CREDIT AGREEMENT
THIS
CREDIT AGREEMENT (this "Agreement") is entered into as of March 14, 2007,
by and
between COST-U-LESS, INC., a Washington corporation ("Borrower"), and XXXXX
FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
Borrower
has requested that Bank extend or continue credit to Borrower as described
below, and Bank has agreed to provide such credit to Borrower on the terms
and
conditions contained herein.
NOW,
THEREFORE, for valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE
I
CREDIT
TERMS
SECTION
1.1.
LINE OF
CREDIT.
(a) Line
of Credit.
Subject
to the terms and conditions of this Agreement, Bank hereby agrees to make
advances to Borrower from time to time up to and including April 1, 2009,
not to
exceed at any time the aggregate principal amount of Six Million Dollars
($6,000,000) ("Line of Credit"), the proceeds of which shall be used to finance
Borrower’s working capital requirements. Borrower's obligation to repay advances
under the Line of Credit shall be evidenced by a promissory note dated as
of
March 14, 2007 ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.
(b) Letter
of Credit Subfeature.
As a
subfeature under the Line of Credit, Bank agrees from time to time during
the
term thereof to issue or cause an affiliate to issue standby and/or commercial
letters of credit for the account of Borrower (each, a "Letter of Credit"
and
collectively, "Letters of Credit"); provided however, that the aggregate
undrawn
amount of all outstanding Letters of Credit shall not at any time exceed
One
Million Dollars ($1,000,000). The form and substance of each Letter of Credit
shall be subject to approval by Bank, in its sole discretion. No Letter of
Credit shall have an expiration date subsequent to the maturity date of the
Line
of Credit. The undrawn amount of all Letters of Credit shall be reserved
under
the Line of Credit and shall not be available for borrowings thereunder.
Each
Letter of Credit shall be subject to the additional terms and conditions
of the
Letter of Credit agreements, applications and any related documents required
by
Bank in connection with the issuance thereof. Each drawing paid under a Letter
of Credit shall be deemed an advance under the Line of Credit and shall be
repaid by Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided however, that if advances under the
Line
of Credit are not available, for any reason, at the time any drawing is paid,
then Borrower shall immediately pay to Bank the full amount drawn, together
with
interest thereon from the date such drawing is paid to the date such amount
is
fully repaid by Borrower, at the rate of interest applicable to advances
under
the Line of Credit. In such event Borrower agrees that Bank, in its sole
discretion, may debit any account maintained by Borrower with Bank for the
amount of any such drawing.
(c) Borrowing
and Repayment.
Borrower may from time to time during the term of the Line of Credit borrow,
partially or wholly repay its outstanding borrowings, and reborrow, subject
to
all of the limitations, terms and conditions contained herein or in the Line
of
Credit Note; provided however, that the total outstanding borrowings under
the
Line of Credit shall not at any time exceed the maximum principal amount
available thereunder, as set forth above.
SECTION
1.2. INTEREST/FEES.
(a) Interest. The
outstanding principal balance of each credit subject hereto shall bear interest,
and the amount of each drawing paid under any Letter of Credit shall bear
interest from the date such drawing is paid to the date such amount is fully
repaid by Borrower, at the rate of interest set forth in each promissory
note or
other instrument or document executed in connection therewith.
(b) Computation
and Payment.
Interest shall be computed on the basis of a 360-day year, actual days elapsed.
Interest shall be payable at the times and place set forth in each promissory
note or other instrument or document required hereby.
(c) Unused
Commitment Fee.
Borrower shall pay to Bank a fee equal to zero point three zero percent (0.30%)
per annum (computed on the basis of a 360-day year, actual days elapsed)
on the
average daily unused amount of the Line of Credit, which fee shall be calculated
on a monthly basis by Bank and shall be due and payable by Borrower in arrears
on the last day of the month.
(d) Letter
of Credit Fees.
Borrower shall pay to Bank (i) fees upon the issuance of each Letter of Credit
equal to one and three quarters percent (1.75%) of the face amount thereof,
(ii)
fees upon the payment or negotiation of each drawing under any Letter of
Credit
equal to the greater of one and three quarters percent (1.75%) of the amount
drawn or $1,000, and (iii) fees upon the occurrence of any other activity
with
respect to any Letter of Credit (including without limitation, the transfer,
amendment or cancellation of any Letter of Credit) determined in accordance
with
Bank's standard fees and charges then in effect for such activity.
