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Exhibit 4.1
ASSET BASED LOAN AND SECURITY AGREEMENT
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THIS AGREEMENT, dated as of March 10, 1998, by and between MAZEL
STORES, INC. ("Stores") an Ohio corporation, and ODD-JOB ACQUISITION CORP.
("Odd-Job"), a Delaware corporation, HIA TRADING ASSOCIATES, a New York General
Partnership, jointly and severally ("Borrower"), whose mailing address is 31000
Aurora Road, Solon, Ohio 44139, and THE PROVIDENT BANK ("Agent"), an Ohio
banking corporation, whose mailing address is 1111 Superior Avenue, Cleveland,
Ohio 44114-2522, LASALLE NATIONAL BANK ("LaSalle"), a national banking
association whose mailing address is 135 South LaSalle Street, Chicago, Illinois
60603, and NATIONAL CITY BANK ("NCB," and together with Agent and
LaSalle,"Lenders"), a national banking association whose mailing address is
National City Center, P.O. Box 5756 Loc. 2104, Cleveland, Ohio 44101-0756, as
Lenders under this Agreement.
SECTION 1. DEFINITIONS. As used herein, the following terms, when
initial capital letters are used, shall have the respective meanings set forth
below. In addition, all terms defined in the Uniform Commercial Code as adopted
in Ohio (hereinafter the "Uniform Commercial Code") shall have the meanings
given therein unless otherwise defined herein.
1.1 ACCOUNTS shall mean all of Borrower's accounts (as that
term is defined in the Uniform Commercial Code), accounts receivable, chattel
paper, contract rights, documents and instruments; all other obligations or
indebtedness owed to Borrower from whatever source arising; all guarantees of
any of the foregoing and all security therefor; all of the right, title and
interest of Borrower in and with respect to the goods, services or other
property which gave rise to or which secure any of the foregoing and all
insurance policies and proceeds relating thereto; all of the foregoing whether
now owned by Borrower or hereafter acquired or in existence.
1.2 ADVANCE shall mean an advance made by Agent to Borrower
(including without limitation, any advance made to reimburse the Agent for
drawings under any Letter of Credit), pursuant to the provisions, terms and
conditions of Section 2 of this Agreement.
1.3 ADVANTAGE shall mean any payment (whether made voluntarily
or involuntarily, by offset of any deposit or other indebtedness or otherwise)
received by a Lender in respect of the Obligations if the payment results in any
other Lender's having more than its Ratable Portion of the Obligations in
question.
1.4 AFFILIATE shall mean (i) Reuven Dessler, Brady Churches,
any individual who is a member of the senior management of Borrower or an inside
director or officer of Borrower, and any member of the immediate family of such
persons (collectively, the "Affiliated Individuals"); and (ii) any Person who
directly or indirectly controls, is controlled by or is under common control or
ownership with Borrower, any Affiliate Entities or any Affiliated Individuals.
For the purposes of this definition, the term "control" shall mean the ownership
of twenty percent (20%) or more of the beneficial interest in the entity being
referred to, and the term "immediate family" shall mean spouses, ancestors,
lineal descendants, and brothers and sisters of the person in questions
including those adopted.
1.5 AGENT shall mean THE PROVIDENT BANK, an Ohio banking
corporation, whose mailing address is 1111 Superior Avenue, Cleveland, Ohio
44114-2522.
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1.6 AVAILABLE DRAW shall have the meaning set forth in Section
2.2(a) hereof.
1.7 BORROWING shall mean a group of Advances of a single Type
made by the Lenders on a single date and as to which a single Interest Period is
in effect (i.e., any group of Advances made by the Lenders of a different Type,
or having a different Interest Period (regardless of whether such Interest
Period commences on the same date as another Interest Period), or made on a
different date shall be considered to comprise a different Borrowing).
1.8 BORROWING BASE shall mean the sum of (A) sixty percent
(60%) of the cost or market value, whichever is lower, of Eligible Inventory
which is not Retail Inventory, (B) sixty percent (60%) of the cost or market
value, whichever is lower, of Retail Inventory, (C) eighty-five percent (85%) of
the outstanding amount of Eligible Accounts, and (D) the amount of collected
funds in the Cash Collateral Account.
1.9 BUSINESS DAY means a day of the year on which the Agent is
not required or authorized to close in Cleveland, Ohio.
1.10 CASH COLLATERAL ACCOUNT shall mean that deposit account
maintained by Borrower at Agent, without liability by Agent to pay interest
thereon, into which all collections on the Collateral shall be deposited and
over which Agent shall have the sole power of withdrawal until all Obligations
are paid, performed, satisfied, enforced, and observed in full, and any
outstanding Letters of Credit issued by Agent on behalf of Borrower have been
canceled or expired.
1.11 COLLATERAL shall mean (a) all of the Borrower's
Equipment, General Intangibles, Inventory, Accounts and all other items of
personal property, including all motor vehicles, now owned or hereafter acquired
by the Borrower or in which the Borrower has granted or may in the future grant
a security interest to the Agent hereunder or in any supplement hereto or
otherwise; (b) all proceeds and products of any of the foregoing in whatever
form, including cash, negotiable instruments and other evidences of
indebtedness, chattel paper, security agreements or other documents and all
rights of Borrower in, to and under all leases and rental agreements relating to
the foregoing; (c) all of the Borrower's right, title and interest in and to all
goods or other property represented by or securing any of the Accounts,
including all goods that may be reclaimed or repossessed from or returned by
Debtors; (d) all of the Borrower's rights as an unpaid seller, including
stoppage in transit, detinue and reclamation; (e) all additional amounts due to
the Borrower from any Debtor, irrespective of whether such additional amounts
have been specifically assigned to the Agent; (f) all guaranties, or other
agreements or property securing or relating to any of the items referred to in
(a) above, or acquired for the purpose of securing and enforcing any of such
items; (g) all instruments, documents, securities, cash, property, deposit
accounts (including but not limited to deposits made to Borrower's Cash
Collateral Account), and the proceeds of any of the foregoing, owned by the
Borrower or in which it has an interest, which are now or may hereafter be in
the possession or control of the Agent or in transit by mail or carrier to or
from the Agent, or in possession of any third party acting on behalf of Agent,
without regard to whether Agent received same in pledge, for safekeeping, as
agent for collection or transmission or otherwise or whether Agent had
conditionally released the same; (h) all the capital stock of the subsidiaries
of Borrower; (i) all partnership interest of partnerships in which Borrower
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has an interest; (j) all of Borrower's right, title and interest in and to all
real estate and personal property leases, whether as lessor or lessee; (k) all
ledger sheets, files, records, documents, blueprints, drawings and instruments
(including, without limitation, computer programs, tapes and related electronic
data processing software) evidencing an interest in or relating to the
foregoing; and (l) all proceeds and products of the collateral described above,
including, without limitation, all claims against third parties for damage to or
loss or destruction of any of the foregoing, including insurance proceeds, and
accounts, contract rights, chattel paper and general intangibles arising out of
any sale, lease or other disposition of any of the foregoing; provided, however,
that the term "Collateral" shall not include, any leases, agreements, chattel
paper, contract rights or General Intangibles which are now held or hereafter
acquired by the Borrower to the extent that such leases, agreements, chattel
paper, contract rights or General Intangibles are not assignable or capable of
being encumbered (A) as a matter of law or (B) under the terms of any agreement
applicable thereto (but solely to the extent that any such restriction is
enforceable under applicable law) without the consent of the other party thereto
where such consent has not been obtained. Attached hereto as Schedule 4.12 is a
list of all material leases, agreements, chattel paper, contract rights or
General Intangibles held by Borrower as of the date hereof which by their
respective terms are non-assignable.
1.12 DEBTOR shall mean the account debtor with respect to any
of the Borrower's Accounts and/or the prospective purchaser with respect to any
contract right, and/or any party who enters into or proposes to enter into any
contract or other arrangement with the Borrower pursuant to which the Borrower
is to deliver any personal property or perform any service.
1.13 DEBT SERVICE RATIO shall mean that ratio of (a) the sum
of (i) Borrower's interest expense; plus (ii) Borrower's scheduled principal
payments to (b) EBITDA.
1.14 DEFAULT RATE shall mean that rate of interest which is
two and one-half percent (2 1/2) above the then applicable rate under the
Notes, or if there is no then applicable rate, the default rate shall be a rate
of interest equal to the Prime Rate plus two and one-half percent (2-1/2%).
1.15 DIVIDENDS shall mean (i) any payment made, liability
incurred, or other consideration or property given, for the repurchase or
redemption of any equity interest of Borrower, or (ii) a distribution (of cash
or property) in respect of any equity interest of Borrower or (iii) any payment
to any shareholder in respect of any Indebtedness of Borrower to such Person.
1.16 EBITDA shall mean the net income of the Borrower before
deduction for interest expense, income tax expense, depreciation expense,
amortization expense, as determined in accordance with GAAP, measured quarterly
on a rolling twelve (12) month basis.
