower.
(b) The Borrower shall:
(i) Provide the Lender , when so distributed, with copies of any
materials distributed to the shareholders of the Borrower (in their
capacity as such shareholders).
(ii) Add the Lender as an addressee on all mailing lists maintained by
or for the Borrower.
(iii) At the request of the Lender, from time to time, provide the
Lender with copies of all advertising (including copies of all print
advertising and duplicate tapes of all video and radio such advertising).
(iv) Provide the Lender, when received by the Borrower, with a copy of
any management letter or similar communications from any accountant of the
Borrower.
9-4. Borrowing Base Certificate. The Borrower shall provide the Lender,
daily, with a Borrowing Base Certificate (in the form of EXHIBIT 9.4 annexed
hereto, as such form may be revised from time to time by the Lender ) and shall
also provide Lender, daily, with an Average Cost Inventory Report (such report
to be in form and substance satisfactory to Lender). Such Certificate and such
Report shall be submitted to Lender on each day that Borrower requests a loan
and in all events, shall be submitted to Lender on Wednesday and Friday of each
week. Such Certificate and such Report may be sent to the Lender by facsimile
transmission, provided that the originals thereof are forwarded to the Lender on
the date of such transmission.
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9-5. Weekly Reports. Weekly, on Wednesday of each week (as of the then
immediately preceding Saturday) the Borrower shall provide the Lender with a
Flash Sales Report (Borrower format acceptable). Such reports may be sent to the
Lender by facsimile transmission, provided that the original thereof is
forwarded to the Lender on the date of such transmission.
9-6. Monthly Reports.
(a) Monthly, the Borrower shall provide the Lender with original
counterparts of (each in such form as the Lender from time to time may specify):
(i) Within Fifteen (15) days of the end of the previous month:
(A) An Average Cost Report.
(B) An Inventory on Order Report and Receivings.
(C) Summary of monthly sales and payment type report
(D) Summary of monthly receivings by vendor
(ii) Within Forty (40) days of the end of the previous month:
(A) A Statement of Gross Margin.
(B) Reconciliation of Inventory to the general ledger as of the
end of the subject month.
(C) An aging of the Borrower's accounts payable.
(D) An internally prepared financial statement of the Borrower's
financial condition at, and the results of its operations for, the
period ending with the end of the subject month, which financial
statement shall include, at a minimum, a balance sheet, income
statement (on a store specific and on a "consolidated" basis), cash
flow and comparison of same store sales for the corresponding month of
the then immediately previous year, as well as to the Business Plan.
(E) A statement of Store Activity (Borrower's format).
(F) a Rollforward of perpetual inventory.
(b) For purposes of Section 9-6(a)(i), above, the first "previous month" in
respect of which the items required by that Section shall be provided shall be
October, 1997 and for purposes of Section 9-6(a)(ii), above, the first "previous
month" in respect of which the items required by that Section shall be provided
shall be October, 1997.
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9-7. Quarterly Reports. Quarterly, within Forty Five (45) days following
the end of each of the Borrower's fiscal quarters, the Borrower shall provide
the Lender with an original counterpart of a management prepared financial
statement of the Borrower for the period from the beginning of the Borrower's
then current fiscal year through the end of the subject quarter, with
comparative information for the same period of the previous fiscal year, which
statement shall include, at a minimum, a balance sheet, income statement (on a
store specific and on a "consolidated" basis), statement of changes in
shareholders' equity, and cash flows and comparisons for the corresponding
quarter of the then immediately previous year, as well as to the Business Plan.
9-8. Annual Reports.
(a) Annually, within ninety (90) days following the end of the Borrower's
fiscal year, the Borrower shall furnish the Lender with an original signed
counterpart of the Borrower's annual financial statement, which statement shall
have been prepared by, and bearing the unqualified opinion of, the Borrower's
independent certified public accountants (i.e. said statement shall be
"certified" by such accountants). Such annual statement shall include, at a
minimum, a balance sheet, income statement, statement of changes in
shareholders' equity, cash flows and all forms which are now or may in the
future be required to be filed with the Securities and Exchange Commission.
(b) Each annual statement shall be accompanied by such accountant's
Certificate indicating that to the best knowledge of such accountant, no event
has occurred which is or which, solely with the passage of time or the giving of
notice (or both) would be, an Event of Default.
9-9. Officers' Certificates. The Borrower shall cause the Borrower's
President and Chief Financial Officer respectively to provide such Person's
Certificate with those monthly, quarterly, and annual statements to be furnished
pursuant to this Agreement, which Certificate shall:
(a) Indicate that the subject statement was prepared in accordance
with GAAP consistently applied, and presents fairly the financial condition
of the Borrower at~the close of, and the results of the Borrower's
operations and cash flows for, the period(s) covered, subject, however
(with the exception of the Certificate which accompanies such annual
statement) to usual year end adjustments.
(b) Indicate either that (i) no Suspension Event has occurred or (ii)
if such an event has occurred, its nature (in reasonable detail) and the
steps (if any) being taken or contemplated by the Borrower to be taken on
account thereof.
(c) Include calculations concerning the Borrower's compliance (or
failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 9-12, below.
(d) Indicate that all taxes (broken down by type and taxing authority)
have or have not been paid.
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(e) Indicate that all rent and additional rent (broken down by store
location) due pursuant to any store lease have or have not been paid.
9-10. Inventories. Appraisals. and Audits.
(a) The Lender, at the expense of the Borrower, may participate in and/or
observe each physical count and/or inventory of so much of the Collateral as
consists of Inventory which is undertaken on behalf of the Borrower.
(b) Upon the Lender's request from time to time, the Borrower shall obtain,
or shall permit the Lender to obtain (in all events, at the Borrower's expense)
physical counts and/or inventories of the Collateral, conducted by such
inventory takers as are satisfactory to the Lender and following such
methodology as may be required by the Lender, each of which physical counts
and/or inventories shall be observed by the Borrower's accountants. The Lender
will require the Borrower to conduct two (2) such counts and/or inventories
during each twelve (12) month period during which the within Agreement is in
effect, but in its discretion, may undertake additional such counts or
inventories during such period.
(c) Upon the Lender's request from time to time, the Borrower shall permit
the Lender to obtain appraisals (in all events, at the Borrower's expense)
conducted by such appraisers as are satisfactory to the Lender.
(d) The Lender contemplates conducting three (3) commercial finance audits
(in each event, at the Borrower's expense in the amount of $750.00 per man day,
plus expenses) of the Borrower's books and records during any twelve (12) month
period during which the within Agreement is in effect, but in its discretion,
may undertake additional such audits during such period.
(e) The Lender from time to time (in all events, at the Borrower's expense)
may undertake "mystery shopping" (so-called) visits to all or any of the
Borrower's business premises. The Lender shall provide the Borrower with a copy
of any non-company confidential results of such mystery shopping.
9-11. Additional Financial Information.
(a) In addition to all other information required to be provided pursuant
to this Article 9, the Borrower promptly shall provide the Lender with such
other and additional information concerning the Borrower and any guarantor of
the Liabilities, the Collateral, the operation of the Borrower's business, and
the Borrower's financial condition, including original counterparts of financial
reports and statements, as the Lender may from time to time request from the
Borrower.
(b) The Borrower may provide the Lender, from time to time hereafter, with
updated Business Plans. In all events, the Borrower, no sooner than ninety (90)
nor later than sixty (60) days prior to the end of each of the Borrower's fiscal
years, shall furnish the Lender with an updated and extended Business Plan which
shall go out at least through the end of the then next fiscal year. In each
event, such updated and extended Business Plans shall be prepared pursuant to a
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methodology and shall include such assumptions as are satisfactory to the
Lender. The Lender, following the receipt of any of such Business Plans, may,
but shall not be under any obligation to, revise the financial performance
covenants included on EXHIBIT 9-12, annexed hereto.
9-12. Financial Performance Covenants. The Borrower shall observe and
comply with those financial performance covenants set forth on EXHIBIT 9-12(a),
annexed hereto, certain of which covenants are based on the Business Plan set
forth on EXHIBIT 9-12(b), annexed hereto.
9-13. Electronic Reporting. At Lender's option all information and reports
required to be substituted to Lender by Borrower shall be transmitted
electronically pursuant to an electronic transmitting reporting system and shall
be in a record layout format designated by Lender from time to time. Lender
shall not require electronic reporting if such reporting is beyond the then
capabilities of the systems maintained by the Borrower.
ARTICLE 10 - EVENTS OF DEFAULT
The occurrence of any event described in this Article 10 respectively shall
constitute an "Event of Default" herein. Upon the occurrence of any Event of
Default described in Section 10-11, any and all Liabilities shall become due and
payable without any further act on the part of the Lender. Upon the occurrence
of any other Event of Default, any and all Liabilities shall become immediately
due and payable, at the option of the Lender and without notice or demand. The
occurrence of any Event of Default shall also constitute, without notice or
demand, a default under all other agreements between the Lender and the Borrower
and instruments and papers given the Lender by the Borrower, whether such
agreements, instruments, or papers now exist or hereafter arise.
10-1. Failure to Pay Revolving Credit. The failure by the Borrower to pay
any amount when due under the Revolving Credit.
10-2. Failure To Make Other Payments. The failure by the Borrower to pay
when due (or upon demand, if payable on demand) any payment Liability other than
under the Revolving Credit.
