CREDIT AGREEMENT
by and between
XXXXXXXX CONVERTIBLES, INC.
AND
IBJ XXXXXXXX BANK & TRUST COMPANY
$2,000,000
Dated as of August 31, 1993
TABLE OF CONTENTS
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION 1
1.1. Definitions 1
1.2. Principles of Construction 11
2. AMOUNT AND TERMS OF LOANS 12
2.1. Loans 12
2.2. Note 12
2.3. Procedure for Borrowing 13
2.4. Termination or Reduction of Commitment 13
2.5. Prepaymnts of the Loans 13
2.6. Interest Rate and Payment Dates 14
2.7. Taxes; Net Payments 15
2.8. Use of Proceeds 16
2.9. Capital Adequacy 16
2.10. Bank's Records 17
3. FEES; PAYMENTS 17
3.1. Commitment Fee 17
3.2. Advisory Fee 17
3.3. Fees of Special Counsel 17
3.4. Treatment and Application of Payments 18
4. REPRESENTATIONS AND WARRANTIES 18
4.1. Subsidiaries; Capitalization 18
4.2. Existence and Power 19
4.3. Authority 19
4.4. Binding Agreement 19
4.5. Litigation 19
4.6. Required Consents 20
4.7. No Conflicting Agreements 20
4.8. Compliance with Applicable Laws 20
4.9. Taxes 20
4.10. Governmental Regulations 21
4.11. Federal Reserve Regulations; Use of Proceeds 21
4.12. Plans; Multiemployer Plans 21
4.13. Financial Statements 22
4.14. Property 22
4.15. Franchises, Intellectual Property, Etc. 22
4.16. Security Interests 23
4.17. Environmental Matters 23
4.18. Labor Relations 24
4.19. Burdensome Obligations 24
4.20. No Misrepresentation 25
5. CONDITIONS TO FIRST LOAN 25
5.1. Evidence of Action 25
5.2. This Agreement 25
5.3. Note 26
5.4. Approvals 26
5.5. Opinion of Counsel to the Borrower 26
5.6. Security Agreement 26
5.7. Search Reports and Related Documents 26
5.8. Warehousing Agreement 27
5.9. Cash Management Services Agreement, ACH Cash
Concentration Service Agreement 27
5.10. Property, Public Liability and Other
Insurance 27
5.11. Reserved 27
5.12. Fees of Special Counsel 27
5.13. Solvency Certificate 27
5.14. Business Plan 27
5.15. Compliance Certificate 28
5.16. Greenfield Employment Agreement 28
5.17. Audit of Inventory 28
5.18. No Material Adverse Change 28
6. CONDITIONS OF LENDING - ALL LOANS 28
6.1. Compliance 28
6.2. Loan Closings 29
6.3. Borrowing Request 29
6.4. Borrowing Base Certificate 29
6.5. Documentation and Proceedings 29
6.6. Required Acts and Conditions 29
6.7. Approval of Special Counsel 30
6.8. Supplemental Opinions 30
6.9. Other Documents 30
7. AFFIRMATIVE AND FINANCIAL COVENANTS 30
7.1. Financial Statements 30
7.2. Certificates; Other Information 31
7.3. Legal Existence 33
7.4. Taxes 33
7.5. Insurance 33
7.6. Payment of Indebtedness and Performance of
Obligations 35
7.7. Condition of Property 35
7.8. Observance of Legal Requirements 35
7.9. Inspection of Property; Books and Records;
Discussions 36
7.10. Licenses, Intellectual Property 36
7.11. Assignment of Trademark 36
7.12. Minimum Consolidated Tangible Net Worth 37
7.13. Current Ratio 37
7.14. Interest Coverage Ratio 37
7.15. Maintenance of Certain Agreements 37
8. NEGATIVE COVENANTS 38
8.1. Indebtedness 38
8.2. Liens 38
8.3. Merger, Consolidation and Certain Dispositions
of Property 39
8.4. Contingent Obligations 39
8.5. Dividends and Purchase of Stock 39
8.6. Investments, Loans, Etc. 39
8.7. Business and Name Changes 40
8.8. Sale of Property 41
8.9. Subsidiaries 41
8.10. Certificate of Incorporation and By-laws 41
8.11. ERISA 41
8.12. Prepayments of Indebtedness 41
8.13. Sale and Leaseback 41
8.14. Fiscal Year 41
8.15. Amendments, Etc. of Certain Agreements 42
8.16. Transactions with Affiliates 42
8.17. Maintenance of Cash and Cash Equivalents 42
9. DEFAULT 42
9.1. Events of Xxxxxxx 00
00. OTHER PROVISIONS 46
10.1. Amendments and Waivers 46
10.2. Notices 46
10.3. No Waiver; Cumulative Remedies 47
10.4. Survival of Representations and Warranties 47
10.5. Payment of Expenses and Taxes 48
10.6. Successors and Assigns 49
10.7. Counterparts 50
10.8. Set-off 50
10.9. Indemnity 51
10.10. Governing Law 52
10.11. Headings Descriptive 52
10.12. Severability 52
10.13. Integration 52
10.14. Consent to Jurisdiction 52
10.15. Service of Process 53
10.16. No Limitation on Service or Suit 53
10.17. WAIVER OF TRIAL BY JURY 53
10.18. Concerning Inventory Owned by Subsidiaries 53
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Borrowing Request
Exhibit C Form of Compliance Certificate
Exhibit D Form of Opinion of Counsel to the Borrower
Exhibit E Form of Security Agreement
Exhibit F Form of Borrowing Base Certificate
Exhibit G Form of Solvency Certificate
SCHEDULES
Schedule 4.1 List of Subsidiaries
Schedule 8.1 List of Existing Indebtedness
Schedule 8.2 List of Existing Liens
Schedule 8.4 List of Existing Contingent Obligations
Schedule 8.6 List of Existing Investments
CREDIT AGREEMENT, dated as of August 31, 1993, by and be-
tween XXXXXXXX CONVERTIBLES, INC., a Delaware corporation (the
"Borrower") and IBJ XXXXXXXX BANK & TRUST COMPANY (the
"Bank").
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1. Definitions
As used in this Agreement, terms defined in the pre-
amble have the meanings indicated therein, and the following
terms have the following meanings:
"Accountants": BDO Xxxxxxx (or any successor
thereto), or such other firm of certified public accountants
of recognized national standing selected by the Borrower and
in all respects reasonably satisfactory to the Bank.
"ACM Cash Concentration Service Agreement": the ACH
Cash Concentration Service Agreement, dated as of August 31,
1993, by and between the Borrower and the Bank, as the same
may be amended, supplemented or otherwise modified from time
to time.
"Advisory Fee": as defined in Section 3.2.
"Affiliate": as to any Person, any other Person
which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For pur-
poses of this definition, control of a Person shall mean the
power, direct or indirect, (i) to vote 5% or more of the secu-
rities having ordinary voting power for the election of direc-
tors of such Person or (ii) to direct or cause the direction
of the management and policies of such Person, whether by con-
tract or otherwise.
"Agreement": this Credit Agreement, as the same may
be amended, supplemented or otherwise modified from time.
"Alternate Base Rate": at any date of determination,
a rate of interest per annum equal to the higher of (i) the
Federal Funds Rate in effect on such date plus 1/2 of 1% or
(ii) the Prime Rate in effect on such date.
"Authorized Signatory": in respect of any Person
that is a corporation, the president, any vice president or
the chief financial officer of such Person (or such other of-
ficer as shall be acceptable to the Bank).
"Borrowing Base": at any date of determination, an
amount equal to 50% of Eligible Inventory.
"Borrowing Base Certificate": a certificate of the
Borrower in the form of Exhibit F.
"Borrowing Date": any Business Day specified in a
Borrowing Request as a date on which the Borrower intends to
borrow Loans under this Agreement.
"Borrowing Request": a request for Loans in the form
of Exhibit B.
"Business Day": any day other than a Saturday, Sun-
day or other day on which commercial banks located in New York
City are authorized or required by law or other governmental
action to close or remain closed.
"Capital Leases": leases which have been, or under
GAAP are required to be, capitalized.
"Cash Management Services Agreement": the Cash Man-
agement Services Agreement, dated as of August 31, 1993, by
and between the Borrower and the Bank, as the same may be
amended, supplemented or otherwise modified from time to time
"Code": the Internal Revenue Code of 1986, as the
same may be amended from time to time, and the rules and regu-
lations issued thereunder, as from time to time in effect.
"Collateral": the collateral under and as defined in
the Security Agreement.
"Commitment": the Bank's undertaking during the Com-
mitment Period to make Loans to the Borrower, subject to the
terms and conditions hereof, in an aggregate outstanding prin-
cipal amount not exceeding the Commitment Amount.
"Commitment Amount": at any date of determination,
$2,000,000 or such lesser amount, as such amount may be re-
duced under Section 2.4.
"Commitment Fee": as defined in Section 3.1.
"Commitment Period": the period from, and including,
the Effective Date through, and including, the Expiration
Date.
"Compliance Certificate": a certificate of the Vice
President-Finance and Treasurer of the Borrower (or such other
-2-
officer as shall be acceptable to the Bank) in the form of
Exhibit C.
"Consolidated": the Borrower and its Subsidiaries
which are consolidated for financial reporting purposes.
"Consolidated Cash Interest Expense": for any pe-
riod, interest expense of the Borrower and its Subsidiaries
determined on a Consolidated basis in accordance with GAAP
(adjusted to give effect to all interest rate swap, cap or
other interest rate hedging arrangements and fees and expenses
paid in connection with the same, all as determined in ac-
cordance with GAAP) to the extent paid or payable in cash dur-
ing such period.
"Consolidated Current Assets": at any date of de-
termination, current assets of the Borrower and its Subsidiar-
ies determined on a Consolidated basis in accordance with
GAAP.
"Consolidated Current Liabilities": at any date of
determination, current liabilities of the Borrower and its
Subsidiaries determined on a Consolidated basis in accordance
with GAAP, including the current portion of long-term Indebt-
edness and excluding Indebtedness in respect of the Loans.
"Consolidated EBIT": for any period, Consolidated
Net Income (or loss) for such period plus the sum of, without
duplication, (i) Taxes paid by the Borrower and its Subsidiar-
ies during such period and (ii) Consolidated Cash Interest
Expense, all to the extent deducted in determining such Con-
solidated Net Income (or loss) for such period.
"Consolidated Net Income": net income of the Bor-
rower and its Subsidiaries determined on a Consolidated basis
in accordance with GAAP.
"Consolidated Tangible Net Worth": at any date of
determination, the sum of all amounts which would be included
as shareholders' equity on a Consolidated balance sheet of the
Borrower prepared in accordance with GAAP as at such date,
less all assets that would be classified as intangible assets
on a Consolidated balance sheet of the Borrower prepared in
accordance with GAAP, including, without limitation, unamor-
tized debt discount and expense, unamortized organization and
reorganization expense, patents, trade or servicemarks, xxxx-
chises, trade names and goodwill.
"Contingent Obligation": as to any Person, any obli-
gation of such Person guaranteeing or in effect guaranteeing
-3-
any Indebtedness, leases, dividends or other obligations
("primary obligations") of any other Person (the "primary ob-
ligor") in any manner, whether directly or indirectly, and
whether arising from partnership or keep-well agreements, in-
cluding, without limitation, any obligation of such Person,
whether contingent (a) to purchase such primary obligation or
any Property constituting direct or indirect security there-
for, (b) to advance or supply funds (i) for the purchase or
payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or
otherwise to maintain net worth, solvency or other financial
statement condition of the primary obligor, (c) to purchase
Property, securities or services primarily for the purpose of
assuring the beneficiary of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure, protect from loss or
hold harmless the beneficiary of such primary obligation in
respect thereof; provided, however, that the term Contingent
Obligation shall not include the indorsement of instruments
for deposit or collection in the ordinary course of business.
The term Contingent Obligation shall also include the li-
ability of a general partner in respect of the liabilities of
the partnership in which it is a general partner. The amount
of any Contingent Obligation of a Person shall be deemed to be
an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obliga-
tion is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as deter-
mined by such Person in good faith.
"Current Ratio": at any date of determination, the
ratio of Consolidated Current Assets to Consolidated Current
Liabilities on such date.
"Default": any event or condition which constitutes
an Event of Default or which, with the giving of notice, the
lapse of time, or both, or any other condition, would, unless
cured or waived, become an Event of Default.
"Dollars" and "$": lawful currency of the United
States of America.
"Effective Date": August 31, 1993.
"Eligible Inventory": at any date of determination,
inventory consisting of first quality, currently finished
products held for sale to customers in the ordinary course of
business, valued at the lower of cost or market value, deter-
mined on a first-in, first-out basis, as to which the follow-
ing requirements have been fulfilled in all respects to the
-4-
satisfaction of the Bank: (i) such inventory is owned by the
Borrower, (ii) such inventory conforms to the representations
and warranties contained herein and in the Security Agreement,
(iii) such inventory is subject to a fully perfected first
priority security interest in favor of the Bank pursuant to
the Security Agreement, (iv) such inventory does not consist
of Special Order Goods and (v) such inventory is not
slow-moving, obsolete, used, damaged or otherwise unmerchant-
able; provided, however, that the Bank may, in its sole dis-
cretion, exclude from "Eligible Inventory" all or a portion of
any such inventory which otherwise satisfies the requirements
set forth in (i) through (v) above.
"Environmental Laws": any and all federal, state and
local laws relating to the environment, the use, storage,
transporting, manufacturing, handling, discharge, disposal or
recycling of hazardous substances, materials or pollutants or
industrial hygiene and including, without limitation, (i) the
Comprehensive Environmental Response, Compensation and Li-
ability Act, as amended, 42 USCA ss.9601 et seq.; (ii) the Re-
source Conservation and Recovery Act of 1976, as amended, 42
USCA ss.6901 et seq.; (iii) the Toxic Substance Control Act, as
amended, 15 USCA ss.2601 et seq.; (iv) the Water Pollution Con-
trol Act, as amended, 33 USCA ss.1251 et seq.; (v) the Clean Air
Act, as amended, 42 USCA ss.7401 et seq.; (vi) the Hazardous
Material Transportation Act, as amended, 49 USCA ss.1801 et seq.
and (viii) all rules, regulations, judgments, decrees, injunc-
tions and restrictions thereunder and any analogous state law.
"ERISA": the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the rules and regu-
lations issued thereunder, as from time to time in effect.
"ERISA Affiliate": any Person which is a member of
any group of organizations (i) described in Section 414(b) or
(c) of the Code of which the Borrower or any of its Subsidiar-
ies is a member, or (ii) solely for purposes of potential li-
ability under Section 302 (c) (11) of ERISA and Section
412(c) (11) of the Code and the Lien created under Section
302(f) of ERISA and Section 412(n) of the Code, described in
Section 414(m) or (o) of the Code of which the Borrower or any
of its Subsidiaries is a member.
"ERISA Liabilities": without duplication, the ag-
gregate of all unfunded vested benefits under all Plans and
all potential withdrawal liabilities under all Multiemployer
Plans.
-5-
"Event of Default": any of the events specified in
Section 9, provided that any requirement for the giving of no-
xxxx, the lapse of time, or both, or any other condition has
been satisfied.
"Expiration Date": the day immediately preceding the
Maturity Date.
"Federal Funds Rate": for any day, a rate per annum
(expressed as a decimal, rounded upwards, if necessary, to the
next higher 1/100 of 1%), equal to the weighted average of the
rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers
on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day, provided
that (i) if the day for which such rate is to be determined is
not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Busi-
ness Day as so published on the next succeeding Business Day,
and (ii) if such rate is not so published for any day, the
Federal Funds Rate for such day shall be the average of the
quotations for such day on such transactions received by the
Bank as determined by the Bank.
"Financial Statements": as defined in Section 4.13.
"GAAP": generally accepted accounting principles set
forth in the opinions, statements and pronouncements of the
Accounting Principles Board and the American Institute of Cer-
tified Public Accountants and the opinions, statements and
pronouncements of the Financial Accounting Standards Board or
in such other opinion, statement or pronouncement by such
other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circum-
stances as of the date of determination, consistently applied.
"Governmental Authority": any nation or government,
any state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and
any court or arbitrator.
"Greenfield": Xxxxxx X. Xxxxxxxxxx, an individual.
"Greenfield Employment Agreement": Employment Agree-
ment, dated as of April 6, 1992, by and between Greenfield and
the Borrower, as the same may be amended, supplemented or oth-
erwise modified from time to time.
-6-
"Hazardous Substance": any hazardous or toxic sub-
stance, material or waste, including, but not limited to, (i)
those substances, materials, and wastes listed in the United
States Department of Transportation Hazardous Materials Table
(49 CFR 172.101) or by the Environmental Protection Agency as
hazardous substances (40 CFR Part 302) and amendments thereto
and replacements therefor and (ii) any substance, pollutant or
material defined as, or designated in, any Environmental Law
as a "hazardous substance," "toxic substance," "hazardous ma-
terial," "hazardous waste," "restricted hazardous waste,"
"pollutant," "toxic pollutant" or words of similar import.
"Highest Lawful Rate": the maximum rate of interest,
if any, that at any time or from time to time may be con-
tracted for, taken, charged or received on the Note or which
may be owing to the Bank pursuant to this Agreement under the
laws applicable to the Bank and this transaction.
"Indebtedness": as to any Person, at any date of
determination, all items which constitute, without duplica-
tion, (a) indebtedness for borrowed money or the deferred pur-
chase price of Property (other than trade payables incurred in
the ordinary course of business), (b) indebtedness evidenced
by notes, bonds, debentures or similar instruments, (c) obli-
gations with respect to any conditional sale or title reten-
tion agreement, (d) indebtedness arising under acceptance fa-
cilities and the amount available to be drawn under all let-
ters of credit issued for the account of such Person and,
without duplication, all drafts drawn thereunder to the extent
such Person shall not have reimbursed the issuer in respect of
the issuer's payment of such drafts, (e) all liabilities se-
cured by any Lien on any Property owned by such Person even
though such Person has not assumed or otherwise become liable
for the payment thereof (other than carriers', warehousemen's,
mechanics', repairmen's or other like non-consensual statutory
Liens arising in the ordinary course of business), (f) obliga-
tions under Capital Leases, (g) Contingent Obligations and (h)
ERISA Liabilities.
"Indemnified Liabilities": as defined in Section
10.5.
"Indemnified Person": as defined in Section 10.9.
"Intellectual Property": all copyrights, trademarks,
patents, trade names, trade styles, service names and like
Property.
-7-
"Interest Coverage Ratio": at any date of determina-
tion, the ratio of Consolidated EBIT for the immediately pre-
ceding four fiscal quarters to Consolidated Cash Interest Ex-
pense for such period.
"Interest Payment Date": in respect of any Loan, the
last day of each month commencing on the first of such days to
occur after such Loan is made.
"Investments": as defined in Section 8.6.
"Inwood Development": Inwood Development Corp., a
New York corporation.
"Inwood Warehouse": the warehouse owned by the Xxxx-
house Partnership located at Xxxxxx Avenue, Inwood, New York
(Nassau County).
"Xxxxxxxx Guaranty": the Guaranty, dated as of Au-
gust 31, 1993, made by the Borrower to the Bank pursuant to
the Warehousing Loan Agreement.
"Xxxxxxxx Outlet Store": any retail outlet store
which operates under the Trademark.
"Xxxxxxxx Warehousing": Xxxxxxxx Warehousing, Inc.,
a New York corporation.
"JCI Development": JCI Development Corp., a New York
corporation.
"Lien": any mortgage, pledge, hypothecation, assign-
ment, deposit or preferential arrangement, encumbrance, lien
(statutory or other), or other security interest of any kind
or nature whatsoever, including, without limitation, any con-
ditional sale or other title retention agreement and any capi-
tal or financing lease having substantially the same economic
effect as any of the foregoing.
"Loan" and "Loans": as defined in Section 2.1.