1.17 ELIGIBLE ACCOUNTS shall mean such Accounts which are and
at all times shall continue to be acceptable to the Agent in all respects. As of
the Closing of the Loans, the following criteria shall be in effect as to the
Eligible Accounts, which shall be Accounts which:
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(a) are not subject to any claim for credit,
allowance, or adjustment by the account
Debtor or any set off or counter claim;
provided, however, that the portion of
any Account which is not subject to such
claim for credit, allowance, adjustment,
setoff or counterclaim, shall be deemed
an Eligible Account;
(b) arose in the ordinary course of
Borrower's business from the performance
(fully completed) of services or bona
fide sale of Inventory which have been
shipped to the Debtor (excluding any
portion of an Account which is
attributable to finance charges,
advertising charges or the like), and not
more than ninety (90) days have elapsed
since the due date in respect of such
Account (but in no circumstances more
than one hundred twenty (120) days from
the invoice date), less any unused credit
owed such Debtor by Borrower;
(c) no notice of any bankruptcy or insolvency
proceeding (pending or threatened) in
respect of a Debtor, any discontinuation
of such Debtor's business, or any other
information reasonably calling into
question the ability of such Debtor to
perform its obligations has been received
by Borrower or Agent;
(d) is not subject to an assignment, pledge,
claim, mortgage, lien, or security
interest of any type except that granted
to or in favor of Agent;
(e) the Debtor has not rejected, returned,
revoked acceptance of, or refused to
accept any of the Inventory which are the
subject of the Account; provided,
however, that the portion of any Account
which is not subject to such rejection,
return, revocation or refusal, shall be
deemed an Eligible Account;
(f) Borrower has not received any Instrument,
promissory note or chattel paper with
respect to or in payment of the Account;
(g) is not an Account which arises out of
contracts with or orders from the United
States or any of its departments,
agencies or instrumentalities, UNLESS
Agent's security interest in such Account
is perfected according to the Federal
Assignment of Claims Act in a manner
satisfactory to Agent;
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(h) is not an Account due from any Affiliate,
partner or employee of Borrower or an
"intercompany" or "interdivisional"
receivable;
(i) is not an Account which arises out of
contracts with or orders from a Debtor
which is not a resident of the United
States (unless such Account is secured by
a letter of credit acceptable to the
Agent) provided, however, that the Agent
will consider, on a case by case basis,
Accounts of Debtors which are residents
of Canada and may determine, in its
discretion, whether such Accounts shall
constitute Eligible Accounts;
(j) is not an Account owed to Borrower by a
Debtor which has failed to pay more than
twenty-five percent (25%) of its
currently outstanding Accounts in
accordance with the requirements set
forth in (b) above or such Account does
not otherwise comply with the
requirements set forth in (b) of this
Section 1.17;
(k) does not arise from the shipment or
conditional sale of Inventory on
consignment;
(l) is not an Account owed to Borrower by
Debtor which is a creditor of Borrower
for goods sold or services rendered by
such Debtor to Borrower, but only to the
extent of the value of such goods or
services at any time outstanding and
unpaid;
(m) a Debtor's Account balance (together with
any Accounts owing by an Affiliate of
such Debtor) in the aggregate does not
exceed thirty percent (30%) of the
aggregate total of Borrower's Eligible
Accounts; provided, however, that only
the portion in excess of such limitation
shall be deemed ineligible, and further
provided that this subsection (m) shall
not limit or exclude any amount of the
Account owed by Consolidated Stores,
Inc., successor to MacFrugal Pic-N-Save,
dba West Coast Liquidators or its
successors;
(n) is not subject to a reduction for a
discrepancy pursuant to Section 7.5
hereof, provided, however, that only the
amount of the discrepancy shall be deemed
ineligible;
(o) Borrower has not exercised or attempted
to exercise any seller's remedies with
regard to any Account, including,
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without limitation, stoppage in transit
or right of reclamation;
(p) is not an Account for which unapplied
funds have been received by Borrower or
Agent; and
(q) is not an Account owed from a Debtor
located in New Jersey or Minnesota which
exceeds, in the aggregate, $2,000,000.00
(it being agreed that only the amount in
excess thereof shall be excluded),
provided that (I) any single Account of
$1,000,000.00 or more shall be excluded
if such Account is in default and (II) if
the Agent requests that the Borrower
qualify to do business in either such
state or file any necessary reports, any
account from a Debtor located in such
state shall be excluded unless the
Borrower becomes qualified or files the
requested report within thirty (30) days
after the Agent's request.
1.18 ELIGIBLE INVENTORY shall mean such of Borrower's
Inventory in which Agent shall have a perfected first priority security
interest. Eligible Inventory will not include Inventory:
(a) located outside the United States;
(b) in the possession of an Affiliate, bailee
or a third party, unless such Inventory
is subject to a perfected first priority
security interest in favor of Agent to
secure the Loans and then only to the
extent not subject to any lien or claim,
setoff, credit, or allowance for amounts
due and unpaid to the Person in
possession of such Inventory;
(c) which is work in process;
(d) which is damaged, defective,
unmerchantable or spoiled;
(e) (i) held for twenty-four (24) or more
months for any period after December 1,
1997, as determined by the monthly
Inventory aging report prepared by
Borrower in the ordinary course; or (ii)
which is obsolete;
(f) held by Borrower or a third party on
consignment;
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(g) which is Inventory from vendors or
suppliers with corresponding liens or
purchase money security interests against
such Inventory, whether or not such liens
are Permitted Liens;
(h) which Agent, in its reasonable
discretion, has determined is
unsatisfactory in any respect and has
given Borrower not less than thirty (30)
days prior written notice of the reason
therefor;
(i) which is Inventory consisting of goods
not held for sale, including, without
limitation, maintenance items and
supplies, packing materials and cartons;
(j) which is inventory owned by another
Person and in Borrower's possession; or
(k) which is fully prepaid, in transit
Inventory not yet received by Borrower
unless title to such Inventory has passed
to Borrower, and so long as such
Inventory is adequately insured to the
reasonable satisfaction of the Agent and
the Agent is loss payee on such
insurance, with a value not in excess of
$5,000,000.00.
1.19 EQUIPMENT shall mean all of Borrower's equipment (as that
term is defined in the Uniform Commercial Code), including, without limitation,
all furniture, fixtures, machinery and other equipment of any kind and all
substitutions and replacements thereof and accessories and parts therefor, all
whether now owned or hereafter acquired by Borrower.
1.20 EVENT OF DEFAULT shall mean any event described in
Section 10.1 hereof.
1.21 INDEBTEDNESS shall mean:
(a) indebtedness created, issued or incurred
by Borrower for borrowed money (whether
by loan or the issuance and sale of debt
securities) whether or not recourse is
limited to specific assets of Borrower;
(b) obligations of Borrower to pay the
deferred purchase or deferred acquisition
price of property or services, other than
trade accounts payable arising in the
ordinary course of business so long as
such trade accounts payable are not for
borrowed money and are paid within sixty
(60) days after the due date (unless such
trade account payable is being contested
in good faith pursuant to appropriate
proceedings and a sufficient
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reserve, as reasonably determined by
Agent, has been established in respect
thereof);
(c) indebtedness of others secured by a lien
on the property of Borrower, whether or
not the indebtedness so secured has been
assumed by Borrower;
(d) obligations of Borrower in respect of
letters of credit or similar instruments
issued or accepted by banks and other
financial institutions for the account of
Borrower;
(e) capitalized lease obligations of
Borrower; and
(f) indebtedness of others guaranteed by
Borrower.
1.22 GAAP shall mean generally accepted accounting principles
as then in effect, which shall include the official interpretations thereof by
the Financial Accounting Standards Board, applied on basis consistent with past
accounting practices and procedures of Borrower.
1.23 GENERAL INTANGIBLES shall mean all of Borrower's general
intangibles (as that term is defined in the Uniform Commercial Code), including,
without limitation, all goodwill, patents, formulas, blueprints, proprietary
manufacturing processes, trademarks, trade names, licenses, franchises,
beneficial interests in trusts, joint venture interests, partnership interests,
rights to tax refunds, pension plan overfundings, literary rights, leasehold
interests and other contractual rights of Borrower, all whether now owned or
hereafter acquired by Borrower.
1.24 GUARANTOR means any Person which guarantees or assumes
performance of Borrower's Obligations to Lenders , either in whole or part.
1.25 INTEREST DETERMINATION DATE shall mean the third to last
Eurodollar Business Day (as defined in Section 1.26) of any then current
Interest Period with respect to any outstanding Advance, or in the case of funds
constituting a new Advance, that date which is two (2) Eurodollar Business Days
prior to the date such funds are actually advanced. If such date is not a
Eurodollar Business Day, then the immediately preceding Eurodollar Business Day
shall be utilized.
1.26 INTEREST PERIOD means, with respect to any Libor Rate
Loan, the period commencing on the date such Loan is made, continued or
converted or on the last day of the immediately preceding Interest Period
applicable to such Libor Rate Loan, as the case may be, and ending on the same
day in the first, second or third calendar month thereafter, as the Borrower may
elect in advance in accordance with the requirements of this Agreement;
provided, however, that whenever the last day of any Interest Period would
otherwise occur on a day other than a Eurodollar Business Day, the last day of
such Interest Period shall occur on the next succeeding Eurodollar Business Day,
provided that if such extension of time would cause the last day of such
Interest Period for a Libor Rate Loan to occur in the next following calendar
month, the last day of such Interest Period shall occur on the next preceding
Eurodollar Business Day. If any Interest
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Period ends on a day during a month in which there is no numerically
corresponding day to the first day of the Interest Period, then the Interest
Period shall end on the last Eurodollar Business Day of such calendar month. For
all purposes herein, a "Eurodollar Business Day" shall be any day on which major
commercial banks in London, England are open for the regular conduct of
business. Interest shall accrue from and including the first day of an Interest
Period to but excluding the last day of such Interest Period.
1.27 INVENTORY shall mean all of Borrower's inventory (as that
term is defined in the Uniform Commercial Code), including, without limitation,
all goods, merchandise and other personal property which are held for sale or
lease, or are furnished or to be furnished under any contract of service by
Borrower, or are raw materials, work-in-progress, supplies or materials used or
consumed in Borrower's business, and all products thereof, and all
substitutions, replacements, additions and accessories thereto, all whether now
owned or hereafter acquired by Borrower; and all of Borrower's right, title and
interest in and to any leases or rental agreements for such inventory.
1.28 LC EXPOSURE shall mean, with respect to any Lender, at
any time of determination, such Lender's Ratable Portion of the sum of (a) the
aggregate undrawn amount of all Letters of Credit outstanding at such time and
(b) the aggregate amount that has been drawn under such Letters of Credit which
the Letter of Credit Lender or the Lenders, as the case may be, have not at such
time been reimbursed by the Borrower.
1.29 LC FACILITY shall have the meaning set forth in Section
2.2 hereof.
1.30 LENDERS shall mean Agent, LaSalle, and NCB and the
successors thereto and assignees thereof.
1.31 LENDING OFFICE shall mean, with respect to any Lender,
the office of such Lender specified as its "Lending Office" under its name on
the signature pages hereto, or such other office of such Lender as such Lender
may from time to time specify in writing to the Borrower and the Agent as the
office at which Advances are to be made and maintained.