10-3. Failure to Perform Covenant or Liability (No Grace Period). The
failure by the Borrower to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability not otherwise described in
section 10-1 or section 10-2, above, and included in any of the following
provisions hereof:
Section Relates to:
------- -----------
5-4 Location of Collateral
5-5 Title to Assets
5-6 Indebtedness
5-7 Insurance Policies
5-12(d) Pay Taxes
5-21 Affiliate Transactions
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5-23 Additional Assurances
Article 7 Cash Management
Article 9 Financial Reporting Requirements
and Financial Covenants
10-4. Failure to Perform Covenant or Liability (Grace Period). The failure
by the Borrower to promptly, punctually and faithfully perform, or observe any
term, covenant or agreement on its part to be performed or observed pursuant to
any of the provisions of this Agreement, other than those described in Sections
10-1, 10-2 or 10-3, or in any other agreement with Lender which is not remedied
within the earlier of twenty (20) days after (i) notice thereof by Lender to
Borrower, or (ii) the date Borrower was required to give notice to Lender
pursuant to Section 9-3(a)(vi) hereof.
10-5. Misrepresentation. The determination by the Lender that any
representation or warranty at any time made by the Borrower to the Lender, was
not true or complete in all material respects when given.
10-6. Acceleration of Other Debt. Breach of Lease. The occurrence of any
event such that any Indebtedness of the Borrower to any creditor other than the
Lender is accelerated or, without the consent of the Borrower, any Lease is
terminated.
10-7. Default Under Other Agreements. The occurrence of any breach or
default under any agreement between the Lender and the Borrower or instrument or
paper given the Lender by the Borrower, whether such agreement, instrument, or
paper now exists or hereafter arises (notwithstanding that the Lender may not
have exercised its rights upon default under any such other agreement,
instrument or paper).
10-8. Casualty Loss. Non-Ordinary Course Sales. The occurrence of any (a)
uninsured loss, theft, damage, or destruction of or to any material portion of
the Collateral having a fair market value in excess of Twenty Thousand
($20,000.00) Dollars, or (b) sale (other than sales in the ordinary course of
business) of any material portion of the Collateral having a fair market value
in excess of Twenty Thousand ($20,000.00) Dollars.
10-9. Judgment. Restraint of Business.
(a) The service of process upon the Lender or any Participant seeking to
attach, by trustee, mesne, or other process, any of the Borrower's funds on
deposit with, or assets of the Borrower in the possession of, the Lender or such
Participant.
(b) The entry of any judgment against the Borrower, which judgment is not
satisfied (if a money judgment) or appealed from (with execution or similar
process stayed) within thirty (30) days of its entry.
(c) The entry of any order or the imposition of any other process having
the force of law, the effect of which is to restrain in any material way the
conduct by the Borrower of its business in the ordinary course.
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10-10. Cessation of Business or Voluntary Insolvency Proceedings. The (i)
cessation of operations of Borrower's business as conducted on the date of this
Agreement; (ii) filing by Borrower of a petition or request for liquidation,
reorganization, arrangement, adjudication as a bankrupt, relief as a debtor, or
other relief under the bankruptcy, insolvency, or similar laws of the United
States of America or any state or territory thereof or any foreign jurisdiction
now or hereafter in effect; (iii) making by Borrower of a general assignment for
the benefit of creditors; (iv) consent by the Borrower to the appointment of a
receiver or trustee, including, without limitation, a "custodian," as defined in
the Bankruptcy Code, for Borrower or any of Borrower's assets; (v) making of
any, or sending of any, notice of any intended, bulk sale by Borrower; or (vi)
execution by Borrower of a consent to any other type of insolvency proceeding
(under the Bankruptcy Code or otherwise) or any formal or informal proceeding
for the dissolution or liquidation of, or settlement of, claims against or
winding up of affairs of, Borrower.
10-11. Involuntary Insolvency Proceedings. The appointment (which
appointment shall not be vacated or such petition or proceeding shall not be
dismissed with sixty (60) days after such appointment, filing or institution) of
a receiver, trustee, custodian, or officer performing similar functions,
including, without limitation, a "custodian," as defined in the Bankruptcy Code,
for Borrower or any of Borrower's assets; or the filing against Borrower of a
request or petition for liquidation, reorganization, arrangement, adjudication
as a bankrupt, or other relief under the bankruptcy, insolvency, or similar laws
of the United States of America, any state or territory thereof, or any foreign
jurisdiction now or hereafter in effect; or of any other type of insolvency
proceeding (under the Bankruptcy Code or otherwise) or any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against,
or winding up of affairs of Borrower shall be instituted against Borrower.
10-12. Insecurity. The occurrence of any event or circumstance with respect
to the Borrower such that Lender shall believe in good faith that the prospect
of payment of all or any part of the Liabilities or the performance by the
Borrower under this Agreement or any other agreement between the Lender and the
Borrower is impaired or there shall occur any material adverse change in the
business or financial condition of the Borrower.
10-13. Default by Guarantor or Related Entity. The occurrence of any of the
foregoing Events of Default with respect to any guarantor of the Liabilities, or
the occurrence of any of the foregoing Events of Default with respect to any
parent (if the Borrower is a corporation), subsidiary, or Related Entity, as if
such guarantor, parent, or Related Entity were the "Borrower" described therein.
10-14. Indictment - Forfeiture. The indictment of, or institution of any
legal process or proceeding against, the Borrower, any Executive Officer or any
guarantor of the Liabilities under any federal, state, municipal, and other
civil or criminal statute, rule, regulation, order, or other requirement having
the force of law where the relief, penalties, or remedies sought or available
include the forfeiture of any property of the Borrower and/or the imposition of
any stay or other
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order, the effect of which could be to restrain in any material way the conduct
by the Borrower of its business in the ordinary course.
10-15. Termination of Guaranty. The termination or attempted termination of
any guaranty by any guarantor of the Liabilities.
10-16. Challenge to Loan Documents.
(a) Any challenge by or on behalf of the Borrower or any guarantor of the
Liabilities to the validity of any Loan Document or the applicability or
enforceability of any Loan Document strictly in accordance with the subject Loan
Document's terms or which seeks to void, avoid, limit, or otherwise adversely
affect any security interest created by or in any Loan Document or any payment
made pursuant thereto.
(b) Any determination by any court or any other judicial or government
authority that any Loan Document is not enforceable strictly in accordance with
the subject Loan Document's terms or which voids, avoids, limits, or otherwise
adversely affects any security interest created by any Loan Document or any
payment made pursuant thereto.
10-17. Change in Board of Directors. The failure to maintain Xxxxxxx Xxxxx
or his designee as a member of the Board of Directors of Borrower.
10.18. Past Due Tax Returns. The failure to file all past due federal and
state income tax returns and pay all taxes shown as due thereon, together with
all interest and penalties prior to November 30, 1997 and to submit satisfactory
evidence of the same to the Lender by that date.
ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Lender is provided prior to the occurrence of an Event of
Default, the Lender shall have the following rights and remedies upon the
occurrence of any Event of Default and at any time thereafter. No stay which
otherwise might be imposed pursuant to the Bankruptcy Code or otherwise shall
stay, limit, prevent, hinder, delay, restrict, or otherwise prevent the Lender's
exercise of any of such rights and remedies.
11-1. Rights of Enforcement. The Lender shall have all of the rights and
remedies of a secured party upon default under the UCC, in addition to which the
Lender shall have all and each of the following rights and remedies:
(a) To collect the Receivables Collateral with or without the taking
of possession of any of the Collateral.
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(b) To take possession of all or any portion of the Collateral.
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or
processing as the Lender deems advisable and with or without the taking of
possession of any of the Collateral.
(d) To conduct one or more going out of business sales which include
the sale or other disposition of the Collateral.
(e) To apply the Receivables Collateral or the proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
11-2. Sale of Collateral.
(a) Any sale or other disposition of the Collateral may be at public or
private sale upon such terms and in such manner as the Lender deems advisable,
having due regard to compliance with any statute or regulation which might
affect, limit, or apply to the Lender's disposition of the Collateral.
(b) The Lender, in the exercise of the Lender's rights and remedies upon
default, may conduct one or more going out of business sales, in the Lender's
own right or by one or more agents and contractors. Such sale(s) may be
conducted upon any premises owned, leased, or occupied by the Borrower. The
Lender and any such agent or contractor, in conjunction with any such sale, may
augment the Inventory with other goods (all of which other goods shall remain
the sole property of the Lender or such agent or contractor). Any amounts
realized from the sale of such goods which constitute augmentations to the
Inventory (net of an allocable share of the costs and expenses incurred in their
disposition) shall be the sole property of the Lender or such agent or
contractor and neither the Borrower nor any Person claiming under or in right of
the Borrower shall have any interest therein.
(c) Unless the Collateral is perishable or threatens to decline speedily in
value, or is of a type customarily sold on a recognized market (in which event
the Lender shall provide the Borrower with such notice as may be practicable
under the circumstances), the Lender shall give the Borrower at least seven (7)
business days prior written notice of the date, time, and place of any proposed
public sale, and of the date after which any private sale or other disposition
of the Collateral may be made. The Borrower agrees that such written notice
shall satisfy all requirements for notice to the Borrower which are imposed
under the UCC or other applicable law with respect to the exercise of the
Lender's rights and remedies upon default.