"Loan Documents": collectively, this Agreement, the
Note, the Security Agreeent, the Cash Management Services
Agreement and the ACM Cash Concentration Service Agreement.
"Love": Xxxx X. Love, an individual.
-8-
"Margin Stock": any "margin stock", as said term is
defined in Regulation U of the Board of Governors of the Fed-
eral Reserve System, as the same may be amended from time to
time.
"Material Adverse Change": a material adverse change
in (i) the financial condition, operations, business, pros-
pects or Property of (x) the Borrower, or (y) the Borrower and
its Subsidiaries taken as a whole, (ii) the ability of the
Borrower to perform its obligations under the Loan Documents
or (iii) the ability of the Bank to enforce the Loan Docu-
ments.
"Material Adverse Effect": a material adverse effect
on (i) the financial condition, operations, business, pros-
pects or Property of (x) the Borrower or (y) the Borrower and
its Subsidiaries taken as a whole, (ii) the ability of the
Borrower to perform its obligations under the Loan Documents
or (iii) the ability of the Bank to enforce the Loan Docu-
ments.
"Maturity Date": August 30, 1996, or such earlier
date on which the Note shall become due and payable, whether
by acceleration or otherwise.
"Multiemployer Plan": a plan defined as such in Sec-
tion 3(37) of ERISA to which contributions have been made by
the Borrower or any ERISA Affiliate and which is covered by
Title IV of ERISA.
"Note": as defined in Section 2.2.
"Permitted Liens": Liens permitted to exist under
Section 8.2.
"Person": an individual, a partnership, a corpora-
tion, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental
Authority or any other entity of whatever nature.
"Plan": any employee benefit or other plan estab-
lished or maintained by the Borrower or any ERISA Affiliate
and which is covered by or subject to the minimum funding
standards of Title IV of ERISA, other than a Multiemployer
Plan.
"Pledged Collateral": the Pledged Collateral under
and as defined in the Security Agreement.
-9-
"Prime Rate": a rate of interest per annum equal to
the rate of interest publicly announced in New York City by
the Bank from time to time as its prime commercial lending
rate, such rate to be adjusted automatically (without notice)
on the effective date of any change in such publicly announced
rate.
"Property": in respect of any Person, all types of
real, personal, tangible, intangible or mixed property, in-
cluding, without limitation, Intellectual Property, owned or
leased by such Person.
"Real Property": real Property owned or leased by
the Borrower or any of its Subsidiaries.
"Security Agreement": the Security Agreement, made
by the Borrower in favor of the Bank, in the form of Exhibit
E, as the same may be amended, supplemented or otherwise modi-
fied from time to time.
"SEC": the Securities and Exchange Commission or any
Governmental Authority succeeding to the functions thereof.
"Xxxxxxx": Xxxxxx X. Xxxxxxx, an individual.
"Solvency Certificate": a certificate of the Vice
President-Finance and Treasurer of the Borrower (or such other
officer as shall be acceptable to the Bank) in the form of
Exhibit G.
"Secial Counsel": Xxxxx, Xxxxxx & Xxxxxx.
"Special Order Goods": sofabeds, sofabed loveseat
combinations and related articles purchased specifically to
fill special orders by customers of the Borrower.
"Stock": any and all shares, rights, interests, par-
ticipations, warrants or other equivalents (however desig-
nated) of corporate stock, including, without limitation, so-
called "phantom stock".
"Subsidiary": as to any Person, any corporation,
association, partnership, joint venture or other business en-
tity of which such Person or any Subsidiary of such Person,
directly or indirectly, either (i) in respect of a corpora-
tion, owns or controls more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board
of directors or similar managing body, irrespective of whether
a class or classes shall or might have voting power by reason
of the happening of any contingency or (ii) in respect of an
- 10 -
association, partnership, joint venture or other business en-
tity, is entitled to share in more than 50% of the profits and
losses, however determined.
"Taxes": any present or future income, stamp or
other taxes, levies, imposts, duties, fees, assessments, de-
ductions, withholdings, or other charges of whatever nature,
now or hereafter imposed, levied, collected, withheld, or as-
sessed by any Governmental Authority.
"Trademark": the trademark, "Xxxxxxxx Convert-
ibles"(TM), together with all right, title and interest therein
and thereto, and all applications, registrations and record-
ings thereof, including, without limitation, applications,
registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the
United States or any State thereof and all reissues, exten-
sions or renewals thereof and all licenses thereof.
"Warehouse Partnership": Inwood Development and JCI
Development, as tenants-in-common.
"Warehousing Agreement": the Warehousing Agreement,
dated as of November 3, 1986, by and between the Borrower and
Xxxxxxxx Warehousing, as the same may be amended, supplemented
or otherwise modified from time to time.
"Warehousing Loan Agreement": the Term Loan Agree-
ment, dated as of August 31, 1993, by and between Xxxxxxxx
Warehousing and the Bank, as the same may be amended, supple-
mented or otherwise modified from time to time.
1.2. Princiles of Construction.
(a) All terms defined in this Agreement shall have
the meanings given to such terms herein when used in the Loan
Documents or any certificate, opinion or other document made
or delivered pursuant hereto or thereto, unless otherwise de-
fined therein.
(b) As used in the Loan Documents and in any cer-
tificate, opinion or other document made or delivered pursuant
thereto, accounting terms not defined in Section 1.1, and ac-
counting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them
under GAAP.
(c) The words "hereof", "herein", "hereto" and
"hereunder" and similar words when used in any Loan Document
shall refer to such Loan Document as a whole and not to any
- 11 -
particular provision thereof, and Section, schedule and ex-
hibit references contained therein shall refer to Sections
thereof or schedules or exhibits thereto unless otherwise ex-
pressly provided therein.
(d) The word "or" shall not be exclusive; the words
"may not" are prohibitive and not permissive.
(e) Unless the context otherwise requires, words in
the singular number include the plural, and words in the plu-
ral include the singular.
(f) Unless specifically provided in a Loan Document
to the contrary, references to time shall refer to New York
City time.
2. AMOUNT AND TERMS OF LOANS.
2.1. Loans.
Subject to the terms and conditions hereof, the Bank
agrees to make revolving credit loans (each a "Loan" and, col-
lectively, the "Loans") to the Borrower from time to time dur-
ing the Commitment Period, in an aggregate principal amount at
any one time outstanding not to exceed the lesser of the Com-
mitment Amount and the Borrowing Base then in effect. During
the Commitment Period, the Borrower may borrow, prepay in
whole or in part and reborrow under the Commitment, all in ac-
cordance with the terms and conditions of this Agreement.
2.2. Note.
The Loans made by the Bank shall be evidenced by a
promissory note of the Borrower, in the form of Exhibit A,
with appropriate insertions therein as to date and principal
amount (as indorsed, amended, supplemented or otherwise modi-
fied from time to time, the "Note"), payable to the order of
the Bank and representing the obligation of the Borrower to
pay the lesser of (a) the Commitment Amount as of the Effec-
tive Date and (b) the aggregate unpaid principal balance of
the Loans, with interest thereon as prescribed in Section 2.6.
The Note shall (i) be dated the first Borrowing Date, (ii) be
stated to mature on the Maturity Date and (iii) bear interest
from the date thereof on the unpaid principal balance thereof
payable on the dates and at the applicable intrest rate or
rates per annum determined as provided in Section 2.6. The
Bank is hereby authorized to record and, prior to any transfer
of the Note, shall indorse (i) the date and amount of each
Loan and (ii) each payment and prepayment of the principal
- 12 -
thereof on the schedule (and any continuation thereof) annexed
to and constituting a part of the Note. No failure to so
record or indorse or any error in so recording or indorsing
shall affect the obligation of the Borrower to make payment
when due of any amount owing under the Loan Documents.
2.3. Procedure for Borrowing.
(a) The Borrower may borrow under the Commitment on
any Business Day during the Commitment Period, provided, how-
ever, that the Borrower shall notify the Bank (by telephone or
telecopy) no later than 11:00 A.M., one Business Day prior to
the requested Borrowing Date, specifying (A) the amount to be
borrowed and (B) the requested Borrowing Date. Each such no-
xxxx shall be irrevocable and confirmed immediately by de-
livery to the Bank of a Borrowing Request duly executed by an
Authorized Signatory of the Borrower. Each borrowing shall be
in an aggregate principal amount equal to $100,000 or such
amount plus a whole multiple of $25,000 in excess thereof, or,
if less, the unused amount of the Commitment then in effect.
Subject to the satisfaction of the terms and conditions of
this Agreement as determined by the Bank, the amount of each
such borrowing will be made available to the Borrower on the
applicable Borrowing Date either by crediting the general de-
posit account of the Borrower maintained with the Bank or by
wiring such amount as instructed by the Borrower in writing.
2.4. Termination or Reduction of Commitment.
(a) Voluntary Reductions. The Borrower shall have
the right, upon at least three Business Days' prior written
notice to the Bank, at any time to terminate the Commitment or
from time to time to permanently reduce the Commitment Amount
then in effect, provided, however, that any such reduction
shall be in the amount of $100,000 or such amount plus a whole
multiple of $25,000 in excess thereof.
(b) In General. Simultaneously with each reduction
of the Commitment Amount under this Section, the Borrower
shall pay the Commitment Fee accrued on the amount by which
the Commitment has been reduced and prepay the Loans by the
amount, if any, by which the aggregate unpaid principal bal-
ance of the Loans exceeds the amount of the Commitment as so
reduced.
2.5. Prenayments of the Loans.
(a) Voluntary Prepayments. The Borrower may, at its
option, prepay the Loans, in whole or in part, without premium
or penalty, at any time and from time to time by notifying the
- 13 -
Bank in writing at least two Business Days prior to the pro-
posed prepayment date, specifying the amount to be prepaid and
the date of prepayment. Such notice shall be irrevocable and
the amount specified in such notice shall be due and payable
on the date specified, together with accrued interest to the
date of such payment on the amount so prepaid. Partial pre-
payments of the Loans shall be in an aggregate principal
amount of $100,000 or such amount plus a whole multiple of
$25,000 in excess thereof, or, if less, the outstanding prin-
cipal balance of the Loans.
(b) Mandatory Borrowing Base Prepayment of the
Loans. If on any day prior to the Maturity Date the aggregate
unpaid principal balance of the Loans shall exceed the Borrow-
ing Base, the Borrower shall, within one Business Day of such
day, prepay the Loans by an amount equal to such excess. Un-
til such excess has been prepaid the Borrower shall not be
entitled to borrow additional Loans.
(c) Mandatory Annual Clean-up of the Loans. The
Borrower shall fully repay and/or maintain a zero balance on
the Note for a period of at least 45 consecutive days during
each fiscal year of the Borrower in the Commitment Period.
2.6. Interest Rate and Payment Dates.
(a) Prior to Maturity. Except as otherwise provided
in Section 2.6(b), prior to maturity, the Loans shall bear
interest on the outstanding principal balance thereof at the
Alternate Base Rate plus 1%.
(b) Event of Default. After the occurrence and dur-
ing the continuance of any Event of Default, the outstanding
principal balance of the Loans and any overdue interest or
other amount payable under the Loan Documents shall bear in-
terest at a rate per annum equal to the Alternate Base Rate
plus 3%. All such interest shall be payable on demand.
(c) General. Interest on the Loans shall be calcu-
lated on the basis of a 360-day year for the actual number of
days elapsed, including the first day but excluding the last.
Except as otherwise provided in Section 2.6(b), interest shall
be payable in arrears in each Interest Payment Date and upon
payment (including prepayment) of the Loans. Any change in
the interest rate on the Loans resulting from a change in the
Alternate Base Rate shall become effective as of the opening
of business on the day on which such change shall become ef-
fective. The Bank shall, as soon as practicable, notify the
Borrower of such effective date and the amount of each such
- 14 -
change in the Alternate Base Rate, but any failure to so no-
tify shall not in any manner affect the obligation of the Bor-
rower to pay interest on the Loans in the amounts and on the
dates required. Each determination of the Alternate Base Rate
by the Bank shall be conclusive and binding on the Borrower
absent manifest error. At no time shall the interest rate
payable on the Loans, together with the Commitment Fee, the
Advisory Fee and all other amounts payable under the Loan
Documents, to the extent the same are construed to constitute
interest, exceed the Highest Lawful Rate. If interest payable
to the Bank on any date would exceed the maximum amount per-
mitted by the Highest Lawful Rate, such interest payment shall
automatically be reduced to such maximum permitted amount, and
interest for any subsequent period, to the extent less than
the maximum amount permitted for such period by the Highest
Lawful Rate, shall be increased by the unpaid amount of such
reduction. Any interest actually received for any period in
excess of such maximum allowable amount for such period shall
be deemed to have been applied as a prepayment of the Loans.
The Borrower acknowledges that to the extent interest payable
on the Loans is based on the Prime Rate, such rate is only one
of the bases for computing interest on loans made by the Bank,
and by basing interest payable on the Loans on the Prime Rate,
the Bank has not committed to charge, and the Borrower has not
in any way bargained for, interest based on a lower or the
lowest rate at which the Bank may now or in the future make
loans to other borrowers.
2.7. Taxes; Net Pavments.
All payments made by the Borrower under the Loan
Documents shall be made free and clear of, and without reduc-
tion for or on account of, any Taxes required by law to be
withheld from any amounts payable under the Loan Documents.
In the event that the Borrower is prohibited by law from mak-
ing payments under the Loan Documents free of any such reduc-
tion or withholding, the Borrower shall pay such additional
amounts to the Bank as may be necessary in order that the ac-
tual amounts received by the Bank in respect of interest and
any other amounts payable under the Loan Documents after such
reduction or withholding (and after payment of any additional
Taxes or other charges due as a consequence of the payment of
such additional amounts) shall equal the amount which would
have been received if such reduction or withholding were not
required. If the Borrower shall make any payments under this
Section or shall make any such reduction or withholding, the
Borrower shall forthwith forward to the Bank original or cer-
tified copies of official receipts or other evidence accept-
able to the Bank establishing such payment.
2.8. Use of Proceeds.
The proceeds of the Loans shall be used exclusively
to purchase inventory consisting of first quality current fin-
ished products to be held for sale by the Borrower to custom-
ers in the ordinary course of its business. All Loans and the
use to which the proceeds thereof are put shall conform with
the provisions of Section 4.11.
2.9. Capital Adequacy.
If (i) the enactment or promulgation of, or any
change or phasing in of, any United States or foreign law or
regulation or in the interpretation thereof by any Governmen-
tal Authority charged with the administration thereof, (ii)
compliance with any directive or guideline from any central
bank or United States or foreign Governmental Authority
(whether having the force of law) promulgated or made after
the date hereof, or (iii) compliance with the Risk-Based Capi-
tal Guidelines of the Board of Governors of the Federal Re-
serve System as set forth in 12 CFR Parts 208 and 225, or of
the Comptroller of the Currency, Department of the Treasury,
as set forth in 12 CFR Part 3, or similar legislation, rules,
guidelines, directives or regulations under any applicable
United States or foreign Governmental Authority affects or
would affect the amount of capital required to be maintained
by the Bank (or any lending office of the Bank) or any corpo-
ration directly or indirectly owning or controlling the Bank
or imposes any restriction on or otherwise adversely affects
the Bank (or any lending office of the Bank) or any corpora-
tion directly or indirectly owning or controlling the Bank and
the Bank shall have determined that such enactment, promulga-
tion, change or phasing in or compliance has the effect of
reducing the rate of return on the Bank's or such
corporation's capital or the asset value to the Bank or such
corporation of any Loan as a consequence, directly or indi-
rectly, of its obligations to make and maintain the funding of
the Loans at a level below that which the Bank or such corpo-
ration could have achieved but for such enactment, promulga-
tion, change or phasing in or compliance (after taking into
account the Bank's or such corporation's policies regarding
capital adequacy) by an amount deemed by the Bank to be mate-
rial, then, upon demand by the Bank, the Borrower shall
promptly pay to the Bank such additional amount or amounts as
shall be sufficient to compensate the Bank or such corporation
for such reduction in such rate of return or asset value. A
certificate in reasonable detail as to such amounts submitted
to the Borrower setting forth the determination of such amount
or amounts that will compensate the Bank or such corporation
- 16 -
for such reductions shall be presumed correct absent manifest
error.
2.10. Bank's Records.
The Bank's records with respect to the Loans, the
interest rates applicable thereto, each payment by the Bor-
rower of principal and interest on the Loans and fees, ex-
penses and any other amounts due and payable in connection
with the Loan Documents shall be presumed correct absent mani-
fest error as to the amount of the Loans and as to the amount
of principal and interest paid by the Borrower in respect of
such Loans and as to the other information relating to the
Loans and amounts paid and payable by the Borrower under the
Loan Documents.
3. FEES; PAYMENTS
3.1. Commitment Fee.
The Borrower agrees to pay to the Bank a fee (the
"Commitment Fee"), during the Commitment Period, equal to 1/2 of
1% per annum on the average daily excess of (a) the Commitment
Amount over (b) the aggregate outstanding principal balance of
the Loans, provided, however, that no Commitment Fee shall
accrue with respect to any period during which the Borrower
may not borrow Loans under Section 2.5(c). The Commitment Fee
shall be payable monthly in arrears on the last day of each
month, commencing on the first such day to occur following the
Effective Date, and on the Expiration Date. The Commitment
Fee shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.
3.2. Advisorv Fee.
The Borrower agrees to pay to the Bank a fee (the
"Advisory Fee"), payable on the Effective Date, equal to
$20,000.
3.3. Fees of Special Counsel.
The Borrower agrees to pay on the Effective Date the
fees and expenses of Special Counsel billed through a date on
or before the Effective Date, in connection with the negotia-
tion and closing of this Agreement. In addition, the Borrower
agrees to pay to Special Counsel any additional fees and ex-
penses incurred subsequent to the xxxx referred to in the
first sentence hereof, such payment to be made within a rea-
sonable time after the presentation of a xxxx therefor.
- 17 -
3.4. Treatment and Application of Payments.
Each payment, including each prepayment, of princi-
pal and interest on the Loans and of the Commitment Fee shall
be made by the Borrower to the Bank at its office set forth in
Section 10.2 in funds immediately available to the Bank at
such office by 12:00 noon on the due date for such payment.
The failure of the Borrower to make any such payment by such
time shall not constitute a default hereunder, provided that
such payment is made on such due date, but any such payment
made after 12:00 noon on such due date shall be deemed to have
been made on the next Business Day for the purpose of calcu-
lating interest on amounts outstanding on the Loans. If any
payment hereunder or under the Note shall be due and payable
on a day which is not a Business Day, the due date thereof
shall be extended to the next Business Day and (except with
respect to payments in respect of the Commitment Fee) interest
shall be payable at the applicable rate specified herein dur-
ing such extension.
4. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement
and to make the Loans, the Borrower makes the following repre-
sentations and warranties to the Bank:
4.1. Subsidiaries; Capitalization.
The Borrower has only the Subsidiaries set forth on
Schedule 4.1. Each such Subsidiary is wholly-owned by the
Borrower except as indicated thereon. The shares of each
corporate Subsidiary of the Borrower are duly authorized,
validly issued, fully paid and nonassessable and are owned
free and clear of any Liens. The interest of the Borrower in
each of its non-corporate Subsidiaries is owned free and clear
of any Liens. No Subsidiary of the Borrower has issued any
securities convertible into Stock (or other equity interest)
of such Subsidiary and there are no outstanding options or
warrants to purchase Stock (or other equity interest) of such
Subsidiary of any class or kind, and there are no agreements
or understandings with respect thereto or affecting in any
manner the sale, pledge, assignment or other disposition
thereof, including, without limitation, any right of first
refusal, option, redemption, voting trust, call or other
rights with respect thereto, whether similar or dissimilar to
any of the foregoing.