1.32 LETTER OF CREDIT shall mean any one or more letters of
credit issued under the LC Facility.
1.33 LETTER OF CREDIT LENDER shall mean Agent, its successors
and assigns.
1.34 LIABILITIES shall mean all indebtedness, obligations and
other liabilities of Borrower, whether matured or unmatured, liquidated or
unliquidated, direct or contingent or joint or several, that should, in
accordance with GAAP, be classified as liabilities on a balance sheet of
Borrower.
1.35 LIBOR MARGIN shall mean:
(a) 200 basis points if Borrower's EBITDA,
calculated quarterly on a rolling
four-quarter basis, is less than Eighteen
Million Dollars ($18,000,000.00); or
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(b) 175 basis points if Borrower's EBITDA,
calculated quarterly on a rolling
four-quarter basis, is greater than or
equal to Eighteen Million Dollars
($18,000,000.00).
1.36 LIBOR RATE shall mean with respect to a Libor Rate Loan
the arithmetic mean of the offered rates for deposits in U.S. dollars having a
maturity coterminous with the Interest Period designated in the applicable Libor
Rate Loan request commencing on the second Eurodollar Business Day immediately
following the Interest Determination Date, as reported on the Bloomberg L.P.
Financial Markets System as of 11:00 A.M., London time, on such Interest
Determination Date. If Agent terminates its subscription to the Bloomberg L.P.
Financial Markets System, the Libor Rate shall be determined by Agent utilizing
any other reasonable system selected by Agent as a reference service to
determine Libor rates. The Agent will use reasonable efforts to confirm in
writing any Libor Rate selected by the Borrower; however, Agent shall have no
liability to Borrower for failing to send such confirmation.
1.37 LIBOR RATE LOAN means any Advance under Section 2 of this
Agreement that bears interest with reference to the Libor Rate.
1.38 LOAN DOCUMENTS shall mean this Agreement, the Notes, and
all other documents, agreements, instruments or certificates executed or
delivered by Borrower and/or Guarantor in connection herewith or relating
hereto, and any amendments or modifications thereto.
1.39 LOANS shall mean all Advances made pursuant to Section 2
of this Agreement.
1.40 MATERIAL AGREEMENTS shall mean those contracts,
agreements, documents or other arrangements set forth on Schedule 4.21.
1.41 MAXIMUM LOAN AMOUNT shall have the meaning set forth in
Section 2.1.
1.42 NOTES shall mean one or more promissory notes evidencing
the Loans pursuant to Section 2 hereof.
1.43 OBLIGATIONS shall mean, without limitation, all Loans and
all other debts, obligations, or liabilities of every kind and description of
Borrower and/or Guarantor to Lenders arising or existing in connection with or
pursuant to the Loan Documents, now due or to become due, direct or indirect,
absolute or contingent, presently existing or hereafter arising, joint or
several, secured or unsecured, whether for payment or performance, including,
without limitation, all loans (including any loan by renewal or extension), all
overdrafts, all guarantees, all bankers acceptances, all agreements, all letters
of credit issued by Letter of Credit Lender for Borrower hereunder and the
applications relating thereto, all indebtedness of Borrower to Agent, and all
undertakings to take or refrain from taking any action. Obligations shall also
include all interest and other charges chargeable to the Borrower or due from
the Borrower to the Lenders from time to time under the Loan Documents,
including but not limited to, all costs and expenses referred to in Section 8
and Section 14 of this Agreement.
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1.44 PERMITTED INDEBTEDNESS shall mean only the following
Indebtedness:
(a) Trade payables and other current
liabilities occurred in the ordinary
course of business;
(b) Any Indebtedness which is subordinated to
the satisfaction of Agent;
(c) Payments under capitalized leases
permitted by Section 6.13 hereof and
purchase money Indebtedness, provided the
aggregate annual payments under any such
leases, combined with the purchase money
Indebtedness, is less than $5,000,000.00,
exclusive of (I) any amount with respect
to Borrower's proposed AS400 computer
lease and (II) up to $2,500,000.00 with
respect to the point of sale inventory
system, and further provided that any
amount of purchase money Indebtedness in
excess of $1,000,000.00 shall require the
approval of the Agent, which shall not be
unreasonably withheld;
(d) Such other Indebtedness as hereinafter
approved by Lender in writing;
(e) Guaranties executed by (i) either
Borrower for the benefit of the other in
connection with the leasing of real
property or (ii) Stores for the benefit
of VCM Ltd., an Ohio limited liability
company, and joint ventures between
Stores and Value City Department Stores,
Inc. and;
(f) Such other Indebtedness owing to any
Borrower, ZS Peddler's Mart, Inc., a
Delaware corporation, and/or Odd-Job
Holdings, Inc., a Delaware corporation.
1.45 PERMITTED LIENS shall mean the liens and interests in
favor of Agent granted in connection herewith and, to the extent reflected on
Borrower's books and records and not materially impairing the operations of
Borrower or any performance hereunder or contemplated hereby:
(a) liens arising by operation of law for
taxes not yet due and payable;
(b) inchoate statutory liens of mechanics,
landlord's materialmen, shippers and
warehousemen for services or materials
for which payment is not yet due;
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(c) liens incurred or deposits made in the
ordinary course of business in connection
with workers' compensation, unemployment
insurance and other types of social
security;
(d) liens in an amount less than $100,000, if
any, specifically permitted by Agent from
time to time in writing;
(e) the following if the validity or amount
thereof is being contested in good faith
and by appropriate and lawful proceedings
promptly initiated and diligently
conducted of which Borrower has given
notice to Agent and for which appropriate
reserves (in Agent's reasonable judgment)
have been established and so long as levy
and execution thereon have been and
continue to be stayed: claims and liens
for taxes due and payable and claims of
mechanics, materialmen, shippers,
warehousemen, carriers and landlords;
(f) liens to secure purchase money
Indebtedness which is Permitted
Indebtedness;
(g) liens securing statutory obligations,
surety, customs and appeal bonds and
other obligations of like nature,
incurred in the ordinary course of
business;
(h) liens arising under or securing
capitalized lease obligations permitted
hereunder;
(i) those liens and encumbrances shown on
Schedule 1.45 hereto; and
(j) reservations, rights of way, zoning
restrictions and other similar
encumbrances to title affecting real
property, provided that they do not as a
practical matter have any adverse effect
on the ownership or use of any of the
property in question.
1.46 PERSON shall mean an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, and a
government or any department or agency thereof.
1.47 PLAN shall mean any pension plan, retirement plan, profit
sharing plan, defined benefit or contribution plan, bonus plan, other
compensatory or similar plan, other
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qualified or nonqualified plan, or "employee pension benefit plan" as defined in
Section 3(2) of ERISA (as defined in Section 4.18) and all rules and regulations
promulgated thereunder.
1.48 POTENTIAL DEFAULT shall mean an event, condition or thing
which with the lapse of any applicable grace period or with the giving of notice
or both would constitute, an Event of Default and which has not been
appropriately waived in writing in accordance with this Agreement or fully
corrected, prior to becoming an actual Event of Default.
1.49 PRIME RATE shall mean that annual percentage rate of
interest established by Agent from time to time as its prime rate (and disclosed
to Borrower), whether or not such rate is publicly announced and which provides
a base to which loan rates may be referenced. The Prime Rate is not necessarily
the lowest lending rate of the Agent.
1.50 PRIME RATE LOAN shall mean any Advance which bears
interest at a rate of interest utilizing the Agent's Prime Rate as the index
rate.
1.51 RATABLE PORTION shall mean, in respect of any Lender, the
quotient (expressed as a percentage) obtained at any time by dividing (x) the
sum of such Lender's Revolving Credit Commitment at such time plus such Lender's
Term Loan Commitment by (y) the sum of the aggregate amount of the Revolving
Credit Commitments of all the Lenders plus the aggregate amount of the Term Loan
Commitment of all the Lenders.
1.52 RELATED EXPENSES shall mean any and all reasonable costs,
liabilities, and expenses (including without limitation, losses, damages,
penalties, claims, actions, reasonable attorney's fees and legal expenses,
judgments, suits, and disbursements) incurred by, imposed upon, or asserted
against, the Agent or any Lender in connection with any attempt by the Agent or
any Lender:
(a) to preserve, perfect, or enforce any security interest
evidenced by (i) the Agreement, or (ii) any other pledge
agreement, mortgage deed, hypothecation agreement, guaranty,
security agreement, assignment, or security instrument
executed or given by the Borrower to or in favor of the Agent
for the benefit of the Lenders,
(b) to obtain payment, performance, and observance of any and all
of the Obligations,
(c) to maintain, insure, collect, preserve, repossess, and dispose
of any of the Collateral, or
(d) incidental or related to (a) through (c) above including,
without limitation, interest thereupon from the date incurred,
imposed, or asserted until paid at the rate payable as set
forth in Section 2 of the Agreement, but in no event greater
than the highest rate permitted by law.
1.53 RESERVE shall mean that portion of the Borrowing Base
which is designated, in the reasonable discretion of the Agent, as a reserve for
inventory located on real property leased by Borrower and for which a landlord
waiver and consent agreement has not been executed pursuant to Section 5.19
herein. As of the date hereof, the reserve amount shall mean an amount equal to
the
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aggregate total of the base rental payments due for each of the foregoing
locations for a period of three (3) months.
1.54 RETAIL INVENTORY shall mean that portion of Eligible
Inventory which is located at any retail location operated by Borrower. In
addition to the exclusions set forth in Section 1.18, the aggregate value of
Retail Inventory shall, for purposes of determining the amount which can be
borrowed under the Revolving Loan, be reduced by (a) any intercompany mark-up or
profit margin, and (b) a factor of two percent (2%) to reserve for damaged or
obsolete Retail Inventory.
1.55 REVOLVING CREDIT ADVANCES shall mean means an Advance
made by Agent to Borrower, subject to the provisions, terms and conditions of
Section 2.1 of this Agreement.