(d) The Lender may purchase the Collateral, or any portion of it at any
sale held under this Article.
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(e) The Lender shall apply the proceeds of any exercise of the Lender's
Rights and Remedies under this Article 11 towards the Liabilities in such
manner, and with such frequency, as the Lender determines.
11-3. Occupation of Business Location. In connection with the Lender's
exercise of the Lender's rights under this Article 11, the Lender may enter
upon, occupy, and use any premises owned or occupied by the Borrower, and may
exclude the Borrower from such premises or portion thereof as may have been so
entered upon, occupied, or used by the Lender . The Lender shall not be required
to remove any of the Collateral from any such premises upon the Lender's taking
possession thereof, and may render any Collateral unusable to the Borrower. In
no event shall the Lender be liable to the Borrower for use or occupancy by the
Lender of any premises pursuant to this Article 11, nor for any charge (such as
wages for the Borrower's employees and utilities) incurred in connection with
the Lender's exercise of the Lender's Rights and Remedies.
11-4. Grant of Nonexclusive License. The Borrower hereby grants to the
Lender a royalty free nonexclusive irrevocable license to use, apply, and affix
any trademark, tradename, logo, or the like in which the Borrower now or
hereafter has rights, such license being with respect to the Lender's exercise
of the rights hereunder including, without limitation, in connection with any
completion of the manufacture of Inventory or sale or other disposition of
Inventory.
11-5. Assembly of Collateral. The Lender may require the Borrower to
assemble the Collateral and make it available to the Lender at the Borrower's
sole risk and expense at a place or places which are reasonably convenient to
both the Lender and Borrower.
11-6. Rights and Remedies. The rights, remedies, powers, privileges, and
discretions of the Lender hereunder (herein, the "Lender's Rights and Remedies")
shall be cumulative and not exclusive of any rights or remedies which it would
otherwise have. No delay or omission by the Lender in exercising or enforcing
any of the Lender's Rights and Remedies shall operate as, or constitute, a
waiver thereof. No waiver by the Lender of any Event of Default or of any
default under any other agreement shall operate as a waiver of any other default
hereunder or under any other agreement. No single or partial exercise of any of
the Lender's Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between the Lender and any person,
at any time, shall preclude the other or further exercise of the Lender's Rights
and Remedies. No waiver by the Lender of any of the Lender's Rights and Remedies
on any one occasion shall be deemed a waiver on any subsequent occasion, nor
shall it be deemed a continuing waiver. All of the Lender's Rights and Remedies
and all of the Lender's rights, remedies, powers, privileges, and discretions
under any other agreement or transaction are cumulative, and not alternative or
exclusive, and may be exercised by the Lender at such time or times and in such
order of preference as the Lender in its sole discretion may determine. The
Lender's Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Liabilities.
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11-7. Upon the happening and continuance of one or more events described in
Section 10-11, the Lender's obligation hereunder to make loans and advances
shall be cancelled immediately, automatically and without notice.
Notwithstanding the foregoing, the Lender's obligations hereunder to make loans
and advances to the Borrower shall be reinstated if, within five (5) days of the
appointment, filing or institution described in Section 10-11, the Borrower
obtains an order in form and substance satisfactory to the Lender confirming
that the security interest created pursuant to this Agreement extends to
property, proceeds, products, offsprings or profits acquired by the Borrower or
the estate of the Borrower after the commencement of such proceeding to extend
provided by this Agreement and by applicable new bankruptcy law.
ARTICLE 12 - NOTICES.
12-1. Notice Addresses. All notices, demands, and other communications made
in respect of this Agreement (other than a request for a loan or advance or
other financial accommodation under the Revolving Credit) shall be made to the
following addresses, each of which may be changed upon seven (7) days written
notice to all others given by certified mail, return receipt requested:
If to the Lender: Paragon Capital LLC
Paragon Towers
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, President
Phone:(000) 000-0000
Fax: (000) 000-0000
With a copy to: Xxxx X. Xxxxxxxxx, Esq.
Xxxxxxx, Xxxxxx & Weiner, P.C.
000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
If to the Borrower: Xxxxxx Electronics, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx,
Executive Vice President and
Chief Financial Officer
Phone:(000) 000-0000
Fax: (000) 000-0000
With a copy to: Ruskin, Moscou, Xxxxx & Faltischek, P.C.
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000-0000
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Attention: Xxxxxxx X. Xxxxx, Esq.
Phone:(000) 000-0000
Fax: (000) 000-0000
12-2. Notice Given.
(a) Except as otherwise specifically provided herein, notices shall be
deemed made and correspondence received, as follows (all times being local to
the place of delivery or receipt):
(i) By mail: the sooner of when actually received or three (3) days
following deposit in the United States mail, postage prepaid.
(ii) By recognized overnight express delivery: the Banking Day
following the day when sent.
(iii) By hand: If delivered on a Banking Day after 9:00 A.M. and no
later than three (3) hours prior to the close of customary business hours
of the recipient, when delivered. Otherwise, at the opening of the then
next Banking Day.
(iv) By facsimile transmission (which must include a header indicated
the party sending such transmission): If sent on a Banking Day after 9:00
A.M. and no later than Three (3) hours prior to the close of customary
business hours of the recipient, one (1) hour after being sent. Otherwise,
at the opening of the then next Banking Day.
(b) Rejection or refusal to accept delivery and inability to deliver
because of a changed address or facsimile number for which no due notice was
given shall each be deemed receipt of the notice sent.
ARTICLE 13 - TERM.
13-1. Termination of Revolving Credit. This Agreement is, and is intended
to be, a continuing agreement and shall remain in full force and effect for an
initial term ending on the Maturity Date, and thereafter for successive
twelve-month periods, each beginning on the first day of October (commencing
October 1, 2000) of each year and ending on September 30 of the following year
(each such twelve-month period is hereinafter referred to as a "renewal term");
provided, however, that either party may terminate this Agreement as of the end
of the initial term or any subsequent renewal term by giving the other party
notice to terminate in writing at least sixty (60) days prior to the end of any
such period whereupon at the end of such period all Liabilities shall be due and
payable in full without presentation, demand, or further notice of any kind,
whether or not all or any part of the Liabilities is otherwise due and payable
pursuant to the agreement or instrument evidencing same. Lender may terminate
this Agreement immediately and without notice upon the occurrence of an Event of
Default. Notwithstanding the foregoing or anything in this Agreement or
elsewhere to the contrary, the security interest, Lender's rights and remedies
hereunder and Borrower's obligations and liabilities hereunder shall survive any
termination of this Agreement and
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shall remain in full force and effect until all of the Liabilities outstanding,
or contracted or committed for (whether or not outstanding), before the receipt
of such notice by Lender, and any extensions or renewals thereof (whether made
before or after receipt of such notice), together with interest accruing thereon
after such notice, shall be finally and irrevocably paid in full. No Collateral
shall be released or financing statement terminated until such final and
irrevocable payment in full of the Liabilities, as described in the preceding
sentence.
13-2. Effect of Termination. Upon the termination of Revolving Credit, the
Borrower shall pay the Lender (whether or not then due), in immediately
available funds, all then Liabilities including, without limitation: the entire
balance of the Loan Account; any then remaining installments of the Commitment
Fee; any then remaining balance of the Facility Fee; any accrued and unpaid Line
Fee; any Prepayment Premium and all unreimbursed costs and expenses of the
Lender for which the Borrower is responsible, and shall make such arrangements
concerning any L/C's then outstanding are reasonably satisfactory to the Lender.
Until such payment, all provisions of this Agreement, other than those contained
in Article 1 which place an obligation on the Lender to make any loans or
advances or to provide financial accommodations under the Revolving Credit or
otherwise, shall remain in full force and effect until all Liabilities shall
have been paid in full. The release by the Lender of the security interests
granted the Lender by the Borrower hereunder may be upon such conditions and
indemnifications as the Lender may require.
13-3. Prepayment Premium. If Borrower pays in full all or substantially all
of the Liabilities prior to the end of the initial term of this Agreement (or
any renewal term), other than temporarily from funds internally generated in the
ordinary course of business, at the time of such payment Borrower shall also pay
to Lender a prepayment premium of $50,000. Any tender of payment in full of the
Liabilities following an acceleration by Lender of the Liabilities pursuant to
Article 10, shall be for purposes of this section deemed to be a prepayment
requiring Borrower to pay the aforementioned prepayment premium.
Such prepayment premium shall be paid to Lender as liquidated damages for
the loss of the bargain by Lender and not as a penalty.
ARTICLE 14 - GENERAL.
14-1. Protection of Collateral. The Lender has no duty as to the collection
or protection of the Collateral beyond the safe custody of such of the
Collateral as may come into the possession of the Lender and shall have no duty
as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Lender may include reference to the Borrower (and may
utilize any logo or other distinctive symbol associated with the Borrower) in
connection with any advertising, promotion, or marketing undertaken by the
Lender.
14-2. Successors and Assigns. This Agreement shall be binding upon the
Borrower and the Borrower's representatives, successors, and assigns and shall
enure to the benefit of the Lender and the Lender's successors and assigns
provided, however, no trustee or other fiduciary appointed with respect to the
Borrower shall have any rights hereunder. In the event that the Lender assigns
or
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transfers its rights under this Agreement, the assignee shall thereupon succeed
to and become vested with all rights, powers, privileges, and duties of the
Lender hereunder and the Lender shall thereupon be discharged and relieved from
its duties and obligations hereunder.