(e) Letter
of Credit Fees.
Borrower shall pay to Bank (i) fees upon the issuance of each Letter of Credit
equal to one and three quarters percent (1.75%) per annum (computed on the
basis
of a 360-day year, actual days elapsed) of the face amount thereof, and (ii)
fees upon the payment or negotiation of each drawing under any Letter of
Credit
and fees upon the occurrence of any other activity with respect to any Letter
of
Credit (including without limitation, the transfer, amendment or cancellation
of
any Letter of Credit) determined in accordance with Bank's standard fees
and
charges then in effect for such activity.
SECTION
1.3. COLLECTION
OF PAYMENTS. Borrower authorizes Bank to collect all principal, interest
and
fees due under each credit subject hereto by charging Borrower's deposit
account with Bank, or any other deposit account maintained by Borrower with
Bank, for the full amount thereof. Should there be insufficient funds in
any
such deposit account to pay all such sums when due, the full amount of such
deficiency shall be immediately due and payable by Borrower.
SECTION
1.4. COLLATERAL.
As
security for all indebtedness and other obligations of Borrower to Bank subject
hereto, Borrower hereby grants to Bank security interests of first priority
in
all Borrower's accounts receivable and other rights to payment, general
intangibles and inventory.
All
of
the foregoing shall be evidenced by and subject to the terms of such security
agreements, financing statements, deeds or mortgages, and other documents
as
Bank shall reasonably require, all in form and substance satisfactory to
Bank.
Borrower shall pay to Bank immediately upon demand the full amount of all
charges, costs and expenses (to include fees paid to third parties and all
allocated costs of Bank personnel), expended or incurred by Bank in connection
with any of the foregoing security, including without limitation, filing
and
recording fees and costs of appraisals, audits and title insurance; provided,
however, that the amount Borrower is obligated to pay under this Section
1.4
shall be limited as set forth in Section 7.3.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES
Borrower
makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement
and
shall continue in full force and effect until the full and final payment,
and
satisfaction and discharge, of all obligations of Borrower to Bank subject
to
this Agreement.
SECTION
2.1. LEGAL
STATUS. Borrower is a corporation, duly organized and existing and in good
standing under the laws of Washington, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if applicable)
in
all jurisdictions in which such qualification or licensing is required or
in
which the failure to so qualify or to be so licensed could have a material
adverse effect on Borrower.
SECTION
2.2. AUTHORIZATION
AND VALIDITY. This Agreement and each promissory note, contract, instrument
and
other document required hereby or at any time hereafter delivered to Bank
in
connection herewith (collectively, the "Loan Documents") have been duly
authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower or the party which executes the same, enforceable
in
accordance with their respective terms.
SECTION
2.3. NO
VIOLATION. The execution, delivery and performance by Borrower of each of
the
Loan Documents do not violate any provision of any law or regulation, or
contravene any provision of the Articles of Incorporation or By-Laws of
Borrower, or result in any breach of or default under any contract, obligation,
indenture or other instrument to which Borrower is a party or by which Borrower
may be bound.
SECTION
2.4. LITIGATION.
There are no pending, or to the best of Borrower's knowledge threatened,
actions, claims, investigations, suits or proceedings by or before any
governmental authority, arbitrator, court or administrative agency which
could
have
a
material adverse effect on the financial condition or operation of Borrower
other than those disclosed by Borrower to Bank in writing prior to the date
hereof.
SECTION
2.5. CORRECTNESS
OF FINANCIAL STATEMENT. The annual financial statement of Borrower dated
December 31, 2006, and all interim financial statements delivered to Bank
since
said date, true copies of which have been delivered by Borrower to Bank prior
to
the date hereof, (a) are complete and correct and present fairly the financial
condition of Borrower, (b) disclose all liabilities of Borrower that are
required to be reflected or reserved against under generally accepted accounting
principles, whether liquidated or unliquidated, fixed or contingent, and
(c)
have been prepared in accordance with generally accepted accounting principles
consistently applied. Since the dates of such financial statements there
has
been no material adverse change in the financial condition of Borrower, nor
has
Borrower mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets or properties except in favor of Bank or as
otherwise permitted by Bank in writing.