1.56 REVOLVING CREDIT BORROWING shall mean a Borrowing
consisting of Revolving Credit Advances.
1.57 REVOLVING CREDIT COMMITMENT shall mean the Revolving
Credit Commitment of each Lender as set forth in Annex 1.
1.58 REVOLVING CREDIT TERMINATION DATE shall mean November 15,
2002.
1.59 REVOLVING LOAN shall mean any Advance pursuant to Section
2.1.
1.60 REVOLVING LOAN NOTE shall mean the Revolving Loan
Promissory Note executed by Borrower to evidence the loan described in Section
2.1 hereof.
1.61 TANGIBLE NET WORTH shall mean, at any time, partner's or
shareholder's equity (in accordance with GAAP) less the sum of (i) any surplus
resulting from any write-up of assets, (ii) goodwill, including any amounts,
however designated on a balance sheet of Borrower, representing the excess of
the purchase price paid for assets or stock acquired over the value assigned
thereto on the books of the Borrower, (iii) patents, trademarks, trade names and
copyrights, (iv) any deferred expenses, (v) any other amount in respect of an
intangible that should be classified as an asset on the balance sheet of
Borrower in accordance with GAAP, (vi) any receivables or other amount owed
Borrower by any Affiliate, and (vii) any investment by Borrower in any
Affiliate.
1.62 TERM LOAN ADVANCES shall mean an Advance made by Lenders
to Borrower subject to the provisions, terms and conditions of Section 2.3 of
this Agreement.
1.63 TERM LOAN BORROWING shall mean a Borrowing consisting of
Term Loan Advances.
1.64 TERM LOAN COMMITMENT shall mean the Term Loan Commitment
of each Lender as set forth in Annex 1.
1.65 TERM LOAN shall mean the loan described in Section 2.3
hereof.
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1.66 TERM LOAN NOTE shall mean the Term Loan Promissory Note
executed by Borrower to evidence the Term Loan as described in Section 2.3
hereof.
1.66 TYPE shall mean, when used in respect of any Advance, the
Libor Rate or the Prime Rate in effect in respect of such Advance.
SECTION 2. LOANS AND INTEREST.
2.1 REVOLVING CREDIT FACILITY.
(a) Subject to the terms and conditions of
this Agreement, and in reliance upon the
representations and warranties contained
herein, each Lender severally agrees to
make Advances to or for the account of
Borrower in the form of loans to the
Borrower in an aggregate amount not to
exceed the lesser of (i) the amount of
such Lender's Revolving Credit
Commitment, minus any Reserves, minus the
lesser of (A) the aggregate face amount
such Lender's LC Exposure or (B) the
Available Draw under such Lender's LC
Exposure or (ii) such Lender's Ratable
portion of the Borrowing Base minus any
Reserves, minus the lesser of (E) the
aggregate face amount such Lender's LC
Exposure or (F) the Available Draw under
such Lender's LC Exposure (the lesser of
(i) or (ii) being referred to hereinafter
as the "Maximum Loan Amount"). Agent
reserves the right to modify, in its
reasonable discretion, subject to Section
11.21 herein, the advance rates stated in
the definition of "Borrowing Base" upon
ninety (90) days prior notice to
Borrower. Should the outstanding amount
of Loans at any time exceed the Maximum
Loan Amount, Borrower shall on demand
immediately repay such excess amount.
Each Lender's loan pursuant to this
Section 2.1 shall be evidenced by a
properly executed promissory note in the
form of Exhibit C ("Revolving Loan
Note"), with all blanks appropriately
filled in.
(b) Each Lender shall automatically reimburse
itself for amounts drawn under any Letter
of Credit issued pursuant to the LC
Facility. The automatic reimbursement
described above shall constitute, and be
made in the form of, an Advance under the
Revolving Loan Note as a Prime Rate Loan.
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(c) Advances under the Revolving Loan Note
shall be made pursuant to Borrower's
written or telephonic request therefor,
given by Borrower to Agent, at least two
(2) Business Days before the requested
date of a proposed Revolving Credit
Borrowing, stating the date of the
requested borrowing, the amount of the
requested Advance, whether it will be a
Prime Rate Loan or Libor Rate Loan, the
applicable Interest Period, if any, and
the total amount to be borrowed. For all
purposes relating to Advances hereunder,
Stores shall be the agent of Borrower,
and Agent shall not be obligated to
accept direction from any other Borrower
with respect to any Advance until Agent
shall have received written notice to
that effect. In addition, all Advances to
be made at the Libor Rate shall equal or
exceed One Million Dollars
($1,000,000.00). Each written request for
an Advance shall be signed by an
authorized representative of Borrower,
and each telephonic request for an
Advance shall be made, and confirmed in
writing within twenty-four (24) hours
thereafter, by such an authorized
representative. Any written request with
respect to a Libor Rate Loan shall be
received by Agent on or before the
applicable Interest Determination Date.
Any telephonic request for a Libor Rate
Advance shall be made on or before the
applicable Interest Determination Date.
No written request for an Advance shall
become effective until actually received
by Agent. The Agent shall give each
Lender reasonably prompt notice by
telecopier or verbal notice not later
than 12:00 noon (Cleveland, Ohio time) on
(i) the Business Day immediately
preceding the requested date of the
proposed Prime Rate Advance ; or (ii) the
second Business Day preceding the
requested date of the Libor Rate Advance.
(d) Borrower undertakes and agrees to pay to
Agent, for the benefit of Lenders, on the
first day of each calendar month interest
on the amount outstanding under such
Lender's Revolving Loan Note, at an
annual rate based upon a year of three
hundred sixty-five (365) days, with
respect to each Advance to be determined
as follows:
(i) A rate per annum, at the
option of Borrower, based on
either (A) the Libor Rate plus
the Libor Margin or (B) the
Prime Rate less one-half
percent (1/2%).
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(ii) The rate of interest on any
Prime Rate Loan will
automatically and immediately
increase or decrease on the
day of, and by an amount equal
to, each increase or decrease
in the Prime Rate with no
notice to Borrower.
(iii) Any Libor Rate Loan elected by
Borrower under this Section
2.1 shall, as to each such
Advance, remain in effect
until the expiration of the
applicable Interest Period.
Borrower may select a new
Interest Period for such Libor
Rate Loan on the applicable
Interest Determination Date by
delivery of written notice to
Agent on or before such date.
In the event that Borrower
shall fail to give timely
notice on or before the
applicable Interest
Determination Date of its
election to continue any Libor
Rate Loan as provided above or
convert such Loan to a Prime
Rate Loan, or in the event any
such conversion or
continuation shall be
prohibited by the terms of
this Agreement, such Advance
(unless repaid) shall
automatically be deemed to be
refinanced with a Prime Rate
Loan at the end of the
Interest Period then in effect
with respect to such Libor
Rate Loan.
(iv) Notwithstanding any provision
in this Agreement to the
contrary, if an Event of
Default shall have occurred,
the unpaid principal and, to
the extent permitted by law,
accrued interest under the
Revolving Loan Note shall bear
interest at the Default Rate
until the Event of Default
shall have been cured with the
consent of Agent. Prior to
maturity, if any payment of
principal or interest is ten
(10) or more days past due,
Borrower shall pay a late fee
of an amount equal to the
lesser of five percent (5%) of
such payment or Two Hundred
Fifty Dollars ($250.00).
(e) The Revolving Loan shall mature on the
Revolving Credit Termination Date.
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2.2 LETTER OF CREDIT FACILITY.
(a) Subject to the terms and conditions set
forth in this Agreement and in reliance
upon the representations and warranties
contained herein being true as of the
date of issuance of the letters of credit
described herein, the Letter of Credit
Lender on behalf of the Lenders agrees,
at any time and from time to time, from
and including the Closing Date but in no
event beyond the thirtieth (30th)
calendar day immediately preceding the
Revolving Credit Termination Date then in
effect, to issue and deliver, or to
extend the expiration of, Letters of
Credit for the account of the Borrower in
an aggregate undrawn face amount (that
is, that portion which has not already
been drawn upon by the beneficiary
thereof (the "Available Draw")) not to
exceed at any time outstanding the lesser
of: (x) Twenty-Five Million Dollars
($25,000,000) or (y) the Borrowing Base
MINUS the sum of aggregate outstanding
Revolving Credit Advances of the Lenders
plus the aggregate LC Exposure of the
Lenders plus any Reserves or (z) the
aggregate Revolving Credit Commitments of
the Lenders MINUS the sum of the
aggregate outstanding Revolving Credit
Advances of the Lenders plus the
aggregate LC Exposure of the Lenders plus
any Reserves (the "LC Facility"). For
purposes of determining the Maximum Loan
Amount permitted pursuant to Section 2.1,
the issuance of a Letter of Credit by
Letter of Credit Lender shall limit the
availability of Advances under the
Revolving Loan as set forth in Section
2.1. In connection with the issuance and
maintenance of each Letter of Credit,
Borrower shall pay to the Letter of
Credit Lender fees and commissions as set
forth in Section 8 hereof.
(b) TERM AND FORM OF LETTERS OF CREDIT. Each
Letter of Credit shall be issued in such
form and upon such terms (including,
without limitation, the execution and
delivery by Borrower of such
applications, notes and other instruments
and payments of the fees provided herein
as the Letter of Credit Lender may
require) and in such form and substance
as are satisfactory to Letter of Credit
Lender in connection with the Borrower's
business activities. Notwithstanding
anything herein, in no event shall the
maturity date of any Letter of Credit
issued by the Letter of Credit Lender
extend beyond the Revolving Credit
Termination Date.
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(c) REQUESTS FOR LETTERS OF CREDIT. Letters
of Credit shall be issued upon request
given by the Borrower to the Letter of
Credit Lender and the Agent not later
than 10:00 A.M. (Cleveland, Ohio time)
three (3) Banking Days prior to the
requested date of the proposed issuance
of the Letter of Credit. Each such
request for a Letter of Credit shall be
made in the form of a Credit Request
transmitted by the Borrower to the Letter
of Credit Lender and the Agent via
telecopier, telex, cable, or the PRO
TRADE automated letter of credit system
(confirmed in writing prior to the date
of the requested issuance of the Letter
of Credit), specifying with respect to
each Letter of Credit requested: (A) the
face amount thereof, (B) the beneficiary,
(C) the intended date of issuance and (D)
the terms of the Letter of Credit.