- 18 -
4.2. Existence and Power.
Each of the Borrower and its Subsidiaries is duly
organized or formed and validly existing in good standing un-
der the laws of the jurisdiction of its incorporation or for-
mation, has all requisite power and authority to own its Prop-
erty and to carry on its business as now conducted, and each
is in good standing and authorized to do business in each ju-
risdiction in which the nature of the business conducted
therein or the Property owned therein makes such qualification
necessary, except where such failure to qualify could not rea-
sonably be expected to have a Material Adverse Effect.
4.3. Authority.
The Borrower has full legal power and authority to
enter into, execute, deliver and perform the terms of the Loan
Documents and to make the borrowings contemplated hereby and
by the Note, to execute, deliver and carry out the terms of
the Note and to incur the obligations provided for herein and
therein, all of which have been duly authorized by all proper
and necessary corporate action and are in full compliance with
its certificate of incorporation and by-laws.
4.4. Binding Agreement.
Each of the Loan Documents (other than the Note),
the Greenfield Employment Agreement and the Warehousing Agree-
ment constitutes, and the Note, when issued and delivered pur-
suant hereto for value received, will constitute, the valid
and legally binding obligations of the Borrower, enforceable
in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorgani-
zation or other similar laws affecting the enforcement of
creditors' rights generally.
4.5. Litigation.
Except as set forth in the Form 10-K filed by the
Borrower with the SEC with respect to its fiscal year ended
August 31, 1992, and the Form 10-Q filed by the Borrower with
the SEC with respect to its fiscal quarter ended May 31, 1993,
there are no actions, suits, arbitration proceedings or claims
(whether or not purportedly on behalf of the Borrower or any
of its Subsidiaries) pending or, to the knowledge of the Bor-
rower, threatened against the Borrower or any of its Subsid-
iaries, or maintained by the Borrower or any of its Subsidiar-
ies, at law or in equity, before any Governmental Authority
which: (i) if adversely determined, could reasonably be ex-
pected to have a Material Adverse Effect or (ii) call into
- 19 -
question the validity or enforceability of any of the Loan
Documents.
4.6. Required Consents.
No consent, authorization or approval of, filing
with, notice to, or exemption by, stockholders, any Governmen-
tal Authority or any other Person is required to authorize, or
is required in connection with the execution, delivery and
performance of the Loan Documents or is required as a condi-
tion to the validity or enforceability of the Loan Documents.
4.7. No Conflicting Agreements.
Neither the Borrower nor any of its Subsidiaries is
in default under any mortgage, indenture, contract or agree-
ment to which it is a party or by which it or any of its Prop-
erty is bound, the effect of which default could reasonably be
expected to have a Material Adverse Effect. The execution,
delivery or carrying out of the terms of the Loan Documents
will not constitute a default under, or result in the creation
or imposition of, or obligation to create, any Lien upon any
Property of the Borrower or any of its Subsidiaries pursuant
to the terms of any such mortgage, indenture, contract or
agreement.
4.8. Compliance with Applicable Laws.
Neither the Borrower nor any of its Subsidiaries is
in default with respect to any judgment, order, writ, injunc-
tion, decree or decision of any Governmental Authority which
default could reasonably be expected to have a Material Ad-
verse Effect. Each of the Borrower and its Subsidiaries is
complying in all material respects with all applicable sta-
tutes, regulations, rules and orders of all Governmental Au-
thorities, including, without limitation, Environmental Laws
and ERISA, a violation of which could reasonably be expected
to have a Material Adverse Effect.
4.9. Taxes.
Each of the Borrower and its Subsidiaries has filed
or caused to be filed all tax returns required to be filed and
has paid, or has made adequate provision for the payment of,
all taxes shown to be due and payable on said returns or in
any assessments made against it (other than those being con-
tested as required under Section 7.4) which would be material
to the Borrower or any of its Subsidiaries, and no tax Liens
have been filed with respect thereto. The charges, accruals
- 20 -
and reserves on the books of the Borrower and each of its Sub-
sidiaries with respect to all federal, state, local and other
taxes are, to the best knowledge of the Borrower, adequate for
the payment of all such taxes, and the Borrower knows of no
unpaid assessment which is due and payable against it or any
of its Subsidiaries or any claims being asserted which could
reasonably be expected to have a Material Adverse Effect, ex-
cept such thereof as are being contested as required under
Section 7.4, and for which adequate reserves have been set
aside in accordance with GAAP. The federal income tax returns
of the Borrower and each of its Subsidiaries consolidated in
such returns have been examined by and settled with the Inter-
nal Revenue Service or the statute of limitations with respect
thereto have run, for all years through, and including,
August 31, 1989.
4.10. Governmental Regulations.
Neither the Borrower nor any of its Subsidiaries is
subject to regulation under the Public Utility Holding Company
Act of 1935, as amended, the Federal Power Act or the Invest-
ment Company Act of 1940, as amended, and neither the Borrower
nor any of its Subsidiaries is subject to any statute or regu-
lation which prohibits or restricts the incurrence of Indebt-
edness under the Loan Documents, including, without limita-
tion, statutes or regulations relative to common or contract
carriers or to the sale of electricity, gas, steam, water,
telephone, telegraph or other public utility services.
4.11. Federal Reserve Regulations; Use of Proceeds.
Neither the Borrower nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing
or carrying any Margin Stock. No part of the proceeds of the
Loans will be used, directly or indirectly, for a purpose
which violates any law, rule or regulation of any Governmental
Authority, including, without limitation, the provisions of
Regulations G, T, U or X of the Board of Governors of the Fed-
eral Reserve System, as amended. No part of the proceeds of
the Loans will be used, directly or indirectly, to purchase or
carry Margin Stock or to extend credit to others for the pur-
pose of purchasing or carrying Margin Stock.
4.12. Plans; Multiemployer Plans.
Neither the Borrower nor any of its ERISA Affiliates
maintains or makes contributions to any Plan or Multiemployer
Plan.
- 21 -
4.13. Financial Statements.
The Borrower has heretofore delivered to the Bank
copies of its Form 10-K for the fiscal year of the Borrower
ended August 31, 1992, containing the audited Consolidated
Balance Sheet of the Borrower and its Subsidiaries as of Au-
gust 31, 1992 and August 31, 1991, and the related Xxxxxxx-
dated Statements of Operations, Cash Flows and Shareholders'
Equity for the periods then ended and, in addition, for the
period ended August 31, 1990, and its Form 10-Q for the fiscal
quarter ending May 31, 1993, containing the unaudited Xxxxxxx-
dated Balance Sheet of the Borower and its Subsidiaries for
such fiscal quarter, together with the related Statements of
Operations, Cash Flows and Shareholders' Equity for the fiscal
quarter then ended (with the related notes and schedules, the
"Financial Statements"). The Financial Statements fairly pre-
sent the Consolidated financial condition and results of the
operations of the Borrower and its Subsidiaries as of the
dates and for the periods indicated therein and have been pre-
pared in conformity with GAAP. Except as reflected in the
Financial Statements or in the footnotes thereto, neither the
Borrower nor any of its Subsidiaries has any obligation or
liability of any kind (whether fixed, accrued, contingent, un-
matured or otherwise) which, in accordance with GAAP, should
have been shown in the Financial Statements and was not.
Since August 31, 1992, each of the Borrower and its Subsidiar-
ies has conducted its business only in the ordinary course and
there has been no Material Adverse Change.
4.14. Property.
Each of the Borrower and its Subsidiaries has good
and marketable title to all of its Property, title to which is
material to it, subject to no Liens, except Liens in favor of
the Bank pursuant to the Security Agreement and Permitted
Liens.
4.15. Franchises, Intellectual Property. Etc.
Each of the Borrower and its Subsidiaries possesses
or has the right to use all franchises, Intellectual Property,
licenses and other rights as are material and necessary for
the conduct of its business, and with respect to which it is
in compliance, with no known conflict with the valid rights of
others which could reasonably be expected to have a Material
Adverse Effect. No event has occurred which permits or, to
the best knowledge of the Borrower, after notice or the lapse
of time, or both, or any other condition, could reasonably be
expected to permit, the revocation or termination of any such
franchise, Intellectual Property, license or other right and
- 22 -
which revocation or termination could reasonably be expected
to have a Material Adverse Effect.
4.16. Security Interests.
Upon fulfillment of the conditions set forth in Sec-
tion 5.7, and subject to the filing of appropriate UCC-1 Fi-
nancing Statements at the filing offices described in Section
5.7 with respect to the Collateral (other than the Pledged
Collateral) and the continuing possession by the Bank of the
Pledged Collateral, the security interests granted under the
Security Agreement will constitute valid, binding and continu-
ing duly perfected first priority Liens in favor of the Bank
in and to the Collateral.
4.17. Environmental Matters.
(a) Each of the Borrower and its Subsidiaries is in
compliance in all material respects with the requirements of
all applicable Environmenal Laws.
(b) No Hazardous Substances have been generated or
manufactured on, transported to or from, treated at, stored at
or discharged from any Real Property in violation of any Envi-
ronmental Laws, which violation could reasonably be expected
to have a Material Adverse Effect; no Hazardous Substances
have been discharged into subsurface waters under any Real
Property in violation of any Environmental Laws, which
violation could reasonably be expected to have a Material
Adverse Effect; no Hazardous Substances have been discharged
from any Real Property on or into property or waters
(including subsurface waters) adjacent to any Real Property in
violation of any Environmental Laws, which violation could
reasonably be expected to have a Material Adverse Effect; and
there are not now, nor ever have been, on any Real Property,
any underground or above ground storage tanks in violation of
any Environmental Laws, which violation could reasonably be
expected to have a Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiar-
ies (i) has received notice (written or oral) or otherwise
learned of any claim, demand, suit, action, proceeding, event,
condition, report, directive, lien, violation, non-compliance
or investigation indicating or concerning any potential or
actual liability (including, without limitation, potential
liability for enforcement, investigatory costs, cleanup costs,
government response costs, removal costs, remedial costs,
natural resources. damages, property damages, personal injuries
or penalties) arising in connection with: (x) any
non-compliance with or violation of the requirements of any
- 23 -
applicable Environmental Laws, or (y) the presence of any Haz-
ardous Substance on any Real Property (or any real Property
previously owned or leased by the Borrower or any of its Sub-
sidiaries) or the release or threatened release of any Hazard-
ous Substance into the environment for which the Borrower or
any of its Subsidiaries is or may be liable, (ii) has any
threatened or actual liability in connection with the presence
of any Hazardous Substance on any Real Property (or any real
Property previously owned or leased by the Borrower or any of
its Subsidiaries) or the release or threatened release of any
Hazardous Substance into the environment for which the Bor-
rower or any of its Subsidiaries is or may be liable, (iii)
has received notice of any federal or state investigation
evaluating whether any remedial action is needed to respond to
the presence of any Hazardous Substance on any Real Property
(or any real Property previously owned or leased by the Bor-
rower or any of its Subsidiaries) or a release or threatened
release of any Hazardous Substance into the environment for
which the Borrower or any of its Subsidiaries is or may be li-
able, or (iv) has received notice that the Borrower or any of
its Subsidiaries is or may be liable to any Person under any
Environmental Law.
(d) No Real Property is located in an area identi-
fied by the Secretary of Housing and Urban Development as an
area having special flood hazards.
4.18. Labor Relations.
Neither the Borrower nor any of its Subsidiaries is
a party to any collective bargaining agreement and, to the
best knowledge of the Borrower, no petition has been filed or
proceedings instituted by any employee or group of employees
with any labor relations board seeking recognition of a bar-
gaining representative with respect to the Borrower or any of
its Subsidiaries. There are no material controversies pending
between the Borrower or any of its Subsidiaries and any of
their respective employees, which could reasonably be expected
to have a Material Adverse Effect.
4.19. Burdensome Obligations.
Neither the Borrower nor any of its Subsidiaries is
a party to or bound by any franchise, agreement, deed, lease
or other instrument, or subject to any corporate restriction
which, in the opinion of its management, is so unusual or bur-
densome, in the context of its business, as in the foreseeable
future might materially and adversely affect or impair its
revenue or cash flow or the ability of the Borrower to perform
its obligations under the Loan Documents. The Borrower does
- 24 -
not presently anticipate that future expenditures by the Bor-
rower or any of its Subsidiaries needed to meet the provisions
of federal or state statutes, orders, rules or regulations
will be so burdensome as to result in a Material Adverse Ef-
fect.
4.20. No Misrepresentation.
No representation or warranty contained in any Loan
Document and no certificate or report furnished or to be fur-
nished by the Borrower or any of its Subsidiaries in connec-
tion with the transactions contemplated hereby, contains or
will contain a misstatement of material fact or, to the best
knowledge of the Borrower, omits or will omit to state a mate-
rial fact required to be stated in order to make the state-
ments herein or therein contained not misleading in the light
of the circumstances under which made.
5. CONDITIONS TO FIRST LOAN
In addition to the conditions precedent set forth in
Section 6, the obligation of the Bank to make a Loan on the
first Borrowing Date shall be subject to the fulfillment of
the following conditions precedent:
5.1. Evidence of Action.
The Bank shall have received from the Borrower, and
be satisfied in all respects with, a certificate, dated the
first Borrowing Date, of its Secretary or Assistant Secretary
(i) attaching a true and complete copy of the resolutions of
its Board of Directors and of all documents evidencing other
necessary corporate action taken by it to authorize the Loan
Documents and the transactions contemplated thereby, (ii) at-
taching a true and complete copy of its certificate of incor-
poration and by-laws, (iii) setting forth the incumbency of
its officer or officers who may sign the Loan Documents, in-
cluding therein a signature specimen of such officer or of-
ficers and (iv) attaching a certificate of good standing of
the Secretary of State of the State of Delaware and of each
other jurisdiction in which it is qualified to do business.
5.2. This Agreement.
The Bank shall have received a counterpart of this
Agreement signed by a duly Authorized Signatory of the Bor-
rower (or the Bank shall have received a facsimile signature
page signed by a duly Authorized Signatory of the Borrower who
- 25 -
shall have agreed to promptly provide the Bank with an origi-
xxxxx executed counterpart hereof).
5.3. Note.
The Bank shall have received and be in possession of
the Note, duly executed by an Authorized Signatory of the Bor-
rower.
5.4. Approvals.
The Bank shall have received, and be satisfied in
all respects with, evidence that all approvals and consents of
all Persons required to be obtained in connection with the
consummation of the transactions contemplated by the Loan
Documents have been duly obtained and are in full force and
effect.
5.5. Opinion of Counsel to the Borrower.
The Bank shall have received and be satisfied in all
respects with an opinion of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
& Xxxxxx, counsel to the Borrower, addressed to the Bank,
dated the first Borrowing Date, in the form of Exhibit D, and
covering such additional matters as the Bank may reasonably
request.
5.6. Security Agreement.
The Bank shall have received the Security Agreement,
duly executed by an Authorized Signatory of the Borrower, to-
gether with instruments representing the Pledged Collateral
duly indorsed in blank by the Borrower.
5.7. Search Reports and Related Documents.
The Bank shall have received and be satisfied in all
respects with (i) UCC-1 Financing Statements with respect to
the Collateral (other than Pledged Collateral), to be filed in
each office as the Bank shall deem necessary to cause the se-
curity interests granted under the Security Agreement to con-
stitute valid, binding and continuing duly perfected first
priority Liens in favor of the Bank in and to such Collateral,
(ii) UCC, tax and judgment lien search reports with respect to
each applicable public office where Liens are filed disclosing
that there are no Liens of record in such official's office
covering any Collateral or showing the Borrower as a debtor
thereunder, (iii) a certificate signed by an Authorized Signa-
tory of the Borrower, dated the first Borrowing Date, certify-
ing that, upon the making of the first Loan there exist no
- 26 -
Liens on the Collateral and (iv) such other documents as the
Bank shall request, including, without limitation, such agree-
ments with Subsidiaries of the Borrower with respect to the
Collateral.
5.8. Warehousing Agreement.
The Bank shall have received a copy of, and be sat-
isfied in all respects with the terms of, the Warehousing
Agreement duly executed by an Authorized Signatory of the Bor-
rower and by an Authorized Signatory of Xxxxxxxx Warehousing.
5.9. Cash Management Services Agreement; ACMH Cash Concen-
tration Service Agreement.
The Bank shall have received each of the Cash Man-
agement Services Agreement and the ACH Cash Concentration Ser-
vice Agreement, duly executed by an Authorized Signatory of
the Borrower.
5.10. Property, Public Liability and Other Insurance.
The Bank shall have received and be satisfied in all
respects with (i) a descriptive list of all insurance main-
tained by the Borrower and each of its Subsidiaries and (ii)
appropriate certificates of insurance evidencing that the Bor-
rower and each of its Subsidiaries has obtained the insurance
coverage and endorsements required by Section 7.5.
5.11. Reserved.
5.12. Fees of Special Counsel.
The unpaid fees and expenses of Special Counsel
which shall have accrued through the first Borrowing Date
shall have been paid.
5.13. Solvency Certificate.
The Bank shall have received and be satisfied in all
respects with a Solvency Certificate, dated the first Borrow-
ing Date, duly executed by the Vice President-Finance and
Treasurer of the Borrower (or such other officer as shall be
acceptable to the Bank).
5.14. Business Plan.
The Bank shall have received and be satisfied in all
respects with a business and strategic plan, including, with-
out limitation, annual projections for the first three fiscal
- 27 -
years of the Borrower following the Borrowing Date, in each
case covering all segments of the Borrower's business.
5.15. Compliance Certificate.
The Bank shall have received and be satisfied in all
respects with a Compliance Certificate, dated the first Bor-
rowing Date, certified by the Vice President-Finance and Trea-
surer of the Borrower (or such other officer as shall be ac-
ceptable to the Bank).
5.16. Greenfield Employment Agreement.
The Bank shall have received a copy of, and be sat-
isfied in all respects with the terms of, the Xxxxxxxxxx Xx-
ployment Agreement duly executed by Greenfield and an Autho-
rized Signatory of the Borrower.
5.17. Audit of Inventory.
The Bank shall have received and be satisfied in all
respects with an audit and valuation of the Eligible Inventory
and other assets and liabilities of the Borrower, as at a date
not more than 90 days prior to the first Borrowing Date.
0.00.Xx Material Adverse Change.
Since February 28, 1993, there shall have occurred
no Material Adverse Change and the Bank shall have received
and be satisfied in all respects with a certificate of the
Vice President-Finance and Treasurer of the Borrower to such
effect.
6. CONDITIONS OF LENDING - ALL LOANS
The obligation of the Bank to make any Loan is subject to
the satisfaction of the following conditions precedent:
6.1. Compliance.
On each Borrowing Date and after giving effect to
the Loans to be made thereon, (a) the Borrower shall be in
full compliance with all of the terms, covenants and condi-
tions of the Loan Documents, (b) there shall exist no Default
or Event of Default, (c) the representations and warranties
contained in the Loan Documents shall be true and correct with
the same effect as though such representations and warranties
had been made on such Borrowing Date and (d) the aggregate
outstanding principal balance of the Loans shall not exceed
- 28 -
the lesser of the Commitment Amount and the Borrowing Base
then in effect. The receipt by or for the account of the Bor-
rower of the proceeds of each Loan shall constitute a cer-
tification by the Borrower as of such Borrowing Date that each
of the foregoing matters is true and correct in all respects.
6.2. Loan Closings.
All documents required by the provisions of the Loan
Documents to be executed or delivered to the Bank on or before
the applicable Borrowing Date shall have been duly executed
and shall have been delivered to the office of the Bank set
forth in Section 10.2 on or before such Borrowing Date.
6.3. Borrowing Request.
The Bank shall have received a Borrowing Request
duly executed by an Authorized Signatory of the Borrower.
6.4. Borrowing Base Certificate.
The Bank shall have received a Borrowing Base Cer-
tificate, dated as of the applicable Borrowing Date, certified
by the Vice President-Finance and Treasurer of the Borrower
(or such other officer as shall be acceptable to the Bank).
