EXHIBIT 10.1
LOAN AGREEMENT
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THIS AGREEMENT is made effective as of May 16, 1997, by and between
CD WAREHOUSE, Inc., a Delaware corporation, and COMPACT DISCS MANAGEMENT, INC.,
a Delaware corporation (collectively the "Borrowers") and BANK ONE, OKLAHOMA
CITY, a state banking association ("Bank").
WITNESSETH:
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WHEREAS, the Borrowers and the Bank have agreed to a certain extension
of credit by the Bank to the Borrowers in the form of a revolving loan in the
Maximum Principal Amount, as hereinafter defined and as evidenced by a certain
promissory note described herein; and
WHEREAS, the Borrowers will use the proceeds of the loan for general
working capital purposes, issuing letters of credit, retrofitting existing CD
Warehouse stores and the acquisition of existing stores from CD Warehouse
franchisees; and
WHEREAS, the Borrowers desire to secure the obligations under this
Agreement and the promissory note with certain property pursuant to the terms
and conditions of this Agreement and other loan and security documents as
described herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms with
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their initial letters capitalized shall have the following meanings except where
the context otherwise requires:
"Account(s)" shall mean all accounts receivable, contract rights,
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franchise agreements, notes, drafts, acceptances, general intangibles,
chattel paper and other forms of obligations and receivables owing to
Warehouse arising out of or in connection with Warehouse's business,
including such as may arise out of the sale, lease or other disposition at
any time and from time to time of Inventory, whether now owned or hereafter
acquired, and any right to payment for goods sold or leased or for services
rendered and the Proceeds thereof, together with all other forms of
accounts as may be defined or determined under the Uniform Commercial Code
whether such Accounts now exist or are hereinafter acquired.
"Agreement" shall mean this Loan Agreement, as the same may from
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time to time be amended, supplemented or modified.
"Base Rate" shall mean that fluctuating annual rate of interest
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adopted by the Bank, from time to time (whether or not charged or
published), as its "Base Rate."
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"Borrowers" shall mean CD Warehouse, Inc., Compact Discs
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Management, Inc. and their successors.
"Borrowing Base" shall mean an amount equal to: (a) 80% of all
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Eligible Accounts; plus (b) 50% of the cost of all Eligible Inventory,
limited to 50% of the total Borrowing Base; determined monthly by the Bank
as reflected in the monthly financial statements of Warehouse.
"Business Day" shall mean any day other than a Saturday or Sunday
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or other holiday on which commercial banks are open for business with the
public in Oklahoma City, Oklahoma.
"Chattel Paper" shall mean any right to payment for a monetary
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obligation, together with all other forms of chattel paper as may be
defined or determined under the Uniform Commercial Code, whether now owned
or hereafter acquired.
"Collateral" means all of Warehouse's right, title and interest
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in and to: (i) all Accounts, Inventory, Chattel Paper, Documents,
Equipment, Goods, Instruments and General Intangibles, together with all
Proceeds; (ii) all Franchise Agreements and all Proceeds thereof; and (iii)
all Leasehold Improvements and all Proceeds thereof.
"Debt" means, as to any person, all indebtedness, liabilities and
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obligations of such person, determined in accordance with GAAP, including
all contingent and indirect obligations and liabilities.
"Documents" means all forms of documents as may be defined or
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determined under the Uniform Commercial Code, whether now owned or
hereafter acquired.
"Eligible Accounts" means all Accounts owing to Warehouse from
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the time they come into existence until they are collected in full, except
for:
(i) any Account which is over ninety (90) days past due from
the date of first billing;
(ii) any Account from a debtor that is an officer, employee,
director, agent or shareholder of the Borrowers, or where an Account
debtor is a subsidiary of, the parent of, related to or affiliated
with the Borrowers, or has common shareholders, officers or directors
with the Borrowers;
(iii) any Account not arising from a bona fide outright sale
of goods or performance of services, or where the Account holder does
not have possession or has not delivered to the Bank shipping and
delivery receipts evidencing shipment of the goods, and if
representing services, the services have not been fully performed for
the Account debtor;
(iv) any Account which is subject to any claim, set-off,
allowance or adjustment by the Account debtor or any counterclaim,
including but not limited to
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any claim, set-off, allowance or adjustment based upon any violation
of or failure to comply with any applicable federal or state consumer
law;
(v) any Account where an Account debtor has returned any of
the goods from the sale of which the claim arose, or any partial
payment has been made thereon;
(vi) any Account subject to any assignment, claim, lien or
security interest of any character, or subject to any attachment,
levy, garnishment or other judicial process, except the security
interest of the Bank;
(vii) any Account arising in the ordinary course of business
where a notice of bankruptcy, insolvency or adverse change in the
financial condition of the Account debtor has been received;
(viii) any Account evidenced by a judgment, an Instrument or
Chattel Paper;
(ix) any Account where the Account debtor is not a resident of
the United States and such Account is not supported by a letter of
credit satisfactory to the Bank;
(x) any Account where the Account debtor is the United States
or any department, agency or instrumentality of the United States, or
any city, town, municipality or division thereof;
(xi) any Account that the Bank has reasonably determined is
unsatisfactory;
(xii) with respect to any Account which exceeds twenty percent
(20%) of the total Accounts, any such excess portion of said Account;
and
(xiii) all Accounts of any Account debtor who has more than
five percent (5%) of its total Accounts past due more than sixty (60)
days from date of first billing.
"Eligible Inventory" means all new and used compact discs which
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are not subject to a purchase money security interest (as that term is
defined in the Code) of a third party.
"Environmental Laws" means all federal, state and local laws,
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rules, regulations, ordinances, and consent decrees relating to health,
safety, hazardous substances, and environmental matters applicable to
Borrowers' business and facilities. Such laws and regulations include, but
are not limited to, the Resource Conservation and Recovery Act,
Comprehensive Environmental Response; Compensation and Liability Act; Toxic
Substances Control Act; Clean Water Act; Clean Air Act; Comprehensive
Environmental Response, Compensation and Liability Information System; all
state and federal superlien and environmental cleanup programs; and all
other applicable environmental laws and regulations of all applicable
jurisdictions.
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"ERISA" means the Employee Retirement Income Security Act of
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1974, as amended, together with all regulations issued pursuant thereto.
"Events of Default" shall have that meaning provided in Section 8
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hereof.
"Equipment" means all tools, equipment, machinery, appliances,
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building materials, supplies, furniture, fixtures, furnishings, business
records, goods to become fixtures and all other similar tangible personal
property of every kind now owned by Warehouse or hereafter acquired,
together with all other forms of equipment and fixtures as may be defined
or determined under the Uniform Commercial Code.
"Franchise Agreements" shall mean any and all franchise
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agreements, contracts, contract rights, documents, licenses, general
intangibles, chattel paper and other forms of rights in favor of Warehouse
and obligations owing to Warehouse arising out of or in connection with any
franchise arrangement with any franchisee or other party, and any right to
any royalty or other payments thereunder, whether now existing or hereafter
incurred.
"GAAP" means the generally accepted accounting principles,
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practices and procedures, set forth by the Accounting Principles Board and
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, which are applicable as of the date of the end
of the fiscal quarter immediately preceding such date of determination.
"General Intangibles" means any personal property, including
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things in action, other than Goods, Accounts, Chattel Paper, Documents,
Equipment, Instruments, Inventory and money, including any and all patents,
trademarks, copyrights and other intellectual property, whether now owned
or hereafter acquired, together with all other forms of general intangibles
as may be defined or determined under the Uniform Commercial Code.
"Goods" shall include all things which are movable at the time a
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security interest attaches or which are fixtures (12A O.S. (S)9-313),
together with all other forms of goods as may be defined or determined
under the Uniform Commercial Code, whether now owned or hereafter acquired,
but does not include money, Documents, Instruments, Accounts, Chattel Paper
or General Intangibles, but does include (i) "Equipment" if they are used
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or bought for use primarily in business or if the goods are not included in
the definition of Inventory, together with all other forms of equipment as
may be defined or determined under the Uniform Commercial Code; and (ii)
"Inventory" if they are held by a person who holds them for sale or lease
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or to be furnished under contracts of service or if he has so furnished
them, or if they are raw materials, work in process, or materials used or
consumed in a business, together with all other forms of inventory as may
be defined or determined under the Uniform Commercial Code.
"Guaranties" shall mean the absolute, unconditional and unlimited
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guaranties of the Guarantors which guarantee the payment and performance of
all of the
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Loan and all other obligations of the Borrowers to the Bank, direct or
indirect, absolute or contingent, and whether now existing or hereafter
incurred, such Guaranties being in form satisfactory to the Bank.
"Guarantors" shall mean Xxxxx X. Xxxxxxx, individually, and The
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Xxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx Revocable Living Trust dated January
6, 1994.
"Instrument" shall mean a negotiable instrument, defined in 12A
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O.S. (S)3-104, or a security, defined in 12A O.S. (S)8-102, or any other
writing which evidences a right to the payment of money and is not itself a
security agreement or lease and is a type of which is in the ordinary
course of business transferred by delivery with any necessary endorsement
or assignment, together with all other forms of instruments as may be
defined or determined under the Uniform Commercial Code, whether now owned
or hereafter acquired.
"Inventory" means all inventory, raw materials, finished goods,
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work-in-process and all other personal property of whatever nature now or
hereafter owned and which are held for sale or lease or are furnished or to
be furnished under contracts of service, together with all other forms of
inventory as may be defined or determined under the Uniform Commercial
Code, whether now owned or hereafter acquired.
"Leasehold Improvements" shall mean all furniture, fixtures,
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trade fixtures, machinery, equipment and other moveable or removable
personal property of any kind located at, or removed from, any leased
facility, whether now owned or hereafter acquired.
"Letters of Credit" shall mean all letters of credit issued by
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the Bank for the benefit of either of the Borrowers during the term of the
Loan.
"Leverage Ratio" means Total Liabilities divided by Net Worth.
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"Lien" means any lien, mortgage, security interest, tax lien,
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pledge, encumbrance, conditional sale or title retention arrangement, or
any other interest in property designed to secure the repayment of Debt,
whether arising by agreement or under any statute or law, or otherwise.
"Loan" means the loan contemplated by this Agreement and
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described in Section 2 hereof and evidenced by the Note and any outstanding
Letters of Credit.
"Loan Documents" collectively means this Agreement, the Note, the
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Letters of Credit, the Guaranties, all security agreements, assignments and
financing statements securing the Loan, and all other promissory notes,
guaranties, agreements and all other documents, agreements, certificates
and instruments executed and delivered in connection with the Loan
described herein and any renewals, amendments, supplements or modifications
thereof or thereto.
"Management" means Compact Discs Management, Inc. and its
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successors.
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"Material Adverse Effect" means any set of circumstances or
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events which (i) could have an adverse effect upon the validity,
performance or enforceability of this Agreement or any other Loan
Documents, (ii) could be material and adverse to the financial condition or
business operations of the Borrowers, (iii) could materially impair the
ability of the Borrowers to perform its obligations under this Agreement or
any other Loan Documents or any other contract, agreement or obligation to
which the Borrowers are a party, or (iv) constitutes an Event of Default.
"Maturity Date" means May 31, 1998, provided that, if the Note is
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renewed and extended pursuant to Section 2.5 hereof, the Maturity Date
shall then mean May 31, 1999.
"Maximum Principal Amount" means, during the Original Term, an
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amount equal to the lesser of (i) $1,000,000.00, or (ii) the amount of the
Borrowing Base plus $500,000.00. During the Renewal Term, the "Maximum
Principal Amount" shall mean an amount equal to the lesser of (i)
$2,000,000.00, or (ii) the amount of the Borrowing Base plus $500,000.00.
"Note" means the Promissory Note from the Borrowers payable to
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the order of the Bank in the principal face amount of $2,000,000.00 dated
even date herewith, and all renewals, extensions, modifications and
substitutions thereto and therefor.
"Original Term" means the period beginning with the date of the
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Note and ending on May 31, 1998.
"PBGC" means the Pension Benefit Guaranty Corporation and any
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successor to all or any of its functions under ERISA.
"Permitted Debt" means (i) any accounts payable, taxes,
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insurance, operating expenses and all other general and administrative
expenses of the Borrowers incurred in the normal course of Borrowers'
business operations, including real property lease agreements, and (ii) any
intercompany indebtedness incurred for the purpose of purchasing Inventory,
with all such obligations in (i) and (ii) being in amounts and of the types
as are consistent with those identified in the latest financial statements
of the Borrowers.
"Permitted Liens" mean any Lien attaching to property of either
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of the Borrowers for the purpose of securing a purchase money security
interest in Inventory of the Borrowers.
"Proceeds" means: (i) all amounts, sums, revenues and income
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which become payable from any of the Collateral (including any after-
acquired properties); (ii) whatever is received upon the sale, exchange,
collection or other disposition of the Collateral or Proceeds; and (iii)
all "proceeds" as defined or determined under the Uniform Commercial Code.
An Instrument payable by reason of loss or damage to the Collateral is
Proceeds.
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"Regulation D" means Regulation D of the Board of Governors of
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the Federal Reserve System, as in effect from time to time.
"Regulation U" means Regulation U of the Board of Governors of
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the Federal Reserve System, as in effect from time to time.
"Regulation X" means Regulation X promulgated by the Board of
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Governors of the Federal Reserve System, as in effect from time to time.
"Renewal Term" means the period beginning on June 1, 1998, and
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ending on May 31, 1999.
"Request for Advance" means a completed request for cash advances
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in the form of Exhibit "A" hereto.
"Tangible Net Worth" means the difference between Warehouse's
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(i) Total Assets, excluding any intangibles, and (ii) Total Liabilities,
all as set forth in the financial statements of Warehouse and as determined
under GAAP.
"Total Assets" shall mean the Total Assets of Warehouse as
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reflected on Warehouse's financial statements and as accounted for under
GAAP.
"Total Liabilities" shall mean the Total Liabilities of Warehouse
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as reflected on Warehouse's financial statements and as accounted for under
GAAP.
"Uniform Commercial Code" means the Uniform Commercial Code of
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the State of Oklahoma (12A O.S. (S)9-101 et. seq.), as amended from time to
time.
"Warehouse" means CD Warehouse, Inc. and its successors.
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"Working Capital" means the difference between the current assets
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and current liabilities of Warehouse as determined in accordance with GAAP.
1.1 Other Definitional Provisions.
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(a) All terms defined in this Agreement shall have the above-
defined meanings when used in the Note or any Loan Document, certificate,
report or other document made or delivered pursuant to this Agreement,
unless the context shall otherwise require.
(b) Unless otherwise specified herein, all accounting terms
shall be interpreted in accordance with GAAP.
(c) Defined terms used herein in the singular shall include the
plural and vice versa.
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(d) The words "hereof", "herein", "hereunder" and similar terms
when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
2. LOAN TERMS. Subject to the terms and conditions hereof, and the
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terms and conditions of the Loan Documents, the Bank agrees to extend credit to
the Borrowers, and the Borrowers, jointly and severally, agree to such extension
of credit from the Bank, in the Maximum Principal Amount, together with interest
thereon as described herein, which will be evidenced by a Promissory Note in the
principal face amount of $2,000,000.00, together with all renewals, extensions,
modifications and substitutions thereto ("Note") and any outstanding Letters of
Credit, the proceeds of which shall be used for general working capital
purposes, retrofitting existing Warehouse stores and the acquisition of existing
stores from Warehouse's franchisees. All issued and outstanding Letters of
Credit shall be deemed advances made on the Note and shall be subject to the
restrictions on advances contained in Section 2.4 hereof. This credit will be
in the form of a revolving line of credit which Borrowers may borrow, repay and
reborrow in accordance with the terms and conditions of this Agreement and the
Note.
2.1 Principal. During the Original Term, the outstanding
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principal amount of the Note and the amount of any outstanding Letters of
Credit shall not exceed the Maximum Principal Amount applicable for the
Original Term. During the Renewal Term, if any, the outstanding principal
amount of the Note and the amount of any outstanding Letters of Credit
shall not exceed the Maximum Principal Amount applicable for the Renewal
Term.
2.2 Interest. The principal amount of the Note shall bear
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interest per annum, accrued from the date of disbursement, at a rate of
interest equal to three-quarters of one percent (0.75%) in excess of the
Base Rate, as such rate may change from time to time hereafter. Each change
in the per annum interest rate charged hereunder shall become effective,
without notice (which notice is hereby waived), on the date of such change.
As of the effective date hereof, the Base Rate is eight and one-half
percent (8.50%) per annum and the initial rate hereunder is nine and one-
quarter percent (9.25%) per annum. The Bank may, from time to time, extend
credit to anyone at rates of interest varying from, and having no
relationship to the Base Rate. The interest rate described above shall be
calculated on the basis of actual number of days elapsed, but computed as
if each calendar year consisted of a 360 day year.
2.3 Repayment of Note. During the Original Term of the Note,
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payments of the accrued interest on the outstanding principal balance of
the Note and any principal amount in excess of the Maximum Principal
Amount, shall be due and payable monthly beginning May 31, 1997, and
continuing thereafter on the last day of each and every month and at
maturity. On the Maturity Date for the Original Term, all outstanding and
unpaid principal and all accrued and unpaid interest on the Note shall be
immediately due and payable. If the Note is renewed for the Renewal Term as
provided in Section 2.5 hereof, the during the Renewal Term, payments of
the accrued interest on the outstanding principal balance of the Note and
any principal amount in excess of the Maximum
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Principal Amount, shall be due and payable monthly beginning June 30, 1998,
and continuing thereafter on the last day of each and every month and at
maturity. On the Maturity Date for the Renewal Term, all outstanding and
unpaid principal and all accrued and unpaid interest on the Note shall be
immediately due and payable.
2.4 Advances on Note. Advances under the Note (and issuing
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Letters of Credit which shall be deemed advances under the Note) will be
made from time to time prior to the Maturity Date thereof upon Borrowers'
request; provided however, the aggregate principal amount at any one time
outstanding on the Note and all outstanding Letters of Credit shall not
exceed the Maximum Principal Amount. All advances on the Note (or with
respect to a Letter of Credit) shall be made in accordance with this
Agreement and the Bank shall not be obligated to make an advance on the
Note if (i) an Event of Default shall exist under this Agreement at the
time of a requested advance, or (ii) the amount of such advance and all
other outstanding advances made by the Bank to Borrowers under the Note
would exceed the Maximum Principal Amount.