Concurrently with each Credit Request
requesting a Letter of Credit, the
Borrower shall execute and deliver to the
Letter of Credit Lender and the Agent an
appropriate request and Reimbursement
Agreement in the Letter of Credit
Lender's then standard form of
APPLICATION AND AGREEMENT FOR IRREVOCABLE
STANDBY LETTER OF CREDIT or APPLICATION
AND AGREEMENT FOR COMMERCIAL LETTER OF
CREDIT, as the case may be (each a
"Reimbursement Agreement"); PROVIDED,
HOWEVER, that in the event of any
conflict between the provisions of any
such Reimbursement Agreement and this
Agreement, the provisions of this
Agreement shall govern. The Agent shall
give each Lender reasonably prompt notice
of each such Letter of Credit Request by
telex, telecopier or cable.
(d) LENDERS TO PARTICIPATE. By the issuance
of a Letter of Credit (and without any
further action on the part of the Letter
of Credit Lender, the Agent or the
Lenders in respect thereof), the Letter
of Credit Lender hereby grants to each
Lender, and each Lender hereby acquires
from the Letter of Credit Lender, a
participation in such Letter of Credit
equal to such Lender's Ratable Portion of
the face amount of such Letter of Credit,
effective upon the issuance of such
Letter of Credit. Each Lender
acknowledges and agrees that its
acquisition of participations in respect
of Letters of Credit and its obligation
to make payments in accordance with
Section 2.4 of this Agreement is absolute
and unconditional and shall not be
affected by any circumstance whatsoever,
including the occurrence and continuance
of any Potential Default or Event of
Default hereunder, and that
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each such payment shall be made without
any offset, abatement, withholding or
reduction whatsoever.
(e) DRAWINGS TO CONSTITUTE ADVANCES. Promptly
after it shall have ascertained that any
draft and any accompanying documents
presented under a Letter of Credit appear
to be in conformity with the terms and
conditions of such Letter of Credit, the
Letter of Credit Lender, on behalf of the
Lenders, shall give written or telecopy
notice to the Borrower and the Lenders of
the receipt and amount of such draft and
the date on which payment thereon will be
made. Any amount paid by the Letter of
Credit Lender in respect of a drawing on
any Letter of Credit shall automatically
be deemed to be a Revolving Credit
Borrowing comprised of Prime Rate
Advances as of the date of such payment.
Each Lender shall be deemed to have made
an Advance in the amount of its Ratable
Portion of any such Borrowing (it being
understood that each Lender's obligation
to make such payment is absolute and
unconditional and shall not be affected
by any event or circumstance whatsoever,
including the occurrence of any Possible
Default or Event of Default hereunder and
each such payment shall be made without
any offset, abatement, withholding or
reduction whatsoever). Each Lender shall
fund its ratable portion of such deemed
Advance in accordance with the settlement
procedures set forth herein.
(f) OBLIGATIONS ABSOLUTE. The obligation of
the Lenders to make, and the Borrower to
pay, any Revolving Credit Borrowing made
pursuant to Section 2.2(e) of this
Agreement shall be absolute and
unconditional and shall be performed
under all circumstances including,
without limitation: (i) any lack of
validity or enforceability of any Letter
of Credit, (ii) the existence of any
claim, offset, defense or other right
that the Borrower may have against the
beneficiary of any Letter of Credit or
any successor in interest thereto, (iii)
the existence of any claim, offset,
defense or other right that any Lender
may have against the Borrower or against
the beneficiary of any Letter of Credit
or against any successor in interest
thereto, (iv) the existence of any fraud
or misrepresentation in the presentment
of any draft or other item drawn and paid
under any Letter of Credit or (v) any
payment of any draft or other item by the
Letter of Credit Lender which does not
strictly comply with the terms of any
Letter of Credit provided the payment
shall not have constituted gross
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negligence or willful misconduct on the
part of the Letter of Credit Lender;
PROVIDED, HOWEVER that the Lenders shall
not be obligated to make any such payment
provided by Section 2.2(e) of this
Agreement with respect to any wrongful
payment or disbursement made under any
Letter of Credit as a result of the gross
negligence or willful misconduct of the
Letter of Credit Lender to the extent
that such negligence or willful
misconduct releases the Borrower of its
obligations to reimburse the Letter of
Credit Lender and the Lenders under such
Letter of Credit.
(g) RIGHTS OF LETTER OF CREDIT LENDER.
Neither the Letter of Credit Lender, nor
any of its correspondents, shall be
responsible, absent gross negligence or
wilful misconduct, as to any document
presented under a Letter of Credit, or
any renewal or extension thereof, which
appears to be regular on its face and
appears on its face to conform to the
terms of the Letter of Credit and to make
reasonable reference thereto, for the
validity or sufficiency of any signature
or endorsement, for delay in giving any
notice or failure of any instrument to
bear adequate reference to the Letter of
Credit, or to any renewal or extension
thereof, or failure of documents not
clearly specified in the Letter of Credit
to accompany any instrument at
negotiation, or for failure of any person
to note the amount of any draft on the
reverse of the Letter of Credit or on any
renewal or extension thereof. Any action,
inaction or omission on the part of the
Letter of Credit Lender or any of its
correspondents, under or in connection
with any Letter of Credit or any renewal
or extension thereof or the related
instruments or documents, if in good
faith and in conformity with such Laws,
regulations or customs as are applicable
and the terms of this Section 2.2(g),
shall be binding upon the Borrower and
shall not place the Letter of Credit
Lender or any of its correspondents under
any liability to the Borrower, in the
absence of gross negligence or wilful
misconduct by the Letter of Credit Lender
or its correspondents. The Letter of
Credit Lender's rights, powers,
privileges and immunities specified in or
arising under this Agreement are in
addition to any heretofore or at any time
hereafter otherwise created or arising,
whether by statute or rule of Law or
contract.
(h) EFFECT OF APPLICABLE LAW OR CUSTOM. All
Letters of Credit issued hereunder will,
except to the extent
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otherwise expressly provided in this
Agreement, the Reimbursement Agreements
or the Letters of Credit, be governed by
the Uniform Customs and Practice for
Documentary Credits (1993 Revision),
International Chamber of Commerce
Publication No. 500, and any subsequent
revisions thereof.
(i) Borrower shall be obligated to reimburse
Letter of Credit Lender for any
additional amounts, if any law,
regulation or guideline which becomes
effective after the date hereof or change
after the date hereof in any law or
regulation or in the interpretation
thereof or issuance after the date hereof
of any ruling, decree, judgment or
recommendation by any regulatory body,
court or any administrative or
governmental authority charged or
claiming to be charged with the
administration thereof, shall either (i)
impose upon, modify, require, make or
deem applicable to the Letter of Credit
Lender or any of its affiliates any
reserve requirement based upon the
deeming of Letters of Credit to be
deposits held by the Letter of Credit
Lender, special deposit requirement,
insurance assessment or similar costs or
requirement against or affecting letters
of credit issued or to be issued
hereunder or (ii) subject the Letter of
Credit Lender or any of its affiliates to
any tax, charge, fee, deduction,
withholding or similar costs of any kind
whatsoever or (iii) impose any condition
upon or cause in any manner the addition
of any supplement to or increase of any
kind to the Letter of Credit Lender's or
an affiliate's capital or cost base for
issuing such Letters of Credit which
results in an increase in the capital
requirement supporting such Letters of
Credit or (iv) impose upon, modify,
require, make or deem applicable to the
Letter of Credit Lender or any of its
affiliates any capital requirement,
increased capital requirement or similar
requirement such as the deeming of such
Letters of Credit to be assets held by
the Letter of Credit Lender or any of its
affiliates for capital calculation or
other purposes, and the result of any
events referred to in (i), (ii), (iii) or
(iv) above shall be to increase the costs
or decrease the benefit in any way to the
Letter of Credit Lender or any affiliate
of issuing, maintaining or participating
in such Letters of Credit, then the
Borrower shall, on the tenth (10th)
business day after receipt of written
notice of such increased costs or
decreased benefits (which notice shall
set forth in
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reasonable detail the calculation of such
increased costs or decreased benefits) or
both to the Borrower by the Letter of
Credit Lender, pay to the Letter of
Credit Lender all such additional amounts
which, in the Letter of Credit Lender's
sole good faith calculation as allocated
to such Letters of Credit:
(i) in the case of events referred
to in (i) and (ii) above,
shall be sufficient to
compensate it for all such
increased costs, decreased
benefits or both; or
(ii) in the case of events referred
to in (iii) and (iv) above,
shall be an amount per annum,
payable quarterly, equal to
the product obtained by
multiplying (i) the minimum
percentage (expressed as a
decimal) capital required by
the appropriate regulatory
bodies to be maintained for
letter of credit risks of the
type issued hereunder (taking
into account any risk
allocation percentage or
weighing factor), times (ii)
the amount of the Letters of
Credit; and
(iii) all as certified by the Letter
of Credit Lender in said
written notice to the
Borrower, which certification
shall be conclusive absent
manifest error.
The Letter of Credit Lender agrees not to
seek reimbursement pursuant to this
Section 2.2(i) unless the Letter of
Credit Lender is seeking similar type
reimbursement from its other borrowers or
customers for whom it has issued letters
of credit or has established a letter of
credit facility.
(j) TERMINATION OF LETTER OF CREDIT FACILITY.