6.5. Documentation and Proceedings.
All corporate and legal proceedings and all docu-
ments and papers in connection with the transactions contem-
plated by the Loan Documents shall be satisfactory in all re-
spects to the Bank, and the Bank shall have received and be
satisfied in all respects with all information and copies of
all documents which the Bank may reasonably have requested in
connection therewith, such documents (where appropriate) to be
certified by an Authorized Signatory of the Borrower or proper
Governmental Authorities.
6.6. Required Acts and Conditions.
All acts, conditions and things (including, without
limitation, the obtaining of any necessary regulatory approv-
als and the making of any filings, recordings or registra-
tions) required to be done, performed and to have happened on
or prior to the applicable Borrowing Date and which are neces-
sary for the continued effectiveness of the Loan Documents,
shall have been done and performed and shall have happened in
due compliance with all applicable laws.
- 29 -
6.7. Approval of Special Counsel.
All legal matters in connection with the making of
each Loan shall be reasonably satisfactory in all respects to
Special Counsel.
6.8. Supplemental Opinions.
If requested by the Bank with respect to the ap-
plicable Borrowing Date, there shall have been delivered to
the Bank favorable supplementary opinions of counsel to the
Borrower, addressed to the Bank and dated as of such Borrowing
Date, covering such matters incident to the transactions con-
templated herein as the Bank may reasonably request.
6.9. Other Documents.
The Bank shall have received and be satisfied in all
respects with such other documents as the Bank shall reason-
ably request.
7. AFFIRMATIVE AND FINANCIAL COVENANTS
The Borrower covenants and agrees that, so long as this
Agreement is in effect, any Loan remains outstanding and un-
paid or any other amount is owing to the Bank under any Loan
Document, the Borrower shall:
7.1. Financial Statements.
Maintain a standard system of accounting in ac-
cordance with GAAP, and furnish or cause to be furnished to
the Bank:
(a) As soon as available but in any event within
105 days after the end of each fiscal year of the Borrower, a
copy of its annual report on Form 10-K in respect of such fis-
cal year, together with the financial statements required to
be attached thereto, provided, however, that the Borrower is
required to file such annual report with the SEC and such fil-
ing is actually made.
(b) As soon as available but in any event within 55
days after the end of the first three fiscal quarters of each
fiscal year of the Borrower a copy of its quarterly report on
Form 10-Q in respect of such fiscal quarter, together with the
financial statements required to be attached thereto, pro-
vided, however, that the Borrower is required to file such
- 30 -
quarterly report with the SEC and such filing is actually
made.
(c) Within 55 days after the end of each of the
first three fiscal quarters of each fiscal year of the Bor-
rower, and within 105 days after the end of the last fiscal
quarter of such fiscal year, a Compliance Certificate, dated
as of the end of such fiscal quarter and certified by the Vice
President-Finance and Treasurer (or such other officer as
shall be acceptable to the Bank) of the Borrower.
(d) Within 15 days after the end of each month if
Loans are outstanding at such month end, a Borrowing Base Cer-
tificate, dated as of the end of such month and certified by
the Vice President-Finance and Treasurer of the Borrower (or
such other officer as shall be acceptable to the Bank).
(e) At the request of the Bank and at the expense
of the Borrower, such on-going field examinations and audits
of the Eligible Inventory, performed by a Person satisfactory
to the Bank, as the Bank shall require.
(f) Such other information as the Bank may reason-
ably request from time to time including, without limitation,
such annual and quarterly financial statements as the Bank
customarily obtains from Borrowers having similar credit
agreements with it, in the event that, at any time, the Bor-
rower is not currently filing an annual Form 10-K and a quar-
terly Form 10-Q with the SEC.
7.2. Certificates: Other Information.
Furnish to the Bank:
(a) Prompt written notice if: (i) any Indebt-
edness of the Borrower or any of its Subsidiaries is declared
or shall become due and payable prior to its stated maturity,
or called and not paid when due, (ii) a default shall have oc-
curred under any note (other than the Note) or the holder of
any such note, or other evidence of Indebtedness, certificate
or security evidencing any such Indebtedness or any obligee
with respect to any other Indebtedness of the Borrower or any
of its Subsidiaries has the right to declare any such Indebt-
edness due and payable prior to its stated maturity, (iii) the
Borrower shall have decided to change the method by which it
shall authorize or continue to authorize the use of the Trade-
xxxx in the operation of each Xxxxxxxx Outlet Store not owned
by it by requiring that such use be authorized pursuant to a
franchising or similar agreement between it and the owner of
such Xxxxxxxx Outlet Store rather than pursuant to a licensing
- 31 -
agreement, (iv) Greenfield shall have died or become disabled
or (v) there shall have occurred and be continuing a Default
or an Event of Default;
(b) Prompt written notice of: (i) any cita-
tion, summons, subpoena, order to show cause or other document
naming the Borrower or any of its Subsidiaries a party to any
proceeding before any Governmental Authority which could rea-
sonably be expected to have a Material Adverse Effect, and in-
clude with such notice a copy of such citation, summons, sub-
poena, order to show cause or other document, (ii) any lapse
or other termination of any material Intellectual Property,
license, permit, franchise or other authorization issued to
the Borrower or any of its Subsidiaries by any Person or Gov-
ernmental Authority, (iii) any refusal by any Person or Gov-
ernmental Authority to renew or extend any such material In-
tellectual Property, license, permit, franchise or other au-
thorization, which lapse, termination, refusal or dispute
could reasonably be expected to have a Material Adverse Effect
and (iv) the termination of the business operation of any Jen-
nifer Outlet Store not owned by the Borrower as a result of
the change referred to in subsection (a) (iii) above;
(c) Promptly upon becoming available, copies
of all (i) regular, periodic or special reports, schedules and
other material which the Borrower or any of its Subsidiaries
may now or hereafter be required to file with or deliver to
any securities exchange or the SEC and (ii) material news re-
leases and annual reports relating to the Borrower or any of
its Subsidiaries;
(d) Prompt written notice of any order, no-
xxxx, claim or proceeding received by, or brought against, the
Borrower or any of its Subsidiaries, or with respect to any of
the Real Property, under any Environmental Law;
(e) In the event that the Bank shall have a
reasonable basis for believing that Hazardous Substances may
be on, at, under or around any Real Property in violation of
any applicable Environmental Law, conduct and complete (at the
Borrower's expense) all investigations, studies, samplings and
testings relative to such Hazardous Substances as the Bank may
reasonably request;
(f) Such other information as the Bank shall rea-
sonably request from time to time.
- 32 -
7.3. Legal Existence.
Maintain, and cause each of its Subsidiaries so to
maintain, the corporate or partnership existence of the Bor-
rower or such Subsidiary, as the case may be, in good standing
in the jurisdiction of its incorporation or formation, as the
case may be, and in each other jurisdiction in which the fail-
ure so to do could reasonably be expected to have a Material
Adverse Effect, provided that a Subsidiary need not maintain
its corporate or partnership existence in the jurisdiction of
its incorporation or formation if the failure so to do could
not reasonably be expected to have a Material Adverse Effect.
7.4. Taxes.
Pay and discharge when due, and cause each of its
Subsidiaries so to do, all Taxes, assessments and governmental
charges, license fees and levies upon, or with respect to, the
Borrower or such Subsidiary, as the case may be, and all Taxes
upon the income, profits and Property of the Borrower and its
Subsidiaries, which if unpaid, could reasonably be expected to
have a Material Adverse Effect or become a Lien on the Prop-
erty of the Borrower or such Subsidiary, as the case may be
(other than a Permitted Lien), unless and to the extent only
that such Taxes, assessments, charges, license fees and levies
shall be contested in good faith and by appropriate proceed-
ings diligently conducted by the Borrower or such Subsidiary,
as the case may be, and provided that any such contested Tax,
assessment, charge, license fee or levy shall not constitute,
or create, a Lien on any Property of the Borrower or such Sub-
sidiary, as the case may be, senior or equal to the Liens
granted to the Bank by the Security Agreement on such Prop-
erty, and, provided further, that the Borrower shall give the
Bank prompt notice of such contest and that such reserve or
other appropriate provision as shall be required by the Ac-
countants in accordance with GAAP shall have been made there-
for.
7.5. Insurance.
(a) Maintain, and cause each of its Subsidiaries so
to maintain, insurance with financially sound insurance xxxxx-
ers on such of its Property or such Subsidiary's Property, as
the case may be, against at least such risks, and in at least
such amounts, as are usually insured against by similar busi-
nesses and which, in the case of property insurance, shall be
in amounts sufficient to prevent the Borrower or such Subsid-
iary, as the case may be, from becoming a co-insurer, includ-
ing, without limitation, public liability (bodily injury and
property damage), fidelity, and workers' compensation with
- 33 -
deductibles not exceeding $5,000 per occurrence, and file with
the Bank within 10 days after request therefor a detailed list
of such insurance then in effect, stating the names of the
carriers thereof, the policy numbers, the insureds thereunder,
the amounts of insurance, dates of expiration thereof, and the
Property and risks covered thereby, together with a certifi-
cate of the Vice President-Finance and Treasurer (or such
other officer as shall be acceptable to the Bank) of the Bor-
rower certifying that in the opinion of such officer, such
insurance complies with the obligations of the Borrower under
this Section, and is in full force and effect.
(b) Insurance Covering Collateral. At all times
insure all of the tangible Collateral against all risks as are
customarily insured against by companies engaged in similar
businesses, and maintain at all times general public liability
insurance with respect to all of the tangible Collateral
against damage resulting from bodily injury, including death
or damage to Property of others, all such insurance being in
amounts equal to no less than that customarily carried by com-
panies engaged in similar businesses, with deductibles not
exceeding $5,000 per occurrence. Promptly upon request there-
for, the Borrower will deliver or cause to be delivered to the
Bank originals or duplicate originals of all such policies of
insurance. All such insurance policies shall be endorsed to
provide that, in respect of the interests of the Bank: (i) the
Bank shall be an additional insured, (i) twenty days' prior
written notice of any cancellation, reduction of amounts pay-
able, or any changes and amendments shall be given to the
Bank, and (iii) the Bank shall have the right, but not the
obligation, to pay any premiums due or to acquire other such
insurance upon the failure of the Borrower to pay the same or
to so insure. All property insurance policies shall name the
Bank as sole loss payee in respect of each claim relating to
the tangible Collateral and resulting in a payment under any
such insurance policy exceeding $100,000. Provided that no
Default or Event of Default shall exist, the Bank agrees,
promptly upon its receipt thereof, to pay over to the Borrower
the proceeds of such payment to enable the Borrower to repair,
restore or replace the Property subject to such claim. If a
Default or Event of Default shall exist, the Bank shall (i)
hold the proceeds of such payment as Collateral until such
Default or Event of Default shall no longer exist and then pay
over the same to the Borrower to enable the Borrower to re-
pair, restore or replace or cause to be repaired, restored or
replaced the Property subject to the claim which resulted in
such payment or (ii) hold such proceeds as Collateral and ap-
ply the same to the obligations of the Borrower under the Loan
Documents in such order, in such amounts and at such times as
the Bank shall decide.
- 34 -
(c) Concurrent Insurance. The Borrower shall not
take out separate insurance concurrent in form or contributing
in the event of loss with that required to be maintained pur-
suant to Section 7.5(b) unless the Bank has approved the car-
rier and the form and content of the insurance policy, includ-
ing, without limitation, naming the Bank as an additional in-
sured and sole loss payee thereunder.
7.6. Payment of Indebtedness and Performance of Oblia-
tions.
Pay and discharge when due, and cause each of its
Subsidiaries so to pay and discharge when due, all lawful In-
debtedness, obligations and claims for labor, materials and
supplies or otherwise which, if unpaid, might (i) have a Mate-
rial Adverse Effect, or (ii) become a Lien upon Property of
the Borrower or such Subsidiary, as the case may be, other
than a Permitted Lien, unless and to the extent only that the
validity of such Indebtedness, obligation or claim shall be
contested in good faith and by appropriate proceedings dili-
gently conducted by it or such Subsidiary, as the case may be,
and that any such contested Indebtedness, obligations or
claims shall not constitute, or create, a Lien on any Property
of the Borrower or such Subsidiary, as the case may be, senior
or equal to the Lien granted to the Bank under the Security
Agreement on such Property, and further provided that the Bor-
rower shall give the Bank prompt notice of any such contest
and that such reserve or other appropriate provision as shall
be required by the Accountants in accordance with GAAP shall
have been made therefor.
7.7. Condition of Property.
At all times, maintain, protect and keep in good
repair, working order and condition (ordinary wear and tear
excepted), and cause each of its Subsidiaries so to do, all
Property necessary to the operation of the Borrower's or such
Subsidiary's business, as the case may be.
7.8. Observance of Legal Requirements.
Observe and comply in all respects, and cause each
of its Subsidiaries so to do, with all laws, ordinances, or-
ders, judgments, rules, regulations, certifications, xxxx-
chises, permits, licenses, directions and requirements of all
Governmental Authorities, which now or at any time hereafter
may be applicable to it or such Subsidiary, as the case may
be, including, without limitation, ERISA and all Environmental
Laws, a violation of which could reasonably be expected to
- 35 -
have a Material Adverse Effect, except such thereof as shall
be contested in good faith and by appropriate proceedings
diligently conducted by it or such Subsidiary, as the case may
be, provided that the Borrower shall give the Bank prompt no-
xxxx of such contest and that such reserve or other appropri-
ate provision as shall be required by the Accountants in ac-
cordance with GAAP shall have been made therefor.
7.9. Inspection of Property; Books and Records; Discus-
sions.
Keep, and cause each of its Subsidiaries to keep,
proper books of record and account in which full, true and
correct entries in conformity with GAAP and all requirements
of law shall be made of all dealings and transactions in rela-
tion to the business and activities of the Borrower or such
Subsidiary, as the case may be, and permit representatives of
the Bank to visit the offices of the Borrower or such Subsid-
iary to inspect any of its or such Subsidiary's Property and
examine and make copies or abstracts from any of its or such
Subsidiary's books and records at any reasonable time and as
often as may reasonably be desired, and to discuss the busi-
ness, operations, prospects, licenses, Property and financial
condition of the Borrower or such Subsidiary with the officers
thereof and the Accountants.
7.10. Licenses, Intellectual Property.
Maintain, and cause each of its Subsidiaries to
maintain, in full force and effect, all material licenses,
franchises, Intellectual Property, permits, licenses, authori-
zations and other rights as are necessary for the conduct of
its or such Subsidiary's business.
7.11.Assignment of Trademark.
As soon as practicable but in any event within 60
days after the Effective Date, deliver to the Bank evidence in
all respects reasonably satisfactory to the Bank that the
Trademark shall have been duly and validly assigned to the
Borrower and all necessary applications, registrations and
recordings in connection therewith shall have been made, in-
cluding, without limitation, any such applications, registra-
tions and recordings which are required to be made in the
United States Patent and Trademark Office or in any similar
office or agency of the United States or any state thereof.
- 36 -
7.12. Minimum Consolidated Tangible Net Worth.
Maintain at all times during the periods set forth
below, Consolidated Tangible Net Worth in amounts not less
than the following:
Period Amount
Effective Date through
August 31, 1993 $22,000,000
September 1, 1993
through August 31, 1994 $23,000,000
September 1, 1994
through August 31, 1995 $24,000,000
September 1, 1995 and
thereafter $25,000,000
7.13. Current Ratio.
Maintain at all times during the periods set forth
below, a Current Ratio of not less than the ratios set forth
below:
Period Ratio
Effective Date through
August 31, 1994 3.00:1.00
September 1, 1994
and thereafter 3.50:1.00
7.14. Interest Coverage Ratio.
Maintain at all times an Interest Coverage Ratio of
not less than 4.00:1.00.
7.1.5. Maintenance of Certain Agreements.
Maintain each of the Warehousing Agreement and the
Greenfield Employment Agreement in full force and effect,
provided, however, that the Borrower may enter into a new
warehousing agreement with Xxxxxxxx Warehousing substantially
in the form of the draft thereof dated August 31, 1993 and
heretofore delivered to the Bank and (i) the Bank shall have
received, and be satisfied in all respects with, a copy of
- 37 -
such new warehousing agreement, (ii) the Borrower shall
maintain such new warehousing agreement in full force and
effect and (iii) unless the Warehousing Agreement shall be
superceded in its entirety by such new warehousing agreement,
the Borrower shall continue to maintain the Warehousing
Agreement in full force and effect.
8. NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as
this Agreement is in effect, any Loan remains outstanding and
unpaid, or any other amount is owing to the Bank under any
Loan Document the Borrower shall not, directly or indirectly:
8.1. Indebtedness.
Create, incur, assume or suffer to exist any li-
ability for Indebtedness, or permit any of its Subsidiaries so
to do, except (i) Indebtedness due under the Loan Documents,
(ii) Indebtedness of the Borrower or such Subsidiary existing
on the Effective Date as set forth on Schedule 8.1, but not
any increases or refinancings thereof and (iii) Indebtedness
consisting of Contingent Obligations permitted by Section 8.4.
8.2. Liens.
Create, incur, assume or suffer to exist any Lien,
or permit any of its Subsidiaries so to do, upon any of its
Property or such Subsidiary's Property, whether now owned or
hereafter acquired, except (i) Liens for Taxes, assessments or
similar charges incurred in the ordinary course of business
which are not delinquent or which are being contested in ac-
cordance with Section 7.4, provided that enforcement of such
Liens is stayed pending such contest, (ii) Liens in connection
with workers' compensation, unemployment insurance or other
social security obligations (but not ERISA), (iii) deposits or
pledges to secure bids, tenders, contracts (other than con-
tracts for the payment of money), leases, statutory obliga-
tions, surety and appeal bonds and other obligations of like
nature arising in the ordinary course of business, (iv) zoning
ordinances, easements, rights of way, minor defects, ir-
regularities, and other similar restrictions affecting Real
Property which do not materially adversely affect the value of
such Real Property or the financial condition of the Borrower
or such Subsidiary, as the case may be, or impair its use for
the operation of the business of the Borrower or such Subsid-
iary, (v) statutory Liens arising by operation of law such as
- 38 -
mechanics', materialmen's, carriers', warehousemen's liens in-
curred in the ordinary course of business which are not xxxxx-
xxxxx or which are being contested in accordance with Section
7.6, provided that enforcement of such Liens is stayed pending
such contest, (vi) Liens arising out of judgments or decrees
which are being contested in accordance with Section 7.8, pro-
vided that enforcement of such Liens is stayed pending such
contest, (vii) Liens in favor of the Bank under the Security
Agreement and (viii) Liens on Property of the Borrower or such
Subsidiary, as the case may be, existing on the Effective Date
as set forth on Schedule 8.2, but not any increases or
ref inancings in the amounts secured thereby.
8.3. Merger. Consolidation and Certain Dispositions of
Property.
Consolidate with, be acquired by, or merge into or
with any Person, or sell, lease or otherwise dispose of all or
substantially all of its Property, or permit any of its Sub-
sidiaries so to do, provided, however, that any such Subsid-
iary which owns a Xxxxxxxx Outlet Store may dispose of all or
substantially all of its Property in connection with the ter-
mination of the business operation of such Xxxxxxxx Outlet
Store.
8.4. Continent Obligations.
Assume, guarantee, indorse, contingently agree to
purchase or perform, or otherwise become liable upon any Con-
tingent Obligation or permit any of its Subsidiaries so to do,
except (i) the Contingent Obligations of the Borrower or such
Subsidiary, as the case may be, existing on the Effective Date
as set forth on Schedule 8.4 and (ii) the Contingent Obliga-
tions of the Borrower under the Xxxxxxxx Guaranty.
8.5. Dividends and Purchase of Stock.
Declare or pay any dividends payable in cash or oth-
erwise or apply any of its Property to the purchase, redemp-
tion or other retirement of, or set apart any sum for the pay-
ment of any dividends on, or make any other distribution by
reduction of capital or otherwise in respect of, any shares of
its Stock, or permit any of its Subsidiaries so to do, except
that a wholly-owned Subsidiary of the Borrower may declare and
pay dividends to the Borrower.