Borrowers may request a cash advance orally, but must deliver to
the Bank within twenty four (24) hours of such oral request, a written
confirmation of the request for an advance in the form of a Request for
Advance signed by an authorized officer of Warehouse and a signed Borrowing
Base certificate described in Section 6.1.2 hereof indicating sufficient
credit availability under the Note. Borrower must request an advance in the
form a Letter of Credit in writing in the form of the Request for Advance
accompanied by the Borrowing Base certificate as described above. Each oral
request shall be deemed a representation, warranty, acknowledgment and
agreement by Borrowers as to the matters which are required to be contained
in the written requests. Subject to the limitations on advances contained
above, the Bank shall deposit the amount of such advance in a designated
account of Warehouse maintained at the Bank on the same business day as any
request is received by 2:00 p.m. on such date, or on the next business day,
if such request is received later than 2:00 p.m. Subject to the limitations
on advances contained above, the Bank may issue any Letter of Credit within
three (3) business days of receipt of information relating to such Letter
of Credit that is satisfactory in all reasonable respects to the Bank. All
amounts advanced to Borrowers and all obligations evidenced by Letters of
Credit shall be evidenced by the Note.
2.5 Renewal and Extension. The Note shall be renewed and
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extended for the Renewal Term only in the event that the Borrowers are in
full and complete compliance with all terms, conditions and covenants in
this Agreement and the other Loan Documents and no Event of Default exists
on the Maturity Date of the Original Term, said compliance to be determined
in the sole discretion of the Bank.
2.6 Payments. The principal of and interest on the Note shall
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be payable in lawful money of the United States of America, in immediately
available funds, at the principal office of the Bank in Oklahoma City,
Oklahoma. All such payments shall be made not later than 2:00 p.m.,
Oklahoma City time, on the date due, and funds received for principal
payments on the Note after such hour on any day shall be treated for all
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purposes of this Agreement as having been received on the next succeeding
Business Day in Oklahoma City. If any payment made by the Borrowers under
this Agreement or the Note is to be made on a day not a Business Day, such
payment shall be made on the next succeeding Business Day and such
extension of time will in such case be included in computing interest, if
any, in connection with such payment.
2.7 Default Interest. While any Event of Default exists
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hereunder or under the Note or any of the Loan Documents, which has not
been cured as provided in this Agreement, in lieu of the interest rate
provided herein and in the Note, all sums owing by Borrowers to Bank in
connection with the Loan shall bear interest at the rate equal to five
percent (5%) per annum in excess of the Base Rate, accrued from the date of
the Event of Default but after any applicable grace period to cure said
Event of Default as is provided for herein, to the date on which such Event
of Default is cured.
2.8. Nonuse Fee. If the average daily outstanding principal
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balance of the Note during any calendar quarter within the Original Term or
the Renewal Term is less than the Maximum Principal Amount, then on the
last day of each calendar quarter, beginning June 30, 1997, the Borrowers
shall pay to the Bank a nonuse fee equal to one-half of one percent (0.5%)
of the unused Maximum Principal Amount of the Note for such calendar
quarter.
2.9 Letter of Credit Fees. Prior to the issuance of any Letter
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of Credit hereunder, the Borrowers shall pay to the Bank a fee equal to one
and one-quarter percent (1.25%) per annum on the amount of the Letter of
Credit for the period such Letter of Credit shall be outstanding, with a
minimum fee on each Letter of Credit of $400. Amendments to any outstanding
Letter of Credit shall require a fee of $60 per amendment, payable at the
time of the amendment.
3. CONDITIONS OF LENDING. The obligation of the Bank to perform
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this Agreement and to extend the Loan as described herein is subject to the
performance of the following conditions precedent:
3.1 Loan Documents. This Agreement, the Note, the Guaranties,
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the other Loan Documents, and all other documents required by the Bank
shall have been duly executed, acknowledged (where appropriate) and
delivered to the Bank, all in form and substance satisfactory to the Bank.
All of the Loan Documents which require filing or recordation for the
perfection of Liens on the Collateral shall be properly filed or recorded
in all appropriate recording offices and the Borrowers shall have
reimbursed the Bank for all costs, including reasonable attorney's fees,
pertaining thereto.
3.2 Information. The Borrowers and Guarantors shall have
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furnished to the Bank such financial statements and other information as
the Bank shall have requested, including but not limited to, the Borrowers'
December 31, 1996 financial statements, the Guarantors' recent financial
statements, and the last two years federal income tax statements for the
Guarantors, including all supporting schedules.
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3.3 No Default, Representations and Warranties. No Events of
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Default shall have occurred and be continuing under this Agreement or the
Loan Documents. All representations and warranties contained herein shall
be true and correct.
3.4 Authority. The Borrowers shall have delivered to the Bank
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such resolutions and other documents reasonably required to authorize the
execution, delivery and performance of the Loan Documents, all in form and
substance satisfactory to the Bank, together with certified copies of the
Borrowers' Certificates of Incorporation (and amendments), Bylaws (and
amendments), Certificate of Good Standing from the State of Delaware, and
Certificates of Foreign Qualification and Good Standing Certificates from
the State of Oklahoma.
3.5 Incumbency Certificate. The Bank shall have received a
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certificate from an officer of each Borrower which shall certify the names
of the persons authorized to sign each of the Loan Documents to be executed
by such person and the other documents or certificates to be delivered by
such person pursuant to the Loan Documents, together with the true
signatures of each of such persons. Bank may conclusively rely on the
certificates until Bank shall receive a further certificate from an officer
of a Borrower canceling or amending the prior certificate and submitting
the signatures of the persons named in such further certificate.
3.6 Litigation. The Bank shall have received a Litigation
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Certificate in the form of Exhibit "B" attached hereto, signed by an
authorized officer of Borrowers stating that no litigation, investigation
or proceeding before or by an arbitrator or court is continuing or
threatened against Borrowers or the Collateral (i) with respect to this
Agreement, the Note, any other Loan Documents, or any of the transactions
contemplated hereby or thereby, or (ii) which could have a Material Adverse
Effect on Borrowers. Bank shall also receive either (a) a summary and
analysis of all litigation in which Borrowers are involved or (b) an
opinion of counsel, in form and substance acceptable to Bank, to the effect
that no litigation in which Borrowers are involved would, in the event of
an adverse determination, have a Material Adverse Effect.
3.7 UCC Information. The Bank shall have received and reviewed
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copies of UCC Title Searches for Warehouse from such jurisdictions as the
Bank may determine, and all Liens of any party on the Collateral as
evidenced by such information shall have been released to the satisfaction
of the Bank.
3.8 Insurance. Warehouse shall have provided to the Bank,
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endorsements to all insurance policies of Warehouse described in Section
4.16 hereof, which endorsements shall name the Bank as an additional
insured to the extent of the Bank's interest in the Collateral.
3.9 Expenses. The Borrowers shall have paid all of the Bank's
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costs and expenses, including reasonable fees of legal counsel, incurred in
the negotiation and preparation of the Loan Documents and in closing and
perfecting the rights of the Bank under the Loan Documents.
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3.10 Certification of Eligible Accounts. The Bank shall have
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received and approved an initial list of all Eligible Accounts from
Warehouse, which list will include appropriate agings of the Eligible
Accounts, certified as true and correct by an authorized party for
Warehouse and in form satisfactory to the Bank.
3.11 Eligible Inventory List. The Bank shall have received and
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approved an initial list from Warehouse of the respective locations where
all Eligible Inventory is located and identifies the amount of new and used
compact discs at each such location.
3.12 Lease Obligations. The Bank shall have received and
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approved an initial list of all real property lease obligations of
Warehouse covering a period of twelve (12) months from the date of this
Agreement, including a description of Management's obligations with respect
to any real property leases, if any.
4. REPRESENTATIONS AND WARRANTIES. To induce the Bank to extend the
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Loan and enter into this Agreement, the Borrowers represent and warrant to the
Bank during the term of the Loan and any and all renewals and extensions
thereof, as follows:
4.1 Existence. The Borrowers are duly organized, validly
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existing, and in good standing under the law of their state of
organization, and are authorized to do business in all jurisdictions in
which their ownership of property and transaction of business legally
requires such authorization, and Borrowers have full power, authority, and
legal right to own their property and transact business as presently
transacted or proposed to be transacted.
4.2 Authority. The execution, delivery and performance of the
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Loan Documents by the Borrowers are within the power of the Borrowers, have
been duly authorized, is not in contravention of law or the terms of the
Borrowers' certificates of incorporation or other organization documents,
or of any indenture, agreement or undertaking to which the Borrowers are a
party or by which they are bound.
4.3 Governmental Authorization. The execution, delivery, and
--------------------------
performance by the Borrowers of this Agreement requires no approval of or
filing with any governmental authority.
4.4 Binding Effect. This Agreement and the Loan Documents, when
--------------
duly executed and delivered, will constitute legal, valid, and binding
obligations of the Borrowers, fully enforceable in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or limiting creditor's rights generally.
4.5 Financial Condition. Subject to any limitations stated
-------------------
therein or in connection therewith, all balance sheets, earnings
statements, and other financial data which have been or may hereafter be
furnished to the Bank to induce the Bank to enter into this Agreement or
otherwise in connection herewith, do or shall fairly represent the
financial condition of the Borrowers as of the dates and the results of
operations for the
-13-
periods for which the same are furnished, are, or shall be at the time the
same are so furnished, accurate and correct in all material respects and
complete insofar as completeness may be necessary to give the Bank a true
and accurate knowledge of the respective subject matter involved.
4.6 Litigation. Except as described in the Litigation
----------
Certificate attached hereto as Exhibit "B", there is no action, suit,
investigation or proceeding pending, or to the knowledge of Borrowers
threatened against Borrowers or any of the Collateral, which would have a
Material Adverse Effect on Warehouse's or the Bank's rights in the
Collateral.
4.7 Taxes. The Borrowers have filed all tax returns which are
-----
required to be filed and has paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Borrowers. This provision,
however, does not preclude the Borrowers from filing proper extensions or
protesting by proper procedure any tax, assessment or penalty.
4.8 Permits. The Borrowers have all licenses, permits,
-------
certificates, consents and franchises, and all necessary filings associated
thereto have been made, in order to carry on their respective business as
now being conducted and to own or lease and operate their properties as now
owned, leased or operated. All such licenses, permits, certificates,
consents, and franchises are valid and subsistent, and the Borrowers are
not in violation thereof to the extent such violation would cause a
Material Adverse Effect.
4.9 Title to Collateral and No Liens. All of the Collateral is
--------------------------------
free and clear of all Liens, except for Permitted Liens, and Warehouse has
good and defensible title to such Collateral.
4.10 Full Disclosure. Except as otherwise disclosed to Bank in
---------------
writing prior to the execution of this Agreement, there is no material fact
that Borrowers have not disclosed to Bank which could have a Material
Adverse Effect on the properties, business, prospects or condition
(financial or otherwise) of Borrowers. Neither the financial statements
referenced in Section 4.5 hereof, nor any certificate or statement
delivered herewith or heretofore by Borrowers to Bank in connection with
the negotiations of this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary to keep the
statements contained herein or therein from being misleading which would
have a Material Adverse Effect.
4.11 Use of Proceeds; Margin Stock. The proceeds of the Loan
-----------------------------
will be used by Borrowers solely for the purposes described herein. None of
such proceeds will be used for the purpose of purchasing or carrying any
"margin stock" as defined in Regulation U or Regulation X, or for the
purpose of reducing or retiring any Debt which was originally incurred to
purchase or carry a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of such
Regulation U or Regulation X. Borrowers are not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stocks.
Borrowers have not taken
-14-
or will not take any action which might cause the Note or any of the other
Loan Documents, including this Agreement, to violate Regulation U or
Regulation X, or any other regulations of the Board of Governors of the
Federal Reserve System or to violate Section 8 of the Securities Exchange
Act of 1934 or any rule or regulation thereunder, in each case as now in
effect or as the same may hereinafter be in effect. Borrowers do not own
margin stock.
4.12 Principal Office, Etc. The principal office, chief
----------------------
executive office and principal place of business of Warehouse is 0000
Xxxxxxxxx Xxx, Xxxxxxxx Xxxx, 00000. Warehouse maintains its principal
records and books at such address. The Collateral is located at such
locations as stated by Warehouse pursuant to Section 3.11 hereof.
4.13 ERISA. Borrowers are in compliance with all ERISA
-----
requirements and interpretations with respect to any employee benefit plan
of the Borrowers and have not incurred any liability to PBGC with respect
to any such plan.
4.14 Compliance With Law. Borrowers are not in violation of any
-------------------
law, rule, regulation, order or decree which is applicable to Borrowers or
their properties the result of which could have a Material Adverse Effect.
4.15 Casualties. Neither the business nor the properties of
----------
Borrowers are currently affected by any environmental hazard, fire,
explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or other casualty (whether or
not covered by insurance), which could have a Material Adverse Effect.
4.16 Insurance. The Collateral is insured in accordance with the
---------
coverage set forth in Exhibit "C" hereto, with the Bank as an additional
insured to the extent of its interest therein. There has been no receipt of
any notice from any insurer indicating that coverage or premium rates will
be materially changed in the future with respect to the Collateral or
indicating that the Collateral may not qualify for continued coverage with
respect to any such insurance. Warehouse is in full compliance with all
such insurance contracts and the same are in full force and effect and are
enforceable in accordance with their terms.
4.17 Hazardous Substances. To the best of Borrowers' knowledge,
--------------------
all environmental permits, certificates, licenses, approvals, registrations
and authorizations required under all Environmental Laws in connection with
the business of Borrowers have been obtained. No unremedied notice,
citation, summons or order has been issued, no unremedied complaint has
been filed, no unremedied penalty has been assessed and, to the best of
Borrowers' knowledge, no investigation or review is pending or threatened
by any governmental entity with respect to any generation, treatment,
storage, recycling, transportation or disposal of any hazardous or toxic or
polluting substance or waste (including petroleum products and radioactive
materials) generated or used ("Hazardous Substances") by Borrowers which
would have a Material Adverse Effect.
-15-
4.18 No Event of Default. No Event of Default has occurred and
-------------------
is continuing.
4.19 Survival of Representations. All of the representations and
---------------------------
warranties made by the Borrowers herein will survive the delivery of the
Loan Documents and any renewal and extension of the Loan hereunder. All
statements contained in any certificate or other instrument delivered by or
on behalf of the Borrowers under or pursuant to this Agreement or in
connection with the transactions contemplated hereby shall constitute
representations and warranties made by the Borrowers hereunder as
applicable.
5. SECURITY. The Loan shall be secured by first and prior Liens on
--------
the Collateral in favor of the Bank pursuant to the Loan Documents, subject only
to such other exceptions or other liens or encumbrances as may be consented to
by the Bank in writing. From time to time during the term of this Agreement,
the Bank may reasonably require Warehouse to execute and deliver other and
further Loan Documents to confirm and further secure the interest of the Bank in
the Collateral, which Warehouse agrees they will so execute and deliver upon
request. The Loan shall be guaranteed by the Guarantors pursuant to the
Guaranties.
6. AFFIRMATIVE COVENANTS. Until payment in full of the Loan, the
---------------------
Borrowers agree, unless the Bank shall otherwise consent in writing, to perform
or cause to be performed the following agreements:
6.1 Financial Statements and Information.
------------------------------------
6.1.1. Monthly Financial Statements. Warehouse shall
----------------------------
furnish to Bank, within twenty (20) days after the close of each
calendar month, complete copies of Warehouse's financial statements,
including balance sheets and income statements, as of the close of
such month, prepared internally by Warehouse and in form satisfactory
to the Bank in accordance with GAAP applied on a consistent basis.
6.1.2 Monthly Borrowing Base and Other Reports. Within
----------------------------------------
twenty (20) business days after the end of each calendar month,
Warehouse shall execute and deliver to the Bank a Borrowing Base
Certificate in the form of Exhibit "E" attached hereto and shall
provide the Bank with Accounts aging reports and Inventory reports in
form acceptable to the Bank
6.1.3 Quarterly Compliance Certificate. Warehouse shall
--------------------------------
furnish to the Bank, within forty-five (45) days after the close of
each calendar quarter, an executed Compliance Certificate in the form
of Exhibit "D" attached hereto.
6.1.4 Quarterly Lease Summary. Warehouse shall furnish
-----------------------
to the Bank, within forty-five days after the close of each calendar
quarter, a detailed summary of all future real estate lease and rental
obligations of Warehouse, and if applicable, Management.
-16-
6.1.5 Audited Annual Financial Statements. For the year
-----------------------------------
ending December 31, 1996, and annually thereafter, the Borrowers shall
furnish to Bank, within ninety (90) days after the close of such year,
complete copies of the Borrowers' audited annual financial statements,
including balance sheets, income statements and statements of sources
and uses of funds with accompanying notes and schedules, as of the
close of such year, prepared by accountants acceptable to the Bank and
in form satisfactory to the Bank in accordance with GAAP applied on a
consistent basis. All such audited financial statements shall be
unqualified.
6.1.6 SEC Filings. Warehouse shall furnish to Bank,
-----------
within forty- five (45) days after the close of each calendar quarter,
complete copies of Warehouse's Form 10-Q as filed with the Securities
and Exchange Commission ("SEC"), and within ninety (90) days after the
close of each fiscal year of Warehouse, complete copies of Warehouse's
Form 10-K as filed with the SEC.
6.1.7 Annual Budget and Capital Expenditures. Warehouse
--------------------------------------
shall furnish to the Bank, within thirty (30) days after the close of
its fiscal year, complete copies of Warehouse's annual budget for the
upcoming fiscal year, including a capital expenditures budget.
6.1.8 Field Audit. On or about July 1 of each year, the
-----------
Bank shall have the right, but not the obligation, to conduct an
annual field audits of the books and records of the Borrowers in
accordance with Section 6.8 hereof, at the sole cost and expense of
the Bank.
6.1.9 Guarantors' Financial Statements. The Borrowers
--------------------------------
shall cause Guarantors to furnish to Bank, within thirty (30) days
after the close of each calendar year, complete copies of the
Guarantors' financial statements, including balance sheets and income
statements and inclusive of all contingent liabilities and supporting
information, as of the close of such calendar year and true and
correct in all respects. Further, the Borrowers shall cause Guarantors
to furnish to Bank, within thirty (30) days of filing, a copy of each
of the Guarantors' federal income tax returns for each year.