14-3. Severability. Any determination that any provision of this Agreement
or any application thereof is invalid, illegal, or unenforceable in any respect
in any instance shall not affect the validity, legality, or enforceability of
such provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Agreement.
14-4. Amendments. Course of Dealing.
(a) This Agreement and the other Loan Documents incorporate all discussions
and negotiations between the Borrower and the Lender, either express or implied,
concerning the matters included herein and in such other instruments, any
custom, usage, or course of dealings to the contrary notwithstanding. No such
discussions, negotiations, custom, usage, or course of dealings shall limit,
modify, or otherwise affect the provisions thereof. No failure by the Lender to
give notice to the Borrower of the Borrower's having failed to observe and
comply with any warranty or covenant included in any Loan Document shall
constitute a waiver of such warranty or covenant or the amendment of the subject
Loan Document. No change made by the Lender in the manner by which Availability
is determined shall obligate the Lender to continue to determine Availability in
that manner.
(b) The Borrower may undertake any action otherwise prohibited hereby, and
may omit to take any action otherwise required hereby, upon and with the express
prior written consent of the Lender. No consent, modification, amendment, or
waiver of any provision of any Loan Document shall be effective unless executed
in writing by or on behalf of the party to be charged with such modification,
amendment, or waiver (and if such party is the Lender, then by a duly authorized
officer thereof). Any modification, amendment, or waiver provided by the Lender
shall be in reliance upon all representations and warranties theretofore made to
the Lender by or on behalf of the Borrower (and any guarantor, endorser, or
surety of the Liabilities) and consequently may be rescinded in the event that
any of such representations or warranties was not true and complete in all
material respects when given.
14-5. Power of Attorney. In connection with all powers of attorney included
in this Agreement, the Borrower hereby grants unto the Lender full power to do
any and all things necessary or appropriate in connection with the exercise of
such powers as fully and effectually as the Borrower might or could do, hereby
ratifying all that said attorney shall do or cause to be done by virtue of this
Agreement. No power of attorney set forth in this Agreement shall be affected by
any disability or incapacity suffered by the Borrower and each shall survive the
same. All powers conferred upon the Lender by this Agreement, being coupled with
an interest, shall be irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of the Lender. Such
appointment to become effective and to remain in effect upon the occurrence and
continuance of a Suspension Event or an Event of Default.
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14-6. Application of Proceeds. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Lender
determines in its sole discretion. The Borrower shall remain liable for any
deficiency remaining following such application.
14-7. Lender's Costs and Expenses. The Borrower shall pay on demand all
Costs of Collection and all reasonable expenses of the Lender in connection with
the preparation, execution, and delivery of this Agreement and of any other Loan
Documents, whether now existing or hereafter arising, and all other reasonable
expenses which may be incurred by the Lender in preparing or amending this
Agreement and all other agreements, instruments, and documents related thereto,
or otherwise incurred with respect to the Liabilities, including, without
limiting the generality of the foregoing, any counsel fees or expenses incurred
in any bankruptcy or insolvency proceedings. The Borrower specifically
authorizes the Lender to pay all such fees and expenses and in the Lender's
discretion, to add such fees and expenses to the Loan Account.
14-8. Copies and Facsimiles. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished the Lender may
be reproduced by the Lender by any photographic, microfilm, xerographic, digital
imaging, or other process, and the Lender may destroy any document so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made in the
regular course of business). Any facsimile which bears proof of transmission
shall be binding on the party which or on whose behalf such transmission was
initiated and likewise shall be so admissible in evidence as if the original of
such facsimile had been delivered to the party which or on whose behalf such
transmission was received.
14-9. Massachusetts Law. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of The Commonwealth of Massachusetts.
14-10. Consent to Jurisdiction.
(a) The Borrower agrees that any legal action, proceeding, case, or
controversy against the Borrower with respect to any Loan Document may be
brought in the Superior Court of Middlesex County, Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Lender may elect in the Lender's sole discretion. By
execution and delivery of this Agreement, the Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
(b) Nothing herein shall affect the right of the Lender to bring legal
actions or proceedings in any other competent jurisdiction.
(c) The Borrower agrees that any action commenced by the Borrower asserting
any claim or counterclaim arising under or in connection with this Agreement or
any other Loan Document shall be brought solely in the Superior Court of
Middlesex County, Massachusetts or in
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xxx Xxxxxx Xxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx of Massachusetts, sitting in Boston,
Massachusetts, and that such Courts shall have exclusive jurisdiction with
respect to any such action.
14-11. Indemnification. The Borrower shall indemnify, defend, and hold the
Lender and any employee, officer, or agent of the Lender (each, an "Indemnified
Person") harmless of and from any claim brought or threatened against any
Indemnified Person by the Borrower, any guarantor or endorser of the
Liabilities, or any other Person (as well as from attorneys' reasonable fees and
expenses in connection therewith) on account of the relationship of the Borrower
or of any other guarantor or endorser of the Liabilities Lender (each of claims
which may be defended, compromised, settled, or pursued by the Indemnified
Person with counsel of the Lender's selection, but at the expense of the
Borrower) other than any claim as to which a final determination is made in a
judicial proceeding (in which the Lender and any other Indemnified Person has
had an opportunity to be heard), which determination includes a specific finding
that the Indemnified Person seeking indemnification had acted in a grossly
negligent manner or in actual bad faith. The within indemnification shall
survive payment of the Liabilities and/or any termination, release, or discharge
executed by the Lender in favor of the Borrower.
14-12. Right of Set-Off. Any and all deposits or other sums at any time
credited by or due to the undersigned from the Lender or from any participant (a
"Participant") with the Lender in the credit facility contemplated hereby and
any cash, securities, instruments or other property of the undersigned in the
possession of the Lender or any Participant, whether for safekeeping or
otherwise (regardless of the reason such Person had received the same) shall at
all times constitute security for all Liabilities and for any and all
obligations of the undersigned to the and any Participant, and may be applied or
set off against the Liabilities and against such obligations at any time,
whether or not such are then due and whether or not other collateral is then
available to the Lender or any Participant.
14-13. Maximum Interest Rate. Regardless of any provision of any Loan
Document, the Lender shall never be entitled to contract for, charge, receive,
collect, or apply as interest on any Liability, any amount in excess of the
maximum rate imposed by applicable law. Any payment which is made which, if
treated as interest on a Liability would result in such interest's exceeding
such maximum rate shall be held, to the extent of such excess, as additional
collateral for the Liabilities as if such excess were "Collateral."
14-14. Usury Savings Clause. It is the intention of the parties hereto to
comply strictly with applicable usury laws, if any; accordingly, notwithstanding
any provisions to the contrary in this Agreement or any other Loan Documents, in
no event shall this Agreement or such Loan Document require or permit the
payment, taking, reserving, receiving, collecting or charging of any sums
constituting interest under applicable laws which exceed the maximum amount
permitted by such laws. If any such excess interest is called for, contracted
for, charged, paid, taken, reserved, collected or received in connection with
the Liabilities or in any communication by Lender or any other person to the
Borrower or any other person, or in the event all or part of the principal of
the Liabilities or interest thereon shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, collected,
-47-
reserved, or received on the amount of principal actually outstanding from time
to time under this Agreement shall exceed the maximum amount of interest
permitted by applicable usury laws, if any, then in any such event it is agreed
as follows: (i) the provisions of this paragraph shall govern and control, (ii)
neither the Borrower nor any other person or entity now or hereafter liable for
the payment of the Liabilities shall be obligated to pay the amount of such
interest to the extent such interest is in excess of the maximum amount of
interest permitted by applicable usury laws, if any, (iii) any such excess which
is or has been received notwithstanding this paragraph shall be credited against
the then unpaid principal balance hereof or, if the Liabilities have been or
would be paid in full by such credit, refunded to the Borrower, and (iv) the
provisions of this Agreement and the other Loan Documents, and any communication
to the Borrower, shall immediately be deemed reformed and such excess interest
reduced, without the necessity of executing any other document, to the maximum
lawful rate allowed under applicable laws as now or hereafter construed by
courts having jurisdiction hereof or thereof. Without limiting the foregoing,
all calculations of the rate of interest contracted for, charged, taken,
collected, reserved, or received in connection herewith which are made for the
purpose of determining whether such rate exceeds the maximum lawful rate shall
be made to the extent permitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full term of the Liabilities,
including all prior and subsequent renewals and extensions, all interest at any
time contracted for, charged, taken, collected, reserved or received. The terms
of this paragraph shall be deemed to be incorporated in every Loan Document and
communication relating to the Liabilities.
14-15. Waivers.
(a) The Borrower (and all guarantors, endorsers, and sureties of the
Liabilities) make each of the waivers included in Section 14-14(b), below,
knowingly, voluntarily, and intentionally, and understands that the Lender, in
entering into the financial arrangements contemplated hereby and in providing
loans and other financial accommodations to or for the account of the Borrower
as provided herein, whether not or in the future, is relying on such waivers.
(b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY
RESPECTIVELY WAIVES THE FOLLOWING.
(i) Except as otherwise specifically required in this Agreement,
notice of non-payment, demand, presentment, protest and all forms of demand
and notice, both with respect to the Liabilities and the Collateral.