8.6. Investments. Loans. Etc.
At any time, purchase or otherwise acquire, hold or
invest in the Stock of, or any other interest in, any Person,
- 39 -
or make any loan or advance to, or enter into any arrangement
for the purpose of providing funds or credit to, or make any
other investment, whether by way of capital contribution, time
deposit or otherwise, in or with any Person, or permit any of
its Subsidiaries so to do, (all of which are sometimes re-
ferred to herein as "Investments") except:
(a) Investments in short-term domestic and
eurodollar time deposits with the Bank, or any other com-
mercial bank, trust company or national banking association
incorporated under the laws of the United States or any state
thereof and having undivided capital, surplus and undivided
profits exceeding $500,000,000;
(b) Investments in short-term direct obliga-
tions of the United States or agencies thereof whose obliga-
tions are guaranteed by the United States;
(c) Investments existing on the date hereof as
set forth on Schedule 8.6;
(d) Investments consisting of loans or ad-
vances to Affiliates in an aggregate outstanding principal
amount not exceeding at any time $8,000,000, provided that (i)
each such loan or advance shall be on such terms and shall be
secured by such collateral as shall be satisfactory to the
Bank and (ii) no Default or Event of Default shall exist im-
mediately before or after giving effect to each such loan or
advance;
(e) Investments in connection with the estab-
lishment after the Effective Date of additional Subsidiaries
pursuant to Section 8.9 in an aggregate amount not exceeding
$5,000,000; and
(f) normal business banking accounts and
short-term certificates of deposit and time deposits in, or
issued by, federally insured institutions in amounts not ex-
ceeding the limits of such insurance.
8.7. Business and Name Chanes.
Materially change the nature of the business of the
Borrower and its Subsidiaries as conducted on the Effective
Date, or alter or modify its name, structure or status, or
permit any of its Subsidiaries so to do.
- 40 -
8.8. Sale of Property.
Sell, exchange, lease, transfer or otherwise dispose
of any of its Property, or permit any of its Subsidiaries so
to do, except sales in the ordinary course of business.
8.9. Subsidiaries.
Create or acquire any Subsidiary not set forth on
Schedule 4.1, or permit any of its Subsidiaries so to do, ex-
cept that the Borrower or such Subsidiary, as the case may be,
shall be permitted to create additional Subsidiaries provided
that (i) the business of each such additional Subsidiary shall
consist solely of owning and operating a Xxxxxxxx Outlet Store
and (ii) the aggregate number of all additional Subsidiaries
permitted to be created hereunder shall not exceed twelve.
8.10. Certificate of Incorporation and By-laws.
Amend or otherwise modify its certificate of incor-
poration or by-laws in any way which would adversely affect
the interests of the Bank under any of the Loan Documents, or
permit any of its Subsidiaries so to do.
8.11. ERISA.
Adopt or become obligated to contribute to any Plan
or Multiemployer Plan, or permit any ERISA Affiliate so to do.
8.12. Prepavments of Indebtedness.
Prepay or obligate itself to prepay, in whole or in
part, any Indebtedness (other than the Indebtedness under the
Loan Documents), or permit any of its Subsidiaries so to do.
8.13. Sale and Leaseback.
Enter into any arrangement with any Person providing
for the leasing by it of Property which has been or is to be
sold or transferred by it to such Person or to any other Per-
son to whom funds have been or are to be advanced by such Per-
son on the security of such Property or its rental obliga-
tions, or permit any of its Subsidiaries so to do.
8.14. Fiscal Year.
Change its fiscal year from that in effect on the
Effective Date, or permit any of its Subsidiaries so to do.
- 41 -
8.15. Amendments. Etc. of Certain Areements.
Enter into or agree to any amendment, modification
or waiver of any term or condition of (i) the Warehousing
Agreement, except to the extent that any term or condition
thereof is amended, modified or waived pursuant to the new
warehousing agreement referred to in Section 7.15, (ii) the
Greenfield Employment Agreement or (iii) the new warehousing
agreement referred to in Section 7.15.
8.16. Transactions with Affiliates.
Except as permitted under Section 8.6(d), become a
party to any transaction with an Affiliate unless its Board of
Directors shall have determined that the terms and conditions
relating thereto are as favorable to it as those which would
be obtainable at the time in a comparable arm's-length trans-
action with a Person other than such Affiliate, or permit any
of its Subsidiaries so to do.
8.17. Maintenance of Cash and Cash Equivalents.
Permit, at any time, the cash and cash equivalents
of the Borrower and its Subsidiaries on deposit with, or is-
sued by, the Bank to be in an amount less than $2,000,000.
9. DEFAULT
9.1. Events of Default.
The following shall each constitute an "Event of
Default" hereunder:
(a) The failure of the Borrower to pay princi-
pal on the Note on the date when due and payable or to pay any
installment of interest or any other fees or expenses payable
by it under any Loan Document when due and payable; or
(b) The use of the proceeds of any Loan in a
manner inconsistent with or in violation of Section 2.8; or
(c) The failure of the Borrower to observe or
perform any covenant or agreement contained in Sections 7.3,
7.12, 7.13, 7.14, 7.15 or Section 8; or
(d) The failure to observe or perform any
other term, covenant, or agreement contained in any Loan Docu-
ment and such failure shall have continued unremedied for a
- 42 -
period of 30 days after the Chairman, President, Chief Execu-
tive Officer, the Vice President-Finance and Treasurer or any
other Vice President of the Borrower shall have obtained ac-
tual knowledge thereof; or
(e) Any representation or warranty of the Bor-
rower (or of any officer of the Borrower on its behalf) made
in any Loan Document or in any certificate, report, opinion
(other than an opinion of counsel) or other document delivered
or to be delivered pursuant thereto, shall prove to have been
incorrect or misleading (whether because of misstatement or
omission) in any material respect when made; or
(f) Obligations of the Borrower (other than
its obligations under the Note) or any of its Subsidiaries in
an aggregate amount for the Borrower and its Subsidiaries in
excess of $150,000, whether as principal, guarantor, surety or
other obligor, for the payment of any Indebtedness or operat-
ing leases (i) shall become or shall be declared to be due and
payable prior to the expressed maturity thereof, or (ii) shall
not be paid when due or within any grace period for the pay-
ment thereof, or (iii) any holder of any such obligation shall
have the right to declare such obligation due and payable
prior to the expressed maturity thereof; or
(g) The Borrower or any of its Subsidiaries
shall (i) suspend or discontinue its business, (ii) make an
assignment for the benefit of creditors, (iii) generally not
be paying its debts as such debts become due, (iv) admit in
writing its inability to pay its debts as they become due, (v)
file a voluntary petition in bankruptcy, (vi) become insolvent
(however such insolvency shall be evidenced), (vii) file any
petition or answer seeking for itself any reorganization, ar-
rangement, composition, readjustment of debt, liquidation or
dissolution or similar relief under any present or future
statute, law or regulation of any jurisdiction, (viii) peti-
tion or apply to any tribunal for any receiver, custodian or
any trustee for any substantial part of its Property, (ix) be
the subject of any such proceeding filed against it which re-
mains undismissed for a period of 45 days, (x) file any answer
admitting or not contesting the material allegations of any
such petition filed against it or any order, judgment or xx-
xxxx approving such petition in any such proceeding, (xi)
seek, approve, consent to, or acquiesce in any such proceed-
ing, or in the appointment of any trustee, receiver, custo-
xxxx, liquidator, or fiscal agent for it, or any substantial
part of its Property, or an order is entered appointing any
such trustee, receiver, custodian, liquidator or fiscal agent
and such order remains in effect for 45 days, (xii) take any
- 43 - `
formal action for the purpose of effecting any of the forego-
ing or looking to its liquidation or dissolution; or
(h) An order for relief is entered under the
United States bankruptcy laws or any other decree or order is
entered by a court having jurisdiction (i) adjudging the Bor-
rower or any of its Subsidiaries bankrupt or insolvent, (ii)
approving as properly filed a petition seeking reorganization,
liquidation, arrangement, adjustment or composition of or in
respect of the Borrower or any of its Subsidiaries under the
United States bankruptcy laws or any other applicable federal
or state law, (iii) appointing a receiver, liquidator, as-
signee, trustee, custodian, sequestrator (or other similar
official) of the Borrower or any of its Subsidiaries or of any
substantial part of the Property thereof, (iv) ordering the
winding up or liquidation of the affairs of the Borrower or
any of its Subsidiaries, and any such decree or order contin-
ues unstayed and in effect for a period of 45 days; or
(i) Judgments or decrees against the Borrower
or any of its Subsidiaries in an aggregate amount for the Bor-
rower and its Subsidiaries in excess of $150,000 shall remain
unpaid, unstayed on appeal, undischarged, unbonded or
undismissed for a period of 30 days; or
(j) The occurrence of an Event of Default un-
der and as defined in the Security Agreement; or
(k) Any Loan Document shall cease, for any
reason, to be in full force and effect, or the Borrower shall
so assert in writing or shall disavow any of its obligations
thereunder; or
(l) There shall occur a Material Adverse
Change; or
(m) Greenfield, Love and Xxxxxxx shall, col-
lectively, not own, directly or indirectly, at least 10% of
the issued and outstanding voting common Stock of the Borrower
free and clear of all Liens; or
(n) The occurrence of a default under the
Warehousing Loan Agreement and the applicable grace period or
cure period, if any, with respect thereto shall have expired;
or
(o) The occurrence of a default under the
Warehousing Agreement and the applicable grace period or cure
period, if any, with respect thereto shall have expired; or
- 44 -
(p) The occurrence of a default under the
Greenfield Employment Agreement and the applicable grace pe-
riod or cure period, if any, with respect thereto shall have
expired.
Upon the occurrence of an Event of Default or at any
time thereafter during the continuance thereof, (a) if such
event is an Event of Default specified in clause (g) or (h)
above, the Commitment shall immediately and automatically ter-
minate and the Loans, all accrued and unpaid interest thereon,
and all other amounts owing to the Bank under the Loan Docu-
ments shall immediately become due and payable, and the Bank
may exercise any and all remedies and other rights provided to
it in the Loan Documents, and (b) if such event is any other
Event of Default, any or all of the following actions may be
taken: (i) the Bank may declare the Commitment to be termi-
nated forthwith, whereupon the Commitment shall immediately
terminate, and (ii) the Bank may, by notice to the Borrower,
declare the Loans, all accrued and unpaid interest thereon and
all other amounts owing to it under the Loan Documents to be
due and payable forthwith, whereupon the same shall im-
mediately become due and payable and the Bank may exercise any
and all remedies and other rights provided to it in the Loan
Documents. Except as otherwise provided in this Section, pre-
sentment, demand, protest and all other notices of any kind
are hereby expressly waived. The Borrower hereby further ex-
pressly waives and covenants not to assert any appraisement,
valuation, stay, extension, redemption or similar laws, now or
at any time hereafter in force which might delay, prevent or
otherwise impede the performance or enforcement of any Loan
Document.
In the event that the Commitment shall have been
terminated or the Note shall have been declared due and pay-
able pursuant to the provisions of this Section, any funds
received by the Bank from or on behalf of the Borrower shall
be applied by the Bank in liquidation of the Loans and the
obligations of the Borrower under the Loan Documents in the
following manner and order: (i) first, to the payment of any
fees or expenses due the Bank from the Borrower; (ii) second,
to reimburse the Bank for any expenses due to the Bank under
the Loan Documents; (iii) third, to the payment of accrued
Commitment Fees, and all other fees, expenses and amounts due
the Bank under the Loan Documents (other than principal and
interest on the Note); (iv) fourth, to the payment of interest
due on the Note; (v) fifth, to the payment of principal out-
standing on the Note; and (vi) sixth, to the payment of any
other amounts owing to the Bank under any Loan Document.
- 45 -
10. OTHER PROVISIONS.
10.1. Amendments and Waivers.
The Bank and the Borrower may, from time to time,
enter into written amendments, supplements or modifications of
the Loan Documents and the Bank may execute and deliver to the
Borrower a written instrument waiving or a consent to a depar-
ture from, on such terms and conditions as the Bank may
specify in such instrument, any of the requirements of the
Loan Documents or any Default or Event of Default and its con-
sequences. Any such amendment, supplement, modification,
waiver or consent shall be binding upon the Borrower, the Bank
and all future holders of the Note. In the case of any
waiver, the Borrower and the Bank shall be restored to their
former position and rights under the Loan Documents, and any
Default or Event of Default waived shall not extend to any
subsequent or other Default or Event of Default, or impair any
right consequent thereon.
10.2. Notices.
All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing
and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made (i) when delivered by
hand, (ii) three Business Days after having been deposited in
the mail, first-class postage prepaid or (iii) when sent, in
the case of telecopier notice, in each case, addressed as fol-
lows:
if to the Borrower:
Xxxxxxxx Convertibles, Inc.
East 000 Xxxxx 0 Xxxx
Xxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx,
President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx
1290 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
- 00 -
xxx
Xxxxxxx Xxxxxx, Xxx.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
if to the Bank:
IBJ Xxxxxxxx Bank & Trust Company
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxxxx,
Assistant Vice President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000,
except that any notice, request or demand by the Borrower to
or upon the Bank pursuant to Section 2.3 shall not be ef fec-
tive until received. Any party to a Loan Document may rely on
signatures of the parties thereto which are transmitted by
telecopier or other electronic means as fully as if originally
signed.
10.3. No Waiver: Cumulative Remedies.
No failure to exercise and no delay in exercising,
on the part of the Bank, any right, remedy, power or privilege
under any Loan Document shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy,
power or privilege under any Loan Document preclude any other
or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, pow-
ers and privileges under the Loan Documents are cumulative and
not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4. Survival of Representations and Warranties.
All representations and warranties made under the
Loan Documents and in any document, certificate or statement
delivered pursuant thereto or in connection therewith shall
survive the execution and delivery of the Loan Documents.
- 47 -
10.5. Payment of Expenses and Taxes.
The Borrower agrees, promptly upon presentation of a
statement or invoice therefor, to pay or reimburse the Bank
for all its out-of-pocket costs and expenses, including, with-
out limitation, the reasonable fees and disbursements of its
counsel, incurred in connection with (i) the development,
preparation and execution of the Loan Documents and any amend-
ment, supplement or modification thereto (whether or not ex-
ecuted and whether or not any Loan is made), any documents
prepared in connection therewith and the consummation of the
tranactIons conteniplated thereby, as well as all accounting,
audit, appraisal, field exam and credit and background check
fees incurred from time to time by the Bank, (ii) any Default
or Event of Default and any enforcement or collection proceed-
ings resulting therefrom or in connection with the negotiation
of any restructuring or "work-out" (whether consummated or
not) of the obligations of the Bank and the Borrower under any
of the Loan Documents and (iii) the enforcement of this Sec-
tion. In addition, the Borrower agrees to (i) pay, indemnify,
and hold the Bank harmless from and against, any and all re-
cording and filing fees and any and all liabilities with re-
spect to, or resulting from any delay in paying, stamp, excise
and other similar taxes, if any, which may be payable or de-
termined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions con-
templated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, the Loan
Documents and any such other documents, and (ii) pay, indem-
nify and hold the Bank and its officers, directors and employ-
ees harmless from and against any and all other liabilities,
obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind
or nature whatsoever (including, without limitation, reason-
able counsel fees and disbursements) with respect to the en-
forcement and performance of the Loan Documents, the use of
the proceeds of the Loans and the enforcement and performance
of the provisions of any subordination agreement now or here-
after executed in favor of the Bank (all the foregoing, col-
lectively, the "Indemnified Liabilities") and, if and to the
extent that the foregoing indemnity may be unenforceable for
any reason, the Borrower agrees to make the maximum payment
permitted or not prohibited under applicable law, provided,
however, that the Borrower shall have no obligation hereunder
to pay Indemnified Liabilities to the Bank to. the extent aris-
ing from the gross negligence or willful miconduct of the
Bank or claims between one indemnified party and another in-
demnified party. The agreements in this Section shall survive
the termination of the Commitment and the payment of all
amounts payable under the Loan Documents.
- 48 -
10.6. Successors and Assigns.
(a) The Loan Documents shall be binding upon and
inure to the benefit of the Borrower, the Bank, all future
holders of the Note and their respective successors and as-
signs, except that the Borrower may not assign, delegate or
transfer any of its rights or obligations under the Loan Docu-
ments without the prior written consent of the Bank.
(b) The Bank may from time to time grant participa-
tions in or assign all or any part of the Loans, the Note, or
the Commitment to one or more banks, insurance companies, fi-
nancial institutions, pension funds, mutual funds or other
corporations or institutions. The Borrower agrees, at its
expense, to cooperate fully with the Bank in connection with
any such participation or assignment and to execute and de-
liver such documents (including, without limitation, a new
Note or notes) as the Bank shall reasonably require.
(c) If any participation or assignment pursuant to
subsection (b) above shall be made to any Person that is orga-
nized under the laws of any jurisdiction other than the United
States or any State thereof, such Person shall deliver to the
Borrower and the Bank such certificates, documents or other
evidence as the Borrower or the Bank may require from time to
time as are necessary to establish that such Person is not
subject to withholding under Section 1441 or 1442 of the Code
or as may be necessary to establish, under any law imposing
upon the Borrower, whether existing at the time of such par-
ticipation or assignment or thereafter, an obligation to with-
hold any portion of the payments made by the Borrower under
the Loan Documents, that payments to such Person are not sub-
ject to any such withholding because such Person is eligible
for the benefits of a tax treaty which provides for a zero %
rate of tax on any payments under the Loan Documents or be-
cause any such payments to such Person are effectively con-
nected with the conduct by such Person of a trade or business
in the United States.
(d) The Bank shall not, as between the Borrower and
the Bank, be relieved of any of its obligations under the Loan
Documents as a result of the granting of participations in all
or any part of the Loans, the Commitment or the Note.
(e) Notwithstanding anything to the contrary con-
tained in Section 10.6(b), the Bank may at any time or from
time to time assign all or any portion of its rights under the
Loan Documents to a Federal Reserve Bank, provided that any
- 49 -
such assignment shall not release the Bank from its obliga-
tions thereunder.
10.7. Counterparts.
Each Loan Document (other than the Note) may be ex-
ecuted by one or more of the parties thereto on any number of
separate counterparts and all of said counterparts taken to-
gether shall be deemed to constitute one and the same docu-
ment. It shall not be necessary in making proof of any Loan
Document to produce or account for more than one counterpart
signed by the party to be charged. A telecopied counterpart
of any Loan Document or to any document evidencing, and of any
amendment, modification, consent or waiver to or of any Loan
Document shall be deemed to be an originally executed counter-
part. Any party to a Loan Document may rely upon the signa-
tures of any other party thereto which are transmitted by
telecopier or other electronic means to the same extent as if
originally signed.
10.8. Set-off.
In addition to any rights and remedies of the Bank
provided by law, upon the occurrence of an Event of Default
and the acceleration of the obligations owing to the Bank in
connection with the Loan Documents, or at any time upon the
occurrence and during the continuance of an Event of Default,
under Section 9.1(a), the Bank shall have the right, without
prior notice to the Borrower, any such notice being expressly
waived by the Borrower to the extent not prohibited by ap-
plicable law, to set-off and apply against any amounts owing
to the Bank in connection with the Loan Documents, at, or at
any time after, the happening of any of the above-mentioned
events, including, without limitation, all deposits referred
to in Section 8.17, all deposits created pursuant to the Cash
Management Services Agreement and the ACM Cash Concentration
Services Agreement and all other deposits of the Borrower with
the Bank. To the extent not prohibited by applicable law, the
aforesaid right of set-off may be exercised by the Bank
against the Borrower or against any trustee in bankruptcy,
custodian, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment
creditor of the Borrower, or against anyone else claiming
through or against the Borrower or such trustee in bankruptcy,
custodian, debtor in possession, assignee for the benefit of
creditors, receivers, or execution, judgment or attachment
creditor, notwithstanding the fact that such right of set-off
shall not have been exercised by the Bank prior to the making,
filing or issuance, or service upon the Bank of, or of notice
- 50 -
of, any such petition, assignment for the benefit of credi-
tors, appointment or application for the appointment of a re-
ceiver, or issuance of execution, subpoena, order or warrant.