6.1.10 Other Financial Statements. The Borrowers shall
--------------------------
also furnish to the Bank such other information concerning the
financial affairs of the Borrowers or the Guarantors as the Bank might
reasonably request.
6.2 Taxes. All taxes, assessments, governmental charges and
-----
levies imposed on the Borrowers and its assets, income and profits will be
paid prior to the date on which penalties attach thereto; PROVIDED,
HOWEVER, that the Borrowers will not be required to pay any such charge
which is being contested in good faith by proper proceedings and the
imposition of such charge would not have a Material Adverse Effect on the
Borrowers.
6.3 Additional Assurances. The Borrowers shall execute,
---------------------
acknowledge and deliver to the Bank such instruments, documents, and any
other items in a form
-17-
acceptable to Bank as the Bank may reasonably require, in good faith, in
order to more fully carry out the transactions contemplated herein.
6.4 Performance of Obligations. The Borrowers shall pay the
--------------------------
Note according to the reading, tenor and effect thereof, and Borrowers will
do and perform every act and discharge all obligations provided herein or
in any Loan Document to be performed and discharged or as contemplated
hereby, at the time or times and in the manner specified.
6.5 Expenses. The Borrowers shall pay all costs and expenses
--------
required to satisfy the conditions of this Agreement. Without limitation of
the generality of the foregoing, Borrowers will pay: (i) all of the
reasonable fees and expenses of counsel employed by the Bank in connection
with preparing the loan documentation; (ii) all of the fees, expenses and
costs of perfecting the Liens on the Collateral; (iii) all reasonable costs
and expenses of Bank (including, without limitation, the reasonable
attorneys' fees of Bank's legal counsel) incurred by Bank in connection
with the preservation and enforcement of this Agreement, the Note, and/or
the other Loan Documents; and (iv) all reasonable costs and expenses,
including any reasonable fees and expenses of counsel employed by the Bank,
in regard to any litigation arising out of or relating to this transaction
and all other reasonable costs, fees and expenses involved in the
enforcement or defense of this Agreement, the Loan Documents or any
instrument executed pursuant hereto.
6.6 Existence. The Borrowers shall take all necessary actions
---------
to preserve the Borrowers' existence and their right to conduct business in
the applicable jurisdictions; to obtain and retain all material approvals,
consents, permits, licenses and certificates from all applicable
governmental authorities; to comply with all valid and applicable statutes,
rules and regulations; and to continue to conduct their business in
substantially the same manner as such business is now conducted or
anticipated to be conducted.
6.7 Litigation. The Borrowers shall notify the Bank at any time
----------
of any action, suit, investigation or proceeding pending or threatened
against the Borrowers which may have a Material Adverse Effect.
6.8 Books and Records; Access. Subject to the limitations
-------------------------
afforded as a result of the attorney/client privilege, Borrowers shall give
any representative of Bank reasonable access during normal business hours
to, and permit such representative to examine, copy or make excerpts from,
any and all books, records and documents in the possession of Borrowers and
relating to the Borrowers' affairs, and to inspect any of the properties of
Borrowers. The Borrowers shall maintain complete and accurate books and
records of their transactions in accordance with good accounting practices.
6.9 Compliance with Law. Borrowers shall comply with all
-------------------
applicable laws, rules, regulations, and all orders of any court or
tribunal applicable to the Borrowers or any of their property, business
operations or transactions, a breach of which could have a Material Adverse
Effect.
-18-
6.10 Insurance. Warehouse shall maintain, or cause to be
---------
maintained, in full force and effect during the term of the Loan the
insurance described in Exhibit "C". Warehouse shall deliver or cause to be
delivered to the Bank (a) contemporaneously with the execution hereof,
copies of the policies evidencing such insurance or certificates evidencing
such policies, and (b) copies of all renewal policies, or certificates
evidencing such policies, at least fourteen days before the expiration of
each expiring policy. Warehouse shall promptly notify the Bank in writing
of the occurrence of any loss or damage to the Collateral that is covered
by the insurance policies. All policies of insurance required hereunder
shall contain an endorsement or agreement by the insurer that any loss
shall be payable in accordance with the terms of such policy
notwithstanding any act or negligence of Warehouse which might otherwise
result in the forfeiture of said insurance. All property damage policies of
insurance shall insure Bank's interest in the Collateral as a secured party
and all liability insurance policies shall name Bank as an additional
insured as its interest may appear. All such policies shall contain a
provision that such policies will not be canceled or materially amended,
which term shall include any reduction in the scope or the limits of
coverage, without at least twenty (20) days' prior written notice to Bank.
All policies of insurance required hereunder shall be issued by companies
having a Best's rating of at least A:XII, and shall be in amounts specified
herein or otherwise satisfactory to Bank.
6.11 Authorizations and Approvals. Borrowers shall promptly
----------------------------
obtain, from time to time at their own expense, all such governmental
licenses, authorizations, consents, permits and approvals which may be
required or necessary in the Borrowers' business or with respect to their
assets and properties if the failure to obtain the same could have a
Material Adverse Effect.
6.12 ERISA Compliance. Borrowers shall (i) at all times, make
----------------
prompt payment of all contributions required under all employee benefit
plans and as required to meet the minimum funding standard set forth in
ERISA with respect to its plans, (ii) notify Bank immediately of any fact,
including, but not limited to, any reportable event arising in connection
with any of their plans, which might constitute grounds for termination
thereof by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such plan, together with a
statement, if requested by Bank, as to the reason therefor and the action,
if any, proposed to be taken with respect thereto, and (iii) furnish to
Bank, upon its request, such additional information concerning any of their
plans as may be reasonably requested.
6.13 Banking Accounts. Warehouse shall establish and maintain
----------------
all of its general operating banking accounts with the Bank and shall
establish such control and administrative devices with respect to such
accounts as the Bank may reasonably request. Such accounts shall include a
designated account of Warehouse which shall be used by Warehouse for
depositing all payments and other revenues received under any of the
Franchise Agreements.
6.14 Maintenance of Collateral. Warehouse will do all things
-------------------------
necessary to maintain, preserve, protect and keep all the Collateral in
good condition, and make all
-19-
necessary and proper repairs, renewals and replacements thereto so that the
business anticipated by Warehouse through the ownership, operation or use
of the Collateral can be performed and conducted at all times.
7. NEGATIVE COVENANTS. Until payment in full of the Loan, the
------------------
Borrowers shall not, unless the Bank shall otherwise consent in writing, violate
or cause to be violated the following:
7.1 Limitation on Debt. The Borrowers shall not incur, create,
------------------
contract, assume, have outstanding, guarantee or otherwise be or become
directly or indirectly, liable in respect of any Debt, except Permitted
Debt.
7.2 Limitation on Liens. Warehouse shall not create, incur,
-------------------
permit or suffer to exist any Lien upon any of the Collateral, except
Permitted Liens. Management shall not create, incur, permit or suffer to
exist any Lien upon any material portion of its assets or properties.
7.3 Liquidation; Merger; Consolidation; Change of Name.
--------------------------------------------------
Borrowers will not liquidate or discontinue their normal operations with an
intention to liquidate and will not merge or consolidate with any
corporation, firm or partnership, or change their corporate names.
7.4 Tangible Net Worth. Warehouse shall not permit its Tangible
------------------
Net Worth to be less than an amount equal to the sum of (i) $1,500,000.00,
plus (ii) eighty percent (80%) of the Net Income of Warehouse realized
after the date of this Agreement. Tangible Net Worth shall be calculated
quarterly as of the last day of each calendar quarter. For purposes hereof,
"Net Income" shall have the meaning of such term under GAAP.
7.5 Working Capital. Warehouse shall not permit its Working
---------------
Capital to be less than $350,000.00. Working Capital shall be calculated
quarterly as of the last day of each calendar quarter.
7.6 Leverage Ratio. Warehouse shall not permit its Leverage
--------------
Ratio to be greater than 1.0 to 1.0 as determined on the last day of each
calendar quarter.
7.7 Debt Coverage. Warehouse shall not permit the ratio of its
-------------
(i) Net Income after taxes and tax accruals, plus interest, and less all
---- ----
franchise and development fees, all during the period of one year
immediately preceding the date of determination, to (ii) all interest
expense during the period of the immediately preceding twelve (12) months,
to be less than 1.75 to 1.00. Such ratio shall be determined quarterly by
the Bank as of the last day of each calendar quarter.
7.8 Capital Expenditures. Warehouse shall not expend or incur
--------------------
more than $750,000.00 in the aggregate during any calendar year for capital
expenditures, including capitalized leases.
-20-
7.9 Acquisition and Development of Stores. Warehouse shall not
-------------------------------------
acquire, directly or indirectly, from any franchise of Warehouse stores,
any such franchised stores or the assets associated therewith, which
acquisitions shall exceed, during any twelve (12) month period, the amounts
of (i) $60,000.00 for any single store and related assets, or (ii) $250,000
for all such stores and related assets.
7.10 Liquid Assets. Warehouse shall cause Xxxxx X. Xxxxxxx to
-------------
maintain liquid assets of not less than $500,000.00 at all times throughout
the term of this Agreement.
7.11 Dividends and Distributions. Borrowers shall not declare or
---------------------------
pay any cash or stock dividends or make any other distributions of cash,
stock or property to their respective shareholders or to any of the
Guarantors.
7.12 Change of Business. The Borrowers shall not change or
------------------
otherwise discontinue their primary lines of business from those existing
on the date hereof.
7.13 Sale or Disposition of Collateral. Warehouse shall not
---------------------------------
sell, assign, dispose or otherwise transfer any of the Collateral to any
other person or entity, except Inventory in the ordinary course of business
and for fair consideration.
7.14 Stock Redemptions and Repurchases. The Borrowers shall not
---------------------------------
redeem, retire or repurchase any of the shares of capital stock of either
of the Borrowers or any subsidiary of the Borrowers.
7.15 Affiliated Transactions. The Borrowers shall not enter
-----------------------
into any transaction for goods, services or otherwise with any employee,
director or shareholder of either of the Borrowers, or any related or
affiliated entity or interest of such employee, director or shareholder of
the Borrowers, unless such transactions are bona fide transactions for fair
consideration.
8. EVENTS OF DEFAULT. The following shall constitute Events of
-----------------
Default hereunder and under each of the Loan Documents:
8.1 Nonpayment of Note. Default in payment when due of any
------------------
principal or interest due and owing on the Note.
8.2 Other Nonpayment. Default in payment when due of any amount
----------------
payable to the Bank under the terms of this Agreement, the Loan Documents
or any other obligation or agreement between the Borrowers and the Bank,
whether now existing or hereafter incurred.
8.3 Breach of Covenants. Default by the Borrowers in the
-------------------
performance or observance of any covenant or agreement contained in this
Agreement, the Loan Documents, or any agreement in connection therewith, or
under the terms of any other instrument delivered to the Bank in connection
with this Agreement.
-21-
8.4 Representations and Warranties. Any representation or
------------------------------
warranty herein, or any representation, statement, certificate, schedule or
report made or furnished to the Bank on behalf of the Borrowers proves to
be false or erroneous in any material respect at the time of making thereof
or any warranty ceases to be complied with in any material respect.
8.5 Insolvency. The Borrowers or the Guarantors shall: (i)
----------
apply for or consent to the appointment of a receiver, trustee or
liquidator of their respective properties; (ii) admit in writing their
inability to pay debts as they mature; (iii) make a general assignment for
the benefit of creditors; or (iv) any material part of their assets or
properties shall be placed in the hands of a receiver, trustee or other
officers or representatives of a court or of creditors.
8.6 Voluntary Bankruptcy. The Borrowers or the Guarantors shall
--------------------
be adjudged bankrupt or any voluntary proceeding shall be instituted by
Borrowers or the Guarantors in insolvency or bankruptcy or for
readjustment, extension or composition of debts or for any other relief of
debtors.
8.7 Involuntary Bankruptcy. Any involuntary proceeding shall be
----------------------
instituted against Borrowers or the Guarantors in insolvency or for
readjustment, extension, or composition of debts, which proceeding is not
dismissed within sixty (60) days after the filing of the commencement of
the same.
8.8 Creditor's Proceedings. Entry by any court of a final
----------------------
judgment against Borrowers or the Guarantors, or the institution of any
levy, attachment, garnishment or charging order against the Borrowers or
the Guarantors, which has a Material Adverse Effect on the financial
condition of the Borrowers or Guarantors.
9. OPPORTUNITY TO CURE. In the event the Borrowers shall cure or
-------------------
cause to be cured the foregoing Events of Default within five (5) Business Days
after mailing notice to the Borrowers with respect to Events of Default in
Sections 8.1 and 8.2 and within thirty (30) Business Days after mailing notice
to the Borrowers with respect to Events of Default in Sections 8.3 and 8.8, the
parties shall be restored to their respective rights and obligations under this
Agreement as if no such Event or Events of Default had occurred. The Borrowers
shall have no right to cure any Event of Default in Sections 8.4 through 8.7.
10. REMEDIES. Upon the occurrence of any Event of Default, which has
--------
not been timely cured pursuant to Section 9 above, the Bank may, at its option:
10.1 Acceleration of Note. Declare the Note and all sums
--------------------
outstanding pursuant to the Loan Documents to be immediately due and
payable, whereupon the same will be forthwith due and payable, and the Bank
will be entitled to proceed to selectively and successively enforce the
Bank's rights under the Loan Documents or any other instrument delivered to
the Bank in connection with this Agreement.
-22-
10.2 Accelerate Other Indebtedness. The Bank may declare all
-----------------------------
other indebtedness and obligations of the Borrowers owing to the Bank to be
immediately due and payable.
10.3 Exercise Other Rights. The Bank may (i) terminate any of
---------------------
the Bank's obligations hereunder, including the obligation to make any
advance, (ii) reduce any claim to judgment, (iii) exercise any right of
offset including the Set-Off as provided in Section 10.4 hereof, (iv)
without notice of default or demand except as otherwise provided herein,
pursue and enforce any of the Bank's rights and remedies under the Loan
Documents, or otherwise provided under or pursuant to any applicable law or
agreement, provided, however, that if any Event of Default specified in
Sections 8.6 or 8.7 shall occur, the Loan, shall thereupon become due and
payable concurrently therewith, without any further action by the Bank and
without presentment, demand, protest, notice of default, notice of
acceleration or of intention to accelerate or other notice of any kind, all
of which Borrowers hereby expressly waives, or (v) exercise any other
remedy at law or in equity.
10.4 Right of Set-Off. Borrowers hereby grants to Bank the right
----------------
of set-off ("Set-Off") without notice or demand to or upon Borrowers, (any
such notice and/or demand being hereby waived by Borrowers) to secure
repayment of the Loan, regardless of whether Bank shall have made any
demand therefor and whether all or any part of the Loan are or may be
unmatured, upon any and all moneys, securities or other property of
Borrowers and the proceeds therefrom, now or hereafter held or received by
or in transit to Bank, or any of its agents, from or for the account of
Borrowers, whether for safe keeping, custody, pledge, transmission,
collection or otherwise, and also upon any and all deposits (general or
special) and credits of Borrowers, and any and all claims of Borrowers
against Bank at any time existing.
10.5 Cross-Default. A default by Borrowers in this Agreement,
-------------
the Note or any of the Loan Documents (or by the Guarantors under the
Guaranties) shall constitute a default under all such agreements and
obligations.
10.6 Waiver of Default. By an instrument in writing, the Bank
-----------------
may waive any Event of Default which shall have occurred and any of the
consequences of such Event of Default, and, in such event, the Bank and the
Borrowers will be restored to their respective former positions, rights and
obligations hereunder. Any Event of Default so waived will for all purposes
of this Agreement be deemed to have been cured and not to be continuing;
but no such waiver will extend to any subsequent or other Event of Default
or impair any consequence of such subsequent or other Event of Default.
11. GENERAL CONDITIONS. The following conditions shall be applicable
------------------
throughout the term of this Agreement:
11.1 Strict Compliance. If any action or failure to act by
-----------------
Borrowers violates any covenant or obligation of Borrowers contained
herein, then such violation shall not be excused by the fact that such
action or failure to act would otherwise be
-23-
required or permitted by any covenant (or exception to any covenant) other
than the covenant violated.
11.2 Participations in Loan and Note. Bank may sell
-------------------------------
participations in all or any part of the Loan made by it to one or more
banks or other entities. Bank may furnish any information concerning
Borrowers in the possession of Bank from time to time to participants
(including prospective participants). Bank may provide to its participants
on a timely basis copies of all financial statements and other documents
furnished to it under the provisions of Section 6. Bank shall use
reasonable efforts to notify Borrowers of the identity of the purchaser and
amount of any participation, but failure to give said notice shall have no
effect on the participation, this Agreement or the other Loan Documents.
11.3 Waiver; Modification. No failure to exercise, and no delay
--------------------
in exercising, on the part of Bank, any right hereunder or under any Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right. The rights of Bank hereunder and under the
Loan Documents shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Agreement, the Note or any
Loan Documents, nor consent to departure therefrom, shall be effective
unless in writing and no such consent or waiver shall extend beyond the
particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same,
similar or other instances without such notice or demand.
11.4 Notices. Any notices or other communications required or
-------
permitted to be given by this Agreement or any other documents and
instruments referred to herein must be (i) given in writing (the references
to "in writing" elsewhere in this Agreement are for emphasis and are not a
way of limitation of the generality of the requirement that notices or
other communications shall be in writing), and (ii) be personally delivered
or mailed by prepaid mail or overnight courier, or by telex or telecopy
delivered or transmitted to the party to whom such notice or communication
is directed, to the address of such party as follows:
To Borrowers: CD WAREHOUSE, INC.
0000 Xxxxxxxxx Xxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, President
COMPACT DISCS MANAGEMENT, INC.
0000 Xxxxxxxxx Xxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxxx X. XxxXxxxxx, President
-24-
To Bank: BANK ONE, OKLAHOMA CITY
0000 X. Xxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Senior Vice President
Any such notice or other communication shall be deemed to have been given
(whether actually received or not) on the day three days after it is mailed
by prepaid certified or registered mail, one day after sent by over night
courier, or on the day it is personally delivered as aforesaid or, if
transmitted by telex or telecopy or fax machine, on the day that such
notice is transmitted as aforesaid, and otherwise when actually received.