SECTION
2.6. INCOME
TAX RETURNS. Borrower has no knowledge of any pending assessments or adjustments
of its income tax payable with respect to any year.
SECTION
2.7. NO
SUBORDINATION. There is no agreement, indenture, contract or instrument to
which
Borrower is a party or by which Borrower may be bound that requires the
subordination in right of payment of any of Borrower's obligations subject
to
this Agreement to any other obligation of Borrower.
SECTION
2.8. PERMITS,
FRANCHISES. Borrower possesses, and will hereafter possess, all permits,
consents, approvals, franchises and licenses required and rights to all
trademarks, trade names, patents, and fictitious names, if any, necessary
to
enable it to conduct the business in which it is now engaged in compliance
with
applicable law.
SECTION
2.9. ERISA.
Borrower is in compliance in all material respects with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
or
recodified from time to time ("ERISA"); Borrower has not violated any provision
of any defined employee pension benefit plan (as defined in ERISA) maintained
or
contributed to by Borrower (each, a "Plan"); no Reportable Event as defined
in
ERISA has occurred and is continuing with respect to any Plan initiated by
Borrower; Borrower has met its minimum funding requirements under ERISA with
respect to each Plan; and each Plan will be able to fulfill its benefit
obligations as they come due in accordance with the Plan documents and under
generally accepted accounting principles.
SECTION
2.10. OTHER
OBLIGATIONS. Borrower is not in default on any obligation for borrowed money,
any purchase money obligation or any other material lease, commitment, contract,
instrument or obligation.
SECTION
2.11. ENVIRONMENTAL
MATTERS. Except as disclosed by Borrower to Bank in writing prior to the
date
hereof, Borrower is in compliance in all material respects with all applicable
federal or state environmental, hazardous waste, health and safety statutes,
and
any rules or regulations adopted pursuant thereto, which govern or affect
any of
Borrower's operations and/or properties, including without
limitation,
the Comprehensive Environmental Response, Compensation and Liability Act
of
1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances
Control Act, as any of the same may be amended, modified or supplemented
from
time to time. None of the operations of Borrower is the subject of any federal
or state investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous
waste or substance into the environment. Borrower has no material contingent
liability in connection with any release of any toxic or hazardous waste
or
substance into the environment.
ARTICLE
III
CONDITIONS
SECTION
3.1. CONDITIONS
OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit
contemplated by this Agreement is subject to the fulfillment to Bank's
satisfaction of all of the following conditions:
(a) Approval
of Bank Counsel.
All
legal matters incidental to the extension of credit by Bank shall be
satisfactory to Bank's counsel.
(b) Documentation.
Bank
shall have received, in form and substance satisfactory to Bank, each of
the
following, duly executed:
(i)This
Agreement and each promissory note or other instrument or document required
hereby.
(ii)Certificate
of Incumbency.
(iii)Corporate
Resolution: Borrowing.
(iv)Security
Agreement; Borrower: Continuing Rights to Payments and Inventory.
(v)Insurance
Letter.
(vi)Such
other documents as Bank may require under any other Section of this
Agreement.
(c) Financial
Condition.
There
shall have been no material adverse change, as determined by Bank, in the
financial condition or business of Borrower, nor any material decline, as
determined by Bank, in the market value of any collateral required hereunder
or
a substantial or material portion of the assets of Borrower.
(d) Insurance.
Borrower shall have delivered to Bank evidence of insurance coverage on all
Borrower's property, in form, substance, amounts, covering risks and issued
by
companies satisfactory to Bank, and where required by Bank, with loss payable
endorsements in favor of Bank.
SECTION
3.2. CONDITIONS
OF EACH EXTENSION OF CREDIT. The obligation of Bank to make each extension
of
credit requested by Borrower hereunder shall be subject to the fulfillment
to
Bank's satisfaction of each of the following conditions:
(a) Compliance.