The Bank agrees promptly to notify the Borrower after any such
set-off and application made by the Bank, provided that the
failure to give such notice shall not affect the validity of
such set-off and application.
10.9. Indemnity.
The Borrower agrees to indemnify and hold harmless
the Bank and its affiliates, directors, officers, employees,
attorneys and agents (each an "Indemnified Person") from and
against any loss, cost, liability, damage or expense (includ-
ing the reasonable fees and disbursements of counsel of such
Indemnified Person, including all local counsel hired by any
such counsel) incurred by such Indemnified Person in investi-
gating, preparing for, defending against, or providing evi-
dence, producing documents or taking any other action in re-
spect of, any commenced or threatened litigation, administra-
tive proceeding or investigation under any federal securities
law or any other statute of any jurisdiction, or any regula-
tion, or at common law or otherwise, which is alleged to arise
out of or is based upon (i) any untrue statement or alleged
untrue statement of any material fact by the Borrower in any
document or schedule executed or filed with any Governmental
Authority by or on behalf of the Borrower; (ii) any omission
or alleged omission to state any material fact required to be
stated in such document or schedule, or necessary to make the
statements made therein, in light of the circumstances under
which made, not misleading; (iii) any acts, practices or omis-
sions or alleged acts, practices or omissions of the Borrower
or its agents relating to the use of the proceeds of any or
all borrowings made by the Borrower which are alleged to be in
violation of Section 2.8, or in violation of any federal se-
curities law or of any other statute, regulation or other law
of any jurisdiction applicable thereto; or (iv) any acquisi-
tion or proposed acquisition by the Borrower of all or a por-
tion of the Stock, or all or a portion of the assets, of any
-Person whether or not such Indemnified Person is a party
thereto. The indemnity set forth herein shall be in addition
to any other obligations or liabilities of the Borrower to
each Indemnified Person under the Loan Documents or at common
law or otherwise, and shall survive any termination of the
Loan Documents, the expiration of the Commitment and the pay-
ment of all Indebtedness of the Borrower under the Loan Docu-
ments, provided that the Borrower shall have no obligation
under this Section to an Indemnified Person with respect to
any of the foregoing to the extent found in a final judgment
of a court having jurisdiction to have resulted primarily out
- 51 -
of the gross negligence or wilful misconduct of such Indemni-
fied Person or arising solely from claims between one such
Indemnified Person and another such Indemnified Person.
10.10. Governing Law.
The Loan Documents and the rights and obligations of
the parties thereunder shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State
of New York, without regard to principles of conflict of laws.
10.11. Headings Descriptive.
Section headings have been inserted in the Loan
Documents for convenience only and shall not be construed to
be a part thereof.
10.12. Severability.
Every provision of the Loan Documents is intended to
be severable, and if any term or provision thereof shall be
invalid, illegal or unenforceable for any reason, the valid-
ity, legality and enforceability of the remaining provisions
thereof shall not be affected or impaired thereby, and any in-
validity, illegality or unenforceability in any jurisdiction
shall not affect the validity, legality or enforceability of
any such term or provision in any other jurisdiction.
10.13. Integration.
All exhibits to a Loan Document shall be deemed to
be a part thereof. The Loan Documents embody the entire
agreement and understanding among the Borrower and the Bank
with respect to the subject matter thereof and supersede all
prior agreements and understandings among the Borrower and the
Bank with respect to the subject matter thereof.
10.14. Consent to Jurisdiction.
The Borrower hereby irrevocably submits to the ju-
risdiction of any New York State or federal court sitting in
the City of New York over any suit, action or proceeding aris-
ing out of or relating to the Loan Documents. The Borrower
hereby irrevocably waives, to the fullest extent permitted or
not prohibited by law, any objection which it may now or here-
after have to the laying of the venue of any such suit, action
or proceeding brought in such a court and any claim that any
such suit, action or proceeding brought in such a court has
been brought in an inconvenient forum. The Borrower hereby
- 52 -
agrees that a final judgment in any such suit, action or pro-
ceeding brought in such a court, after all appropriate ap-
peals, shall be conclusive and binding upon it.
10.15. Service of Process.
The Borrower agrees that process may be served
against it in any suit, action or proceeding referred to in
Section 10.14 by sending the same by first-class mail, or by
overnight courier service, to the address of the Borrower set
forth in Section 10.2. The Borrower hereby agrees that any
such service (i) shall be deemed in every respect effective
service of process upon it in any such suit, action, or pro-
ceeding, and (ii) shall to the fullest extent enforceable by
law, be taken and held to be valid personal service upon and
personal delivery to it.
10.16. No Limitation on Service or Suit.
Nothing in the Loan Documents or any modification,
waiver, consent or amendment thereto shall affect the right of
the Bank to serve process in any manner permitted by law or
limit the right of the Bank to bring proceedings against the
Borrower in the courts of any jurisdiction or jurisdictions in
which the Borrower may be served.
10.17. WAIVER OF TRIAL BY JURY.
THE BANK AND THE BORROWER HEREBY KNOWINGLY, VOL-
UNTARILY AND INTENTIONALLY WAIVE ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSAC-
TIONS CONTEMPLATED THEREIN. FURTHER, THE BORROWER HEREBY CER-
TIFIES THAT NO REPRESENTATIVE OF THE BANK OR COUNSEL TO THE
BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK
WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE
THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. THE BORROWER
ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS SECTION.
10.18. Concerning Inventory Owned by Subsidiaries.
If the Borrower shall so request in writing, the
Bank will consider such amendments to the Loan Documents as
may be necessary or appropriate in its sole and absolute dis-
cretion to include inventory owned by Subsidiaries of the Bor-
rower in the Borrowing Base, provided that nothing herein
shall require the Bank to agree to any such amendment unless
it shall, in its sole and absolute discretion, decide to do
so. In the event that the Bank shall agree to so include such
- 53 - `
inventory, the Bank shall not be under any obligation to ex-
ecute any such amendment or related document unless it shall,
in its sole and absolute discretion, deem such amendment and
related documents to be in form and substance satisfactory to
it.
- 54 -
The parties hereto have caused this Credit Agreement
to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above
written.
XXXXXXXX CONVERTIBLES, INC.,
a Delaware corporation
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
IBJ XXXXXXXX BANK & TRUST COMPANY
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
- 55 -
The parties hereto have caused this Credit Agreement
to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above
written.
XXXXXXXX CONVERTIBLES, INC.,
a Delaware corporation
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
IBJ XXXXXXXX BANK & TRUST COMPANY
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
- 56 -
XXXXXXXX CONVERTIBLES EXHIBIT A
FORM OF NOTE
$2,000,000 _____________, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, XXXXXXXX CONVERTIBLES, INC., a Dela-
ware corporation (the "Borrower"), hereby promises to pay on
tho Maturity Date to the order of IBJ XXXXXXXX BANK & TRUST
COMPANY (the "Bank"), at the office of the Bank located at
One State Street, New York, New York or at such other place
as the Bank may specify from time to time, in lawful money of
the United States of America, the principal sum of
$2,000,000, or such lesser unpaid principal balance as shall
be outstanding hereunder, together with interest from the
date hereof, on the unpaid principal balance hereof
outstanding from time to time, payable at the rate or rates
and at the time or times provided for in the Credit Agree-
ment, dated as of August 31, 1993, by and between the
Borrower and the Bank (as the same may be amended, supple-
mented or otherwise modified from time to time, the
"Agreement"). Capitalized terms used herein which are not
herein defined shall have the meanings ascribed thereto by
the Agreement. In no event shall interest payable hereon
exceed the Highest Lawful Rate.
This Note is the Note referred to in the Agreement and
is entitled to the benefits of, and is subject to the terms
set forth in, the Agreement. The principal of this Note is
payable in the amounts and under the circumstances, and its
maturity is subject to acceleration upon the terms, set forth
in the Agreement. Except as otherwise provided in the Agree-
ment, if any payment on this Note becomes due and payable on
a day which is not a Business Day, the maturity thereof shall
be extended to the next Business Day and interest shall be
payable at the applicable rate or rates specified in the
Agreement during such extension period.
Presentment for payment, demand, protest, notice of pro-
test and notice of dishonor and all other demands, protests
and notices in connection with the delivery, performance and
enforcement of this Note are hereby waived, except as
specifically otherwise provided in the Agreement.
This Note is being delivered in, is intended to be per-
formed in, shall be construed and interpreted in accordance
with, and be governed by the internal laws of, the State of
New York, without regard to principles of conflicts of law.
This Note may only be amended by an instrument in writ-
ing executed pursuant to the provisions of Section 10.1 of
the Agreement.
XXXXXXXX CONVERTIBLES, INC.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
-2-
SCHEDULE TO
NOTE
Amount of
principal
paid or Notation
Date Amount prepaid Made By
---- ------ ------- -------
XXXXXXXX CONVERTIBLES EXHIBIT B
FORM OF BORROWING REQUEST
______________ __, 199_
IBJ Xxxxxxxx Bank &
Trust Company
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxxxx,
Assistant Vice President
Re: Credit Agreement, dated as of August 31, 1993, by
and between XXXXXXXX CONVERTIBLES, INC. (the "Bor-
rower") and IBJ XXXXXXXX BANK & TRUST COMPANY (the
"Agreement").
Capitalized terms used herein which are not herein
defined shall have the meanings ascribed thereto by the
Agreement.
1. Pursuant to Section 2.3 of the Agreement, the Bor-
rower hereby gives notice of its intention to borrow Loans in
an aggregate principal amount of $_______ on ______ __, 199 .
2. The Borrower hereby certifies that on the date
hereof and on the Borrowing Date set forth above, and after
giving effect to the Loans requested hereby:
(a) The Borrower is and shall be in compliance with
all of the terms, covenants and conditions of the Loan Docu-
ments.
(b) There exists and there shall exist no Default
or Event of Default.
(c) Each of the representations and warranties con-
tained in the Agreement are true and correct on and as of the
date hereof, and on the Borrowing Date set forth above.
(d) Immediately after giving effect to the Loans,
if any, requested to be made hereby, the aggregate outstanding
principal balance of the Loans does not exceed the lesser of
(i) the Commitment Amount on and as of such date and (ii) the
Borrowing Base on and as of such date.
The Borrower has caused this certificate to be executed
by its Authorized Signatory as of the date and year first
written above.
XXXXXXXX CONVERTIBLES, INC.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
XXXXXXXX CONVERTIBLES EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
Date: ____________
I, ______________, do hereby certify that I am the Vice
President-Finance and Treasurer of Xxxxxxxx Convertibles, Inc.,
a Delaware corporation (the "Borrcwer"), and that, as such, I
am duly authorized to execute and deliver this Compliance Cer-
tificate on the Borrower's behalf pursuant to Sections 5.15 and
7.1(c) of the Credit Agreement, dated as of August 31, 1993, by
and between the Borrower and IBJ Xxxxxxxx Bank & Trust Company
(the "Bank") (as the same may be amended, supplemented or oth-
erwise modified from time to time, the "Agreement"). Capital-
ized terms used herein which are not herein defined shall have
the meanings ascribed thereto by the Agreement.
I hereby certify that:
1. Consolidated Tangible Net Worth as of ______
__, 199_, is $ , calculated as set forth on Schedule 1.
2. The Current Ratio as of ______ __, 199_, is
_. _ :1.00, calculated as set forth on Schedule 2.
3. The Interest Coverage Ratio as of ________ __,
199_, is _. __ :1.00, calculated as set forth on Schedule 3.
4. The amount of cash and cash equivalents of the
Borrower and it Subsidiaries on deposit with, or issued by, the
Bank as of _______ __, 199_ is $_________, calculated as set
forth on Schedule 4.
5. There exists no Default or Event of Default un-
der the Agreement and, since February 28, 1993, there has oc-
curred no Material Adverse Change.
6. The representations and warranties contained in
the Loan Documents to which the Borrower is a party are true
and correct in all material respects.
IN WITNESS WHEREOF, I have executed this Compliance Cer-
tificate on this ___ day of _______________, 19__.
---------------------------
Vice President- Finance
and Treasurer
-2-
Schedule 1 to Compliance Certificate
dated __ /__ /__
Computation of Consolidated Tangible Net Worth
1. Shareholders' equity of the
Borrower and its Subsidiaries
determined on a Consolidated
basis in accordance with GAAP $__________
2. Unamortized debt discount
and expenses $___________
3. Unamortized organization and
reorganization expenses $___________
4. Patents $__________
5. Trade or servicemarks $__________
6. Tradenames $__________
7. Franchises $__________
8. Goodwill $_________
9. Other intangible assets (Specify) $__________
10. Total intangible assets
(Sum of Items 2 through 9) $__________
11. Consolidated Tangible Net Worth
(Item 1 minus Item 10) $__________
12. Minimum Required Consolidated
Tangible Net Worth pursuant
to Section 7.12 of the Agreement $__________
Schedule 2 to Compliance Certificate
dated __/__/__
Computation of Current Ratio
Consolidated Current Assets:
1. Current assets of the Borrower
and its Subsidiaries determined
on a Consolidated basis in
accordance with GAAP $__________
Consolidated Current Liabilities:
2. Current liabilities of the
Borrower and its Subsidiaries
determined on a Consolidated
basis in accordance with
GAAP, including the current
portion of long-term Indebtedness $__________
3. Indebtedness in respect of
the Loans $___________
4. Consolidated Current Liabilities
(Item 2 less Item 3) $___________
5. Current Ratio
(Item 1:Item 4) __ . ___ :1.00
6. Minimum Required Current Ratio
pursuant to Section 7.13
of the Agreement __ . ___ :1.00
Schedule 3 to Compliance Certificate
dated __/__/__
Computation of Interest Coverage Ratio
1. Net income of the Borrower
and its Subsidiaries determined
on a Consolidated basis in
accordance with GAAP for the
immediately preceding four
fiscal quarters $___________
2. Taxes paid by the Borrower
and its Subsidiaries during
such period $__________
3. Interest expense of the Borrower
and its Subsidiaries determined
on a Consolidated basis in
accordance with GAAP (adjusted
to give affect to all interest
rate swap, cap or other interest
rate hedging arrangements and
fees and expenses paid in
connection with the same, all as
determined in accordance with
GAAP) to the extent paid or
payable in cash during such period $__________
4. Consolidated EBIT (Sum of Items 1,
2 and 3) $__________
5. Consolidated Cash Interest
Expense (from Item 3) $_________
6. Interest Coverage Ratio
(Item 4:Item 5) __ .__ :1.00
7. Minimum Required Interest
Coverage Ratio pursuant to
Section 7.14 of the Agreement 4.00:1.00
Schedule 4 to Compliance Certificate
dated __ /__ /__
Computation of Cash and Cash Equivalents
1. Cash of the Borrower and its
Subsidiaries on deposit
with, or issued by, the Bank $__________
2. Cash equivalents of the
Borrower and its Subsidiaries
on deposit with, or issued
by, the Bank $_________
3. Cash and cash equivalents
(Item 1 plus Item 2) $__________
4. Minimum permitted amount of cash
and cash equivalents pursuant to
Section 8.17 of the Agreement $ 2,000,000
EXHIBIT D
FORM OF OPINION OF COUNSEL TO THE BORROWER
[Date]
IBJ Xxxxxxxx Bank &
Trust Company
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Credit Agreement (the "Agreement"), dated
as of August 31, 1993, by and between Xxxxxxxx
Convertibles, Inc. and IBJ Xxxxxxxx Bank & Trust
Company (the "Bank")
Ladies and Gentlemen:
We have acted as special counsel to Xxxxxxxx
Convertibles, Inc., a Delaware corporation (the "Borrower"), in
connection with the Agreement and the other Loan Documents.
Capitalized terms used herein which are not herein defined shall
have the meanings ascribed thereto by the Agreement.
This opinion is furnished to you pursuant to Section
5.5 of the Agreement and may not be relied upon by any other
person other than you, your successors and assigns and Xxxxx,
Xxxxxx & Xxxxxx, Special Counsel, or for any purpose other than
in connection with the transactions contemplated by the
Agreement, without our prior written consent in each instance.
In connection with the foregoing and the delivery of
this opinion, we have examined (i) the executed original of the
Agreement, an executed original of the Note, executed originals
of the other Loan Documents, and financing statements on Form
UCC-1 signed by the Borrower, as debtor, and the Bank, as secured
party (collectively, the "Financing Statements"), in connection
with the execution and delivery of the Security Agreement; (ii)
the certificate of incorporation and by-laws, each as amended to
the date hereof, of the Borrower and (iii) those records of the
corporate proceedings of the Borrower as we have deemed necessary
as a basis for the opinions hereinafter expressed, including,
without limitation, proceedings relative to the Loan Documents
and the transactions contemplated thereby.
We have also examined originals or copies, verified or
otherwise identified to our satisfaction as being true copies, of
certain records, documents and instruments of the Borrower,
certificates of public officials, certificates of officers of the
Borrower and all other records, documents, certificates and
instruments as we have deemed necessary as a basis for the
opinions hereinafter expressed. In our examination, we have
assumed the genuineness of all signatures (other than those of
the Borrower), the authenticity of all documents submitted to us
as originals and the conformity with the originals (and the
authenticity of such originals) of all documents submitted to us
as copies.
Based upon and subject to the foregoing and the
qualifications set forth below, having regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. The Borrower is duly incorporated and validly
existing in good standing under the laws of the jurisdiction of
its formation, has all requisite power and authority to own its
Property and to carry on its business as now conducted, and is in
good standing and authorized to do business in each jurisdiction
in which the nature of the business conducted therein or the
Property owned therein makes such qualification necessary, except
where such failure to qualify could not reasonably be expected to
have a Material Adverse Effect. We have also assumed that the
Loan Documents have been duly executed and delivered by, and
constitute legal, valid and binding and enforceable obligations
of each of the parties thereto other than the Parties.
2. The Borrower has full legal power and corporate
authority to enter into, execute, deliver and perform the terms
of the Loan Documents and to make the borrowings contemplated by
the Agreement and the Note, to execute, deliver and carry out the
terms of the Note and to incur the obligations provided for
therein, all of which have been duly authorized by all proper and
necessary corporate action and do not violate its Certificate of
Incorporation or By-laws.
3. Each of the Loan Documents (other than the Note)
constitutes, and the Note, when issued and delivered pursuant to
the Agreement for value received, will constitute, the valid and
legally binding obligation of the Borrower, enforceable in
accordance with its terms.
4. To the best of our knowledge, except as set forth
in Section 4.5 to the Agreement, there are no actions, suits,
proceedings or claims (whether or not purportedly on behalf of
the Borrower) pending or threatened against the Borrower, or
maintained by the Borrower, at law or in equity, before any
Governmental Authority which: (i) if adversely determined, could
reasonably be expected to have a Material Adverse Effect or (ii)
call into question the validity or enforceability of the Loan
Documents.
5. No consent, authorization or approval of, notice
to, or exemption by, the stockholders, partners, any Governmental
Authority or any other Person (except for those which have been
obtained, made or given) is required to authorize, or is required
in connection with the execution, delivery and performance of the
Loan Documents, or is required as a condition to the validity or
enforceability of the Loan Documents.
-2-
6. To the best of our knowledge, the Borrower is not
in default under any mortgage, indenture, contract or agreement
to which it is a party or by which it or any of its Property is
bound, the effect of which default could reasonably be expected
to have a Material Adverse Effect. To the best of our knowledge,
the execution, delivery or carrying out of the terms of the Loan
Documents will not constitute a default under, or result in the
creation or imposition of, or obligation to create, any Lien upon
the Property of the Borrower pursuant to the terms of any
existing mortgage, indenture, contract or agreement.