Any party may, for purposes of the Loan Documents, change its address,
telex number, fax number or the person to whom a notice or other
communication is marked to the attention of, by giving notice of such
change to the other parties pursuant hereto.
11.5 Governing Law. This Agreement has been prepared, is being
-------------
executed and delivered in the State of Oklahoma, and the substantive laws
of such state and the applicable federal laws of the United States of
America shall govern the validity, construction, enforcement and
interpretation of this Agreement and all of the Loan Documents, except as
otherwise may be provided for in the respective Loan Documents.
11.6 Choice of Forum. Any suit, action or proceeding against
---------------
Borrowers with respect to this Agreement, the Note or any Loan Documents or
any judgment entered by any court in respect thereof, may be brought in the
courts of the State of Oklahoma, County of Oklahoma, or in the United
States courts located in Oklahoma County, State of Oklahoma as Bank in its
sole discretion may elect and Borrowers hereby submit to the non-exclusive
jurisdiction of such courts for the purpose of any such suit, action or
proceeding. Borrowers hereby irrevocably waive any objections which
Borrowers may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any
Loan Document brought in the courts located in the State of Oklahoma,
County of Oklahoma, and hereby further irrevocably waive any claim that any
such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
11.7 Invalid Provisions. If any provision of any Loan Document
------------------
is held to be illegal, invalid or unenforceable under present or future
laws during the term of this Agreement, such provision shall be fully
severable; such Loan Document shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of
such Loan Document; and the remaining provisions of such Loan Document
shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provisions or by its severance from such
Loan Document.
11.8 Nonliability of Bank. The relationship between Borrowers
--------------------
and Bank is, and shall at all times remain, solely that of borrower and
lender, and Bank neither undertakes nor assumes any responsibility or duty
to Borrowers to review, inspect, supervise, pass judgment upon, or inform
Borrowers of any matter in connection with any
-25-
phase of Borrowers' business, operations, or condition, financial or
otherwise. Borrowers shall rely entirely upon their own judgment with
respect to such matters, and any review, inspection, supervision, exercise
of judgment, or information supplied to Borrowers by Bank in connection
with any such matter is for the protection of Bank, and neither Borrowers
nor any third party is entitled to rely thereon.
11.9 Binding Effect. The Loan Documents shall be binding upon
--------------
and inure to the benefit of Borrowers and Bank and their respective
successors, assigns and legal representatives; provided, however, that
Borrowers may not, without the prior written consent of Bank, assign any
rights, powers, duties or obligations thereunder.
11.10 Headings. Section headings are for convenience of
--------
reference only and shall in no way affect the interpretation of this
Agreement.
11.11 No Third-Party Beneficiary. The parties do not intend the
--------------------------
benefits of this Agreement to inure to any third party, nor shall this
Agreement be construed to make or render Bank liable to any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property
owned by Borrowers, or for debts or claims accruing to any such persons
against Borrowers. Notwithstanding anything contained herein or in the Note
or in any other Loan Document, or any conduct or course of conduct by any
or all of the parties hereto, before or after signing this Agreement or any
other Loan Document, shall be construed as creating any right, claim or
cause of action against Bank, or any of its officers, directors, agents or
employees, in favor of any materialman, supplier, contractor,
subcontractor, purchaser or lessee of any property owned by Borrowers, nor
to any other person or entity.
11.12 Multiple Counterparts. This Agreement may be executed in
---------------------
any number of counterparts, all of which taken together shall constitute
one and the same agreement, and any of the parties hereto may execute this
Agreement by signing any such counterpart.
11.13 Contrary Provisions. The terms and conditions of this
-------------------
Agreement shall govern and control any and all contrary provisions of the
other Loan Documents.
11.14 No Oral Agreements. THIS WRITTEN LOAN AGREEMENT REPRESENTS
------------------
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
11.15 Usury. Under no circumstances (and notwithstanding any
-----
other provision of this Agreement, the Note or any other Loan Document)
shall the interest charged, collected, or contracted for on this Agreement,
the Note or any other Loan Document exceed the maximum rate permitted by
applicable law. If any part of this Agreement or the Note cannot be
enforced, this fact will not affect the rest of this Agreement or the Note,
as applicable. In particular, this section means (among other things) that
Borrowers does not agree or intend to pay, and Lender does not agree or
-26-
intend to contract for, charge, collect, take, reserve or receive
(collectively referred to herein as "charge or collect"), any amount in the
nature of interest or in the nature of a fee for the Loan, which would in
any way or event (including demand, prepayment, or acceleration) cause Bank
to charge or collect more for the Loan than the maximum Bank would be
permitted to charge or collect by federal law or the law of the State of
Oklahoma. Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of the Loan and when the principal has been paid in full, be
refunded to Borrowers. The right to accelerate maturity of sums due under
this Agreement or the Note does not include the right to accelerate any
interest which has not otherwise accrued on the date of such acceleration,
and Bank does not intend to charge or collect any unearned interest in the
event of acceleration. All sums paid or agreed to be paid to Bank for the
use, forbearance or detention of sums due hereunder shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of the Loan evidenced by this Agreement and the
Note until payment in full so that the rate or amount of interest on
account of the Loan evidenced hereby does not exceed the applicable usury
ceiling. Bank may delay or forgo enforcing any of its rights or remedies
under this Agreement, the Note or any other Loan Document without losing
them.
-27-
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
day and year first above written.
"BORROWERS" CD WAREHOUSE, INC.,
an Delaware corporation
By: /s/ XXXXX X. XXXXXXX
----------------------------------------
Xxxxx X. Xxxxxxx,
President
COMPACT DISCS MANAGEMENT, INC.,
an Delaware corporation
By: /s/ XXXXX X. XxxXXXXXX
----------------------------------------
Xxxxx X. XxxXxxxxx,
President
"BANK" BANK ONE, OKLAHOMA CITY,
a state banking association
By: /s/ XXXXX X. XXXXXXX
----------------------------------------
Xxxxx X. Xxxxxxx,
Senior Vice President
EXHIBIT "A"
-----------
REQUEST FOR ADVANCE
-------------------
__________________, 19__
Bank One, Oklahoma City
0000 X. Xxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Senior Vice President
Re: CD Warehouse, Inc. and Compact Discs Management, Inc. Credit Facility
Ladies and Gentlemen:
This Request for Advance is delivered to you pursuant to Section 2.4
of the Loan Agreement, dated as of May __, 1997 (together with all amendments
and other modifications, if any, from time to time thereafter made, the "Loan
Agreement"), between CD Warehouse, Inc. and Compact Discs Management, Inc.
("Borrowers"), and Bank One, Oklahoma City ("Bank"). Unless otherwise defined
herein or the context otherwise requires, terms used herein have the meanings
provided in the Loan Agreement.
Borrowers hereby requests (or confirms an earlier oral request) that
an advance be made under the Loan in the aggregate principal amount of
$____________ on ______________, 199__, and that the proceeds thereof be
deposited to Account Number _______________ at the Bank. (Alternatively,
Borrowers request a Letter of Credit be issued to ____________________ in the
amount of $____________ for the benefit of __________________________________,
with an expiration date of _______________. See attached information for Letter
of Credit.)
Borrowers hereby represent, warrant and agree that on the delivery of
this Request for Advance and the acceptance of the proceeds of the advance
requested hereby, the conditions set forth in Sections 2.4 of the Loan Agreement
are true and correct and satisfied.
IN WITNESS WHEREOF, Borrowers have caused this request and certificate
to be executed and delivered by their authorized officers this _____ day of
_____________, 199__.
CD WAREHOUSE, INC., COMPACT DISCS
a Delaware corporation MANAGEMENT, INC.
a Delaware corporation
By: By: /s/ Xxxxx X. XxxXxxxxx
--------------------------- ---------------------------
Xxxxx X. Xxxxxxx, President Xxxxx X. XxxXxxxxx,
President
or or
By: By:
--------------------------- ---------------------------
Xxxxx Xxxxxx, CFO Xxxxx Xxxxxx, CFO
EXHIBIT "B"
-----------
LITIGATION CERTIFICATE
----------------------
The undersigned, as President of CD Warehouse, Inc., a Delaware
corporation, and Compact Discs Management, Inc., a Delaware corporation (the
"Borrowers"), does hereby certify that, as of the date hereof, the Borrowers are
not parties to any action, claim or proceeding, nor is the property of the
Borrowers the subject of any action, claim or proceeding, nor are the Borrowers
or their respective properties the subject of or associated with any threatened
action, claim or proceeding, which is of a material nature and would adversely
affect the Borrowers' abilities to perform any and all of their obligations
under: (i) the extensions of credit in the maximum principal amount of
$2,000,000.00 from BANK ONE, OKLAHOMA CITY, a state banking association (the
"Bank"), as evidenced by a Promissory Note for said amount in favor of the Bank;
(ii) the terms and conditions of a certain Loan Agreement executed and delivered
by Borrowers to the Bank covering said obligation; (iii) the terms and
conditions of a certain Security Agreement and Financing Statement executed and
delivered by CD Warehouse, Inc. to the Bank; and (iv) the terms and conditions
of all other security documents and agreements and any and all other documents,
instruments, affidavits and certificates made in connection therewith.
The undersigned further certifies that, to the best of his knowledge
as of the date hereof, Xxxxx X. Xxxxxxx and The Xxxxx X. Xxxxxxx and Xxxxx X.
Xxxxxxx Revocable Living Trust dated January 6, 1994 (collectively the
"Guarantors") are not parties to any action, claim or proceeding, nor is their
property the subject of any action, claim or proceeding, nor are they or any of
their property the subject of or associated with any threatened action, claim or
proceeding, which is of a material nature and would adversely affect their
ability to perform any and all of the Guarantors' obligations under: (i) their
respective Continuing Guaranty agreements covering the extension of credit to
the Borrowers in the principal amount of $2,000,000.00; (ii) the terms and
conditions of the Loan Agreement, as it pertains to the Guarantors; and (iii)
the terms and conditions of all other security documents and agreements and any
and all other documents, instruments, affidavits and certificates made in
connection therewith.
DATED as of May __, 1997.
CD WAREHOUSE, INC., COMPACT DISCS MANAGEMENT, INC.
a Delaware corporation a Delaware corporation
By: By: /s/ XXXXX X. XxxXXXXXX
--------------------------- ---------------------------
Xxxxx X. Xxxxxxx, President Xxxxx X. XxxXxxxxx,
President
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
This instrument was acknowledged before me on May ______, 1997, by
Xxxxx X. Xxxxxxx, as President of CD Warehouse, Inc., a Delaware corporation.
----------------------------------------
NOTARY PUBLIC
My Commission Expires:
-------------------
[Seal]
STATE OF OKLAHOMA )
) SS.
COUNTY OF OKLAHOMA )
This instrument was acknowledged before me on May ______, 1997, by
Xxxxx X. XxxXxxxxx, as President of Compact Discs Management, Inc., a Delaware
corporation.
----------------------------------------
NOTARY PUBLIC
My Commission Expires:
-------------------
[Seal]
EXHIBIT "D"
-----------
COMPLIANCE CERTIFICATE
----------------------
1. I, _____________________, do hereby certify that I am the duly
elected, qualified and acting ________________________ of CD WAREHOUSE, INC., a
Delaware corporation ("Warehouse") and am authorized to make and deliver this
certificate on behalf of Warehouse.
2. Pursuant to the Loan Agreement ("Loan Agreement") dated May ___,
1997, between the Warehouse, Compact Discs Management, Inc. and Bank One,
Oklahoma City ("Bank"), Warehouse hereby certifies to the following financial
covenants as set forth in the Loan Agreement as of the calendar quarter ending
______________, 199____:
Section 7.4 Net Worth Minimum Actual
$1,500,000, $________
plus 80% of net
income
Section 7.5 Working Capital Minimum Actual
$ 350,000 $_________
Section 7.6 Leverage Ratio Maximum Actual
1.0 to 1.0 ____ to ____
Section 7.7 Debt Coverage Minimum Actual
1.75:1.0 ____ to ____
Section 7.8 Capital Maximum $750,000 Actual
Expenditures $__________
Section 7.9 Store Costs Maximum Actual
$60,000/store $___________
$250,000 $___________
aggregate
(prior 12
months)
3. Attached hereto is a list of new franchise agreements entered
into by the Borrowers and certain franchisees since the date of the last
Compliance Certificate.
4. As of the date of this Certificate, no Event of Default has
occurred and is continuing under the Loan Agreement. If an Event of Default has
occurred, state on an attachment hereto the nature of the Event of Default, the
period of existence thereof and the action proposed to be taken with respect
thereto.
IN WITNESS WHEREOF, I have hereunto signed my name and certify to the
above as of this ____ day of _____________, 19___.
CD Warehouse, Inc., a Delaware corporation
By:
----------------------------------------------
Title:
-------------------------------------------
EXHIBIT "E"
-----------
BORROWING BASE CERTIFICATE
--------------------------
1. I, ______________________, am the duly elected, qualified and
acting ______________ of CD WAREHOUSE, INC., a Delaware corporation (the
"Warehouse") and do hereby make this certificate on behalf of the Warehouse.
2. Pursuant to the Loan Agreement ("Loan Agreement") dated May ___,
1997, between the Warehouse, Compact Discs Management, Inc. and Bank One,
Oklahoma City ("Bank"), the Borrowers hereby certify that the Borrowing Base as
described in the Loan Agreement is as follows as of ______________, 199__:
Borrowing Base
--------------
Total Accounts $____________
Less: Accounts 90 days past due ____________
Less: Related Accounts ____________
Less: Foreign Accounts ____________
Less: Accounts Subject to Set-Off ____________
Less: 5% Rule (60 days past due) ____________
Less: 20% Rule ____________
Less: Other Ineligible Accounts ____________
ELIGIBLE ACCOUNTS $____________ x 80% = _______
Plus:
INVENTORY
New CD Inventory ____________
Plus: Used CD Inventory ____________
Less: Inventory Subject to ____________
Permitted Liens
ELIGIBLE INVENTORY $____________ x 50% = _______
(Limited to not greater than 50% of
total Borrowing Base)
Less:
OUTSTANDING LETTERS OF CREDIT = _______
Less:
OUTSTANDING LOAN BALANCE = _______
BORROWING BASE $___________
3. As of the date of this Certificate, the above information is true
and correct and no Event of Default has occurred and is continuing under the
Loan Agreement. If an Event of Default has occurred, I have stated on an
attachment hereto the nature of the Event of Default, the period of existence
thereof and the action proposed to be taken with respect thereto.
IN WITNESS WHEREOF, I have hereunto signed my name and certify to the
above as of this ____ day of _____________, 19___.
-------------------------------------
,
-------------------- ---------------
PROMISSORY NOTE
---------------
(Revolving Note)
$2,000,000.00 Oklahoma City, Oklahoma
FOR VALUE RECEIVED, the undersigned, jointly and severally, promise to
pay to the order of BANK ONE, OKLAHOMA CITY, a state banking association
("Bank"), at its office in Oklahoma City, Oklahoma, which is located at 0000 X.
Xxxxxxxx, or such other place as may be designated in writing by the holder of
this Note, the principal sum of $2,000,000.00, or so much thereof as shall be
disbursed and outstanding, together with interest at the rate stated herein on
such outstanding principal amount, payable as follows:
All capitalized terms used herein shall have the meanings as set forth
in that certain Loan Agreement dated even date herewith between the
undersigned and the Bank, as the same may be modified, amended or
supplemented from time to time ("Loan Agreement").
This Note shall evidence an extension of credit in the form of a
revolving line of credit which can be advanced, repaid and readvanced from
time to time upon the written request of the undersigned so long as no
Event of Default exists under the Loan Agreement. The principal amount
advanced on this Note shall not exceed the Maximum Principal Amount,
subject to any restrictions on advances as contained in the Loan Agreement.
Advances and payments under this Note shall be made in compliance with the
terms and conditions of the Loan Agreement.
The principal amount of this Note shall bear interest per annum,
accrued from the date of disbursement, at a rate of interest equal to
three-quarters of one percent (0.75%) in excess of the Base Rate, as such
rate may change from time to time hereafter. Each change in the per annum
interest rate charged hereunder shall become effective, without notice
(which notice is hereby waived), on the date of such change. As of the
effective date hereof, the Base Rate is eight and one-half percent (8.50%)
per annum and the initial rate hereunder is nine and one-quarter percent
(9.25%) per annum. The Bank may, from time to time, extend credit to
anyone at rates of interest varying from, and having no relationship to the
Base Rate. The interest rate described above shall be calculated on the
basis of actual number of days elapsed, but computed as if each calendar
year consisted of a 360 day year.
During the Original Term of this Note, payments of the accrued
interest on the outstanding principal balance of this Note and any
principal amount in excess of the Maximum Principal Amount, shall be due
and payable monthly beginning May 31, 1997, and continuing thereafter on
the last day of each and every month
-2-
and at maturity. This Note will mature on May 31, 1998 unless this Note is
renewed and extended by the Bank as provided in the Loan Agreement. On the
Maturity Date, all outstanding and unpaid principal and all accrued and
unpaid interest on this Note shall be immediately due and payable.
If this Note is renewed for the Renewal Term as provided in the Loan
Agreement, then during such Renewal Term, payments of the accrued interest
on the outstanding principal balance of this Note and any principal amount
in excess of the Maximum Principal Amount, shall be due and payable monthly
beginning June 30, 1998, and continuing thereafter on the last day of each
and every month and at maturity. This Note will finally mature on May 31,
1999. On the Maturity Date, all outstanding and unpaid principal and all
accrued and unpaid interest on this Note shall be immediately due and
payable.
Payment of this Note is secured by personal property pursuant to a
certain Security Agreement and Financing Statement and other security documents
covering said property. This Note is to be construed according to the laws of
the State of Oklahoma.
If any Event of Default occurs and is not cured within the applicable
cure period described in the Loan Documents, in lieu of the interest rate
provided in this Note, all sums owing by Borrower to Bank in connection with the
Loan shall bear interest at the rate equal to five percent (5%) per annum in
excess of the Base Rate, accrued from the date after the applicable grace period
to cure the Event of Default as is provided for herein, to the date on which
such Event of Default is cured to the reasonable satisfaction of the Bank.