The
representations and warranties contained herein and in each of the other
Loan
Documents shall be true on and as of the date of the signing of
this
Agreement and on the date of each extension of credit by Bank pursuant hereto,
with the same effect as though such representations and warranties had been
made
on and as of each such date, and on each such date, no Event of Default as
defined herein, and no condition, event or act which with the giving of notice
or the passage of time or both would constitute such an Event of Default,
shall
have occurred and be continuing or shall exist.
(b) Documentation.
Bank
shall have received all additional documents which may be required in connection
with such extension of credit.
(c) Additional
Letter of Credit Documentation.
Prior
to the issuance of each Letter of Credit, Bank shall have received a Letter
of
Credit Agreement, properly completed and duly executed by Borrower.
ARTICLE
IV
AFFIRMATIVE
COVENANTS
Borrower
covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated
or
unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION
4.1. PUNCTUAL
PAYMENTS. Punctually pay all principal, interest, fees or other liabilities
due
under any of the Loan Documents at the times and place and in the manner
specified therein, and immediately upon demand by Bank, the amount by which
the
outstanding principal balance of any credit subject hereto at any time exceeds
any limitation on borrowings applicable thereto.
SECTION
4.2. ACCOUNTING
RECORDS. Maintain adequate books and records in accordance with generally
accepted accounting principles consistently applied, and permit any
representative of Bank, at any reasonable time, to inspect, audit and examine
such books and records, to make copies of the same, and to inspect the
properties of Borrower.
SECTION
4.3. FINANCIAL
STATEMENTS. Provide to Bank all of the following, in form and detail
satisfactory to Bank:
(a) not
later
than 120 days after and as of the end of each fiscal year, a consolidated
copy
of 10K report filed with the Securities Exchange Commission of Borrower,
prepared by a certified public accountant acceptable to Bank, to include
balance
sheet, income statement, statement of cash flows, management report, auditor’s
report, all supporting schedules, and footnotes;
(b) not
later
than 45 days after and as of the end of each fiscal quarter, a copy of 10Q
report filed with the Securities Exchange Commission of Borrower, prepared
by
Borrower, to include balance sheet, income statement and statement of cash
flows;
(c) contemporaneously
with each annual and fiscal quarter end financial statement of Borrower required
hereby, a certificate of the president or chief financial
officer
of Borrower that said financial statements are accurate and that there exists
no
Event of Default nor any condition, act or event which with the giving of
notice
or the passage of time or both would constitute an Event of
Default;
(d) from
time
to time such other information as Bank may reasonably request.
SECTION
4.4. COMPLIANCE.
Preserve and maintain all licenses, permits, governmental approvals, rights,
privileges and franchises necessary for the conduct of its business; and
comply
with the provisions of all documents pursuant to which Borrower is organized
and/or which govern Borrower's continued existence and with the requirements
of
all laws, rules, regulations and orders of any governmental authority applicable
to Borrower and/or its business.
SECTION
4.5. INSURANCE.
Maintain and keep in force, for each business in which Borrower is engaged,
insurance of the types and in amounts customarily carried in similar lines
of
business, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth
all
insurance then in effect.
SECTION
4.6. FACILITIES.
Keep all properties useful or necessary to Borrower's business in good repair
and condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such properties shall be fully and efficiently
preserved and maintained.
SECTION
4.7. TAXES
AND
OTHER LIABILITIES. Pay and discharge when due any and all indebtedness,
obligations, assessments and taxes, both real or personal, including without
limitation federal and state income taxes and state and local property taxes
and
assessments, except (a) such as Borrower may in good faith contest or as
to
which a bona fide dispute may arise, and (b) for which Borrower has made
provision, to Bank's satisfaction, for eventual payment thereof in the event
Borrower is obligated to make such payment.
SECTION
4.8. LITIGATION.
Promptly give notice in writing to Bank of any litigation pending or threatened
against Borrower with a claim in excess of $1,000,000.
SECTION
4.9. FINANCIAL
CONDITION. Maintain Borrower's financial condition as follows using generally
accepted accounting principles consistently applied and used consistently
with
prior practices (except to the extent modified by the definitions herein),
with
compliance determined commencing with Borrower's financial statements for
the
period ending December 31, 2006:
(a) Tangible
Net Worth not less than $20,000,000, plus 50% of net profit generated subsequent
to the closing date on a rolling 4-quarter basis, determined as of each fiscal
quarter end, with "Tangible Net Worth" defined as the aggregate of total
stockholders' equity plus subordinated debt less any intangible
assets.