(ii) Except as otherwise specifically required in this Agreement, the
right to notice and/or hearing prior to the Lender's exercising of the
Lender's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN
WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS
INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE LENDER IS JOINED AS A
PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT
OF, ANY RELATIONSHIP AMONGST OR BETWEEN
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THE BORROWER OR ANY OTHER PERSON AND THE LENDER (AND THE LENDER LIKEWISE
WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).
(iv) Any defense, counterclaim, set-off, recoupment, or other basis on
which the amount of any Liability, as stated on the books and records of
the Lender, could be reduced or claimed to be paid otherwise than in
accordance with the tenor of and written terms of such Liability.
(v) Any claim to consequential, special, or punitive damages.
14-16. Confidentiality. This Agreement and the terms hereof are
confidential, and neither the contents of this Agreement or the details of this
Agreement may be shown or disclosed by the Borrower to any bank, finance company
or other lender without the prior written consent of the Lender.
14-17. Right to Publish Notice. Lender may, at Lender's discretion and
expense, publicize or otherwise advertise by so-called "tombstone" advertising
or otherwise Lender's financing transaction with the Borrower.
Executed as a sealed instrument this 3rd day of November, 1997.
XXXXXX ELECTRONICS, INC.
(BORROWER)
By:
----------------------------------
Print Name: Xxxxxx Xxxxxxxxx
Title: Executive Vice President
and Chief Financial Officer
PARAGON CAPITAL LLC
(LENDER)
By:
----------------------------------
Print Name: Xxxxxx X. Xxxxx
Title: President
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EXHIBIT 1-6 TO LOAN AND SECURITY AGREEMENT
MASTER NOTE
(REVOLVING)
$3,300,000.00 Newton, Massachusetts
November 3, 1997
For value received, the undersigned, Xxxxxx Electronics, Inc., a New York
corporation (the "Borrower"), hereby promises to pay on September 30, 2000 (the
"Maturity Date", unless extended as provided in Article 13-1 of the Loan
Agreement (as defined below), in which event the Maturity Date shall be the last
day of the applicable renewal term), to the order of Paragon Capital LLC, a
Delaware limited liability company (the "Lender"), at its main office in Newton,
Massachusetts, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of Three Million Three Hundred Thousand
($3,300,000.00) Dollars or, if less, the aggregate unpaid principal amount of
all advances made by the Lender to the Borrower hereunder, together with
interest on the principal amount hereunder remaining unpaid from time to time,
computed on the basis of the actual number of days elapsed and a 360-day year,
from the date hereof until this Note is fully paid at the rate from time to time
in effect under the Loan and Security Agreement of even date herewith (the "Loan
Agreement") by and between the Lender and the Borrower. The principal hereof and
interest accruing thereon shall be due and payable as provided in the Loan
Agreement. This Note may be prepaid only in accordance with the Loan Agreement.
This Note is issued pursuant, and is subject, to the Loan Agreement, which
provides, among other things, for acceleration hereof. This Note is the Master
Note referred to in the Loan Agreement.
This Note is secured, among other things, pursuant to the Loan Agreement
and may now or hereafter be secured by one or more other security agreements,
mortgages, deeds of trust, assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.
This Note shall be deemed to be under seal.
XXXXXX ELECTRONICS, INC.
By:
-----------------------------
EXHIBIT 3
"Acceptable Inventory": Such of the Borrower's Inventory, at such
locations, and of such types, character, qualities and quantities, (net of
Inventory Reserves) as the Lender in its sole discretion from time to time
determines to be acceptable for borrowing, as to which Inventory, the Lender has
a perfected security interest which is prior and superior to all security
interests, claims, and Encumbrances.
"Accounts Receivable" include, without limitation, "accounts" as defined in
the UCC.
"ACH": Automated clearing house.
"Account Debtor": Has the meaning given that term in the UCC.
"Affiliate": With respect to any two Persons, a relationship in which (a)
one holds, directly or indirectly, not less than twenty-five (25%) percent of
the capital stock, beneficial interests, partnership interests, or other equity
interests of the other; or (b) one has, directly or indirectly, Control of the
other; or (c) not less than twenty-five (25%) percent of their respective
ownership is directly or indirectly held by the same third Person.
"Annual Facility Fee": Is defined in Section 1-9(b)(iii).
"Availability": Means that amount available for loans and advances as
calculated by the Lender based upon the lending formula set forth in Section
1.1(b).
"Availability Reserves": Such reserves as the Lender from time to time
determines in the Lender's discretion as being appropriate to reflect the
impediments to the Lender's ability to realize upon the Collateral. Without
limiting the generality of the foregoing, Availability Reserves may include (but
are not limited to) reserves based on the following:
(a) Rent (based upon 30 days' past due rent and/or whether or not
Landlord's Waiver, acceptable to the Lender, has been received by the
Lender ).
(b) In store customer credits, special customer deposits and gift
certificates, provided that the Lender shall not create an Availability
Reserve for in store customer credits and gift certificates prior to the
first (1st) anniversary date of this Agreement.
(c) Payables (based upon payables which are more than sixty (60) days
past due).
(d) The then outstanding Stated Amount of all standby L/C's.
(e) Taxes and other governmental charges, including, ad valorem,
personal property, and other taxes which may have priority over the
security interests of the Lender in the Collateral.
"Bankruptcy Code": Title 11, U.S.C., as amended from time to time.
"Base": The Base Rate announced from time to time by Norwest Bank Minnesota
National Association (or any successor in interest to Norwest Bank Minnesota
National Association). In the event that said bank (or any such successor)
ceases to announce such a rate, "Base" shall refer to that rate or index
announced or published from time to time as the Lender, in good faith,
designates as the functional equivalent to said Base Rate. Any change in "Base"
shall be effective, for purposes of the calculation of interest due hereunder,
when such change is made effective generally by the bank on whose rate or index
"Base" is being set.
"Basis Point(s)": An amount which is equal to 1/100th of one (1%) percent.
For example, one and one-half (1.5%) percent equals 150 basis points.
"Borrower": Is defined in the Preamble.
"Borrowing Base": Means up to seventy-five (75%) percent of Cost of
Acceptable Inventory for the first twelve (12) months following the date hereof
and seventy-three (73%) percent of Cost of Acceptable Inventory thereof, minus
(i) the then unpaid principal balance of the Loan Account, minus (ii) the then
aggregate of such Availability Reserves as may have been established by the
Lender, minus (iii) the then outstanding Stated Amount of all L/C's.
"Banking Day": Any day other than (a) a Saturday, Sunday; (b) any day on
which banks in Boston, Massachusetts generally are not open to the general
public for the purpose of conducting commercial banking business; or (c) a day
on which the Lender is not open to the general public to conduct business.
"Blocked Account": Defined in Section 7-3.
"Business Plan": The Borrower's business plan annexed hereto as EXHIBIT
9-12(b) and any revision, amendment, or update of such business plan to which
the Lender has provided its written sign-off.
"Capital Expenditures": The expenditure of funds or the incurrence of
liabilities which may be capitalized in accordance with GAAP.
"Capital Lease": Any lease which may be capitalized in accordance with
GAAP.
"Chattel Paper": Has the meaning given that term in the UCC.
"Collateral": Is defined in Section 2-1.
"Commitment Fee": Is defined in Section 1-9(a).
"Control": The direct or indirect power to direct or cause the direction of
the management and policies of another Person, whether through ownership of
voting securities, by contract, or otherwise. Included among such powers, with
respect to a corporation, are power to cause any of following: (a) the election
of a majority of its Board of Directors; (b) the issuance of additional shares
of its common stock; (c) the issuance and designation of rights and shares of
its preferred stock (if any); (d) the distribution and timing of dividends; (e)
the award of performance bonuses to its management; (f) the termination or
severance of officers or key employees; and (g) all or any similar matters.
"Cost": The calculated moving average cost of purchases, as determined from
invoices received by the Borrower, the Borrower's Stock Ledger, based upon the
Borrower's accounting practices, known to the Lender, which practices are in
effect on the date on which the within Agreement was executed. "Cost" does not
include inventory capitalization costs, but may include other charges used in
the Borrower's determination of cost of goods sold.
"Costs of Collection" includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred by the Lender's
attorneys, and all reasonable costs incurred by the Lender in the administration
of the Liabilities and/or the Loan Documents, including, without limitation,
reasonable costs and expenses associated with travel on behalf of the Lender,
which costs and expenses are directly or indirectly related to or in respect of
the Lender's: administration and management of the Liabilities; negotiation,
documentation, and amendment of any Loan Document; or efforts to preserve,
protect, collect, or enforce the Collateral, the Liabilities, and/or the
Lender's Rights and Remedies and/or any of the Lender's rights and remedies
against or in respect of any guarantor or other person liable in respect of the
Liabilities (whether or not suit is instituted in connection with such efforts).
The Costs of Collection are Liabilities, and at the Lender's option may bear
interest at the highest post-default rate which the Lender may charge the
Borrower hereunder as if such had been lent, advanced, and credited by the
Lender to, or for the benefit of, the Borrower.
"Credit Limit": Means Three Million Three Hundred Thousand ($3,300,000.00)
Dollars, minus (i) the then unpaid principal balance of the Loan Account, minus
(ii) the then aggregate of such Availability Reserves as may have been
established by the Lender, minus (iii) the then outstanding Stated Amount of all
L/C's.