If the undersigned fails to timely cure any Event or Events of Default
as described in the Loan Documents, after the undersigned's receipt of written
notice of such Event or Events of Default as provided in the Loan Agreement,
then, at the option of the holder hereof, the entire indebtedness hereby
evidenced shall become due, payable and collectable then or thereafter as the
holder may elect, regardless of the date of maturity thereof.
The undersigned agrees that if, and as often as, this Note is placed
in the hands of an attorney for collection or to defend or enforce any of the
holder's rights hereunder, the undersigned will pay to the holder hereof its
reasonable attorney's fees, together with all court costs and other expenses
paid by such holder.
All payments on this Note shall be made in legal tender of the United
States of America or other immediately available funds at the Bank's or other
holder's address as shown herein or otherwise indicated and any such payment
will not be deemed to have been made until it is received by the holder of this
Note in collected funds.
All agreements between the undersigned and the holder are expressly
limited so that in no event whatsoever, whether by reason of disbursement of the
proceeds hereof or otherwise, shall the amount of interest or finance charge (as
defined by the laws of the State of Oklahoma) paid or
-3-
agreed to be paid by the undersigned to the holder hereof exceed the highest
lawful contractual rate of interest or the maximum finance charge permissible
under the law which a court of competent jurisdiction, by final non-appealable
order, determines to be applicable hereto. If fulfillment of any agreement
between the undersigned and the holder hereof, at the time of the performance of
such agreement becomes due, involves exceeding such highest lawful contractual
rate or such maximum permissible finance charge, then the obligation to fulfill
the same shall be reduced so such obligation does not exceed such highest lawful
contractual rate or maximum permissible finance charge. If by any circumstance
the holder shall ever receive as interest or finance charge an amount which
would exceed the amount allowed by applicable law, the amount which may be
deemed excessive shall be deemed applied to the principal of the indebtedness
evidenced hereby and not to interest. All interest and finance charges paid or
agreed to be paid to the holder hereof shall be prorated, allocated and spread
throughout the full period of this Note. The terms and provisions of this
paragraph shall control all other terms and provisions contained herein and in
any other documents executed in connection herewith. If any provision of this
Note, or the application thereof to any party or circumstance is held invalid or
unenforceable, the remainder of this Note and the application of such provision
to other parties or circumstances shall not be affected thereby, provisions of
this Note being severable in any such instance.
The makers, endorsers, sureties, guarantors and all other persons who
may become liable for all or any part of this obligation severally waive
presentment for payment, protest and notice of nonpayment. Said parties consent
to any extension of time (whether one or more) of payment hereof, any renewal
(whether one or more) hereof, and any release of any such party liable for
payment of this note without notice to any such party and without discharging
the said party's liability hereunder.
The failure of the holder hereof to exercise any of the remedies or
options set forth in this Note or in any instrument securing payment hereof,
upon the occurrence of one or more of the events of default shall not constitute
a waiver of the right to exercise the same or any other remedy at any subsequent
time in respect to the same or any other event of default. Acceptance by the
holder hereof of any payment which is less than the total of all amounts due and
payable at the time of such payment shall not constitute a waiver of the right
to exercise any of the foregoing remedies or options at that time or at any
subsequent time, or nullify any prior exercise of any such remedy or option,
without the express consent of the holder hereof, except as and to the extent
otherwise provided by law.
This Note is subject to the terms and conditions of the Loan
Agreement, which terms and conditions are hereby incorporated by reference
herein and shall be controlling over any provision of this Note to the contrary.
-4-
IN WITNESS WHEREOF, the undersigned has executed this instrument
effective as of May 16, 1997.
CD WAREHOUSE, INC.,
a Delaware corporation
By: /s/ XXXXX X. XXXXXXX
----------------------------------------
Xxxxx X. Xxxxxxx,
President
COMPACT DISCS MANAGEMENT,
INC., a Delaware corporation
By: /s/ XXXXX X. XxxXXXXXX
----------------------------------------
Xxxxx X. XxxXxxxxx,
President
CONTINUING GUARANTY
-------------------
FOR VALUE RECEIVED, and for the purpose of obtaining from BANK ONE,
OKLAHOMA CITY, a state banking association ("Bank"), loans and extensions of
credit to CD WAREHOUSE, INC., a Delaware corporation and COMPACT DISCS
MANAGEMENT, INC., a Delaware corporation ("Borrowers"), the undersigned
("Guarantor") agrees as follows:
1. The Guarantor unconditionally guarantees and promises to pay to
Bank, or order, on demand after the occurrence of an Event of Default under the
Loan Agreement as hereafter described, and failure to timely cure said Event of
Default, in lawful money of the United States, the obligations of the Borrowers
to Bank as evidenced by that certain Promissory Note dated even date herewith in
the principal amount of $2,000,000.00 or so much thereof that is outstanding,
together with all renewals, extensions, modifications and substitutions thereof
("Note"), made by the Borrowers and payable to the order of the Bank, and all
obligations of the Borrowers to the Bank as evidenced by that certain Loan
Agreement of even date herewith between the Borrowers and the Bank and all
amendments thereto ("Loan Agreement") and all other obligations of the Borrowers
to the Bank whether now existing or hereafter incurred.
2. Notwithstanding anything to the contrary contained herein, it is the
intention of the Guarantor and the Bank that the amount of the Guarantor's
obligations with respect to the guaranteed obligations shall be in, but not in
excess of, the maximum amount thereof not subject to avoidance or recovery by
operation of applicable law governing bankruptcy, reorganization, arrangement,
adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent
transfers or conveyances or other similar laws (including without limitation, 11
U.S.C. (S)547, (S)548, (S)550 and other "avoidance" provisions of Title 11 of
the United States Code) applicable at any time to the Guarantor and this
Guaranty (collectively "Applicable Insolvency Laws"). To that end, but only in
the event and to the extent that the Guarantor's obligations with respect to the
guaranteed obligations or any payment made pursuant to the guaranteed
obligations would, but for the operation of the foregoing proviso, be subject to
avoidance or recovery under Applicable Insolvency Laws, the amount of the
Guarantor's obligations with respect to the guaranteed obligations shall be
limited to the largest amount which, after giving effect thereto, would not,
under Applicable Insolvency Laws, render the Guarantor's obligations with
respect to such guaranteed obligations unenforceable or avoidable or otherwise
subject to recovery under Applicable Insolvency Laws. To the extent any payment
actually made pursuant to the guaranteed obligations exceeds the limitation of
the foregoing proviso, the amount of such excess shall, from and after the time
of payment by the Guarantor, be reimbursed by the Bank upon demand by the
Guarantor. The foregoing proviso is intended solely to preserve the rights of
the Bank hereunder against the Guarantor to the maximum extent permitted by
Applicable Insolvency Laws and neither the Borrowers or any other guarantor nor
any other person shall have any right or claim under such proviso that would not
otherwise be available under Applicable Insolvency Laws.
3. This is a continuing guaranty relating to the indebtedness
described, including that arising under successive transactions which shall
continue the indebtedness.
-2-
4. The obligations hereunder are unlimited, direct, primary and
independent of the obligations of Borrowers, and a separate action or actions
may be brought and prosecuted against Guarantor whether action is brought
against Borrowers or whether Borrowers be joined in any such action or actions.
The obligations hereunder are joint and several with any other guarantor of the
obligations of Borrowers or with a Borrower, and a separate action or actions
may be brought and prosecuted against any other guarantor or a Borrower whether
action is brought against Guarantor or whether Guarantor be joined in any such
action or actions.
5. Guarantor authorizes Bank, without notice or demand and without
affecting his liability hereunder, from time to time, with respect to the
Borrowers, to (a) renew, compromise, extend, accelerate or otherwise change the
time for payment of, or otherwise change the terms of the indebtedness
guaranteed hereby or any part thereof, (b) take and hold security for the
payment of this Guaranty or the indebtedness guaranteed, and exchange, enforce,
waive and release any such security; and (c) release or substitute any one or
more of the endorsers or guarantors. Bank may after reasonable written notice
assign this Guaranty in whole or in part in connection with a whole or partial
assignment of the Note and other Loan Documents, but not otherwise.
6. Guarantor waives any right to require Bank to: (a) proceed against
Borrowers; (b) proceed or exhaust any security; or (c) pursue any other remedy
in Bank's powers whatsoever. Guarantor waives any defense arising by reason of
any disability or other defense of Borrowers or by reason of the cessation from
any cause whatsoever of the liability of Borrowers, except for payment by the
Borrowers. Until the Bank has been fully and completely paid, Guarantor shall
have no right of subrogation against the Borrowers arising out of any loss or
liability to Bank and Guarantor waives any and all rights of subrogation against
Borrowers. Guarantor waives all other presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance of this Guaranty and of the existence, creation, or
incurring of new or additional indebtedness.
7. Any indebtedness of Borrowers now or hereafter held by Guarantor is
hereby subordinated to the indebtedness of Borrowers to Bank described herein;
and such subordinated indebtedness of Borrowers to Guarantor, prior to an Event
of Default under the Loan Agreement resulting from Borrowers' failure to pay
principal and/or interest when the same are due and payable, may be paid by
Borrowers and received by Guarantor for application to such indebtedness, but
upon the failure to cure said Event of Default occurring under the Loan
Agreement, no payments on such subordinated indebtedness will be made by
Borrowers or received by Guarantor during the continuance of said Event of
Default. Any payments made by Borrowers to Guarantor in violation of the above
shall be collected, enforced and received by the Guarantor as trustee for Bank
and be paid over to Bank on account of such indebtedness of Borrowers to Bank
but without reducing or affecting in any manner the liability of the Guarantor
under the other provisions of this Guaranty.
8. Guarantor shall remain obligated hereunder notwithstanding that,
without reservation of rights against the Guarantor and without notice to or
further assent by the
-3-
Guarantor, any demand for payment of any of the obligations guaranteed hereby
may be rescinded and such obligations continued, or the liability of any party
thereon shall be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by Bank. The liability of the Guarantor shall
not be affected or impaired by any failure, neglect or omission on the part of
the Bank to realize on the obligations guaranteed hereby or the taking of any
other guaranty or guaranties of any kind. Guarantor waives any notice of or
proof of reliance by the Bank upon this Guaranty or acceptance of this Guaranty.
The obligations guaranteed hereby shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Guaranty.
9. This Guaranty shall continue to be effective, or reinstated, as the
case may be, if at any time payment, or any part thereof, of any of the
obligations guaranteed hereby is rescinded or must otherwise be restored or
returned by the Bank upon insolvency, bankruptcy or other circumstance relating
to the Borrowers, all as though such payment had not been made. The Guarantor
expressly agrees that its liabilities and obligations under this Guaranty shall
not in any way be affected or impaired by the institution by or against the
Borrowers of any Applicable Insolvency Laws or any other similar proceedings for
relief of debtors or discharge of any of the guaranteed obligations.
10. Upon the request of Guarantor, Bank will sell and assign to the
requesting Guarantor the Note and all of the Loan Documents (as such term is
defined in the Loan Agreement). The purchase price shall consist of the unpaid
principal balance, all unpaid accrued interest, after default interest and late
charges, and all reasonable fees, costs and expenses incurred by Bank in
connection with the Note, including reasonable attorney's fees and expenses.
11. This Agreement shall be governed by and construed according to the
laws of the State of Oklahoma.
12. In case any one or more of the provisions contained in this Guaranty
should be deemed invalid, illegal or unenforceable in any respect in any
jurisdiction, the validity, legality and enforceability of such provision or
provisions will not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the remaining
provisions contained herein and therein will not in any way be affected or
impaired thereby.
13. No failure on the part of the Bank to exercise and no delay in
exercising any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by Bank of any right hereunder preclude any other or
further right of exercise thereof or the exercise of any other right. All
remedies of the Bank are cumulative and not alternative.
14. This Guaranty may not be amended, modified, waived, discharged or
terminated in any way, except by a writing executed by the Guarantor and the
Bank.
15. This Guaranty and the other instruments, statements or documents
described herein or therein shall constitute the entire agreement between the
Guarantor and the Bank with respect to the subject matter of the Loan Agreement,
with any and all prior agreements and understandings being canceled and merged
herein.
-4-
16. Nothing in this Guaranty, express or implied, is intended to confer
upon any person (including the Borrowers), other than the Guarantor, the Bank,
and their respective permitted assigns, any rights or remedies under or by
reason of this Guaranty, and no third party (including the Borrowers) shall have
any right to compel or effect any benefit described herein.
17. Guarantor shall not assign or otherwise transfer this Guaranty or
any rights hereunder without the prior written consent of the Bank.
18. Guarantor agrees to pay a reasonable attorney's fees and all other
costs and expenses which may be incurred by Bank in the enforcement of this
Guaranty.
19. The Guarantor represents and warrants: (i) the execution, delivery
and performance of the Guaranty is within the power of the Guarantor, is not in
contravention of law or of any indenture, agreement or undertaking to which the
Guarantor are a party or by which they are bound; (ii) this Guaranty requires no
approval of or filing with any governmental authority; (iii) this Guaranty
constitutes the legal, valid, and binding obligation of the Guarantor, fully
enforceable in accordance with its terms to the fullest extent permissible under
Oklahoma law; (iv) there is no action, suit, investigation or proceeding pending
or, to the knowledge of the Guarantor, threatened against or affecting the
Guarantor or any properties or rights of the Guarantor which would have a
material adverse effect on Guarantor; and (v) the Guarantor is not in default
with respect to any judgment, order, writ, injunction, decree, rule or
regulation which involves the possibility of any final judgment or liability
which may result in a material adverse effect on the Guarantor.
20. The Guarantor will furnish to the Bank all of the financial
information required by the terms of the Loan Agreement at the times indicated
and shall also furnish to the Bank such other information concerning the
financial affairs of the Guarantor as the Bank might reasonably request.
21. The Guarantor shall comply with all covenants in the Loan Agreement
relating to the Guarantor.
22. All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Loan Agreement dated even date herewith between the
Borrowers and the Bank.
DATED effective as of May 16th, 1997.
GUARANTOR: /s/ XXXXX X. XXXXXXX
----------------------------------------------------
XXXXX X. XXXXXXX
CONTINUING GUARANTY
-------------------
FOR VALUE RECEIVED, and for the purpose of obtaining from BANK ONE,
OKLAHOMA CITY, a state banking association ("Bank"), loans and extensions of
credit to CD WAREHOUSE, INC., a Delaware corporation and COMPACT DISCS
MANAGEMENT, INC., a Delaware corporation ("Borrowers"), the undersigned
("Guarantor") agrees as follows:
1. The Guarantor unconditionally guarantees and promises to pay to
Bank, or order, on demand after the occurrence of an Event of Default under the
Loan Agreement as hereafter described, and failure to timely cure said Event of
Default, in lawful money of the United States, the obligations of the Borrowers
to Bank as evidenced by that certain Promissory Note dated even date herewith in
the principal amount of $2,000,000.00 or so much thereof that is outstanding,
together with all renewals, extensions, modifications and substitutions thereof
("Note"), made by the Borrowers and payable to the order of the Bank, and all
obligations of the Borrowers to the Bank as evidenced by that certain Loan
Agreement of even date herewith between the Borrowers and the Bank and all
amendments thereto ("Loan Agreement") and all other obligations of the Borrowers
to the Bank whether now existing or hereafter incurred.
2. Notwithstanding anything to the contrary contained herein, it is the
intention of the Guarantor and the Bank that the amount of the Guarantor's
obligations with respect to the guaranteed obligations shall be in, but not in
excess of, the maximum amount thereof not subject to avoidance or recovery by
operation of applicable law governing bankruptcy, reorganization, arrangement,
adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent
transfers or conveyances or other similar laws (including without limitation, 11
U.S.C. (S)547, (S)548, (S)550 and other "avoidance" provisions of Title 11 of
the United States Code) applicable at any time to the Guarantor and this
Guaranty (collectively "Applicable Insolvency Laws"). To that end, but only in
the event and to the extent that the Guarantor's obligations with respect to the
guaranteed obligations or any payment made pursuant to the guaranteed
obligations would, but for the operation of the foregoing proviso, be subject to
avoidance or recovery under Applicable Insolvency Laws, the amount of the
Guarantor's obligations with respect to the guaranteed obligations shall be
limited to the largest amount which, after giving effect thereto, would not,
under Applicable Insolvency Laws, render the Guarantor's obligations with
respect to such guaranteed obligations unenforceable or avoidable or otherwise
subject to recovery under Applicable Insolvency Laws. To the extent any payment
actually made pursuant to the guaranteed obligations exceeds the limitation of
the foregoing proviso, the amount of such excess shall, from and after the time
of payment by the Guarantor, be reimbursed by the Bank upon demand by the
Guarantor. The foregoing proviso is intended solely to preserve the rights of
the Bank hereunder against the Guarantor to the maximum extent permitted by
Applicable Insolvency Laws and neither the Borrowers or any other guarantor nor
any other person shall have any right or claim under such proviso that would not
otherwise be available under Applicable Insolvency Laws.
3. This is a continuing guaranty relating to the indebtedness
described, including that arising under successive transactions which shall
continue the indebtedness.
-2-
4. The obligations hereunder are unlimited, direct, primary and
independent of the obligations of Borrowers, and a separate action or actions
may be brought and prosecuted against Guarantor whether action is brought
against Borrowers or whether Borrowers be joined in any such action or actions.
The obligations hereunder are joint and several with any other guarantor of the
obligations of Borrowers or with a Borrower, and a separate action or actions
may be brought and prosecuted against any other guarantor or a Borrower whether
action is brought against Guarantor or whether Guarantor be joined in any such
action or actions.
5. Guarantor authorizes Bank, without notice or demand and without
affecting his liability hereunder, from time to time, with respect to the
Borrowers, to (a) renew, compromise, extend, accelerate or otherwise change the
time for payment of, or otherwise change the terms of the indebtedness
guaranteed hereby or any part thereof, (b) take and hold security for the
payment of this Guaranty or the indebtedness guaranteed, and exchange, enforce,
waive and release any such security; and (c) release or substitute any one or
more of the endorsers or guarantors. Bank may after reasonable written notice
assign this Guaranty in whole or in part in connection with a whole or partial
assignment of the Note and other Loan Documents, but not otherwise.