In the event that: (i) any restriction is
imposed on the Letter of Credit Lender
(including, without limitation, any legal
lending or acceptance limits imposed by
the United States of America or any
political subdivision thereof) which in
the judgment of the Letter of Credit
Lender would prevent the Letter of Credit
Lender from issuing Letters of Credit or
maintaining its commitment to issue
Letters of Credit or (ii) there shall
have occurred, at any time during the
term of this Agreement: (A) failure of
Borrower to observe or perform the
covenants set forth
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in Section 5.15 herein or the failure of
Borrower to pay when due any of the
Obligations, (B) any outbreak of
hostilities or other national or
international crisis or change in
economic conditions if the effect of such
outbreak, crisis or change would make the
creation of Letters of Credit
impracticable, (C) the enactment,
publication, decree or other promulgation
of any statute, regulation, rule or order
of any court or other governmental
authority which would materially and
adversely affect the ability of the
Borrower to perform its obligations under
this Agreement, or (D) the taking of any
action by any government or agency in
respect of its monetary or fiscal affairs
which would have a material adverse
effect on the issuance of Letters of
Credit, then the Letter of Credit Lender,
through the Agent, in the case of the
occurrence of any event described above
shall give written notice of the
occurrence of such event to the Borrower
and the Lenders, whereupon the commitment
of the Letter of Credit Lender to issue
Letters of Credit shall terminate on the
effective date of such notice. The
Borrower shall forthwith pay to the
Letter of Credit Lender all obligations
in respect of Letters of Credit on the
maturity date of drawing of such Letter
of Credit or such amounts shall be deemed
to be advanced as a Revolving Credit
Borrowing consisting of Prime Rate
Advances in accordance with the terms
hereof.
2.3 TERM LOAN.
(a) Subject to the terms and conditions of
this Agreement, and in reliance upon the
representations and warranties contained
herein being true as of the date of the
funding of the Term Loan, each Lender
severally agrees to make an Advance in
the form of a term loan to Borrower in
the principal amount equal to the Ratable
Portion of the Term Loan Commitment (the
"Term Loan").
(b) Borrower shall execute and deliver to
each Lender a Term Loan Promissory Note
(the "Term Loan Note") in substantially
the form set forth at Exhibit B, with all
blanks appropriately filled in, to
evidence the Term Loan.
(c) The Borrower shall repay the principal of
the Term Loan Notes in nineteen (19)
equal, consecutive quarterly payments of
principal in the amount of Five
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Hundred Thousand Dollars ($500,000.00),
which payment shall be due and payable on
the first day of each calendar quarter
commencing on May 1, 1998, and continuing
on the first day of every successive
quarter thereafter until February 1,
2003, on which date a twentieth (20th)
payment in the amount of all outstanding
principal and accrued interest shall be
due and payable in full. In addition,
funds repaid may not be reborrowed.
(d) Borrower undertakes and agrees to pay to
Agent on the first day of each calendar
quarter interest on the amount
outstanding under the Term Loan Note, at
an annual rate based upon a year of three
hundred sixty-five (365) days, with
respect to the Advance to be determined
as follows:
(i) A rate per annum, at the
option of Borrower, based on
either (A) the Libor Rate plus
the Libor Margin or (B) the
Prime Rate less one- half
percent (1/2%).
(ii) The rate of interest on any
Prime Rate Loan will
automatically and immediately
increase or decrease on the
day of, and by an amount equal
to, each increase or decrease
in the Prime Rate with no
notice to Borrower.
(iii) Any Libor Rate Loan elected by
Borrower under this Section
2.3 shall, as to the Advance,
remain in effect until the
expiration of the applicable
Interest Period. Borrower may
select a new Interest Period
for such Libor Rate Loan on
the applicable Interest
Determination Date by delivery
of written notice to Agent on
or before such date. In the
event that Borrower shall fail
to give timely notice on or
before the applicable Interest
Determination Date of its
election to continue any Libor
Rate Loan as provided above or
convert such Loan to a Prime
Rate Loan, or in the event any
such conversion or
continuation shall be
prohibited by the terms of
this Agreement, such Advance
(unless repaid) shall
automatically be deemed to be
refinanced with a Prime Rate
Loan at the end of the
Interest
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Period then in effect with
respect to such Libor Rate
Loan.
(iv) Notwithstanding any provision
in this Agreement to the
contrary, if an Event of
Default shall have occurred,
the unpaid principal and, to
the extent permitted by law,
accrued interest under the
Revolving Loan Note shall bear
interest at the Default Rate
until the Event of Default
shall have been cured with the
consent of Agent. Prior to
maturity, if any payment of
principal or interest is ten
(10) or more days past due,
Borrower shall pay a late fee
of an amount equal to the
lesser of five percent (5%) of
such payment or Two Hundred
Fifty Dollars ($250.00).
2.4 OBLIGATION TO FUND.
(a) FUNDING OF REVOLVING CREDIT ADVANCES.
(i) INITIAL FUNDING ON CLOSING
DATE. Each Lender shall,
before 2:00 P.M. (Cleveland,
Ohio time) on the date of the
initial Revolving Credit
Borrowing on the Closing Date,
make available to the Agent,
in immediately available funds
at the account of the Agent
maintained at the Payment
Office as shall have been
notified by the Agent to the
Lenders prior to such date,
such Lender's Ratable Portion
of: (A) the Revolving Credit
Advances comprising such
Revolving Credit Borrowing. On
the date requested by the
Borrower for a Revolving
Credit Borrowing, after the
Agent's receipt of the funds
representing a Lender's
Ratable Portion of such
Revolving Credit Borrowing,
the Agent will make the funds
of such Lender available to
the Borrower at the aforesaid
applicable Payment Office.
(ii) SETTLEMENT FUNDING; LENDER
SETTLEMENT. In order to
administer the making of draws
and advancements on the
Revolving Credit Borrowings,
Agent may advance to Borrower,
for and on behalf of each
Lender, each Lender's
Ratable Portion of each
Revolving Credit Loan;
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PROVIDED, HOWEVER, that Agent
shall not be deemed to have
assumed any liability as a
Lender hereunder as a
consequence of any advance
which Agent may make on behalf
of the Lenders under this
Section and no such Advance by
Agent shall in any way relieve
any Lender of its obligation
to pay its Ratable Portion and
make Revolving Credit Loans.
Prior to 2:00 P.M. (Cleveland
time) on the Business Day of
each calendar week designated
by Agent, or such earlier date
as the Agent may request in
its sole discretion (each, a
"Settlement Date"): (A) each
Lender shall make available to
the Agent, in settlement with
the Agent, such Lender's
Ratable Portion of the amount
(the "Settlement Amount") by
which the sum of all Revolving
Credit Advances made during
the period commencing on the
Settlement Date immediately
preceding the Settlement Date
in question and ending on the
Business Day immediately
preceding the Settlement Date
in question exceeds the sum of
all collections applied during
such period to Revolving
Credit Advances and (B) the
Agent will remit to each
Lender, in settlement with the
Lenders, each Lender's Ratable
Portion of the amount by which
the sum of all collections
applied to Revolving Credit
Advances during the period
commencing on the Settlement
Date immediately preceding the
Settlement Date in question
and ending on the Business Day
immediately preceding the
Settlement Date in question
exceeds the sum of all
Revolving Credit Advances made
during such period. Prior to
11:00 A.M. (Cleveland time) on
each Settlement Date, the
Agent shall give each Lender
notice specifying such
Lender's Ratable Portion of
the Settlement Amount to be
paid by such Lender on such
Settlement Date or such
Lender's Ratable Portion of
the amount to be remitted by
the Agent to the Lenders on
such Settlement Date.
(b) FUNDING OF TERM LOAN ADVANCE. Each Lender
shall, prior to 2:00 P.M. (Cleveland
time) on the date of the Term Loan
Borrowing, make available to the Agent,
in immediately available funds, such
Lender's Ratable
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Portion of the Term Loan Advance
comprising the Term Loan Borrowing. Such
funds shall be made available at the
account of the Agent maintained at the
Payment Office. Unless the Agent shall
have received notice from a Lender prior
to the date of the Term Loan Borrowing
that such Lender will not make available
to the Agent such Lender's Ratable
Portion of a Term Loan Borrowing, the
Agent may assume prior to receipt of
funds from such Lender that such Lender
has made its Ratable Portion of the Term
Loan Borrowing available to the Agent. In
reliance upon such assumption, the Agent
may, but shall not be obligated to, make
available to the Borrower on the date
requested for a Term Loan Borrowing funds
equal to such Lender's Ratable Portion of
such Term Loan Borrowing.
(c) AVAILABILITY OF FUNDS. Unless the Agent
shall have received notice from a Lender
prior to the date (or, in the case of
Prime Rate Advances, prior to the time)
of any Revolving Credit Borrowing that
such Lender will not make available to
the Agent such Lender's Ratable Portion
of the Revolving Credit Borrowing, the
Agent may assume that such Lender has
made its Ratable Portion of the Revolving
Credit Borrowing available to the Agent
on the date of the Revolving Credit
Borrowing in accordance with Section 2.4
of this Agreement. In reliance upon such
assumption, the Agent may, but shall not
be obligated to, make available to the
Borrower on such date, a corresponding
portion of the Revolving Credit
Borrowing.
(d) FAILURE OF LENDER TO FUND. If and to the
extent that any Lender shall not have
made available to the Agent such Lender's
Ratable Portion of the Term Loan
Borrowing advanced by the Agent, such
Lender's Ratable Portion of Revolving
Credit Borrowing funded on the Closing
Date or such Lender's Ratable Portion of
any Settlement Amount in respect of
Revolving Credit Borrowings advanced by
the Agent, the Borrower agrees to repay
to the Agent, immediately upon demand by
the Agent, and such Lender agrees to
reimburse the Agent in the event the
Borrower does not repay the Agent, an
amount equal to such Lender's Ratable
Portion of such Term Loan Borrowing, such
Revolving Credit Borrowing and such
Settlement Amount in respect of Revolving
Credit Borrowings, together with interest
thereon for each day from the date such
amount is made available to the
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Borrower until the date such amount is
repaid to the Agent, at the interest rate
applicable at the time to Prime Rate
Advances comprising Term Loan Borrowing
or Revolving Credit Borrowings, as the
case may be. If such Lender shall pay to
the Agent such Lender's Ratable Portion
of the Term Loan Borrowing, such
Revolving Credit Borrowing or such
Settlement Amount prior to repayment of
such amount by the Borrower, the amount
so repaid shall constitute such Lender's
Ratable Portion of the Term Loan
Borrowing or such Revolving Credit
Borrowing or such Settlement Amount and
the Borrower shall have no further
obligation to make the payment required
by this Section. Any interest accruing on
such Lender's Ratable Portion of any such
Borrowings up to and including the date
of repayment by the Borrower or payment
by such Lender shall be for the sole
account of the Agent.