(b) Net
income after taxes not less than $1.00 on an annual basis, determined as
of each
fiscal year end, and pre-tax profit not less than $1.00 on a rolling 4-quarter
basis, determined as of each fiscal quarter end.
(c) Outstanding
balances under the Line of Credit shall not exceed 30% of net inventory,
excluding inventory (gross inventory less obsolete inventory) in the Cayman
Islands and St. Maarten on a rolling 4-quarter basis, determined as of each
fiscal quarter end.
SECTION
4.10. NOTICE
TO
BANK. Promptly (but in no event more than five (5) days after the occurrence
of
each such event or matter) give written notice to Bank in reasonable detail
of:
(a) the occurrence of any Event of Default, or any condition, event or act
which
with the giving of notice or the passage of time or both would constitute
an
Event of Default; (b) any change in the name or the organizational structure
of
Borrower; (c) the occurrence and nature of any Reportable Event or Prohibited
Transaction, each as defined in XXXXX, or any funding deficiency with respect
to
any Plan; or (d) any termination or cancellation of any insurance policy
which
Borrower is required to maintain, or any uninsured or partially uninsured
loss
through liability or property damage, or through fire, theft or any other
cause
affecting Borrower's property.
ARTICLE
V
NEGATIVE
COVENANTS
Borrower
further covenants that so long as Bank remains committed to extend credit
to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower will not without Bank's prior written
consent:
SECTION
5.1. USE
OF
FUNDS. Use any of the proceeds of any credit extended hereunder except for
the
purposes stated in Article I hereof.
SECTION
5.2. OTHER
INDEBTEDNESS. Create, incur, assume or permit to exist any indebtedness or
liabilities resulting from borrowings, loans or advances, whether secured
or
unsecured, matured or unmatured, liquidated or unliquidated, joint or several,
except (a) the liabilities of Borrower to Bank, (b) any other liabilities
of
Borrower existing as of, and disclosed to Bank prior to, the date hereof
and (c)
new purchase money debt for equipment and real estate indebtedness not to
exceed
an aggregate of $11,000,000, including capital leases.
SECTION
5.3. MERGER,
CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with any other
entity; make any substantial change in the nature of Borrower's business
as
conducted as of the date hereof; acquire all or substantially all of the
assets
of any other entity; nor sell, lease, transfer or otherwise dispose of all
or a
substantial or material portion of Borrower's assets except in the ordinary
course of its business.
SECTION
5.4. GUARANTIES.
Guarantee or become liable in any way as surety, endorser (other than as
endorser of negotiable instruments for deposit or collection in the ordinary
course of business), accommodation endorser or otherwise for, nor pledge
or
hypothecate any assets of Borrower as security for, any liabilities or
obligations of any other person or entity, except any of the foregoing in
favor
of Bank.
SECTION
5.5. LOANS,
ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any
persons or entities in the aggregate in excess of $1,000,000 without Bank’s
prior written approval, except any of the foregoing existing as of, and
disclosed to Bank prior to, the date hereof.
SECTION
5.6. PLEDGE
OF
ASSETS. Mortgage, pledge, grant or permit to exist a security interest in,
or
lien upon, all or any portion of Borrower's or any U.S. domestic Subsidiary's
assets now owned or hereafter acquired, except (a) any of the foregoing in
favor
of Bank or which is existing as of, and disclosed to Bank in writing prior
to,
the date hereof and (b) purchase money liens to the extent they secure purchase
money debt permitted under Section 5.2 hereof. “Subsidiaries” are entities of
which Borrower now owns or hereafter acquires, directly or indirectly, more
than
50% of the voting shares (or other voting equity interests) and are referred
to
collectively as “Subsidiaries” and each individually as a “Subsidiary.”
ARTICLE
VI
EVENTS
OF DEFAULT
SECTION
6.1. The
occurrence of any of the following shall constitute an "Event of Default"
under
this Agreement:
(a) Borrower
shall fail to pay when due any principal, interest, fees or other amounts
payable under any of the Loan Documents.
(b) Any
financial statement or certificate furnished to Bank in connection with,
or any
representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.