"DDA": Any checking or other demand daily depository account maintained by
the Borrower.
"Employee Benefit Plan": As defined in ERISA.
"Encumbrance": Each of the following:
(a) security interest, mortgage, pledge, hypothecation, lien,
attachment, or charge of any kind (including any agreement to give any of
the foregoing); the interest of a lessor
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under a Capital Lease; conditional sale or other title retention agreement;
sale of accounts receivable or chattel paper; or other arrangement pursuant
to which any Person is entitled to any preference or priority with respect
to the property or assets of another Person or the income or profits of
such other Person or which constitutes an interest in property to secure an
obligation; each of the foregoing whether consensual or non-consensual and
whether arising by way of agreement, operation of law, legal process or
otherwise.
(b) The filing of any financing statement under the UCC or comparable
law of any jurisdiction.
"End Date": The date upon which both (a) all Liabilities have been paid in
full and (b) all obligations of the Lender to make loans and advances and to
provide other financial accommodations to the Borrower hereunder shall have been
irrevocably terminated.
"Environmental Laws": (a) Any and all federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees or
requirements which regulates or relates to, or imposes any standard of conduct
or liability on account of or in respect to environmental protection matters,
including, without limitation, Hazardous Materials, as is now or hereafter in
effect; and (b) the common law relating to damage to Persons or property from
Hazardous Materials.
"ERISA": The Employee Retirement Security Act of 1974, as amended.
"ERISA Affiliate": Any Person which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which would be treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended.
"Events of Default": Is defined in Article 10.
"Executive Agreement": Any agreement or understanding (whether or not
written) to which the Borrower is a party or by which the Borrower may be bound,
which agreement or understanding relates to Executive Pay.
"Executive Officer": Each of Xxxxxxxx Xxxx, Xxxxxx X. Xxxxxxxxx and any
other Person who (without regard to title) is the successor to any of the
foregoing or who exercises a substantial portion of the authority being
exercised, at the execution of the within Agreement, by any of the foregoing or
a combination of the such authority of more than one of the foregoing or who
otherwise has Control of the Borrower.
"Executive Pay": All salary, bonuses, and other value directly or
indirectly provided by or on behalf of the Borrower to or for the benefit of any
Executive Officer or any Affiliate, spouse, parent, or child of any Executive
Officer.
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"Facility Fee": Is defined in Section 1-9(b).
"Funding Account": Is defined in Section 7-3.
"GAAP": Principles which are consistent with those promulgated or adopted
by the Financial Accounting Standards Board and its predecessors (or successors)
in effect and applicable to that accounting period in respect of which reference
to GAAP is being made.
"General Intangibles" includes, without limitation, "general intangibles"
as defined in the UCC; and also all: rights to payment for credit extended;
deposits; amounts due to the Borrower; credit memoranda in favor of the
Borrower; warranty claims; tax refunds and abatements; insurance refunds and
premium rebates; all means and vehicles of investment or hedging, including,
without limitation, options, warrants, and futures contracts; records; customer
lists; telephone numbers; goodwill; causes of action; judgments; payments under
any settlement or other agreement; literary rights; rights to performance;
royalties; license and/or franchise fees; rights of admission; licenses;
franchises; license agreements, including all rights of the Borrower to enforce
same; permits, certificates of convenience and necessity, and similar rights
granted by any governmental authority; patents, patent applications, patents
pending, and other intellectual property; Internet addresses and domain names;
developmental ideas and concepts; proprietary processes; blueprints, drawings,
designs, diagrams, plans, reports, and charts; catalogs; manuals; technical
data; computer software programs (including the source and object codes
therefor), computer records, computer software, rights of access to computer
record service bureaus, service bureau computer contracts, and computer data;
tapes, disks, semi-conductors chips and printouts; trade secrets rights,
copyrights, mask work rights and interests, and derivative works and interests;
user, technical reference, and other manuals and materials; trade names,
trademarks, service marks, and all good will relating thereto; applications for
registration of the foregoing; and all other general intangible property of the
Borrower in the nature of intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts or ideas, and any
matter related to, or connected with, the design, development, manufacture,
sale, marketing, leasing, or use of any or all property produced, sold, or
leased, by the Borrower or credit extended or services performed, by the
Borrower, whether intended for an individual customer or the general business of
the Borrower, or used or useful in connection with research by the Borrower.
"Gross Margin": With respect to the subject accounting period for which
being calculated, the following (determined in accordance with the retail method
of accounting):
Sales (Minus) Cost of Goods Sold
--------------------------------
Sales
"Hazardous Materials": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances, petroleum products, which (as to any of the
foregoing) are defined or regulated as a hazardous material in or under any
Environmental Law and (b) oil in any physical state.
-5-
"Indebtedness": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
(a) In respect of money borrowed (including any indebtedness which is
non-recourse to the credit of such Person but which is secured by an
Encumbrance on any asset of such Person) whether or not evidenced by a
promissory note, bond, debenture or other written obligation to pay money.
(b) For the payment of the purchase price of goods or services
deferred for more than sixty (60) days beyond then current trade terms
provided to such person by the supplier of such goods or services.
(c) In connection with any letter of credit or acceptance transaction
(including, without limitation, the face amount of all letters of credit
and acceptances issued for the account of such Person or reimbursement on
account of which such Person would be obligated).
(d) In connection with the sale or discount of accounts receivable or
chattel paper of such Person.
(e) On account of deposits or advances.
(f) As lessee under Capital Leases.
"Indebtedness" of any Person shall also include:
(a) Indebtedness of others secured by an Encumbrance on any asset of
such Person, whether or not such Indebtedness is assumed by such Person.
(b) Any guaranty, endorsement, suretyship or other undertaking
pursuant to which that Person may be liable on account of any obligation of
any third party.
(c) The Indebtedness of a partnership or joint venture in which such
Person is a general partner or joint venturer.
"Indemnified Person": Is defined in Section 14-11.
"Inventory Reserves": Such Reserves as may be established from time to time
by the Lender in the Lender's discretion with respect to the determination of
the saleability, at retail, of the Acceptable Inventory or which reflect such
other factors as affect the current Retail or market value of the Acceptable
Inventory. Without limiting the generality of the foregoing, Inventory Reserves
may include (but are not limited to) reserves based on the following:
-6-
(a) Obsolescence (determined based upon Inventory on hand beyond a
given number of days).
(b) Seasonality.
(c) Shrinkage reserve consistent with the prior performance and
practice of the Borrower but not less than $25,000.00.
(d) Imbalance.
(e) Change in Inventory character, composition or mix.
(f) Markdowns (both permanent and point of sale).
(g) Retail markons or markups inconsistent with prior period practice
and performance; current business plans; or advertising calendar and
planned advertising events.
(h) Trade-in merchandise.
(i) Damaged merchandise and merchandise to be returned to vendors (to
be calculated at 50% of inventory value at cost at location 145).
"Issuer": The issuer of any L/C.
"L/C": Any letter of credit, the issuance of which is procured by the
Lender for the account of the Borrower and any acceptance made on account of
such letter.
"Landlord Lien State": Any state or other jurisdiction under whose
statutory or common law the rights of a landlord in assets of that landlord's
tenant, for unpaid rent, may be senior to a perfected security interest in such
assets.
"Lease": Any lease or other agreement, no matter how styled or structured,
which the Borrower is entitled to the use or occupancy of any space.
"Lender's Rights and Remedies": Is defined in Section 11-6.
"Liabilities" (in the singular, "Liability") includes, without limitation,
all and each of the following, whether now existing or hereafter arising:
(a) Any and all direct and indirect liabilities, debts, and
obligations of the Borrower to the Lender, each of every kind, nature, and
description.
(b) Each obligation to repay any loan, advance, indebtedness, note,
obligation, overdraft, or amount now or hereafter owing by the Borrower to
the Lender (including all
-7-
future advances whether or not made pursuant to a commitment by the
Lender), whether or not any of such are liquidated, unliquidated, primary,
secondary, secured, unsecured, direct, indirect, absolute, contingent, or
of any other type, nature, or description, or by reason of any cause of
action which the Lender may hold against the Borrower.
(c) All notes and other obligations of the Borrower now or hereafter
assigned to or held by the Lender, each of every kind, nature, and
description.
(d) All interest, fees, and reasonable charges and other amounts which
may be charged by the Lender to the Borrower and/or which may be due from
the Borrower to the Lender from time to time.
(e) All reasonable costs and expenses incurred or paid by the Lender
in respect of any agreement between the Borrower and the Lender or
instrument furnished by the Borrower to the Lender (including, without
limitation, Costs of Collection, attorneys' reasonable fees, and all court
and litigation costs and expenses).
(f) Any and all covenants of the Borrower to or with the Lender and
any and all obligations of the Borrower to act or to refrain from acting in
accordance with any agreement between the Borrower and the Lender or
instrument furnished by the Borrower to the Lender.
"Loan Account": Is defined in Section 1-5.
"Loan Documents": The within Agreement, each instrument and document
executed and/or delivered as contemplated by Article 4, below, and each other
instrument or document from time to time executed and/or delivered in connection
with the arrangements contemplated hereby, as each may be amended from time to
time.
"Local DDA": A depository account maintained by the Borrower, the only
contents of which may be transfers from the Funding Account and actually used
solely (i) for xxxxx cash purposes; or (ii) for payroll.