(e) OBLIGATION OF LENDERS TO FUND. The
failure of any Lender to make any Advance
to be made by it as its Ratable Portion
of any Revolving Credit Borrowing or Term
Loan Borrowing or to make any payment of
its Ratable Portion of the Settlement
Amount shall not relieve any other Lender
of its obligation hereunder to make its
Advance on the date of such Borrowing or
to pay its Ratable Portion of the
Settlement Amount on the Settlement Date.
No Lender shall be responsible for the
failure of any other Lender to make any
Advance to be made by such other Lender
or to pay its Ratable Portion of any
Settlement Amount.
2.5 EVIDENCE OF LOANS. The Loans shall be evidenced by
Revolving Loan Notes and Term Loan Notes and any notes delivered in substitution
therefor (collectively, the "Notes") in form satisfactory to Agent and shall
bear interest as herein provided. In case of any change after the date hereof in
law or governmental rules, regulations, guidelines or orders (or any
interpretations thereof) or the introduction of new laws, regulations or
guidelines which become effective after the date hereof, which require Agent to
reserve for unfunded credit commitments, Agent may charge Borrower an additional
fee which will compensate Agent for such requirements, unless the Borrower
reduces the amount of the unfunded commitment sufficient to obviate the need for
such fee. Agent will only charge such fee to Borrower if the Agent is generally
charging its other customers a similar fee.
The Agent shall make entries in its accounting system for the
amount of each Advance made under the Agreement and all interest and fees as
they accrue and shall credit such account for each payment of principal and
interest and other amounts. Such accounts shall constitute rebuttably correct
evidence of all amounts outstanding and all amounts advanced by the Agent
pursuant to this Agreement.
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2.6 LOAN PAYMENTS. All payments of interest, principal and all
other amounts owing hereunder or under the Notes shall be made by the Borrower
to the Agent in immediately available funds at its principal office in
Cincinnati, Ohio or at such other place as the Agent may designate in writing,
at such times as shall be set forth herein or in the Notes or if not so set
forth, such amounts shall be payable on demand. Borrower hereby authorizes
Agent, at Agent's option, to charge any account or change or increase any Loan
balance of Borrower at Agent for the payment or repayment of any interest or
principal of the Loans or any fees, charges or other amounts due to Agent
hereunder. Agent shall be permitted to apply funds in the Cash Collateral
Account to the Obligations in such order of payment as it deems appropriate. The
Borrower shall make each payment to be made by the Borrower under this Agreement
and under the Notes with respect to principal of, interest on, and other amounts
relating to Advances, not later than 12:00 noon (Cleveland, Ohio time) on the
day when due by deposit of such immediately available funds to the Agent's
account maintained at the location for notices set forth in Section 14.6 of this
Agreement for application to the Borrower's Loan Account. Payments received
after 12:00 noon (Cleveland, Ohio time) shall be deemed to have been received on
the next succeeding Business Day. After receipt of any such payment, the Agent
will promptly cause to be distributed like funds relating to the payment of
principal or interest or commitment fees or other fees (other than amounts
payable pursuant to this Agreement solely to the Agent and amounts payable
pursuant to this Agreement solely to the Letter of Credit Lender) or amounts
which may be received in respect of the Obligations of the Borrower under this
Agreement ratably to each of the Lenders for the account of its respective
Lending Office, and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its Lending Office.
(a) APPLICATION OF PAYMENTS. The funds so
distributed to each Lender shall in each
case be applied by such Lender in
accordance with the terms of this
Agreement. Prior to the occurrence and
continuation of an Event of Default, all
funds received hereunder shall be
applied: (i) first, to the payment of any
accrued and unpaid interest and fees, in
that order on an invoice by invoice basis
in the order of their respective due
dates, until paid in full, (ii) second,
to late charges until paid in full, (iii)
third, to Related Expenses until paid in
full, (iv) fourth, to the outstanding
principal amount of any Revolving Credit
Advances in such order as the Agent may
choose in its sole discretion; PROVIDED,
HOWEVER, the Agent will use reasonable
efforts to avoid applications that would
cause early prepayment of a LIBOR Rate
Borrowing prior to expiration of its
applicable Interest Period, (v) fifth, to
the extent there are not outstanding
Revolving Credit Advances, to the
principal amount of any Advance
comprising any Term Borrowing which is
due on the next Repayment Date, (vi)
sixth, to the extent there are not
outstanding Revolving Credit Advances, to
the outstanding principal amount of any
Advance comprising any Term Borrowing in
the inverse order of maturity or in such
order as the Agent may choose in its
reasonable
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discretion and (vii) to any other
Obligations of the Borrower hereunder.
Upon the occurrence and during the
continuation of an Event of Default, each
Lender shall apply any amounts received
by it in such manner and order as the
Agent, in its sole discretion, elects.
(b) AUTHORIZATION TO CHARGE ACCOUNT. If and
to the extent payment OWED to any Lender
is not made when due hereunder or under
the Notes, the Borrower hereby authorizes
Agent to charge from time to time against
any or all of the Borrower's accounts
with Agent any amount so due. If and to
the extent any amount payable by the
Borrower to such Lender is not made when
due hereunder or under any Reimbursement
Agreement, the Borrower authorizes Agent
to charge from time to time any amount
due against any and all accounts of the
Borrower maintained at Agent . Notice of
any such charge shall be given promptly
to the Borrower by Agent.
(c) COMPUTATIONS OF INTEREST AND FEES. All
computations of interest, fees and other
compensation shall be made by the Agent
on the basis of a year of three hundred
sixty- five (365) days in each case for
the actual number of days (including the
first day but excluding the last day)
occurring in the period for which such
interest or fees are payable. Each
determination by the Agent of interest,
fees or other amounts of compensation due
hereunder shall be conclusive and binding
for all purposes, absent manifest error.
(d) PAYMENT NOT ON BUSINESS DAY. Whenever any
payment hereunder or under the Notes
shall be stated to be due on a day other
than a Business Day, such payment shall
be made on the next succeeding Business
Day. Any such extension or reduction of
time shall in such case be included in
the computation of payment of interest,
fees or other compensation, as the case
may be.
(e) PRESUMPTION OF PAYMENT IN FULL BY
BORROWER. Unless the Agent shall have
received notice from the Borrower prior
to the date on which any payment is due
to the Lenders hereunder that the
Borrower will not make such payment in
full, the Agent may assume that the
Borrower has made such payment in full to
the Agent on such date. In reliance upon
such assumption, the Agent may, but shall
not be obligated to, distribute to each
Lender on such due date the amount then
due such Lender. If and to the
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extent the Borrower shall not have made
such payment in full to the Agent, each
Lender shall repay to the Agent promptly
upon demand the amount distributed to
such Lender together with interest
thereon, for each day from the date such
amount is distributed to such Lender
until the date such Lender repays such
amount to the Agent, at the rate
applicable to the Borrower plus the
amount of any costs, expenses,
liabilities or losses incurred by the
Agent in connection with its distribution
of such funds.
SECTION 3. GRANT OF SECURITY INTEREST. To secure the payment and
performance of all of the Obligations the Borrower hereby grants to the Agent,
for the benefit of Lenders, a continuing security interest in and assigns to the
Agent, for the benefit of Lenders, all of Borrower's right and interest in and
to the Collateral. The foregoing interest granted by Borrower to Agent shall be
a first priority security interest and superior to all other liens and
encumbrances with respect to all Collateral owned by Borrower, subject only to
the Permitted Liens. Borrower acknowledges that the Loans contemplated herein
represent, in part, a refinancing of certain obligations of Borrower to the
Agent. Borrower agrees that all liens and security interests previously granted
to the Agent by Borrower shall continue and extend to secure the Obligations,
and agree that this extension shall in no manner affect or impair such liens and
security interests.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to the Agent that:
4.1 ORGANIZATION AND AUTHORITY. (a) The Borrowers are each
corporations duly organized, validly existing and in good standing under the
laws of the State of their organization and have the power and authority to
conduct their business as now conducted and as proposed to be conducted while
this Agreement is in effect; (b) the execution and delivery of this Agreement,
the Notes and the other Loan Documents and the performance of the transactions
contemplated hereby and thereby are within the authority of the Borrowers and
have been duly authorized by all proper and necessary corporate action; (c)
except as set forth on Schedule 4.1(c), the execution and delivery of this
Agreement, the Notes and the other Loan Documents and the performance of the
transactions contemplated hereby and thereby will not violate or contravene any
provisions of law or the charter or by-laws of any Borrower, or result in a
breach or default in respect of the terms of any agreement to which the any
Borrower is a party or by which it is bound, which breach or default would
result in the creation, imposition or enforcement of any lien against any of the
Collateral, or would have a material adverse affect on the conduct of any
Borrower's business as it is now being conducted and proposed to be conducted
while this Agreement is in effect, or would otherwise materially impair the
value of the security interest granted to the Agent hereunder; and (d) the
Borrowers are each duly qualified and in good standing and duly authorized to do
business in every jurisdiction where the nature of their properties or the
conduct of their business requires such qualification and authorization, as
shown on Schedule 4.1(d) attached hereto, and where the failure to qualify would
have a material adverse effect on any Borrower.
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4.2 BINDING EFFECT OF DOCUMENTS. This Agreement, the Notes and
the other Loan Documents are legal and binding obligations of the Borrower
enforceable in accordance with their terms, except as limited by bankruptcy,
insolvency, or other laws relating to the enforcement of creditor's rights and
general equitable principles.
4.3 GOVERNMENT CONSENT. The execution and delivery of this
Agreement, the Notes and the other Loan Documents and the performance of the
transactions contemplated hereby and thereby do not require any approval or
consent of any governmental agency or authority or of any other party except as
set forth on Schedule 4.3.