(c) Any
default in the performance of or compliance with any obligation, agreement
or
other provision contained herein or in any other Loan Document (other than
those
referred to in subsections (a) and (b) above), and with respect to any such
default which by its nature can be cured, such default shall continue for
a
period of twenty (20) days from its occurrence.
(d) Any
default in the payment or performance of any obligation, or any defined event
of
default, under the terms of any contract or instrument (other than any of
the
Loan Documents) pursuant to which Borrower, any guarantor hereunder or any
general partner or joint venturer in Borrower if a partnership or joint venture
(with each such guarantor, general partner and/or joint venturer referred
to
herein as a "Third Party Obligor") has incurred any debt or other liability
to
any person or entity, including Bank.
(e) The
filing of a notice of judgment lien against Borrower or any Third Party Obligor;
or the recording of any abstract of judgment against Borrower or any Third
Party
Obligor in any county in which Borrower or such Third Party Obligor has an
interest in real property; or the service of a notice of levy and/or of a
writ
of attachment or execution, or other like process, against the assets of
Borrower or any Third Party Obligor; or the entry of a judgment against Borrower
or any Third Party Obligor.
(f) Borrower
or any Third Party Obligor shall become insolvent, or shall suffer or consent
to
or apply for the appointment of a receiver, trustee, custodian or liquidator
of
itself or any of its property, or shall generally fail to pay its debts as
they
become due, or shall make a general assignment for the benefit of creditors;
Borrower or any Third Party Obligor shall file a voluntary petition in
bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform
Act,
Title 11 of the United States Code, as amended or recodified from time to
time
("Bankruptcy Code"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition
or
proceeding pursuant to the Bankruptcy Code or any other applicable state
or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any Third Party Obligor, or Borrower
or any Third Party Obligor shall file an answer admitting the jurisdiction
of
the court and the material allegations of any involuntary petition; or Borrower
or any Third Party Obligor shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower or any Third Party Obligor by any
court
of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other relief
for
debtors.
(g) There
shall exist or occur any event or condition which Bank in good faith believes
impairs, or is substantially likely to impair, the prospect of payment or
performance by Borrower of its obligations under any of the Loan
Documents.
(h) The
death
or incapacity of Borrower or any Third Party Obligor if an individual. The
dissolution or liquidation of Borrower or any Third Party Obligor if a
corporation, partnership, joint venture or other type of entity; or Borrower
or
any such Third Party Obligor, or any of its directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of Borrower
or such Third Party Obligor.
SECTION
6.2. REMEDIES.
Upon the occurrence of any Event of Default: (a) all indebtedness of Borrower
under each of the Loan Documents, any term thereof to the contrary
notwithstanding, shall at Bank's option and without notice become immediately
due and payable without presentment, demand, protest or notice of dishonor,
all
of which are hereby expressly waived by Borrower; (b) the obligation, if
any, of
Bank to extend any further credit under any of the Loan Documents shall
immediately cease and terminate; and (c) Bank shall have all rights, powers
and
remedies available under each of the Loan Documents, or accorded by law,
including without limitation the right to resort to any or all security for
any
credit subject hereto and to exercise any or all of the rights of a beneficiary
or secured party pursuant to applicable law. All rights, powers and remedies
of
Bank may be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive, and
shall
be in addition to any other rights, powers or remedies provided by law or
equity.
ARTICLE
VII
MISCELLANEOUS
SECTION
7.1. NO
WAIVER. No delay, failure or discontinuance of Bank in exercising any right,
power or remedy under any of the Loan Documents shall affect or
operate
as a waiver of such right, power or remedy; nor shall any single or partial
exercise of any such right, power or remedy preclude, waive or otherwise
affect
any other or further exercise thereof or the exercise of any other right,
power
or remedy. Any waiver, permit, consent or approval of any kind by Bank of
any
breach of or default under any of the Loan Documents must be in writing and
shall be effective only to the extent set forth in such writing.
SECTION
7.2. NOTICES.
All notices, requests and demands which any party is required or may desire
to
give to any other party under any provision of this Agreement must be in
writing
delivered to each party at the following address:
BORROWER: COST-U-LESS,
INC.