6. Guarantor waives any right to require Bank to: (a) proceed against
Borrowers; (b) proceed or exhaust any security; or (c) pursue any other remedy
in Bank's powers whatsoever. Guarantor waives any defense arising by reason of
any disability or other defense of Borrowers or by reason of the cessation from
any cause whatsoever of the liability of Borrowers, except for payment by the
Borrowers. Until the Bank has been fully and completely paid, Guarantor shall
have no right of subrogation against the Borrowers arising out of any loss or
liability to Bank and Guarantor waives any and all rights of subrogation against
Borrowers. Guarantor waives all other presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance of this Guaranty and of the existence, creation, or
incurring of new or additional indebtedness.
7. Any indebtedness of Borrowers now or hereafter held by Guarantor is
hereby subordinated to the indebtedness of Borrowers to Bank described herein;
and such subordinated indebtedness of Borrowers to Guarantor, prior to an Event
of Default under the Loan Agreement resulting from Borrowers' failure to pay
principal and/or interest when the same are due and payable, may be paid by
Borrowers and received by Guarantor for application to such indebtedness, but
upon the failure to cure said Event of Default occurring under the Loan
Agreement, no payments on such subordinated indebtedness will be made by
Borrowers or received by Guarantor during the continuance of said Event of
Default. Any payments made by Borrowers to Guarantor in violation of the above
shall be collected, enforced and received by the Guarantor as trustee for Bank
and be paid over to Bank on account of such indebtedness of Borrowers to Bank
but without reducing or affecting in any manner the liability of the Guarantor
under the other provisions of this Guaranty.
8. Guarantor shall remain obligated hereunder notwithstanding that,
without reservation of rights against the Guarantor and without notice to or
further assent by the Guarantor, any demand for payment of any of the
obligations guaranteed hereby may be rescinded
-3-
and such obligations continued, or the liability of any party thereon shall be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by Bank. The liability of the Guarantor shall not be
affected or impaired by any failure, neglect or omission on the part of the Bank
to realize on the obligations guaranteed hereby or the taking of any other
guaranty or guaranties of any kind. Guarantor waives any notice of or proof of
reliance by the Bank upon this Guaranty or acceptance of this Guaranty. The
obligations guaranteed hereby shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Guaranty.
9. This Guaranty shall continue to be effective, or reinstated, as the
case may be, if at any time payment, or any part thereof, of any of the
obligations guaranteed hereby is rescinded or must otherwise be restored or
returned by the Bank upon insolvency, bankruptcy or other circumstance relating
to the Borrowers, all as though such payment had not been made. The Guarantor
expressly agrees that its liabilities and obligations under this Guaranty shall
not in any way be affected or impaired by the institution by or against the
Borrowers of any Applicable Insolvency Laws or any other similar proceedings for
relief of debtors or discharge of any of the guaranteed obligations.
10. Upon the request of Guarantor, Bank will sell and assign to the
requesting Guarantor the Note and all of the Loan Documents (as such term is
defined in the Loan Agreement). The purchase price shall consist of the unpaid
principal balance, all unpaid accrued interest, after default interest and late
charges, and all reasonable fees, costs and expenses incurred by Bank in
connection with the Note, including reasonable attorney's fees and expenses.
11. This Agreement shall be governed by and construed according to the
laws of the State of Oklahoma.
12. In case any one or more of the provisions contained in this Guaranty
should be deemed invalid, illegal or unenforceable in any respect in any
jurisdiction, the validity, legality and enforceability of such provision or
provisions will not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the remaining
provisions contained herein and therein will not in any way be affected or
impaired thereby.
13. No failure on the part of the Bank to exercise and no delay in
exercising any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by Bank of any right hereunder preclude any other or
further right of exercise thereof or the exercise of any other right. All
remedies of the Bank are cumulative and not alternative.
14. This Guaranty may not be amended, modified, waived, discharged or
terminated in any way, except by a writing executed by the Guarantor and the
Bank.
15. This Guaranty and the other instruments, statements or documents
described herein or therein shall constitute the entire agreement between the
Guarantor and the Bank with respect to the subject matter of the Loan Agreement,
with any and all prior agreements and understandings being canceled and merged
herein.
-4-
16. Nothing in this Guaranty, express or implied, is intended to confer
upon any person (including the Borrowers), other than the Guarantor, the Bank,
and their respective permitted assigns, any rights or remedies under or by
reason of this Guaranty, and no third party (including the Borrowers) shall have
any right to compel or effect any benefit described herein.
17. Guarantor shall not assign or otherwise transfer this Guaranty or
any rights hereunder, without the prior written consent of the Bank.
18. Guarantor agrees to pay a reasonable attorney's fees and all other
costs and expenses which may be incurred by Bank in the enforcement of this
Guaranty.
19. The Guarantor represents and warrants: (i) the execution, delivery
and performance of the Guaranty is within the power of the Guarantor, is not in
contravention of law or of any indenture, agreement or undertaking to which the
Guarantor are a party or by which they are bound; (ii) this Guaranty requires no
approval of or filing with any governmental authority; (iii) this Guaranty
constitutes the legal, valid, and binding obligation of the Guarantor, fully
enforceable in accordance with its terms to the fullest extent permissible under
Oklahoma law; (iv) there is no action, suit, investigation or proceeding pending
or, to the knowledge of the Guarantor, threatened against or affecting the
Guarantor or any properties or rights of the Guarantor which would have a
material adverse effect on Guarantor; and (v) the Guarantor is not in default
with respect to any judgment, order, writ, injunction, decree, rule or
regulation which involves the possibility of any final judgment or liability
which may result in a material adverse effect on the Guarantor.
20. The Guarantor will furnish to the Bank all of the financial
information required by the terms of the Loan Agreement at the times indicated
and shall also furnish to the Bank such other information concerning the
financial affairs of the Guarantor as the Bank might reasonably request.
21. The Guarantor shall comply with all covenants in the Loan Agreement
relating to the Guarantor.
22. All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Loan Agreement dated even date herewith between the
Borrowers and the Bank.
DATED effective as of May 16, 1997.
GUARANTOR: The Xxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx
Revocable Living Trust dated January 6, 1994
By: /s/ XXXXX X. XXXXXXX
-----------------------------------------------
Xxxxx X. Xxxxxxx, Trustee
SECURITY AGREEMENT
------------------
THIS AGREEMENT is made effective as of May 16, 1997, by CD WAREHOUSE,
INC., a Delaware corporation ("Debtor") in favor of BANK ONE, OKLAHOMA CITY, a
state banking association ("Bank").
WITNESSETH:
----------
WHEREAS, the Debtor, and Compact Discs Management, Inc. ("Borrowers")
and the Bank have agreed to a certain extension of credit by the Bank to the
Borrowers in the form of a revolving loan in the maximum principal amount of
$2,000,000.00 as described in that certain Loan Agreement between the Borrowers
and the Bank dated even date herewith ("Loan Agreement") and is evidenced by a
certain promissory note described therein; and
WHEREAS, the Debtor desires to secure the Secured Indebtedness as
hereafter described by assigning as security therefor all its right, title and
interest in certain property of the Debtor as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereafter agree as follows:
1. ASSIGNMENT. As security for the Secured Indebtedness (as
----------
hereafter described), the Debtor does hereby assign, transfer, convey, and grant
a security interest to the Bank in all of the Debtor's right, title and interest
in and to all of the property described in Exhibit "A" attached hereto, and all
proceeds, products and increases thereof and any additions, accessions and
substitutions thereto or therefor, and whether now owned or hereafter acquired
(collectively the "Collateral):
2. INDEBTEDNESS SECURED. The security interest granted herein is
--------------------
given to secure the payment of (i) all of the obligations of the Borrowers to
the Bank evidenced by the Promissory Note dated even date herewith in the
principal amount of $2,000,000.00, (ii) all of the obligations of the Borrowers
to the Bank contained in or described in the Loan Agreement or any other Loan
Document (as defined therein), (iii) any and all other obligations of the
Borrowers to the Bank, direct or indirect, and whether now existing or hereafter
incurred, (iv) all interest on any of the above obligations, (v) all costs and
expenses incurred in the collection of any of the foregoing, including all court
costs and attorney's fees, (vi) all extensions, renewals, substitutions and
changes in form of the above obligations, and (vii) all advances made by the
Bank to protect the security hereof, and all interest on any and all moneys
expended or advanced by the Bank hereunder or pursuant hereto (collectively the
"Secured Indebtedness").
3. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants
------------------------------
that, except for the interest of the Bank herein, the Debtor is, and as to
Collateral acquired after the date hereof the Debtor shall and will be, the
owner of all Collateral free from any liens, security interests, encumbrances or
other right, title or interest of any other person, firm or corporation, and the
Debtor shall defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein adverse to the
Bank. The Debtor has all requisite power and authority to enter into this
Agreement, to pledge the Collateral as security for the Secured Indebtedness
described herein, and to carry out the transactions contemplated by this
Agreement. The execution and delivery of this Agreement, and the performance of
all of the terms hereof, will not constitute a default under the terms of any
agreement, indenture or other instrument, or of any license, judgment, decree,
order, law, statute, ordinance or other governmental rule or regulation by which
the Debtor or any of the Debtor's property is bound or affected.
4. PRINCIPAL ADDRESS. The Debtor's principal address is 1204
-----------------
Sovereign Row, Xxxxxxxx Xxxx, Xxxxxxxx 00000. The Collateral is located at such
locations as stated by the Debtor in the Loan Agreement.
5. COVENANTS. So long as the Secured Indebtedness remains unpaid,
---------
the Debtor shall: (i) keep the Collateral free of all liens, encumbrances and
security interests, other than the Bank's; (ii) defend the Collateral against
all claims and legal proceedings; (iii) pay and discharge when due any taxes,
levies, license fees and other charges upon the Collateral; (iv) not, except in
the ordinary course of business, sell, lease or otherwise dispose of the
Collateral; (v) not use or permit the Collateral to be used in violation of any
applicable law; (vi) allow the Bank to inspect the Collateral and all books and
records of the Debtor pertaining to the Collateral (and make copies thereof)
upon Bank's reasonable request; (vii) execute and deliver such additional
documents and agreements as the Bank may request to protect the security
interest granted herein and the priority of the Bank's interest in the
Collateral; or (viii) not move, relocate the Collateral, or establish additional
locations where the Collateral will be located, from those locations described
in Section 4 above, unless at least thirty (30) days prior thereto, Debtor shall
notify Bank of such new location and execute and deliver such additional
documents and agreements as Bank may request to protect the security interests
granted herein.
6. REMEDIES. On the occurrence of an Event of Default under the
--------
Loan Agreement which has not been timely cured, at the option of the Bank, the
entire amount of Secured Indebtedness shall become due, payable, and collectable
then or thereafter as the Bank may elect, regardless of the date of maturity
thereof. Thereafter, the Bank may immediately foreclose on the Collateral or
any part thereof by set-off, self-help repossession or by any other method
permitted by the Uniform Commercial Code or otherwise, and sell or otherwise
dispose of and deliver the Collateral or any part thereof or interest therein,
in one or more parcels at public or private sale or sales, at such prices and on
such terms as may be commercially reasonable, with the right to the Bank or any
purchaser to purchase the whole or any part of the Collateral free of any right
or equity of redemption in the Debtor, which right or equity is hereby expressly
waived and released. The proceeds of any such disposition or other action by
the Bank shall be applied as follows: (a) first, to the costs and expenses
incurred in connection with the retaking, preparation for sale and sale of the
Collateral, if any, and to the care or safekeeping of the Collateral in any way
relating to the rights of the Bank hereunder, including attorneys' fees and
expenses incurred by the Bank in connection with any of the foregoing actions;
(b) second, to the payment of the Secured Indebtedness; (c) third, to the
payment of any other amounts required or permitted to be paid pursuant to the
provisions of Section 9-504(1)(c) of the Uniform
Commercial Code; and (d) fourth, to the Debtor to the extent of any surplus
proceeds. The Bank will give at least ten (10) days' prior written notice of the
time and place of any public sale or of the time after which a private sale may
take place, which notice the Debtor agrees to be reasonable. In the event any
deficiency in satisfaction of the Secured Indebtedness remains after the sale of
the Collateral, the Debtor, will remain liable for such deficiency. In addition
to the rights and remedies provided above, the Bank shall have all the rights
and remedies of a secured party under the Uniform Commercial Code of the State
of Oklahoma (regardless of whether such Code is the law of the jurisdiction
where the rights and remedies are asserted) and all other rights and remedies,
at law or in equity, which may be applicable against the Debtor and property
described herein.
7. MISCELLANEOUS. This Agreement and all rights and liabilities
-------------
hereunder and in and to any and all Collateral shall inure to the benefit of the
Bank and its successors and assigns, and shall be binding upon the Debtor and
its successors and assigns. This Agreement and all rights and obligations
hereunder, including matters of construction, validity and performance, shall be
governed by the laws of Oklahoma. If any provision hereof shall for any reason
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof. All capitalized terms not
otherwise defined herein shall have the meanings of such terms in the Uniform
Commercial Code of the State of Oklahoma or as defined in the Loan Agreement.
8. CONTROLLING DOCUMENTS. This Agreement is subject to the terms
---------------------
and conditions of the Loan Agreement, which terms and conditions are hereby
incorporated by reference herein and the provisions of the Loan Agreement shall
be controlling over any provision of this Agreement to the contrary.
IN WITNESS WHEREOF, the Debtor has executed this Agreement as of the
date and year first hereinabove written.
"DEBTOR" CD WAREHOUSE, INC.,
a Delaware corporation
By: /s/ XXXXX X. XXXXXXX
-----------------------------------------
Xxxxx X. Xxxxxxx, President
EXHIBIT "A"
All of Debtor's right, title and interest in and to the following
described property:
All Accounts, accounts receivable, contract rights, franchise
agreements, notes, drafts, acceptances, general intangibles, chattel paper and
other forms of obligations and receivables owing to Debtor arising out of or in
connection with Debtor's business, including such as may arise out of the sale,
lease or other disposition at any time and from time to time of Inventory,
whether now owned or hereafter acquired, and any right to payment for goods sold
or leased or for services rendered and the Proceeds thereof, together with all
other forms of accounts as may be defined or determined under the Uniform
Commercial Code whether such Accounts now exist or are hereinafter acquired.
All Chattel Paper and any and all rights to payment for a monetary
obligation, together with all other forms of chattel paper as may be defined or
determined under the Uniform Commercial Code, whether now owned or hereafter
acquired.
All forms of Documents as may be defined or determined under the Uniform
Commercial Code, whether now owned or hereafter acquired.
All Equipment, tools, machinery, appliances, building materials,
supplies, furniture, fixtures, furnishings, business records, goods to become
fixtures and all other similar tangible personal property of every kind now
owned by Debtor or hereafter acquired, together with all other forms of
equipment and fixtures as may be defined or determined under the Uniform
Commercial Code.
Any and all franchise agreements, contracts, contract rights, documents,
licenses, general intangibles, chattel paper and other forms of rights in favor
of Debtor and obligations owing to Debtor arising out of or in connection with
any franchise arrangement with any franchisee or other party, and any right to
any royalty or other payments thereunder, whether now existing or hereafter
incurred, including, but not limited to those franchise agreements listed on the
attachment hereto, together with all amendments, modifications and substitutions
thereto and therefor.
All General Intangibles, including any personal property and things in
action, other than Goods, Accounts, Chattel Paper, Documents, Equipment,
Instruments, Inventory and money, including any and all patents, trademarks,
copyrights and other intellectual property, whether now owned or hereafter
acquired, together with all other forms of general intangibles as may be defined
or determined under the Uniform Commercial Code.
All Goods and all other things which are movable at the time a security
interest attaches or which are fixtures (12A O.S. (S)9-313), together with all
other forms of goods as may be defined or determined under the Uniform
Commercial Code, whether now owned or hereafter acquired, but does not include
money, Documents, Instruments, Accounts, Chattel Paper or General Intangibles,
but does include (i) "Equipment" if they are used or bought for use primarily in
---------
business or if the goods are not included in the definition of Inventory,
together with all other
forms of equipment as may be defined or determined under the Uniform Commercial
Code; and (ii) "Inventory" if they are held by a person who holds them for sale
---------
or lease or to be furnished under contracts of service or if he has so furnished
them, or if they are raw materials, work in process, or materials used or
consumed in a business, together with all other forms of inventory as may be
defined or determined under the Uniform Commercial Code.
All Instruments and negotiable instruments, as defined in 12A O.S. (S)3-
104, or a security, defined in 12A O.S. (S)8-102, or any other writing which
evidences a right to the payment of money and is not itself a security agreement
or lease and is a type of which is in the ordinary course of business
transferred by delivery with any necessary endorsement or assignment, together
with all other forms of instruments as may be defined or determined under the
Uniform Commercial Code, whether now owned or hereafter acquired.
All Inventory, raw materials, finished goods, work-in-process and all
other personal property of whatever nature now or hereafter owned and which are
held for sale or lease or are furnished or to be furnished under contracts of
service, together with all other forms of inventory as may be defined or
determined under the Uniform Commercial Code, whether now owned or hereafter
acquired.
All furniture, fixtures, trade fixtures, machinery, equipment and other
moveable or removable personal property of any kind of the Debtor located at, or
removed from, any leased facility, whether now owned or hereafter acquired.
All Proceeds, including: (i) all amounts, sums, revenues and income
which become payable from any of the above described property (including any
after-acquired properties); (ii) whatever is received upon the sale, exchange,
collection or other disposition of the above described property or Proceeds; and
(iii) all "proceeds" as defined or determined under the Uniform Commercial Code.
An Instrument payable by reason of loss or damage to the collateral is Proceeds.