"Loan Maintenance Fee": Is defined in Section 1.9(c).
"Master Note": Is defined in Section 1-6.
"Maturity Date": September 30, 2000, unless extended as provided in Article
13-1, in which event the Maturity Date shall be the last day of the applicable
renewal term.
"Maximum Loan Exposure": The lesser, on any day, of the following, in each
instance determined net of the unpaid principal balance of the Loan Account on
that day: (a) the Borrowing Base, or (b) the Credit Limit.
-8-
"One Turn State": Any state or other jurisdiction under whose statutory or
common law the relative priority of the rights of a landlord in assets of that
landlord's tenant, for unpaid rent, vis a vis the rights of the holder of a
perfected security interest therein is dependent upon whether such security
interest arose prior or subsequent to the subject asset's coming onto the
demised premises.
"Participant": Is defined in Section 14-14.
"Percentage Points": The number of whole (and, if indicated, fractions (or
decimal equivalents) of) integers of a percentage referred to in a financial
performance covenant which consists of a ratio. For example, if a projected
ratio were fifty (50%) percent and the actual ratio turned out to be fifty-five
and 6/10 (55.6%) percent, the variance would be 5.6 Percentage Points.
"Periodic Loan Maintenance Fee": Is defined in Section 1-9(c).
"Person": Any natural person, and any corporation, limited liability
company, trust, partnership, joint venture, or other enterprise or entity.
"Receipts": All cash, cash equivalents, checks, and credit card slips and
receipts as arise out of the sale of the Collateral.
"Receivables Collateral": That portion of the Collateral which consists of
the Borrower's Accounts, Accounts Receivable, contract rights, General
Intangibles, Chattel Paper, Instruments, Documents of Title, Documents,
Securities, letters of credit for the benefit of the Borrower, and bankers'
acceptances held by the Borrower, and any rights to payment.
"Related Entity":
(a) Any corporation, limited liability company, trust, partnership,
joint venture, or other enterprise which: is a parent, brother-sister,
subsidiary, or affiliate, of the Borrower; could have such enterprise's tax
returns or financial statements consolidated with the Borrower's; could be
a member of the same controlled group of corporations (within the meaning
of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as
amended from time to time) of which the Borrower is a member; Controls or
is Controlled by the Borrower or by any Affiliate of the Borrower.
(b) Any Affiliate.
"Requirement of Law": As to any Person:
-9-
(a) (i) All statutes, rules, regulations, orders, or other
requirements having the force of law and (ii) all court orders and
injunctions, arbitrator's decisions, and/or similar rulings, in each
instance ((i) and (ii)) of or by any federal, state, municipal, and other
governmental authority, or court, tribunal, panel, or other body which has
or claims jurisdiction over such Person, or any property of such Person, or
of any other Person for whose conduct such Person would be responsible.
(b) That Person's charter, certificate of incorporation, articles of
organization, and/or other organizational documents, as applicable; and (c)
that Person's by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"Reserves": All (if any) Availability Reserves and Inventory Reserves.
"Revolving Credit": Is defined in Section 1-1.
"Stated Amount": The maximum amount for which an L/C may be honored.
"Suspension Event": Any occurrence, circumstance, or state of facts which
(a) is an Event of Default; or (b) would become an Event of Default if any
requisite notice were given and/or any requisite period of time were to run and
such occurrence, circumstance, or state of facts were not absolutely cured
within any applicable grace period.
"Termination Date": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10-11; or (c) the Lender's notice
to the Borrower setting the Termination Date on account of the occurrence of any
Event of Default other than as described in Section 10-11.
"Transfer Account": Is defined in Section 7-3.
"UCC": The Uniform Commercial Code as presently in effect in Massachusetts
(Mass. Gen. Laws, Ch. 106).
-10-
EXHIBITS
The following Exhibits to the within Loan and Security Agreement are
respectively described in the section indicated. Those Exhibits in which no
information has been inserted shall be deemed to read "None".
EXHIBIT 5-2
Related Entities
EXHIBIT 5-3
Trade Names
EXHIBIT 5-4
Locations
Address Property Located At Such Address
------- --------------------------------
EXHIBIT 5-5
Encumbrances and Liens
Secured Party Payment Terms
or Mortgagee Description of Collateral and Dates of Maturity
------------ ------------------------- ---------------------
Leases
------
Description Date of Lease
Lessor of Property and Term Rental Payable
------ ----------- ------------- --------------
EXHIBIT 5-6
Indebtedness
Creditor Principal Amount Maturity Date Monthly Payment Collateral
-------- ---------------- ------------- --------------- ----------
Guaranties
Amount and Description
Primary Obligor of Obligation Guaranteed Beneficiary of Guaranty
--------------- ------------------------ -----------------------
EXHIBIT 5-7
Insurance Policies
Insurance Company Type and Amount of Coverage
----------------- ---------------------------
EXHIBIT 5-12
Taxes
EXHIBIT 7-1
Demand Deposit Accounts
EXHIBIT 7-2
Credit Card Arrangements
EXHIBIT 9-4 TO LOAN AND SECURITY AGREEMENT
BORROWING BASE CERTIFICATE
[To Be Prepared by Paragon for Each Specific Transaction]
EXHIBIT 9-12(a) TO LOAN AND SECURITY AGREEMENT
FINANCIAL PERFORMANCE COVENANTS
FINANCIAL AND INVENTORY COVENANTS
Min/Max Inventory
For the three (3) month period ending on the last day of each month of
Borrower's fiscal year, average end of month inventory at cost shall be at least
85% of the amount set forth in the Business Plan, or an amount equal to the
number of stores actually opened and those anticipated to be open in the next
succeeding 120 days, and not more than 115% of the Business Plan; exclusive of
"opportunistic buys" (those purchases deemed extraordinary given trade terms
granted different than those typically offered to the company DOCUMENTATION
SUBJECT TO THE SOLE SATISFACTION OF THE LENDER).
Minimum Gross Margin Test
Gross Margin shall not vary from the Business Plan in any one fiscal month by
more than 4 Percentage Points or 332% for the twelve (12) month period ending on
the last day of such month.
Capital Expenditures
Capital Expenditures shall not exceed $125,000.00 on an annualized bases in
accordance with the Business Plan.
Operating Income/(Loss)
For each monthly period beginning on November 30, 1997, income from continuing
operations (excluding non-cash items and extraordinary expenses) shall not vary
from the Business Plan by (a) more than $200,000.00 for the three (3) month
period ending on the last day of the applicable month, or (b) more than
$300,000.00 for such month.
Trade Accounts Payable and Inventory Purchases
For the three (3) month period ending on the last day of each monthly period,
the ratio of trade accounts payable to end of month inventory must not be less
than .3 to 1 and inventory receipts for such period must not be less than 75% of
planned purchases set forth in the Business Plan.
EXHIBIT 9-12(b) TO LOAN AND SECURITY AGREEMENT
BUSINESS PLAN
[To Be Prepared by Borrower for Each Specific Transaction]
EXHIBIT 9-12(b) TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
BUSINESS PLAN
[To Be Prepared by Borrower for Each Specific Transaction]
MASTER NOTE
(REVOLVING)
$3,300,000.00 Newton, Massachusetts
November 3, 1997
For value received, the undersigned, Xxxxxx Electronics, Inc.,
a New York corporation (the "Borrower"), hereby promises to pay on
September 30, 2000 (the "Maturity Date", unless extended as
provided in Article 13-1 of the Loan Agreement (as defined below),
in which event the Maturity Date shall be the last day of the
applicable renewal term), to the order of Paragon Capital LLC, a
Delaware limited liability company (the "Lender"), at its main
office in Newton, Massachusetts, or at any other place designated
at any time by the holder hereof, in lawful money of the United
States of America and in immediately available funds, the principal
sum of Three Million Three Hundred Thousand ($3,300,000.00) Dollars
or, if less, the aggregate unpaid principal amount of all advances
made by the Lender to the Borrower hereunder, together with
interest on the principal amount hereunder remaining unpaid from
time to time, computed on the basis of the actual number of days
elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Loan
and Security Agreement of even date herewith (the "Loan Agreement")
by and between the Lender and the Borrower. The principal hereof
and interest accruing thereon shall be due and payable as provided
in the Loan Agreement. This Note may be prepaid only in accordance
with the Loan Agreement.
This Note is issued pursuant, and is subject, to the Loan
Agreement, which provides, among other things, for acceleration
hereof. This Note is the Master Note referred to in the Loan
Agreement.
This Note is secured, among other things, pursuant to the Loan
Agreement and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or
other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note
is not paid when due, whether or not legal proceedings are
commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
This Note shall be deemed to be under seal.
XXXXXX ELECTRONICS, INC.
By:_______________________________
Xxxxxx X. Xxxxxxxxx, Executive
Vice President
16
TRADEMARK SECURITY AGREEMENT
----------------------------
THIS SECURITY AGREEMENT is entered into as of November 3, 1997, by and
between Xxxxxx Electronics, Inc., with the previous name of The Xxxxxx Group
Inc., a New York corporation having its principal place of business at 000 Xxxxx
Xxxxxx, Xxxxxxxxx 00000 (the "Borrower"), and Paragon Capital LLC, a Delaware
limited liability company with a usual place of business at 000 Xxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000 ("Paragon").