0000
000xx Xxxxx, Xxxxx 000
Xxxxxxxx,
Xxxxxxxxxx 00000
BANK: XXXXX
FARGO BANK, NATIONAL ASSOCIATION
000
000xx
Xxxxxx, XX, Xxxxx 000
Xxxxxxxx,
Xxxxxxxxxx 00000
Xxxx.Xxxxxxxxx@xxxxxxxxxx.xxx
or
to
such other address as any party may designate by written notice to all other
parties. Each such notice, request and demand shall be deemed given or made
as
follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail,
upon
the earlier of the date of receipt or three (3) days after deposit in the
U.S.
mail, first class and postage prepaid; (c) if sent by facsimile, upon receipt;
and (d) if by e-mail, when the recipient acknowledges receipt by return email
or
by a mode described in (a) - (c) in this Section.
SECTION
7.3. COSTS,
EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank immediately upon
demand
the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and
all
allocated costs of Bank's in-house counsel), expended or incurred by Bank
in
connection with (a) the negotiation and preparation of this Agreement and
the
other Loan Documents, Bank's continued administration hereof and thereof,
and
the preparation of any amendments and waivers hereto and thereto, (b) the
enforcement of Bank's rights and/or the collection of any amounts which become
due to Bank under any of the Loan Documents, and (c) the prosecution or defense
of any action in any way related to any of the Loan Documents, including
without
limitation, any action for declaratory relief, whether incurred at the trial
or
appellate level, in an arbitration proceeding or otherwise, and including
any of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion
brought
by Bank or any other person) relating to Borrower or any other person or
entity.
Notwithstanding the foregoing, amounts payable by Borrower under Section
7.3(a)
and Section 1.4 shall not exceed $5,000.00 during the initial term
hereof.
SECTION
7.4. SUCCESSORS,
ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of the
heirs, executors, administrators, legal representatives, successors and assigns
of the parties; provided however, that Borrower may not assign or transfer
its
interests or rights hereunder without Bank's prior written consent. Bank
reserves the right to sell, assign, transfer, negotiate or grant
participations
in all or any part of, or any interest in, Bank's rights and benefits under
each
of the Loan Documents. In connection therewith, Bank may disclose all documents
and information which Bank now has or may hereafter acquire relating to any
credit subject hereto, Borrower or its business, or any collateral required
hereunder.
SECTION
7.5. ENTIRE
AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents constitute
the
entire agreement between Borrower and Bank with respect to each credit subject
hereto and supersede all prior negotiations, communications, discussions
and
correspondence concerning the subject matter hereof. This Agreement may be
amended or modified only in writing signed by each party hereto.
SECTION
7.6. NO
THIRD
PARTY BENEFICIARIES. This Agreement is made and entered into for the sole
protection and benefit of the parties hereto and their respective permitted
successors and assigns, and no other person or entity shall be a third party
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any other of the Loan Documents to which
it
is not a party.
SECTION
7.7. TIME.
Time is of the essence of each and every provision of this Agreement and
each
other of the Loan Documents.
SECTION
7.8. SEVERABILITY
OF PROVISIONS. If any provision of this Agreement shall be prohibited by
or
invalid under applicable law, such provision shall be ineffective only to
the
extent of such prohibition or invalidity without invalidating the remainder
of
such provision or any remaining provisions of this Agreement.
SECTION
7.9. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
when
executed and delivered shall be deemed to be an original, and all of which
when
taken together shall constitute one and the same Agreement.
SECTION
7.10. GOVERNING
LAW. This Agreement shall be governed by and construed in accordance with
the
laws of the State of Washington.
SECTION
7.11. ARBITRATION.
(a) Arbitration.
The
parties hereto agree, upon demand by any party, to submit to binding arbitration
all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys, and other agents),
whether
in tort, contract or otherwise in any way arising out of or relating to (i)
any
credit subject hereto, or any of the Loan Documents, and their negotiation,
execution, collateralization, administration, repayment, modification,
extension, substitution, formation, inducement, enforcement, default or
termination; or (ii) requests for additional credit.
(b) Governing
Rules.