7. To the best of our knowledge, the Borrower is not
in default with respect to any judgment, order, writ, injunction,
decree or decision of any Governmental Authority which default
could reasonably be expected to have a Material Adverse Effect.
To the best of our knowledge, the Borrower is complying in all
material respects with all applicable statutes, regulations,
rules and orders of all Governmental Authorities, a violation of
which could reasonably be expected to have a Material Adverse
Effect.
8. The Borrower is not subject to regulation under
the Public Utility Holding Company Act of 1935, as amended, the
Federal Power Act or the Investment Company Act of 1940, as
amended, and the Borrower is not subject to any statute or
regulation which prohibits or restricts the incurrence of
Indebtedness under the Loan Documents, including, without
limitation, statutes or regulations relative to common or
contract carriers or to the sale of electricity, gas, steam,
water, telephone, telegraph or other public utility services.
9. To the best of our knowledge, the Borrower is not
engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or
carrying any Margin Stock. If used in accordance with Section
2.8 of the Agreement, no part of the proceeds of the Loan will be
used, directly or indirectly, for a purpose which violates any
law, rule or regulation of any Governmental Authority, including,
without limitation, the provisions of Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System, as amended.
If used in accordance with Section 2.8 of the Agreement, no part
of the proceeds of the Loan will be used, directly or indirectly,
to purchase or carry Margin Stock or to extend credit to others
for the purpose of purchasing or carrying Margin Stock.
10. To the best of our knowledge, the Borrower
possesses or has the right to use all franchises, Intellectual
Property, licenses and other rights as are material and necessary
for the conduct of its business, and with respect to which it is
in compliance, with no known conflict with the valid rights of
others which could reasonably be expected to have a Material
Adverse Effect. To the best of our knowledge, no event has
-3-
occurred which permits or, after notice or lapse of time, or
both, could reasonably be expected to permit, the revocation or
termination of any such franchise, Intellectual Property, license
or other right and which revocation or termination could
reasonably be expected to have a Material Adverse Effect.
11. Upon the taking and retaining of possession by the
Bank of the Pledged Collateral, if any, the presentation for
filing of the Financing Statements at the Filing Offices listed
on Schedule 1 hereto with respect to the Collateral (other than
the Pledged Collateral, if any) and tender of the applicable
filing or processing fee therefor, the security interests granted
under the Security Agreement will constitute duly perfected
security interests in and to all of the Borrower's right, title
and interest in the Collateral.
The foregoing opinions are subject to and qualified by the
following additional qualifications:
A. All opinions, to the extent they relate to the
enforceability of any agreement or obligation, are subject to and
qualified by the following:
1. the effect and application of bankruptcy,
insolvency, reorganization, moratorium and other similar laws now
or hereafter in effect which relate to or limit creditors' rights
generally; and
2. the effect and application of general
principles of equity, whether considered in a proceeding in
equity or an action at law.
B. Wherever we have asserted above that a matter is
"to the best of our knowledge", our knowledge is limited to the
actual knowledge of those attorneys in our office who have
participated in this engagement.
We are members of the Bar of the State of New York and
we express no opinion herein concerning any law other than the
laws of the State of New York, the federal laws of the United
States of America and the corporate law of the State of Delaware.
Very truly yours,
-4-
SCHEDULE 1
LIST OF FILING OFFICES
XXXXXXXX CONVERTIBLES EXHIBIT E
FORM OF SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement"), dated as of
___________, 199_, made by XXXXXXXX CONVERTIBLES, INC., a
Delaware corporation (the "Borrower"), to IBJ XXXXXXXX BANK
& TRUST COMPANY (the "Bank").
RECITALS
A. The Borrower has entered into a Credit Agreement,
dated as of August 31, 1993, by and between the Borrower and
the Bank (as the same may be amended, supplemented or other-
wise modified from time to time, the "Credit Agreement").
Capitalized terms used herein which are not herein defined
shall have the meanings ascribed thereto in the Credit Agree-
ment.
B. The Borrower has also made a Guaranty (the "Guar-
anty"), dated as of August 31, 1993, in favor of the Bank,
pursuant to the Term Loan Agreement, dated as of August 31,
1993, by and between Xxxxxxxx Warehousing, Inc., a New York
corporation, and the Bank (as the same may be amended,
supplemented or otherwise modified from time to time, the
"Term Loan Agreement").
C. It is a condition precedent to the making of the
first Loan that the Borrower shall have executed and deliv-
ered this Agreement. It is a condition precedent to the mak-
ing of the term loan under the Term Loan Agreement that the
Borrower shall have executed and delivered the Guaranty. The
obligations of the Borrower under the Guaranty shall be
secured as provided for herein if and when this Agreement
shall be executed and delivered.
NOW THEREFORE, in consideration of the premises and in
order to induce the Bank to make the Loans, the Borrower
hereby agrees with the Bank as follows:
1. Grant of Security.
To secure the prompt and complete payment, xxxxx-
xxxxx and performance of all of the obligations (as the same
may be amended, increased, modified, renewed, refinanced, re-
funded or extended from time to time, collectively, the "Ob-
ligations") of the Borrower now or hereafter existing under
the Loan Documents and under the Guaranty (collectively, the
"Bank Debt Documents"), the Borrower hereby assigns, trans-
fers and pledges to the Bank, and hereby grants to the Bank,
a security interest in and to, and a lien upon, all of the
Borrower's rights, title and interest in and to the following,
whether now owned or existing or hereafter arising or ac-
quired and wherever located (collectively, the "Collateral"):
(a) All "inventory" as defined in the UCC (as de-
fined below), including, without limitation, all goods now
owned and hereafter acquired by the Borrower (wherever lo-
cated, whether in the possession of the Borrower or of a xxx-
xxx or other Person, whether for sale, storage, transit, pro-
cessing, use or otherwise and whether consisting of whole
goods, spare parts, components, supplies, materials, or con-
signed, returned or repossessed goods) which are held for
sale or lease or to be furnished (or have been furnished)
under any contract of service or which are finished goods,
raw materials, work in process or materials used or consumed
in the Borrower's business, in each case whether now owned or
hereafter acquired; and all accessions and additions thereto,
substitutions and replacements therefor, and the products and
Proceeds thereof (collectively, the "Inventory"); and
(b) All loans and advances made by the Borrower to
any limited partnership, any of its Subsidiaries or any of
its Affiliates (collectively, the "Advances") and all chattel
paper, instruments, documents and general intangibles in re-
spect of or evidencing the Advances, in each case whether now
owned or hereafter acquired by or for the benefit of the Bor-
rower, including, without limitation, the certificates, notes
and debt instruments described on Schedule 1 hereto (col-
lectively, the "Pledged Debt"), and all payments and prepay-
ments thereunder and other instruments and Property from time
to time delivered in respect thereof or in exchange therefor,
in each case whether now owned or hereafter acquired by or
for the benefit of the Borrower, and all letters of credit,
guaranties, liens, security interests and other security for
the Advances, in each case whether now owned or hereafter
acquired by or for the benefit of the Borrower; and all addi-
tions and accessions to each of the foregoing, substitutions
and replacements therefor and the products and Proceeds
thereof.
-2-
As used herein, the term "Proceeds" shall have the
meaning assigned to it under Article 9 of the New York Uni-
form Commercial Code (as the same is amended from time to
time, the "UCC") and, to the extent not otherwise included,
shall include, but not be limited to: (i) any and all pro-
ceeds of any insurance, causes and rights of action or
settlements thereof, escrowed amounts or Property, judicial
and arbitration judgments and awards, payable to the Borrower
from or in respect of any Person from time to time with
respect to the Collateral; (ii) any and all payments (in any
form whatsoever) made or due and payable to the Borrower from
time to time in connection with any requisition, conf is-
cation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority; (iii)
all claims of the Borrower for losses or damages arising out
of or relating to or for any breach of any agreements, cov-
enants, representations or warranties or any default whether
or not with respect to or under any of the foregoing Col-
lateral (without limiting any direct or independent rights of
the Bank with respect to the Collateral); and (iv) any and
all other amounts from time to time paid or payable under or
in connection with the Collateral.
2. Borrower Remains Liable.
Anything herein to the contrary notwithstanding,
(a) the Borrower shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereun-
der to the same extent as if this Agreement had not been ex-
ecuted, (b) the exercise by the Bank of any of its rights
hereunder shall not release the Borrower from any of its du-
ties or obligations under the contracts and agreements in-
cluded in the Collateral, and (c) the Bank shall not have any
obligation or liability under the contracts and agreements
included in the Collateral by reason of this Agreement, nor
shall the Bank be obligated to perform any of the obligations
or duties of the Borrower thereunder, to make any payment, to
make any inquiry as to the nature or sufficiency of any pay-
ment received by the Borrower or the sufficiency of any per-
formance by any party under any such contract or agreement or
to take any action to collect or enforce any claim for pay-
ment assigned hereunder.
3. Delivery of Pledged Collateral.
All certificates, notes and other debt instruments,
if any, representing or evidencing the Pledged Debt and all
-3-
other certificates, notes and debt instruments at any time
owned or acquired by or for the benefit of the Borrower in
respect thereof (collectively, the "Pledged Collateral")
shall be delivered to and held by or on behalf of the Bank
pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instru-
ments of transfer or assignments in blank, all in form and
substance satisfactory to the Bank. Upon the occurrence and
during the continuance of an Event of Default, the Bank shall
have the right, at any time in its discretion and without
notice to the Borrower, to transfer to or to register in the
name of the Bank or any of its nominees any or all of the
Pledged Collateral. In addition, upon the occurrence and
during the continuance of an Event of Default, the Bank shall
have the right at any time to exchange certificates, notes or
debt instruments representing or evidencing Pledged Col-
lateral for certificates, notes or debt instruments of
smaller or larger denominations.
4. Representations and Warranties.
The Borrower represents and warrants as follows:
(a) Names: Tradenames. Except as set forth in
Part A of Schedule 4(a) hereto, the Borrower has not during
the preceding five years (i) been known by any other corpo-
rate name, (ii) been the surviving corporation of a merger or
consolidation or (iii) acquired all or substantially all of
the Property of any other Person. As of the date of this
Agreement, the Borrower currently conducts business under its
own name and, in certain areas and for certain operations,
the tradenames listed on Part B of Schedule 4(a) hereto.
(b) Offices: Collateral Locations. As of the
date of this Agreement (i) the chief executive office and
chief place of business of the Borrower are located at the
address set forth in Part A of Schedule 4(b) hereto, (ii) in
addition to such chief executive office and chief place of
business, the Borrower maintains only the offices and places
of business set forth in Part B of Schedule 4(b) hereto and
(iii) the locations listed in Part C of Schedule 4(b) hereto
constitute all locations at which Inventory is located.
(c) Possession of Inventory. The Borrower has
exclusive possession and control of the Inventory, except for
Inventory in transit with common or other carriers.
-4-
(d) Absence of Liens: No Offsets. The Bor-
rower is the legal and beneficial owner of the Collateral,
free and clear of all Liens. No disputes, rights of setoff,
counterclaims or defenses exist with respect to the Col-
lateral or any part of the Collateral.
(e) Pleded Collateral. To the best of the
Borrower's knowledge, the Pledged Debt has been duly autho-
rized, issued and delivered, and is the legal, valid, binding
and enforceable obligation of the respective issuers thereof.
The Pledged Debt constitutes all of the Pledged Collateral.
(f) Security Interest. This Agreement creates
a valid security interest in the Collateral, securing the
payment of the Obligations, and all filings and other actions
necessary or desirable to perfect such security interests
have been duly taken. The delivery and pledge of the
Pledged Collateral pursuant to this Agreement and all other
filings and other actions taken by the Borrower to perfect
such security interests prior to the date hereof, create a
valid and perfected first priority security interest in the
Pledged Collateral securing the payment of the Obligations,
except for Pledged Collateral consisting of checks and drafts
received in the ordinary course of business.
(g) Representation and Warranties. All of
the representations and warranties made by the Borrower in
all instruments and documents evidencing and securing the
Obligations or any part thereof, including, without limita-
tion, the Bank Debt Documents, are true and correct in all
material respects.
5. Further Assurances.
(a) The Borrower agrees that from time to time, at
its expense, the Borrower shall promptly execute and deliver
all further instruments and documents, and take all further
action, that the Bank may reasonably request, in order to
perfect and protect any security interests granted hereby or
to enable the Bank to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, the Borrower shall
promptly execute and file such financing or continuation
statements, or amendments thereto, and such other instruments
or notices, and promptly take such other action as the Bank
may reasonably request, in order to perfect and preserve the
security interests granted hereby.
-5-
(b) The Borrower hereby authorizes the Bank to
file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Col-
lateral without the signature of the Borrower where permitted
by law. The Bank shall provide the Borrower with a copy of
any such statement or amendment, provided that no failure to
do so shall affect the rights of the Bank hereunder, result
in any liability of the Bank to the Borrower or in any way
affect the validity of such filing. A photographic or other
reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be suf-
ficient as a financing statement where permitted by law.
(c) The Borrower shall furnish to the Bank from
time to time statements and schedules further identifying and
describing the Collateral and such other reports in connec-
tion with the Collateral as the Bank may reasonably request,
all in reasonable detail.
6. As to Inventory.
The Borrower shall:
(a) Keep the Inventory at the places speci-
fied in Section 4(b) and deliver written notice to the Bank
at least thirty days prior to establishing any other location
at which it reasonably expects to maintain Inventory having
an aggregate fair market value in excess of $50,000, in which
jurisdiction all action required by Section 5 shall have been
taken with respect to all such Inventory.
(b) Maintain or cause to be maintained in
good repair and condition, excepting ordinary wear and tear
and damage due to casualty, all of the Inventory, and make or
cause to be made all appropriate repairs, renewals and re-
placements thereof, to the extent not obsolete and consistent
with past practice of the Borrower or as required by any Gov-
ernmental Authority, as quickly as practicable after the oc-
xxxxxxxx of any loss or damage thereto which are necessary or
desirable to such end. The Borrower shall promptly furnish
to the Bank a statement respecting any material loss or dam-
age to any of the Inventory with an aggregate fair market
value exceeding $50,000 as a result of a single occurrence.
-6-
7. As to the Pledged Collateral.
(a) So long as no Event of Default shall have oc-
curred and be continuing:
(i) The Borrower shall be entitled to exer-
cise any consensual rights pertaining to the Pledged Col-
lateral or any part thereof for any purpose not inconsistent
with the terms of this Agreement and the other Bank Debt
Documents; provided, however, that the Borrower shall not ex-
ercise or refrain from exercising any such right without the
consent of the Bank if such action or inaction would have a
material adverse effect on the fair market value of any part
of the Pledged Collateral or the validity, priority or per-
fection of the security interests granted hereby or the rem-
edies of the Bank hereunder.
(ii) The Borrower shall be entitled to re-
ceive and retain any and all principal and interest paid in
respect of the Pledged Collateral to the extent not prohib-
ited by this Agreement; provided, however, that any and all
principal and interest paid or payable other than in cash in
respect of, and instruments and other Property received, re-
ceivable or otherwise distributed in respect of, or in ex-
change for, Pledged Collateral, shall forthwith be delivered
to the Bank to hold as Pledged Collateral and shall, if
received by the Borrower, be received in trust for the ben-
efit of the Bank, be segregated from the other Property of
the Borrower, and be forthwith delivered to the Bank, as
Pledged Collateral in the same form as so received (with any
necessary indorsement).
(iii) The Bank shall execute and deliver (or
cause to be executed and delivered) to the Borrower all such
instruments as the Borrower may reasonably request for the
purpose of enabling the Borrower to exercise the consensual
rights which it is entitled to exercise pursuant to clause
(i) above and to receive the principal or interest payments
which it is authorized to receive and retain pursuant to
clause (ii) above.
(b) Upon the occurrence and during the continuance
of an Event of Default and at the Bank's option and following
written notice by the Bank to the Borrower:
(i) All rights of the Borrower to exercise
the consensual rights which it would otherwise be entitled to
-7-
exercise pursuant to Section 7(a) (i) and to receive the prin-
cipal and interest payments which it would otherwise be au-
thorized to receive and retain pursuant to Section 7(a) (ii)
shall cease, and all such rights shall thereupon become
vested in the Bank, who shall thereupon have the sole right
to exercise such consensual rights and to receive and hold as
Pledged Collateral such principal and interest payments.
(ii) All principal and interest payments
which are received by the Borrower contrary to the provisions
of Section 7(b) (i) shall be received in trust for the benefit
of the Bank, shall be segregated from other funds of the Bor-
rower and shall be forthwith paid over to the Bank as Pledged
Collateral in the same form as so received (with any neces-
sary indorsement).
(c) In the event that all or any part of the cer-
tificates, notes or debt instruments constituting the Pledged
Collateral are lost, destroyed or wrongfully taken while such
certificates, notes or debt instruments are in the possession
of the Bank, the Borrower agrees that it will cause the de-
livery of new certificates, notes or debt instruments in
place of the lost, destroyed or wrongfully taken certifi-
xxxxx, notes or debt instruments upon request therefor by the
Bank without the necessity of any indemnity bond or other se-
curity other than the Bank's agreement or indemnity therefor
customary for security agreements similar to this Agreement.
8. Other Covenants and Agreements of the Borrower.
The Borrower covenants and agrees that on and after
the date of this Agreement until the indefeasible cash pay-
ment in full of the Obligations, unless the Bank shall other-
wise consent in writing:
(a) Defense of Collateral. The Borrower will de-
fend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein
adverse to the interests of the Bank.
(b) Security Interest. The Borrower covenants that
the security interests granted hereby constitute and shall at
all times constitute continuing perfected first priority se-
curity interests in the Collateral.
(c) Encumbrances; Filings. The Borrower will not
(i) further hypothecate, pledge, encumber, transfer, sell or
otherwise suffer to exist a security interest in, or a Lien
-8-
on, the Collateral or any portion thereof in favor of any
Person other than the Bank as provided herein, except for
Permitted Liens and except for transfers or sales to the ex-
tent permitted under the Bank Debt Documents or (ii) sign or
file or authorize the signing or filing of any document or
instrument perfecting any Lien on the Collateral except for
Permitted Liens. The inclusion of "Proceeds" of the Col-
lateral under the security interest granted herein shall not
be deemed a consent by the Bank to any sale or other disposi-
tion of any Collateral except as expressly permitted herein.
9. The Bank Appointed Attorney-in-Fact.
Effective upon the occurrence and during the con-
tinuance of an Event of Default, the Borrower hereby ir-
revocably appoints the Bank the Borrower's attorney-in-fact,
with full authority in the place and stead of the Borrower
and in the name of the Borrower or otherwise, from time to
time in the Bank's discretion, to take any action and to ex-
ecute any instrument which the Bank may deem necessary or
advisable to accomplish the purposes of this Agreement, in-
cluding, without limitation:
(a) to obtain and adjust insurance required
to be paid to the Bank pursuant to Section 7.5 of the Credit
Agreement and pursuant to the other Bank Debt Documents,
(b) to ask, demand, collect, xxx for, re-
cover, compromise, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any
of the Collateral,
(c) to receive, indorse, and collect any
drafts or other chattel paper, instruments and documents in
connection with clause (a) or (b) above,
(d) to file any claims or take any action or
institute any proceedings which the Bank may deem necessary
or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of the Bank with respect to
any of the Collateral and
(e) to receive, indorse and collect all in-
struments made payable to the Borrower representing any prin-
cipal payment or interest payment in respect of the Pledged
Collateral or any part thereof and to give full discharge for
the same.
-9-
10. The Bank May Perform.
If the Borrower fails to perform any agreement con-
tained herein, the Bank may itself perform, or cause perfor-
xxxxx of, such agreement, and the reasonable expenses of the
Bank incurred in connection therewith shall be payable by the
Borrower under Section 14.