------------------------------------------------------------------------------------------------------------
CD WAREHOUSE STORE LISTING
02-May-97
------------------------------------------------------------------------------------------------------------
STORE STORE
NUMBER FRANCHISE LEGAL NAME STORE ADDRESS STORE CITY STATE STORE ZIP
------------------------------------------------------------------------------------------------------------
1 Thee Three Musicteers, Inc. 0000 Xxxxxxx Xxx, #X Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
4 Compact Disc Management 0000 Xxxxxx Xx., # 000 Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
5 Xxxx Xxxxx 0000 X. Xxxxxxx Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
6 Jimick Products, Inc. 00000 Xxxxxxxx Xxxx. # 000 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
7 Jimick Products, Inc. 0000 Xxxxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
8 Compact Disc Management 0000 Xxxxxxxx Xx. Xxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
9 Compact Disc Management 0000 Xxxxxx Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
11 R. N. K. Inc. 000 X. 00xx Xxx., # X0 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
12 XxXxxxxx Farms 0000 Xxxxxx Xxxxxx Xxxx. #X Xxxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
13 Compact Disc Management 000 Xxxxxxxxxx Xxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
15 CD Warehouse, Inc. 0000 Xxxxxxxx, # 000 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
16 Third Ear Productions, Inc. 0000 Xxxxxxx Xxxxxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
17 Compact Disc Management 0000 X. Xxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
18 Compact Disc Management 0000 X. Xxxxxxxx Xxxx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
19 Compact Disc Management 0000 Xxxxxxxx Xxxx., # X0 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
20 CDIL Interests, Ltd. 0000 X. Xxxxx Xx. Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
00 Xxxx Xxxxxxx, Inc. 0000 X. Xxxxxxx, # X00 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
22 Xxxxx Xxxxxxx 0000 XX 0000 X. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
23 CDIL Interests, Ltd. 0000 X. Xxxxxxx Xxxxx # 000 Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
24 Compact Disc Management 0000 X. Xxxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
25 Compact Disc Management 00 Xxxxxxxx Xxxx. Xxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
27 Sax Music Corp. 000 Xxxxxxxxx Xxxx. Xxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
28 Compact Disc Management 00000 X. Xxxxxx Xxxxxx Xxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
29 Silverdisc, Inc. 0000 X. Xxxxx Xx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
30 Compact Disc Management 0000 Xxxx Xxx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
31 Compact Disc Management 0000 Xxxx Xxxx Xxxx., # 000 Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
32 Compact Disc Management 0000 Xxxxxxxx Xxxxxxxx Xxxx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
33 CD Warehouse, Inc. 0000 X. Xxxxxxx, #00 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
34 Xxxxx Xxxxxx 0000 Xxxx Xxxx, # 000 X. Xxxxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
35 Compact Disc Management 000 0xx Xx. Xxxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
36 Compact Disc Management 0000 X. Xxx Xxx. Xxxxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
37 Compact Disc Management 0000 XX Xxxxx Xxxxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
38 Compact Disc Management 0000 Xxxxx Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
39 Compact Disc Management 0000 Xxxxxxx Xxxxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
41 The Workout, Inc. 0000 Xxxxxxxxxxxxx Xxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
42 Compact Disc Exchange, Inc. 0000 X.X. Xxxxxxxx, #000 Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
43 Compact Disc Exchange, Inc. 0000 Xxxxxxxx Xxxx, #00 Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
44 Compact Disc Management 0000 Xxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
45 Xxxxx Xxxxxxxx 0000 X. Xxxxx, # 000 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
46 Xxxxxxx X. Xxxxxxx 0000 Xxxxxxx Xxx. Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
47 Compact Disc Management 0000 X0 X. Xxxxxxxxx Xxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
48 Compact Disc Management 0000 X. Xxxxxxx Xxxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
49 Xxx Xxxxxxxx 0000 X. 00xx Xx., # X Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
50 Compact Disc Management 0000-0 X. Xxxxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
52 Sugarpack, Inc. 0000 X. Xxxxx Xx., # 000 Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
53 Compact Disc Management 0000 X. Xxxxxx Xxxxx Xx. Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
54 CD Warehouse, Inc. 000 X. Xxx Xxxx Xxxx., # X Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
STORE STORE
NUMBER FRANCHISE LEGAL NAME STORE ADDRESS STORE CITY STATE STORE ZIP
------------------------------------------------------------------------------------------------------------
55 Compact Disc Management 0000 XXX Xxxx. Xxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
56 The Three Musicteers, Inc. 0000 XX Xxxx, #000 Xxxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
58 Compact Disc Management 00000 Xxx Xxxx Xxxx., #00 Xxxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
59 Compact Disc Management 00000 Xxxxxxx Xxxx., #X Xxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
60 Compact Disc Management 0000 X. Xxxxxxx Xxx., #0X Xx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
61 Xxxx Xxxxxxxxxxx 00000 Xxxxxxx, #000 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
62 Compact Disc Management 00 X. 00xx Xx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
63 Xxxx Xxxxx 00000 X. Xxxxxxxxx Xxx., #00 Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
64 Compact Disc Management 0000 Xxxx Xx. Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
67 Compact Disc Management 2620 X.X. Xxxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
68 The Xxxxxxxx Corp. 00000 Xxxxxx Xxxxx Xx. Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
70 Music Brokers, Inc. 0000 Xxxxx Xxx Xx Xxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
71 Jimick Products, Inc. 0000 X. Xxxxxx Xxx. Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
72 Xxxxxxx X. Xxxxxxx 0000 X. Xxxxx, #X Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
73 Compact Disc Management 3613 D. Ambassador Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
75 Jimick Products, Inc. 0000 Xxxxx Xx. Xxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
77 Xxx X. Xxxxx 0000 X. Xxxxxxxxxx Xx. Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
79 Jimick Products, Inc. 0000 X. Xxxxxx Xx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
80 Jimick Products, Inc. 00000 X. Xxxx Xxxxx Xx. Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
81 Compact Disc Exchange, Inc. 0000 Xxxxx Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
83 CD Warehouse - UK Limited 46 Broadway London K SW191R 0
------------------------------------------------------------------------------------------------------------
84 Xxxx Xxxxxxxxxxx 0000 Xxxxxxxx, #000 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
85 Jimick Products, Inc. 0000 X. Xxxxxxxxxx Xxxx Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
86 C-D Enterprises 0000 Xxxxxxxxx Xxxxx Xxxx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
87 Jimick Products, Inc. 0000 Xxxxxxxx Xx. Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
88 Jimick Products, Inc. 0000 X. Xxxx Xx. Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
89 Chicago Music, Inc. 0000 Xxxxxxxx Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
90 Compact Disc Management 000 X. Xxxx, #000 Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
91 Serindipity Interests, Inc. 0000 X. Xxxxx, #000 Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
92 Xxxx Xxxxx 0000 0xx Xx. Xxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
94 Compact Disc Management 00000 X. Xxxx Xxxxx xxx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
95 Jimick Products, Inc. 0000 X. Xxxxxxxx Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
96 Chicago Music, Inc. Seven Xxxxxx Xxxxxx Xxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
97 Compact Disc Management 000 XX Xxxxx Xx 000 Xxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
99 Xxxx X. Xxxxx, Xx. 000 Xxxxxxxxxx Xxxxx, #X Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
101 CD Warehouse, Inc. 0000 X. Xxxx, #000 Xx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
102 Compact Disc Management 0000 X. Xxxxxxx Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
103 Compact Disc Exchange, Inc. 0000 Xxxxxxxx Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
104 The Xxxxxxxx Corp. 00000 Xxxxxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
105 Chicago Music, Inc. 000 Xxx Xxxxx Xxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
106 JMS Enterprises, Inc. 0000 X. Xxxxxxx Xx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
107 Xxx X. Xxxxx 0000 X. Xxxxxxxxxxxx Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
108 Czarina 1, Inc. 0000 Xxxxxxxxxx Xx., #00X Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
110 Xxxxx X. Xxxxxx 0000 Xxxxxxxx Xx., #0 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
111 CD Warehouse - UK Limited 00 Xxx Xxxxxxxx Xxxxxx XX X0
------------------------------------------------------------------------------------------------------------
112 Third Ear Productions, Inc. 000 Xxxxx Xxx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
113 R. N. K. Inc. 0000 X. Xxxxxxxxxx Xxxx, #00 Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
114 Chicago Music, Inc. 000 X. Xxxxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
115 Xxxx Xxx McNinney 00000 Xxxxxxxxx Xxx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
116 MCB Enterprises, Inc. 0000 Xxxxxxxxx Xxxx #000 Xxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
118 Xxxxx Xxxxxxxx 0000 X X. Xxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
STORE STORE
NUMBER FRANCHISE LEGAL NAME STORE ADDRESS STORE CITY STATE STORE ZIP
------------------------------------------------------------------------------------------------------------
119 JJC, Inc. 000 X. Xxxxxxx Xxx. Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
120 Blue Wolf Entertainment, Inc. 435 N. 0000 X. Xxxx 00 Xx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
121 PMAC, Inc. 0000 X Xxxxxxx Xx. Xxxx Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
122 Serindipity Interests, Inc. 0000 Xxx Xxxx Xxx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
123 H.D. Xxxxxx 00 Xxxxxxx Xx. Xxxxx XX XX0 0XX 0
------------------------------------------------------------------------------------------------------------
124 KC Music, Inc. 0000 00xx Xx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
125 Xxxx Xxxxx 0000 X. Xxxxxxx Xx. # 000 Xxxxxxxx Xx 00000
------------------------------------------------------------------------------------------------------------
126 Xxxx X. Xxxxxx 0000 X. 00xx Xx. Xxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
000 Xxxxxxx Xxxxxxx 000 Xxxxxxx Xx. Xxxxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
128 Music Brokers, Inc. 0000 Xxxx 00xx Xx. Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
129 Xxxxx Xxxxxxx 00000 XX 000 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
130 Compact Disc Exchange, Inc. 0000 Xxx Xxxxx Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
131 CD Warehouse, Inc. 00000 XX 00 Xxxxx Xxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
132 CD Warehouse, Inc. 1560 S. R. 000 Xxxx, #000 Xxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
133 CD Warehouse, Inc. 0000 X. Xxxxxx Xx. Xxxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
134 CD Warehouse, Inc. 0000 Xxxxxx X.X. Xxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
135 CD Warehouse, Inc. 0000 X. Xxxxxxxx Xx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
UCC FINANCING STATEMENT
STATE OF OKLAHOMA
DEBTOR SECURED PARTY
------ -------------
CD WAREHOUSE, INC. BANK ONE, OKLAHOMA CITY
0000 Xxxxxxxxx Xxx 0000 Xxxxx Xxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000 Xxxxxxxx Xxxx, XX 00000
This Financing Statement covers the following types of property:
SEE EXHIBIT "A" ATTACHED
Proceeds and products of Collateral are also covered.
File with: The County Clerk of OKLAHOMA COUNTY, STATE OF OKLAHOMA under the
Uniform Commercial Code of the State of Oklahoma.
DEBTOR SECURED PARTY
------ -------------
CD WAREHOUSE, INC., a Delaware BANK ONE, OKLAHOMA CITY,
corporation a state banking association
By: /s/ XXXXX X. XXXXXXX By: /s/ XXXXX X. XXXXXXX
------------------------------ ------------------------------
Xxxxx X. Xxxxxxx, President Xxxxx X. Xxxxxxx, Senior Vice
President
EXHIBIT "A"
All of Debtor's right, title and interest in and to the following
described property:
All Accounts, accounts receivable, contract rights, franchise
agreements, notes, drafts, acceptances, general intangibles, chattel paper and
other forms of obligations and receivables owing to Debtor arising out of or in
connection with Debtor's business, including such as may arise out of the sale,
lease or other disposition at any time and from time to time of Inventory,
whether now owned or hereafter acquired, and any right to payment for goods sold
or leased or for services rendered and the Proceeds thereof, together with all
other forms of accounts as may be defined or determined under the Uniform
Commercial Code whether such Accounts now exist or are hereinafter acquired.
All Chattel Paper and any and all rights to payment for a monetary
obligation, together with all other forms of chattel paper as may be defined or
determined under the Uniform Commercial Code, whether now owned or hereafter
acquired.
All forms of Documents as may be defined or determined under the Uniform
Commercial Code, whether now owned or hereafter acquired.
All Equipment, tools, machinery, appliances, building materials,
supplies, furniture, fixtures, furnishings, business records, goods to become
fixtures and all other similar tangible personal property of every kind now
owned by Debtor or hereafter acquired, together with all other forms of
equipment and fixtures as may be defined or determined under the Uniform
Commercial Code.
Any and all franchise agreements, contracts, contract rights, documents,
licenses, general intangibles, chattel paper and other forms of rights in favor
of Debtor and obligations owing to Debtor arising out of or in connection with
any franchise arrangement with any franchisee or other party, and any right to
any royalty or other payments thereunder, whether now existing or hereafter
incurred, including, but not limited to those franchise agreements listed on the
attachment hereto, together with all amendments, modifications and substitutions
thereto and therefor.
All General Intangibles, including any personal property and things in
action, other than Goods, Accounts, Chattel Paper, Documents, Equipment,
Instruments, Inventory and money, including any and all patents, trademarks,
copyrights and other intellectual property, whether now owned or hereafter
acquired, together with all other forms of general intangibles as may be defined
or determined under the Uniform Commercial Code.
All Goods and all other things which are movable at the time a security
interest attaches or which are fixtures (12A O.S. (S)9-313), together with all
other forms of goods as may be defined or determined under the Uniform
Commercial Code, whether now owned or hereafter acquired, but does not include
money, Documents, Instruments, Accounts, Chattel Paper or General Intangibles,
but does include (i) "Equipment" if they are used or bought for use primarily in
---------
business or if the goods are not included in the definition of Inventory,
together with all other
forms of equipment as may be defined or determined under the Uniform Commercial
Code; and (ii) "Inventory" if they are held by a person who holds them for sale
---------
or lease or to be furnished under contracts of service or if he has so furnished
them, or if they are raw materials, work in process, or materials used or
consumed in a business, together with all other forms of inventory as may be
defined or determined under the Uniform Commercial Code.
All Instruments and negotiable instruments, as defined in 12A O.S. (S)3-
104, or a security, defined in 12A O.S. (S)8-102, or any other writing which
evidences a right to the payment of money and is not itself a security agreement
or lease and is a type of which is in the ordinary course of business
transferred by delivery with any necessary endorsement or assignment, together
with all other forms of instruments as may be defined or determined under the
Uniform Commercial Code, whether now owned or hereafter acquired.
All Inventory, raw materials, finished goods, work-in-process and all
other personal property of whatever nature now or hereafter owned and which are
held for sale or lease or are furnished or to be furnished under contracts of
service, together with all other forms of inventory as may be defined or
determined under the Uniform Commercial Code, whether now owned or hereafter
acquired.
All furniture, fixtures, trade fixtures, machinery, equipment and other
moveable or removable personal property of any kind of the Debtor located at, or
removed from, any leased facility, whether now owned or hereafter acquired.
All Proceeds, including: (i) all amounts, sums, revenues and income
which become payable from any of the above described property (including any
after-acquired properties); (ii) whatever is received upon the sale, exchange,
collection or other disposition of the above described property or Proceeds; and
(iii) all "proceeds" as defined or determined under the Uniform Commercial Code.
An Instrument payable by reason of loss or damage to the collateral is Proceeds.