Any
arbitration proceeding will (i) proceed in a location in Washington selected
by
the American Arbitration Association (“AAA”); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the parties;
and (iii)
be
conducted by the AAA, or such other administrator as the parties shall mutually
agree upon, in accordance with the AAA’s commercial dispute resolution
procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive
of claimed interest, arbitration fees and costs in which case the arbitration
shall be conducted in accordance with the AAA’s optional procedures for large,
complex commercial disputes (the commercial dispute resolution procedures
or the
optional procedures for large, complex commercial disputes to be referred
to
herein as applicable, as the “Rules”). If there is any inconsistency between the
terms hereof and the Rules, the terms and procedures set forth herein shall
control. Any party who fails or refuses to submit to arbitration following
a
demand by any other party shall bear all costs and expenses incurred by such
other party in compelling arbitration of any dispute. Nothing contained herein
shall be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 U.S.C. §91 or any similar applicable state
law.
(c) No
Waiver of Provisional Remedies, Self-Help and Foreclosure.
The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after
the
pendency of any arbitration proceeding. This exclusion does not constitute
a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise
of
the actions detailed in sections (i), (ii) and (iii) of this
paragraph.
(d) Arbitrator
Qualifications and Powers.
Any
arbitration proceeding in which the amount in controversy is $5,000,000.00
or
less will be decided by a single arbitrator selected according to the Rules,
and
who shall not render an award of greater than $5,000,000.00. Any dispute
in
which the amount in controversy exceeds $5,000,000.00 shall be decided by
majority vote of a panel of three arbitrators; provided however, that all
three
arbitrators must actively participate in all hearings and deliberations.
The
arbitrator will be a neutral attorney licensed in the State of Washington
or a
neutral retired judge of the state or federal judiciary of Washington, in
either
case with a minimum of ten years experience in the substantive law applicable
to
the subject matter of the dispute to be arbitrated. The arbitrator will
determine whether or not an issue is arbitratable and will give effect to
the
statutes of limitation in determining any claim. In any arbitration proceeding
the arbitrator will decide (by documents only or with a hearing at the
arbitrator's discretion) any pre-hearing motions which are similar to motions
to
dismiss for failure to state a claim or motions for summary adjudication.
The
arbitrator shall resolve all disputes in accordance with the substantive
law of
Washington and may grant any remedy or relief that a court of such state
could
order or grant within the scope hereof and such ancillary relief as is necessary
to make effective any award. The arbitrator shall also have the power to
award
recovery of all costs and fees, to impose sanctions and to take such other
action as the arbitrator deems necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the Washington Rules of
Civil
Procedure or other applicable law. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. The institution
and
maintenance of an action for judicial relief or pursuit of a provisional
or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration
if
any other party contests such action for judicial relief.
(e) Discovery.
In any
arbitration proceeding, discovery will be permitted in accordance with the
Rules. All discovery shall be expressly limited to matters directly relevant
to
the dispute being arbitrated and must be completed no later than 20 days
before
the hearing date. Any requests for an extension of the discovery periods,
or any
discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party's
presentation and that no alternative means for obtaining information is
available.
(f) Class
Proceedings and Consolidations.
No
party hereto shall be entitled to join or consolidate disputes by or against
others in any arbitration, except parties who have executed any Loan Document,
or to include in any arbitration any dispute as a representative or member
of a
class, or to act in any arbitration in the interest of the general public
or in
a private attorney general capacity.
(g) Payment
Of Arbitration Costs And Fees.
The
arbitrator shall award all costs and expenses of the arbitration
proceeding.
(h) Miscellaneous.
To the
maximum extent practicable, the AAA, the arbitrators and the parties shall
take
all action required to conclude any arbitration proceeding within 180 days
of
the filing of the dispute with the AAA. No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof,
except for disclosures of information by a party required in the ordinary
course
of its business or by applicable law or regulation. If more than one agreement
for arbitration by or between the parties potentially applies to a dispute,
the
arbitration provision most directly related to the Loan Documents or the
subject
matter of the dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Loan Documents or any
relationship between
the parties.
ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the day and year first written above.
| XXXXX FARGO BANK, | |||
| COST-U-LESS, INC. | NATIONAL ASSOCIATION | ||
| By: /s/ J. Xxxxxxx Xxxxx | By: /s/ Xxxxx Grecian | ||
| Xxxxxxx Xxxxx, Chief Executive Officer | Xxxxx Grecian, Vice President |