11. The Bank's Duties.
The powers conferred on the Bank hereunder are
solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Ex-
cept for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereun-
der, the Bank shall have no duty as to any Collateral. The
Bank shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession
if the Collateral is accorded treatment substantially equal
to that which the Bank accords its own Property, it being
understood that the Bank shall not be under any obligation to
(i) ascertain or take action with respect to conversions,
exchanges, maturities or other matters relative to any
Pledged Collateral, whether the Bank has or is deemed to have
knowledge of such matters, or (ii) take any necessary steps
to preserve rights against prior parties or any other rights
pertaining to any Collateral, but may do so at its option,
and all reasonable expenses incurred in connection therewith
shall be for the sole account of the Borrower and shall be
added to the Obligations.
12. Events of Default.
The following shall each constitute an "Event of
Default" hereunder:
(a) If any representation or warranty made
herein or in any certificate furnished by the Borrower in
connection with this Agreement shall prove to have been in-
correct or misleading (whether because of misstatement or
omission) in any material respect when made; or
(b) If the Borrower shall fail to observe or
perform any term, covenant or agreement contained in Section
8(c) of this Agreement; or
(c) If the Borrower shall fail to perform or
observe any other covenant or agreement on its part to be
- 10 -
performed or observed pursuant to this Agreement and such
failure shall have continued unremedied for a period of
thirty days after the Chairman, President, Chief Executive
Officer, the Vice President-Finance and Treasurer or any
other Vice President of the Borrower shall become aware of
such failure; or
(d) The occurrence of an Event of Default un-
der and as defined in the Bank Debt Documents; or
(e) If the Borrower shall contest or disavow
its obligations under this Agreement or this Agreement shall
not remain in full force and effect.
13. Remedies.
Upon the occurrence of an Event of Default or at
any time thereafter during the continuance thereof, the Bank
may exercise any and all remedies and other rights provided
under this Agreement, including, without limitation, the fol-
lowing:
(a) The Bank may exercise in respect of the
Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and
remedies of a secured party upon default under the UCC
(whether or not the UCC applies to the affected Collateral)
and also may (i) require the Borrower to, and the Borrower
hereby agrees that it will at its expense and upon request of
the Bank forthwith, assemble all or any part of the Col-
lateral as directed by the Bank and make it available to the
Bank at a place designated by the Bank which is reasonably
convenient to the Bank and the Borrower, (ii) without notice,
except as specified below, sell, lease, assign, grant an op-
tion or options to purchase or otherwise dispose of the Col-
lateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker's board or at any of
the Bank's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as may be com-
mercially reasonable. The Borrower agrees that, to the ex-
tent notice of sale shall be required by law, at least five
Business Days' notice to the Borrower of the time and place
of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The
Bank shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Bank may
adjourn any public or private sale from time to time by an-
nouncement at the time and place fixed therefor, and such
- 11 -
sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) Notwithstanding any provision to the con-
trary contained in any Bank Debt Document, any cash held by
the Bank as Collateral and all cash proceeds received by the
Bank in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in
the sole discretion of the Bank, be held by the Bank as Col-
lateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Bank pursuant to
Section 14) in whole or in part by the Bank against all or
any part of, the Obligations as shall be determined by the
Bank in its sole discretion, provided, however, that to the
extent that any such cash or cash proceeds shall be applied
to Obligations in respect of the Loan Documents, such cash or
cash proceeds shall be applied in accordance with Section 9.1
of the Credit Agreement, and to the extent such cash or cash
proceeds shall be applied to Obligations in respect of the
Guaranty, such cash or cash proceeds shall be applied in ac-
cordance with the provisions thereof. Any surplus of such
cash or cash proceeds held by the Bank and remaining after
payment in full of all the Obligations shall be promptly paid
over to the Borrower or to whomsoever may be lawfully en-
titled to receive such surplus.
(c) The Borrower hereby expressly waives and
covenants not to assert any appraisement, valuation, stay,
extension, redemption or similar laws, now or at any time
hereafter in force, which might delay, prevent or otherwise
impede the performance or enforcement of this Agreement.
14. Expenses.
The Borrower will upon demand pay to the Bank any
and all reasonable sums, costs and expenses which the Bank
may pay or incur pursuant to the provisions of this Agreement
or in negotiating, executing, perfecting, defending, protect-
ing or enforcing this Agreement or the security interests
granted herein or in enforcing payment of the Obligations or
otherwise in connection with the provisions hereof, includ-
ing, but not limited to court costs, reasonable collection
charges, reasonable travel expenses, and reasonable at-
torneys' fees and disbursements, all of which, together with
interest at the highest rate then payable on any of the Obli-
gations, shall be part of the Obligations.
- 12 -
15. Amendments Etc.
No amendment or waiver of any provision of this
Agreement or consent to any departure by the Borrower or any
of its Subsidiaries herefrom shall in any event be effective
unless the same shall be in writing and signed by the Bank,
and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which
given.
16. Notices.
All notices and other communications provided for
hereunder shall be given in the manner and to the addresses
set forth in Section 10.2 of the Credit Agreement.
17. Continuing Security Interest; Transfer of Notes;
Termination.
This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force
and effect until the indefeasible cash payment in full of the
Obligations and the termination of each of the Bank Debt
Documents, (ii) be binding upon the Borrower, its successors
and assigns and (iii) inure, together with the rights and
remedies of the Bank hereunder, to the benefit of the Bank,
any successor or assign of the Bank. Except to the extent
not permitted by the Bank Debt Documents or the Term Loan
Agreement, the Bank may assign or otherwise transfer the Note
or the term note held by it under the Term Loan Agreement, as
the case may be, to any other Person, and such other Person
shall thereupon become vested with all the benefits in
respect thereof granted to the Bank herein or otherwise.
Nothing set forth herein or in any other Bank Debt Document
is intended or shall be construed to give any other Person
any right, remedy or claim under, to or in respect of this
Agreement, any other Bank Debt Document or any Collateral.
The Borrower's successors and assigns shall include, without
limitation, a receiver, trustee or debtor-in-possession
thereof or therefor.
18. Other Provisions.
(a) No provision of this Agreement may be waived,
modified or otherwise changed by any means, including, with-
out limitation, any course of dealing, course of performance
- 13 -
or trade usage, or oral evidence of any nature, except pursu-
ant to a writing executed by the party against which enforce-
ment of such waiver, modification or change is sought.
(b) No failure by the Bank to exercise, and no xx-
xxx by the Bank in exercising, any right or remedy hereunder
shall operate as a waiver thereof.
(c) Section headings have been inserted herein for
convenience only and shall not be construed to be a part of
this Agreement. Unless the context otherwise requires, words
in the singular number include the plural, and words in the
plural include the singular.
(d) This Agreement may be executed in any number
of counterparts, each of which shall be an original and all
of which shall constitute one agreement. It shall not be
necessary in making proof of this Agreement or of any docu-
ment required to be executed and delivered in connection
herewith or therewith to produce or account for more than one
counterpart signed by the party to be charged.
(e) Every provision of this Agreement is intended
to be severable, and if any term or provision hereof shall be
invalid, illegal or unenforceable for any reason, the valid-
ity, legality and enforceability of the remaining provisions
hereof or thereof shall not be affected or impaired thereby,
and any invalidity, illegality or unenforceability in any ju-
risdiction shall not affect the validity, legality or en-
forceability of any such term or provision in any other ju-
risdiction.
(f) All Schedules hereto shall be deemed to be a
part hereof.
(g) Each and every right, remedy and power granted
to the Bank hereunder or allowed at law or by any other
agreement shall be cumulative and not exclusive, and may be
exercised by the Bank from time to time.
(h) This Agreement is the "Security Agreement" re-
ferred to in the Credit Agreement. The Borrower and the Bank
acknowledge that Sections 10.13 (Integration), 10.14 (Consent
to Jurisdiction), 10.15 (Service of Process), 10.16 (No
Limitation of Service or Suit) and 10.17 (WAIVER OF TRIAL BY
JURY) of the Credit Agreement, are made applicable to this
Agreement and all such provisions are incorporated by refer-
ence herein as if fully set forth herein.
- 14 -
19. Governing Law: Terms.
This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without
regard to conflicts of laws rules, except to the extent that
the validity or perfection of the security interest hereun-
der, or remedies hereunder, in respect of any particular Col-
lateral are governed by the laws of a jurisdiction other than
the State of New York. Unless otherwise defined herein or in
the Notes, terms used in Articles 8 and 9 of the UCC are used
herein as therein defined.
- 15 -
IN WITNESS WHEREOF, the Borrower has caused this Secu-
rity Agreement to be duly executed and delivered by its of-
ficer thereunto duly authorized as of the date first above
written.
XXXXXXXX CONVERTIBLES, INC.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Accepted and Agreed to:
IBJ XXXXXXXX BANK &
TRUST COMPANY
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
- 16 -
SCHEDULE 1
to
Security Agreement
Dated as of __________, 199_
Pledged Debt:
------------
Debtor Date Face Amount Balance Due
------ ---- ----------- -----------
SCHEDULE 4(a)
to
Security Agreement
Dated as of __________, 199_
PART A - List of Other Corporate Names Mergers or Consolida-
tion and Acquisitions:
PART B - List of Tradenames:
SCHEDULE 4(b)
to
Security Agreement
Dated as of ___________, 199_
PART A - Chief Executive Office and Chief Place of Business:
______________________________________
______________________________________
______________,__________ ___________
(_______ County)
PART B - Other Offices and Places of Business:
______________________________________
______________________________________
_______________, __________ _________
(_______ County)
______________________________________
______________________________________
______________, __________ __________
(_______ County)
______________________________________
______________________________________
______________, ___________ _________
(_________ County)
PART C - Location of Inventory:1
______________________________________
______________________________________
______________, ___________ _________
(_________ County)
-----------------------
1 Indicate whether any location is a public warehouse.
-2-
XXXXXXXX CONVERTIBLES EXHIBIT F
FORM OF BORROWING BASE CERTIFICATE
Date: _________
I, ____________, do hereby certify that I am the Vice
President-Finance and Treasurer of Xxxxxxxx Convertibles,
Inc., a Delaware corporation (the "Borrower"), and that, as
such, I am duly authorized to execute and deliver this
Borrowing Base Certificate on the Borrower's behalf pursuant
to Section 6.4 and 7.1(d) of the Credit Agreement, dated as
of August 31, 1993, by and between the Borrower and IBJ
Xxxxxxxx Bank & Trust Company (the "Bank") (as the same may
be amended, supplemented or otherwise modified from time to
time, the "Agreement"). Capitalized terms used herein which
are not herein defined shall have the meanings ascribed
thereto by the Agreement.
I hereby certify that:
1. The Borrowing Base on and as of __________,
199_, is $_______, computed as shown on the attached
Schedule.
2. The aggregate outstanding principal balance of
the Loans on and as of the date hereof is less than or equal
to the lesser of (i) the Commitment Amount on and as of the
date hereof and (ii) the Borrowing Base.
IN WITNESS WHEREOF, I have executed this Borrowing Base
Certificate on this __ day of ______________, 19__.
--------------------------
Vice President - Finance
and Treasurer
Computation of Borrowing Base
I. Inventory consisting of first
quality, currently finished products
held for sale to customers in
the ordinary course of business,
valued at the lower of cost or
market value, determined on a
first-in, first-out basis, and
(i) such inventory is owned by
the Borrower, (ii) such inventory
conforms to the representations
and warranties contained in the
Agreement and in the Security
Agreement and (iii) such inventory
is subject to a fully perfected
first priority security interest
in favor of the Bank pursuant
to the Security Agreement $_______
II. Ineligible items:
A. Inventory which consists
of Special Order Goods $______
B. Inventory which is
slow moving, obsolete,
used, damaged or otherwise
not merchantable $_______
C. Inventory which the
Bank determines to be
ineligible $______
III. Total of Items IIA through IIC $_______
IV. Eligible Inventory
(Item I less Item III) $_______
V. Borrowing Base
(50% of Item IV) $________
-2-
XXXXXXXX CONVERTIBLES EXHIBIT G
FORM OF SOLVENCY CERTIFICATE
I, _______________, do hereby certify on this __ day of
___________ 199_, that I am the Vice President-Finance and
Treasurer of Xxxxxxxx Convertibles, Inc., a Delaware corpora-
tion (the "Borrower"), and that, as such, I am duly
authorized to execute and deliver this Solvency Certificate
on behalf of the Borrower pursuant to Section 5.13 of the
Credit Agreement, dated as of August 31, 1993, by and between
the Borrower and IBJ Xxxxxxxx Bank & Trust Company (as the
same may be amended, supplemented or otherwise modified from
time to time, the "Agreement"). Capitalized terms used
herein which are not herein defined shall have the meanings
ascribed thereto by the Agreement.
On the basis of the examination described below, I do
hereby certify that, as of the date hereof:
(a) The "present fair saleable value" of the as-
sets of the Borrower exceeds the amount that will be required
to pay the probable liabilities on or in respect of existing
debts and liabilities of the Borrower as they come due,
whether such debt is matured or unmatured, liquidated or un-
liquidated, fixed or contingent. For purposes of this Cer-
tificate, "present fair saleable value" means the amount at
which the assets of the Borrower would likely sell, under
current market conditions, as part of a going concern and for
continued use as part of a going concern between a willing
buyer and a willing seller within a reasonable period of time
with neither party acting under duress and with both parties
acting with reasonable knowledge of all relevant facts.
(b) The assets of the Borrower do not constitute
unreasonably small capital for the Borrower to carry out its
business as now conducted and as proposed to be conducted,
including the capital needs of the Borrower, taking into ac-
count the particular capital requirements of the business
conducted by the Borrower and projecting the capital require-
ments and capital availability therefor.
(c) The Borrower does not intend to incur debts or
liabilities beyond its ability to pay such debts and li-
abilities as they mature, taking into account the timing and
amounts of cash flow expected to be received by the Borrower
and of amounts to be payable on or in respect of debts and
liabilities of the Borrower.
IN WITNESS WHEREOF, I have executed this Solvency Cer-
tificate on behalf of the Borrower.
-------------------------
Vice President-Finance
and Treasurer
-2-
XXXXXXXX CONVERTIBLES SCHEDULE 4.1
TO REVOLVING CREDIT AGREEMENT DATED AUGUST 31, 1993
LIST OF SUBSIDIARIES
ATTACHMENT TO SCHEDULE 4.1 TO
REVOLVING CREDIT AGREEMENT DATED
AUGUST 31, 1993
STORE STORE
NAME ADDRESS
----- -------
BURLINGTON CONVERTIBLES 00 XXXXXXXXX XX, XXXXXXXXXX XX 00000
WESTBORO CONVERTIBLES XXXX 000 XXXXXXX XXX, 000 XXXXXX XXX, XX 0 XXXX, XXXXXXXX, XX 00000
BOSTON POST RD CONVERTIBLES 0000 XXXXXX XXXX XX., XXXXXXX XX 00000
SAUGUS CONVERTIBLES 000 XXXXXXXX, XXXXXX XX 00000
STUART ST. CONVERTIBLES 000 XXXXXX XXXXXX, XXXXXX XX 00000
WEST ROXBURY CONVERTIBLES 0000 XXX XXXXXXX XXXXX 0, XXXX XXXXXXX XX 00000
CAMBRIDGE CONVERTIBLES 0 XXXXXX XXXXXX, XXXXXXXXX XX 00000
DANBURY SQUARE CONVERTIBLES 00 XXXXXX XXXXXX, XXXXXXX XX 00000
EAST BRUNSWICK CONVERTIBLES 000-000 XXXXX 00 XXXXX, XXXX XXXXXXXXX XX 00000
GRAND CONCOURSE 0000 XXXXX XXXXXXXXX, XXXXX XX 00000
WISCONSIN CONVERTIBLES 0000 XXXXXXXXX XXXXXX, XXXXXXXXXX XX 00000-00
HARTSDALE CONVERTIBLES 000 XXXXXXX XXXXXX, XXXXXXXXX XX 00000
HIGH RIDGE CONVERTIBLES 0000 XXXX XXXXX XXXX, XXXXXXXX XX 00000
CONTOUR RD CONVERTIBLES 00000 XXXXXXX XX. XXXXXXXXXX XXXXX XXX. XXXXXXXXXXXX XX 00000
XXXXXXXX SQUARE CONVERTIBLES 0000-00 XXXXXXXXX XX. XXXXXXXX SQE. D-2, GREENBELT MD 00000
XXXXXXXXX XX CONVERTIBLES 0000 XXXXXXXXX XXXX, XXXXXXXXX XX 00000
XXXXXX CONVERTIBLES 000 XXXXXXXX XX., XXXXXXXX XXXXX XX 00000
PORTSMOUTH CONVERTIBLES 0000 XXXXXXXX XXXXXX XXXXXXXXX XXXXX, XXXXXXXXXX XX 00000
XXXXXX XXXXXXX CONVERTIBLES 000 XXXXXX XXXXXXX XXX., XXXXX XXXXXX XX 00000
LONG BRANCH (FORMERLY RT 35) 000 XXXXXXX 00 XXXXX 000 XXXX XXXX XXXXXX XX 00000
PARAMUS CONVERTIBLES EAST 000 XXXXX 0 XXXXXXX, XX 00000
ROUTE 17 CONVERTIBLES 000 XXXXX 00 XXXXX, XXXXXXX XX 00000
ROUTE 440 CONVERTIBLES XXXXXX XXXX XXXXX 000, XXXXXX XXXX XX 00000
ROUTE 46 CONVERTIBLES 000 XXXXX 00 XXXX, XXXXXX XX 00000
ROUTE 7 CONVERTIBLES 000 XXXX XXXXXX, XXXXXXX XX 00000
ROUTE 10 CONVERTIBLES 00-00 XXXXX 00, XXXXXXXX XX 00000
STATEN ISLAND CONVERTIBLES 0000 XXXXXXXX XXXXXX, XXXXXX XXXXXX XX 00000
UNION CONVERTIBLES 00-00 XXXXX 00 XXXX, XXXXX XX 00000
LEESBURG PIKE CONVERTIBLES 0000-0 XXXXX XXXXXXXXX XX., XXXXXXX PIKE PLZ, BAILEYS XXXXXX XX 00000
VIENNA CONVERTIBLES 00-00 XXXXXXXX XXXX, XXXXXX XX 00000
VALLEY STREEM CONVERTIBLES 0 XXXX XXXXXX XXXXX, XXXXXX XXXXXX XX 00000
WOODBRIDGE CONVERTIBLES 000 XXXXX 0 XXXXX, XXXXXXXXXX XX 00000
CENTERBACK CONVERTIBLES* 000 XXXXXXXXXX XXXX XXXXX 00, XXXXXXXXXX XX 00000
FRAMINGHAM CONVERTIBLES 000 XXXXXXXXX XXXX, XXXXXXXXXX, XX 00000
* 51% of the outstanding capital stock of such Subsidiary is owned by Borrower,
and the remainder of such stock is owned by Xxxxxxx Xxxxxxxx.
XXXXXXXX CONVERTIBLES SCHEDULE 8.1
TO REVOLVING CREDIT AGREEMENT DATED AUGUST 31. 1993
LIST OF EXISTING INDEBTEDNESS
None.
XXXXXXXX CONVERTIBLES SCHEDULE 8.2
TO REVOLVING CREDIT AGREEMENT DATED AUGUST 31, 1993
LIST OF EXISTING LIENS
None.
XXXXXXXX CONVERTIBLES SCHEDULE 8.4
TO REVOLVING CREDIT AGREEMENT DATED AUGUST 31. 1993
LIST OF EXISTING CONTINGENT OBLIGATIONS
None.
XXXXXXXX CONVERTIBLES SCHEDULE 8.6
TO REVOLVING CREDIT AGREEMENT DATED AUGUST 31. 1993
LIST OF EXISTING INVESTMENTS
None.