------------------------------------------------------------------------------------------------------------
CD WAREHOUSE STORE LISTING
02-May-97
------------------------------------------------------------------------------------------------------------
STORE STORE
NUMBER FRANCHISE LEGAL NAME STORE ADDRESS STORE CITY STATE STORE ZIP
------------------------------------------------------------------------------------------------------------
1 Thee Three Musicteers, Inc. 0000 Xxxxxxx Xxx, #X Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
4 Compact Disc Management 0000 Xxxxxx Xx., # 000 Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
5 Xxxx Xxxxx 0000 X. Xxxxxxx Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
6 Jimick Products, Inc. 00000 Xxxxxxxx Xxxx. # 000 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
7 Jimick Products, Inc. 0000 Xxxxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
8 Compact Disc Management 0000 Xxxxxxxx Xx. Xxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
9 Compact Disc Management 0000 Xxxxxx Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
11 R. N. K. Inc. 000 X. 00xx Xxx., # X0 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
12 XxXxxxxx Farms 0000 Xxxxxx Xxxxxx Xxxx. #X Xxxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
13 Compact Disc Management 000 Xxxxxxxxxx Xxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
15 CD Warehouse, Inc. 0000 Xxxxxxxx, # 000 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
16 Third Ear Productions, Inc. 0000 Xxxxxxx Xxxxxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
17 Compact Disc Management 0000 X. Xxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
18 Compact Disc Management 0000 X. Xxxxxxxx Xxxx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
19 Compact Disc Management 0000 Xxxxxxxx Xxxx., # X0 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
20 CDIL Interests, Ltd. 0000 X. Xxxxx Xx. Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
00 Xxxx Xxxxxxx, Inc. 0000 X. Xxxxxxx, # X00 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
22 Xxxxx Xxxxxxx 0000 XX 0000 X. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
23 CDIL Interests, Ltd. 0000 X. Xxxxxxx Xxxxx # 000 Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
24 Compact Disc Management 0000 X. Xxxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
25 Compact Disc Management 00 Xxxxxxxx Xxxx. Xxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
27 Sax Music Corp. 000 Xxxxxxxxx Xxxx. Xxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
28 Compact Disc Management 00000 X. Xxxxxx Xxxxxx Xxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
29 Silverdisc, Inc. 0000 X. Xxxxx Xx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
30 Compact Disc Management 0000 Xxxx Xxx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
31 Compact Disc Management 0000 Xxxx Xxxx Xxxx., # 000 Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
32 Compact Disc Management 0000 Xxxxxxxx Xxxxxxxx Xxxx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
33 CD Warehouse, Inc. 0000 X. Xxxxxxx, #00 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
34 Xxxxx Xxxxxx 0000 Xxxx Xxxx, # 000 X. Xxxxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
35 Compact Disc Management 000 0xx Xx. Xxxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
36 Compact Disc Management 0000 X. Xxx Xxx. Xxxxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
37 Compact Disc Management 0000 XX Xxxxx Xxxxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
38 Compact Disc Management 0000 Xxxxx Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
39 Compact Disc Management 0000 Xxxxxxx Xxxxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
41 The Workout, Inc. 0000 Xxxxxxxxxxxxx Xxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
42 Compact Disc Exchange, Inc. 0000 X.X. Xxxxxxxx, #000 Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
43 Compact Disc Exchange, Inc. 0000 Xxxxxxxx Xxxx, #00 Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
44 Compact Disc Management 0000 Xxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
45 Xxxxx Xxxxxxxx 0000 X. Xxxxx, # 000 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
46 Xxxxxxx X. Xxxxxxx 0000 Xxxxxxx Xxx. Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
47 Compact Disc Management 0000 X0 X. Xxxxxxxxx Xxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
48 Compact Disc Management 0000 X. Xxxxxxx Xxxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
49 Xxx Xxxxxxxx 0000 X. 00xx Xx., # X Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
50 Compact Disc Management 0000-0 X. Xxxxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
52 Sugarpack, Inc. 0000 X. Xxxxx Xx., # 000 Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
53 Compact Disc Management 0000 X. Xxxxxx Xxxxx Xx. Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
54 CD Warehouse, Inc. 000 X. Xxx Xxxx Xxxx., # X Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
STORE STORE
NUMBER FRANCHISE LEGAL NAME STORE ADDRESS STORE CITY STATE STORE ZIP
------------------------------------------------------------------------------------------------------------
55 Compact Disc Management 0000 XXX Xxxx. Xxxxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
56 The Three Musicteers, Inc. 0000 XX Xxxx, #000 Xxxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
58 Compact Disc Management 00000 Xxx Xxxx Xxxx., #00 Xxxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
59 Compact Disc Management 00000 Xxxxxxx Xxxx., #X Xxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
60 Compact Disc Management 0000 X. Xxxxxxx Xxx., #0X Xx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
61 Xxxx Xxxxxxxxxxx 00000 Xxxxxxx, #000 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
62 Compact Disc Management 00 X. 00xx Xx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
63 Xxxx Xxxxx 00000 X. Xxxxxxxxx Xxx., #00 Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
64 Compact Disc Management 0000 Xxxx Xx. Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
67 Compact Disc Management 2620 X.X. Xxxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
68 The Xxxxxxxx Corp. 00000 Xxxxxx Xxxxx Xx. Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
70 Music Brokers, Inc. 0000 Xxxxx Xxx Xx Xxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
71 Jimick Products, Inc. 0000 X. Xxxxxx Xxx. Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
72 Xxxxxxx X. Xxxxxxx 0000 X. Xxxxx, #X Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
73 Compact Disc Management 3613 D. Ambassador Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
75 Jimick Products, Inc. 0000 Xxxxx Xx. Xxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
77 Xxx X. Xxxxx 0000 X. Xxxxxxxxxx Xx. Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
79 Jimick Products, Inc. 0000 X. Xxxxxx Xx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
80 Jimick Products, Inc. 00000 X. Xxxx Xxxxx Xx. Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
81 Compact Disc Exchange, Inc. 0000 Xxxxx Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
83 CD Warehouse - UK Limited 46 Broadway London K SW191R 0
------------------------------------------------------------------------------------------------------------
84 Xxxx Xxxxxxxxxxx 0000 Xxxxxxxx, #000 Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
85 Jimick Products, Inc. 0000 X. Xxxxxxxxxx Xxxx Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
86 C-D Enterprises 0000 Xxxxxxxxx Xxxxx Xxxx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
87 Jimick Products, Inc. 0000 Xxxxxxxx Xx. Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
88 Jimick Products, Inc. 0000 X. Xxxx Xx. Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
89 Chicago Music, Inc. 0000 Xxxxxxxx Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
90 Compact Disc Management 000 X. Xxxx, #000 Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
91 Serindipity Interests, Inc. 0000 X. Xxxxx, #000 Xx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
92 Xxxx Xxxxx 0000 0xx Xx. Xxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
94 Compact Disc Management 00000 X. Xxxx Xxxxx xxx. Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
95 Jimick Products, Inc. 0000 X. Xxxxxxxx Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
96 Chicago Music, Inc. Seven Xxxxxx Xxxxxx Xxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
97 Compact Disc Management 000 XX Xxxxx Xx 000 Xxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
99 Xxxx X. Xxxxx, Xx. 000 Xxxxxxxxxx Xxxxx, #X Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
101 CD Warehouse, Inc. 0000 X. Xxxx, #000 Xx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
102 Compact Disc Management 0000 X. Xxxxxxx Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
103 Compact Disc Exchange, Inc. 0000 Xxxxxxxx Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
104 The Xxxxxxxx Corp. 00000 Xxxxxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
105 Chicago Music, Inc. 000 Xxx Xxxxx Xxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
106 JMS Enterprises, Inc. 0000 X. Xxxxxxx Xx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
107 Xxx X. Xxxxx 0000 X. Xxxxxxxxxxxx Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
108 Czarina 1, Inc. 0000 Xxxxxxxxxx Xx., #00X Xxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
110 Xxxxx X. Xxxxxx 0000 Xxxxxxxx Xx., #0 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
111 CD Warehouse - UK Limited 00 Xxx Xxxxxxxx Xxxxxx XX X0
------------------------------------------------------------------------------------------------------------
112 Third Ear Productions, Inc. 000 Xxxxx Xxx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
113 R. N. K. Inc. 0000 X. Xxxxxxxxxx Xxxx, #00 Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
114 Chicago Music, Inc. 000 X. Xxxxxxxxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
115 Xxxx Xxx McNinney 00000 Xxxxxxxxx Xxx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
116 MCB Enterprises, Inc. 0000 Xxxxxxxxx Xxxx #000 Xxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
118 Xxxxx Xxxxxxxx 0000 X X. Xxxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
STORE STORE
NUMBER FRANCHISE LEGAL NAME STORE ADDRESS STORE CITY STATE STORE ZIP
------------------------------------------------------------------------------------------------------------
119 JJC, Inc. 000 X. Xxxxxxx Xxx. Xxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
120 Blue Wolf Entertainment, Inc. 435 N. 0000 X. Xxxx 00 Xx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
121 PMAC, Inc. 0000 X Xxxxxxx Xx. Xxxx Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
122 Serindipity Interests, Inc. 0000 Xxx Xxxx Xxx. Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
123 H.D. Xxxxxx 00 Xxxxxxx Xx. Xxxxx XX XX0 0XX 0
------------------------------------------------------------------------------------------------------------
124 KC Music, Inc. 0000 00xx Xx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
125 Xxxx Xxxxx 0000 X. Xxxxxxx Xx. # 000 Xxxxxxxx Xx 00000
------------------------------------------------------------------------------------------------------------
126 Xxxx X. Xxxxxx 0000 X. 00xx Xx. Xxxxx Xxxxx XX 00000
------------------------------------------------------------------------------------------------------------
000 Xxxxxxx Xxxxxxx 000 Xxxxxxx Xx. Xxxxxxxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
128 Music Brokers, Inc. 0000 Xxxx 00xx Xx. Xxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
129 Xxxxx Xxxxxxx 00000 XX 000 Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
130 Compact Disc Exchange, Inc. 0000 Xxx Xxxxx Xxx Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
131 CD Warehouse, Inc. 00000 XX 00 Xxxxx Xxxx Xxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
132 CD Warehouse, Inc. 1560 S. R. 000 Xxxx, #000 Xxxx Xxxx XX 00000
------------------------------------------------------------------------------------------------------------
133 CD Warehouse, Inc. 0000 X. Xxxxxx Xx. Xxxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
134 CD Warehouse, Inc. 0000 Xxxxxx X.X. Xxxxxxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
135 CD Warehouse, Inc. 0000 X. Xxxxxxxx Xx. Xxxxxxx XX 00000
------------------------------------------------------------------------------------------------------------
LITIGATION CERTIFICATE
----------------------
The undersigned, as President of CD Warehouse, Inc., a Delaware
corporation, and Compact Discs Management, Inc., a Delaware corporation (the
"Borrowers"), does hereby certify that, as of the date hereof, the Borrowers are
not parties to any action, claim or proceeding, nor is the property of the
Borrowers the subject of any action, claim or proceeding, nor are the Borrowers
or their respective properties the subject of or associated with any threatened
action, claim or proceeding, which is of a material nature and would adversely
affect the Borrowers abilities to perform any and all of their obligations
under: (i) the extensions of credit in the maximum principal amount of
$2,000,000.00 from BANK ONE, OKLAHOMA CITY, a state banning association (the
"Bank"), as evidenced by a Promissory Note for said amount in favor of the Bank;
(ii) the terms and conditions of a certain Loan Agreement executed and delivered
by Borrowers to the Bank covering said obligation; (iii) the terms and
conditions of a certain Security Agreement and Financing Statement executed and
delivered by CD Warehouse, Inc. to the Bank; and (iv) the terms and conditions
of all other security documents and agreements and any and all other documents,
instruments, affidavits and certificates made in connection therewith.
The undersigned further certifies that, to the best of his knowledge
as of the date hereof, Xxxxx X. Xxxxxxx and The Xxxxx X. Xxxxxxx and Xxxxx X.
Xxxxxxx Revocable Living Trust dated January 6, 1994 (collectively the
"Guarantors") are not parties to any action, claim or proceeding, nor is their
property the subject of any action, claim or proceeding, nor are they or any of
their property the subject of or associated with any threatened action, claim or
proceeding, which is of a material nature and would adversely affect their
ability to perform any and all of the Guarantors' obligations under: (i) their
respective Continuing Guaranty agreements covering the extension of credit to
the Borrowers in the principal amount of $2,000,000.00; (ii) the terms and
conditions of the Loan Agreement, as it pertains to the Guarantors; and (iii)
the terms and conditions of all other security documents and agreements and any
and all other documents, instruments, affidavits and certificates made in
connection therewith.
DATED as of May 16, 1997.
CD WAREHOUSE, INC., COMPACT DISCS MANAGEMENT, INC.
a Delaware corporation a Delaware corporation
By: /s/ XXXXX X. XXXXXXX By: /s/ XXXXX X. XxxXXXXXX
--------------------------- ---------------------------
Xxxxx X. Xxxxxxx, President Xxxxx X. XxxXxxxxx,
President
CERTIFICATE OF
CORPORATE BORROWING RESOLUTIONS
-------------------------------
I, the undersigned, Xxxxx X. Xxxxxx, Secretary, and as such custodian of
the records, of CD WAREHOUSE, INC. (the "Corporation"), a corporation created
and existing under and by virtue of the laws of the State of Delaware, hereby
certify that on May 16, 1997, the following resolutions were unanimously passed
by its Board of Directors at a meeting thereof, duly and legally called, and in
which a quorum of such Board participated:
WHEREAS, it is necessary and desirable for the Corporation and in the best
interests of the Corporation for the Corporation to obtain certain extensions of
credit in the maximum principal amount of $2,000,000.00 from BANK ONE, OKLAHOMA
CITY, a state banking association (the "Lender"), and for the purposes of and in
connection therewith, to execute and deliver a Promissory Note for the principal
amount of $2,000,000.00 in favor of the Lender ("Note") which obligations shall
be subject to the terms and conditions of a certain Loan Agreement dated even
date herewith ("Loan Agreement"), and which Note and Loan Agreement are subject
to certain other loan and security agreements and documents in form satisfactory
to the Lender (collectively the "Loan Documents"); and
BE IT THEREFORE RESOLVED, that the extensions of credit from the Lender to
the Corporation in the maximum principal amount of $2,000,000.00 as evidenced by
the Note, the Loan Agreement and the Loan Documents, be and the same are hereby
approved by the Corporation, as it is in the best interests of the Corporation,
and that the Note, the Loan Agreement and Loan Documents from the Corporation in
favor of the Lender, together with any and all such other instruments, documents
and certificates necessary or desirable to consummate said extensions of credit
by the Lender to the Corporation are hereby approved and authorized to be
executed and delivered by the Corporation to the Lender; and
BE IT FURTHER RESOLVED, that the President or other proper officer of this
Corporation be and the same is hereby authorized, empowered and directed for and
on behalf of the Corporation to make, execute and deliver to the Lender, with
the Corporation's seal impressed thereon, if necessary, the Note, the Loan
Agreement and Loan Documents, and such other instruments, documents and
certificates which the said officer of the Corporation deems necessary or
desirable in connection with the extensions of credit from the Lender to the
Corporation.
I further certify that: (i) none of the foregoing resolutions have been
amended, modified or rescinded, and each is in full force and effect on the date
hereof; and (ii) there is no provision in the Corporation's Bylaws limiting the
power of the Corporation or any officer thereof to take the actions as described
above, and that the same are in conformity with the provisions of said Bylaws.
Witness my hand effective as of May 16, 1997.
/s/ XXXXX X. XXXXXX
----------------------------------------
Xxxxx X. Xxxxxx, Secretary
(Confirmed) /s/ XXXXX X. XXXXXXX
----------------------------------------
Xxxxx X. Xxxxxxx, President
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged before me this 16th day of May,
1997, by Xxxxx X. Xxxxxx as Secretary of CD Warehouse, Inc., a Delaware
corporation, on behalf of said corporation.
/s/ [SIGNATURE ILLEGIBLE]
----------------------------------------
NOTARY PUBLIC
My Commission Expires:
1-31-98
----------------------
CERTIFICATE OF
CORPORATE BORROWING RESOLUTIONS
-------------------------------
I, the undersigned, Xxxxx X. Xxxxxx, Secretary, and as such custodian of
the records, of COMPACT DISCS MANAGEMENT, INC. (the "Corporation"), a
corporation created and existing under and by virtue of the laws of the State of
Delaware, hereby certify that on May 16, 1997, the following resolutions were
unanimously passed by its Board of Directors at a meeting thereof, duly and
legally called, and in which a quorum of such Board participated:
WHEREAS, it is necessary and desirable for the Corporation and in the best
interests of the Corporation for the Corporation to obtain certain extensions of
credit in the maximum principal amount of $2,000,000.00 from BANK ONE, OKLAHOMA
CITY, a state banking association (the "Lender"), and for the purposes of and in
connection therewith, to execute and deliver a Promissory Note for the principal
amount of $2,000,000.00 in favor of the Lender ("Note") which obligations shall
be subject to the terms and conditions of a certain Loan Agreement dated even
date herewith ("Loan Agreement"), and which Note and Loan Agreement are subject
to certain other loan and security agreements and documents in form satisfactory
to the Lender (collectively the "Loan Documents"); and
BE IT THEREFORE RESOLVED, that the extensions of credit from the Lender to
the Corporation in the maximum principal amount of $2,000,000.00 as evidenced by
the Note, the Loan Agreement and the Loan Documents, be and the same are hereby
approved by the Corporation, as it is in the best interests of the Corporation,
and that the Note, the Loan Agreement and Loan Documents from the Corporation in
favor of the Lender, together with any and all such other instruments, documents
and certificates necessary or desirable to consummate said extensions of credit
by the Lender to the Corporation are hereby approved and authorized to be
executed and delivered by the Corporation to the Lender; and
BE IT FURTHER RESOLVED, that the President or other proper officer of this
Corporation be and the same is hereby authorized, empowered and directed for and
on behalf of the Corporation to make, execute and deliver to the Lender, with
the Corporation's seal impressed thereon, if necessary, the Note, the Loan
Agreement and Loan Documents, and such other instruments, documents and
certificates which the said officer of the Corporation deems necessary or
desirable in connection with the extensions of credit from the Lender to the
Corporation.
I further certify that: (i) none of the foregoing resolutions have been
amended, modified or rescinded, and each is in full force and effect on the date
hereof; and (ii) there is no provision in the Corporation's Bylaws limiting the
power of the Corporation or any officer thereof to take the actions as described
above, and that the same are in conformity with the provisions of said Bylaws.
Witness my hand effective as of May 16, 1997.
/s/ XXXXX X. XXXXXX
----------------------------------------
Xxxxx X. Xxxxxx, Secretary
(Confirmed) /s/ XXXXX X. XXXXXXXXX
----------------------------------------
Xxxxx X. XxxXxxxxx, President
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged before me this 16th day of May,
1997, by Xxxxx X. Xxxxxx as Secretary of Compact Discs Management, Inc., a
Delaware corporation, on behalf of said corporation.
/s/ [SIGNATURE ILLEGIBLE]
----------------------------------------
NOTARY PUBLIC
My Commission Expires:
1-31-98
----------------------
CERTIFICATE OF INCUMBENCY
-------------------------
I, XXXXX X. XXXXXX, DO HEREBY CERTIFY THAT:
1. I am the duly elected, qualified and acting Secretary of CD
Warehouse, Inc., a Delaware corporation (the "Corporation").
2. That each of the persons named below was duly elected to the office
of the Corporation set opposite his or her respective name, and has been duly
qualified and acting as such officer of the Corporation at all times since the
date of his or her election and including the time of delivery of this
Certificate, and the genuine signatures of such officers are set opposite their
respective names:
NAME OFFICE SIGNATURE
---- ------ ---------
Xxxxx X. Xxxxxxx President /s/ XXXXX X. XXXXXXX
------------------------------------
Xxxxx X. Xxxxxx Secretary /s/ XXXXX X. XXXXXX
------------------------------------
IN WITNESS WHEREOF, I have hereunto signed my name effective as of May
16, 1997.
/s/ XXXXX X. XXXXXX
------------------------------------
Xxxxx X. Xxxxxx, Secretary
I, Xxxxx X. Xxxxxxx, President of CD Warehouse, Inc., a Delaware
corporation (the "Corporation") do hereby certify that Xxxxx X. Xxxxxx is the
duly elected and qualified Secretary of the Corporation, and the signature set
forth immediately preceding the certification is his true and genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name effective as of May
16, 1997.
/s/ XXXXX X. XXXXXXX
------------------------------------
Xxxxx X. Xxxxxxx, President
CERTIFICATE OF INCUMBENCY
-------------------------
I, XXXXX X. XXXXXX, DO HEREBY CERTIFY THAT:
1. I am the duly elected, qualified and acting Secretary of Compact
Discs Management, Inc., a Delaware corporation (the "Corporation").
2. That each of the persons named below was duly elected to the office
of the Corporation set opposite his or her respective name, and has been duly
qualified and acting as such officer of the Corporation at all times since the
date of his or her election and including the time of delivery of this
Certificate, and the genuine signatures of such officers are set opposite their
respective names:
NAME OFFICE SIGNATURE
---- ------ ---------
Xxxxx X. XxxXxxxxx President /s/ XXXXX X. XxxXXXXXX
------------------------------------
Xxxxx X. Xxxxxx Secretary /s/ XXXXX X. XXXXXX
------------------------------------
IN WITNESS WHEREOF, I have hereunto signed my name effective as of
May 16, 1997.
/s/ XXXXX X. XXXXXX
------------------------------------
Xxxxx X. Xxxxxx, Secretary
I, Xxxxx X. XxxXxxxxx, President of Compact Discs Management, Inc., a
Delaware corporation (the "Corporation") do hereby certify that Xxxxx X. Xxxxxx
is the duly elected and qualified Secretary of the Corporation, and the
signature set forth immediately preceding the certification is his true and
genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name effective as of
May 16, 1997.
/s/ XXXXX X. XxxXXXXXX
------------------------------------
Xxxxx X. XxxXxxxxx, President