NOW THEREFORE, in consideration of the premises, Borrower hereby agrees
with Paragon as follows:
1. Grant of Security Interest. Borrower hereby grants to Paragon a first
priority security interest in, and conditionally assigns, but does not transfer
title to Paragon, all of Borrower's right, title and interest in and to the
following (collectively, the "Collateral") to secure payment and performance of
all obligations of Borrower to Paragon whether such obligations are direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, including without limitation, those liabilities of Borrower
to Paragon pursuant to a Loan and Security Agreement dated November 3, 1997,
between Paragon and Borrower (the "Loan Agreement") (collectively, the
"Obligations").
The Collateral shall consist of the following:
(a) Each of the trademarks, and rights and interests protectible as
trademarks, which are presently, or in the future may be, owned, created,
acquired or used (whether pursuant to a license or otherwise) by Borrower, in
whole or in part, and all trademark rights with respect thereto throughout the
world, including all proceeds thereof (including license royalties and proceeds
of infringement suits), and rights to renew and extend such trademarks and
trademark rights;
(b) All of Borrower's right, title and interest, in and to the
trademarks and trademark registrations listed on Schedule A attached hereto, as
the same may be updated hereafter from time to time;
(c) All of Borrower's right, title and interest to register trademark
claims under any state or federal trademark law or regulation of any foreign
country, and to apply for, renew and extend the trademark registrations and
trademark rights, the right (without obligation) to xxx or bring opposition or
cancellation proceedings in the name of Borrower or in the name of Paragon for
past, present and future infringements of the trademarks, registrations or
trademark rights and all rights (but not obligations) corresponding thereto in
the United States and any foreign country, and the associated goodwill;
(d) All general intangibles relating to the Collateral; and
(e) All proceeds of any and all of the foregoing (including, without
limitation, license royalties and proceeds of infringement suits) and, to the
extent not otherwise included, all payments under insurance, or any indemnity,
warranty or guaranty payable by reason of loss or damage to or otherwise with
respect to the Collateral.
2. Warranties and Representations. Borrower hereby warrants and represents to
Paragon the following:
(a) A true and complete schedule setting forth all federal and state
trademark registrations owned or controlled by Borrower or licensed to Borrower,
together with a summary description and
17
full information in respect of the filing or issuance thereof and expiration
dates is set forth on Schedule A;
(b) Each of the trademarks and trademark registrations is valid and
enforceable, and Borrower is not presently aware of any past, present or
prospective claim by any third party that any of the trademarks are invalid or
unenforceable, or that the use of any trademarks violates the rights of any
third person, or of any basis for any such claims;
(c) Borrower is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the trademarks and
trademark registrations free and clear of any liens, charges and encumbrances,
including, without limitation, pledges, assignments, licenses, shop rights and
covenants by Borrower not to xxx third persons;
(d) Borrower has used and will continue to use proper statutory notice
in connection with its use of each of the trademarks;
(e) Borrower has used and will continue to use consistent standards of
high quality (which may be consistent with Borrower's past practices) in the
manufacture, sale and delivery of products and services sold or delivered under
or in connection with the trademarks, including, to the extent applicable, in
the operation and maintenance of its merchandising operations, and will continue
to maintain the validity of the trademarks;
(f) Except for the filing of financing statements with the Secretary of
State of New Jersey and the Town Clerk of Lyndhurst under the Uniform Commercial
Code and filings with the United States Patent and Trademark Office necessary to
perfect the security interests created hereunder, no authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required either for the grant by Borrower of the security
interest hereunder or for the execution, delivery or performance of this
Agreement by Borrower or for the perfection of or the exercise by Paragon of its
rights hereunder to the Collateral in the United States.
3. After-Acquired Trademark Rights. If Borrower shall obtain rights to any new
trademarks, the provisions of this Agreement shall automatically apply thereto.
Borrower shall give prompt notice in writing to Paragon with respect to any such
new trademarks or renewal or extension of any trademark registration. Borrower
shall bear any expenses incurred in connection with future applications for
trademark registration.
4. Litigation and Proceedings. Borrower shall commence and diligently prosecute
in its own name, as the real party in interest, for its own benefit, and its own
expense, such suits, administrative proceedings or other actions for
infringement or other damages as are in its reasonable business judgment
necessary to protect the Collateral. Borrower shall provide to Paragon any
information with respect thereto requested by Paragon. Paragon shall provide at
Borrower's expense all necessary cooperation in connection with any such suit,
proceeding or action, including, without limitation, joining as a necessary
party. Following Borrower's becoming aware thereof, Borrower shall notify
Paragon of the institution of, or any adverse determination in, any proceeding
in the United States Patent and Trademark Office, or any United States, state or
foreign court regarding Borrower's claim of ownership in any of such trademarks,
its right to apply for the same, or its right to keep and maintain such
trademark rights.
5. Power of Attorney. Borrower grants Paragon power of attorney, having the full
authority, and in the place of Borrower and in the name of Borrower, from time
to time in Paragon's discretion to take any action and to execute any instrument
which Paragon may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, as may be subject to the provisions of
the Loan Agreement, appointment shall become effective and remain in effect upon
the
18
occurrence and continuation of a Suspension Event or an Event of Default, as
those terms are defined in the Loan Agreement.
(a) To endorse Borrower's name on all applications, documents, papers
and instruments necessary for Paragon to use or maintain the Collateral;
(b) To ask, demand, collect, xxx for, recover, impound, receive and
give acquittance and receipts for money due or to become due under or in respect
of any of the Collateral;
(c) To file any claims or take any action or institute any proceedings
that Paragon may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce Paragon's rights with respect to any of the
Collateral and to assign, pledge, convey or otherwise transfer title in or
dispose of the Collateral to any person.
7. Right to Inspect. Borrower grants to Paragon and its employees and agents the
right to visit Borrower's plants and facilities which manufacture, inspect or
store products sold under any of the trademarks, and to inspect the products and
quality control records relating thereto at reasonable times during regular
business hours.
8. Events of Default. Any of the following events shall be an Event of Default:
(a) Borrower fails to make any payment of principal or interest or any
other payment on any Obligation when due and payable, by acceleration or
otherwise; and
(b) the occurrence of an Event of Default as that term is defined in
the Loan Agreement.
9. Specific Remedies. Upon the occurrence of any Event of Default, as described
in the Loan Agreement:
(a) Paragon may cease advancing money or extending credit to or for the
benefit of Borrower under the Loan Agreement or under any other agreement
between Borrower and Paragon.
(b) Paragon may declare all Obligations to be due and payable
immediately, whereupon they shall immediately become due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by Borrower;
(c) Paragon may set off against the Obligations all Collateral,
balances, credits, deposits, accounts or moneys of Borrower then or thereafter
held with Paragon, including amounts represented by certificates of deposit;
(d) Paragon may notify licensees to make royalty payments on license
agreements directly to Paragon;
(e) Paragon may sell or assign the Collateral and associated goodwill
at public or private sale for such amounts, and at such time or times as Paragon
deems advisable. Any requirement of reasonable notice of any disposition of the
Collateral shall be satisfied if such notice is sent to Borrower ten (10) days
prior to such disposition. Borrower shall be credited with the net proceeds of
such sale only when they are actually received by Paragon, and Borrower shall
continue to be liable for any deficiency remaining after the Collateral is sold
or collected;
(f) If the sale is to be a public sale, Paragon shall also give notice
of the time and place by publishing a notice one time at least ten (10) calendar
days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held; and
(g) To the maximum extent permitted by applicable law, Paragon may be
the purchaser of any or all of the Collateral and associated goodwill at any
public sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any public sale, to use and apply all or any part of the
Obligations as a credit on account of the purchase price of any Collateral
payable by Paragon at such sale.
10. Governing Law. All acts and transactions hereunder and the rights and
obligations of the parties hereto shall be governed, construed and interpreted
in accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Borrower and Paragon have caused this Agreement
to be executed by their duly authorized officers as of the date first above
written.
XXXXXX ELECTRONICS, INC.
By:______________________________________
Xxxxxx X. Xxxxxxxxx, Executive Vice
President and Chief Financial Officer
PARAGON CAPITAL LLC
By:______________________________________
Xxxxxx X. Xxxxx, President
STATE OF NEW YORK
County of November , 1997
Then personally appeared the above named, Xxxxxx X. Xxxxxxxxx,
Executive Vice President and Chief Financial Officer, and acknowledged the
foregoing instrument to be the free act and deed of Xxxxxx Electronics, Inc.,
before me,
-----------------------------------------
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS
Middlesex, ss. November , 1997
Then personally appeared the above named, Xxxxxx X. Xxxxx, President,
and acknowledged the foregoing instrument to be the free act and deed of Paragon
Capital LLC, before me,
-----------------------------------------
Notary Public
My Commission Expires:
SCHEDULE A
TO A TRADEMARK SECURITY AGREEMENT
BETWEEN XXXXXX ELECTRONICS, INC. (Borrower)
AND
PARAGON CAPITAL LLC (Lender)
DATED: NOVEMBER , 1997
REGISTERED TRADEMARKS (USA)
---------------------------
Trademark Registration No. Issue Date
--------- ---------------- ----------
XXXXXX 1529043 March 7, 1989
THE TEMPLE OF HOME THEATER 2,061,476 May 13, 1997