4.4 FINANCIAL STATEMENTS. Borrower has delivered to the Agent
copies of the financial statements of Mazel Company L.P. as of and for the year
or other period ending December 31, 1996 prepared by KPMG Peat Marwick. All of
these financial statements are true and correct, are in accordance with the
respective books of account and records of the Borrower and have been prepared
in accordance with generally accepted accounting principles, and fairly present
the financial condition of the Borrower and its assets and liabilities and the
results of its operations as at such date.
4.5 NO CHANGE IN FINANCIAL CONDITION. Since the ending date of
the financial statement described in Section 4.4, there has been no change in
the assets, liabilities, financial condition or operation of the Borrower, other
than changes in the ordinary course of business, the effect of which have not,
individually or in the aggregate, been materially adverse.
4.6 NO OTHER LIABILITIES. Except to the extent reflected in
the financial statements described in Section 4.4 or set forth in Schedule 4.6,
the Borrower, as of the date of this Agreement, does not know or have reasonable
grounds to know of any basis for the assertion against it of any material
liabilities or obligations of any nature, direct or indirect, accrued, absolute
or contingent, including, without limitation, liabilities for taxes then due or
to become due whether incurred in respect of or measured by the income of the
Borrower for any period prior to the date of this Agreement or arising out of
transactions entered into, or any state of facts existing prior thereto.
4.7 TAXES. The Borrower has filed all federal, state, local
and other tax returns and reports required to be filed by it, and such returns
and reports are true and correct to the best of its knowledge. The Borrower has
paid all taxes, assessments and other governmental charges lawfully levied or
imposed on or against it or its properties, other than those presently payable
without penalty or interest or being contested in good faith.
4.8 NO LITIGATION. Except as described in the attached
Schedule 4.8 and disclosed from time to time pursuant to Section 4.16 hereof,
there is no litigation or proceeding or governmental investigation pending or,
to the knowledge of the Borrower, threatened against or relating to the
Borrower, its properties or business which involves a claim or dispute which
exceeds Five Hundred Thousand Dollars ($500,000.00).
4.9 COMPLIANCE WITH LAWS. The Borrower is not, to its
knowledge, in violation of or default under any statute, law, ordinance,
regulation, license, permit, order, writ,
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injunction or decree of any government, governmental department, commission,
board, bureau, agency, instrumentality or court, which violation or default
would have a material adverse effect on the business, properties or condition,
financial or otherwise, of the Borrower.
4.10 NO DEFAULTS. The Borrower is not, to its knowledge, in
default under a material order, writ, judgment, injunction, decree, indenture,
agreement, lease or other instrument or contract, which default would have a
material adverse effect on the business, properties or condition, financial or
otherwise, of the Borrower, or in the performance of any covenants or conditions
respecting any of its indebtedness for borrowed money, and no holder of any
Indebtedness of the Borrower has given notice of any asserted default
thereunder, and no liquidation or dissolution of the Borrower and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to the Borrower or its properties is pending or, to the
knowledge of the Borrower, is threatened against Borrower.
4.11 LOCATION OF COLLATERAL. The Borrower maintains places of
business and owns Collateral only at those locations shown on Schedule 4.11
attached hereto (other than certain locations disclosed in writing to Agent or
as otherwise permitted by Section 5.9(g) hereof) and incorporated by reference
herein and maintains its chief executive office and its books of account and
records, including all records concerning Collateral at 31000 Aurora Road,
Solon, Ohio 44139 and 385 Nordhoff Place, Englewood, New Jersey. All of such
locations are locations where Borrower is a tenant leasing space or has a
contractual arrangement to store Inventory.
4.12 TITLE TO COLLATERAL. With respect to the Collateral,
other than as set forth on Schedule 4.12 attached hereto at the time the
Collateral becomes subject to the Agent's security interest, the Borrower is and
at all times will be the sole owner of and have good and marketable title to or
valid leasehold interests in the Collateral, free from all liens, encumbrances
and security interests in favor of any Person other than the Agent except for
Permitted Liens, and has full right and power to grant the Agent a security
interest therein. All information furnished to Agent concerning the Collateral
is and will be complete, accurate and correct in all material respects when
furnished.
4.13 RIGHTS OF BORROWER TO ACCOUNTS. As to each and every
Account (a) it is a bona fide existing obligation, valid and enforceable against
the Debtor (except as may be limited by bankruptcy or insolvency of the Debtor
or general equitable principles) for a sum certain for sales of goods shipped or
delivered, or goods leased, or services rendered in the ordinary course of
business; (b) all supporting documents, instruments, chattel paper and other
evidence of indebtedness, if any, delivered to the Agent are complete and
correct and valid and enforceable in accordance with their terms (except as may
be limited by bankruptcy or insolvency of the Debtor or general equitable
principles) and, to the best of Borrower's knowledge, all signatures and
endorsements that appear thereon are genuine, and all signatories and indorsers
have full capacity to contract; (c) the Debtor is liable for payment of the
amount expressed in such Account according to its terms (except as may be
limited by bankruptcy or insolvency of the Debtor or general equitable
principles); (d) it will be subject to no discount, allowance or special terms
of payment except in the ordinary course of business without the prior approval
of the Agent; (e) it is not subject to any prohibition or limitation upon
assignment, except as set forth on Schedule 4.12 hereto; (f) the Borrower has
full right and power to grant the Agent a security interest therein
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and the security interest granted in such Accounts to the Agent in Section 3
hereof, when perfected, will be a valid first security interest which will inure
to the benefit of the Agent without further action. The warranties set out
herein shall be deemed to have been made with respect to each and every Account
now owned or hereafter acquired by the Borrower.
4.14 RIGHTS OF BORROWER IN INVENTORY. The Eligible Inventory
is and will be saleable in the ordinary course of business and none of the
Inventory is or will be stored at a location (a) other than set forth on
Schedule 4.11 or any new location of which Agent has received prior written
notice after the date hereof or (b) with a bailee without the prior written
consent of Agent.
4.15 ACCURACY OF REPRESENTATION. No representation or warranty
by or with respect to the Borrower contained herein or in any certificate or
other document furnished by the Borrower pursuant hereto contains any untrue
statement of a material fact.
4.16 REPRESENTATIONS AS INDUCEMENT TO AGENT. The foregoing
representations and warranties are made by the Borrower with the knowledge and
intention that the Agent will rely thereon, and shall survive the execution and
delivery of this Agreement and the making of all Loans hereunder. The receipt of
Borrower of each Advance shall constitute a representation and warranty by
Borrower that the representations and warranties of Borrower contained in this
Section 4 are true and correct in all material respects as of the date of such
Advance, except to the extent such representations and warranties expressly
relate to an earlier date. The Borrower shall supplement in writing, as
necessary, all representations and warranties made in accordance with this
Agreement, and shall deliver such supplemental disclosure to the Agent and shall
otherwise be entitled to supplement in writing and deliver to the Agent any
information, including without limitation, any exhibits or schedules hereto, so
that the representations and warranties subject to such supplemental disclosure
shall continue to be true and accurate; PROVIDED, HOWEVER, that the furnishing
of such supplemental disclosure shall not constitute a cure or waiver of any
Event of Default arising from the matters disclosed therein or otherwise then
existing, but shall constitute, from the date of delivery of such supplemental
disclosure, an amendment to the representations and warranties. Any reference in
this Agreement to the representations and warranties contained herein shall mean
such representations and warranties as the same may have been supplemented in
accordance with the provisions of this Section.
4.17 ENVIRONMENTAL PROTECTION. The Borrower (a) has no actual
knowledge of the permanent placement, burial or disposal of any Hazardous
Substances (as hereinafter defined) on any real property leased, owned or
occupied by the Borrower (the "Premises"), or any spills, releases, discharges,
leaks, or disposal of Hazardous Substances that have occurred or are presently
occurring on, under, or onto the Premises, or of any spills, releases,
discharges, leaks or disposal of Hazardous Substances that have occurred or are
occurring off the Premises as a result of the Borrower's improvement, operation,
or use of the Premises which would result in non-compliance with any of the
Environmental Laws (as hereinafter defined); (b) is and has been in compliance
with all applicable Environmental Laws, except for such non-compliance which
would not have a material adverse effect on Borrower, its financial condition,
its operations, or properties; (c) knows of no pending or threatened
environmental civil, criminal or administrative proceedings against the Borrower
relating to Hazardous Substances; (d) knows of no facts or
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circumstances that would give rise to any future civil, criminal or
administrative proceeding against the Borrower relating to Hazardous Substances;
and (e) will not permit any of its employees, agents, contractors,
subcontractors, or any other person occupying or present on the Premises to
generate, manufacture, store, dispose or release on, about or under the Premises
any Hazardous Substances which would result in the Premises not complying with
the Environmental Laws.
As used herein, "Hazardous Substances" shall mean and include
all hazardous and toxic substances, wastes, materials, compounds, pollutants and
contaminants (including, without limitation, asbestos, polychlorinated
biphenyls, and petroleum products) which are included under or regulated by the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. 9601, et seq., the Toxic Substances Control Act, 15 U.S.C.
2601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et
seq., the Water Quality Act of 1987, 33 U.S.C. 1251, et seq., and the Clean Air
Act, 42 U.S.C. 7401, et seq., and any other federal, state or local statute
ordinance, law, code, rule, regulation or order regulating or imposing liability
(including strict liability) or standards of conduct regarding Hazardous
Substances (hereinafter the "Environmental Laws"), but does not include such
substances as are permanently incorporated into a structure or any part thereof
in such a way as to preclude their subsequent release into the environment, or
the permanent or temporary storage or disposal of household hazardous substances
by tenants and which are thereby exempt from or do not give rise to any
violation of the aforementioned Environmental Laws.
Further, the Borrower hereby indemnifies the Agent and holds
the Agent harmless from and against any loss, damage, cost, expense or liability
(including strict liability) directly or indirectly arising out of or
attributable to the generation, storage, release, threatened release, discharge,
disposal or presence (whether prior to or during the term of the Loan) of
Hazardous Substances on, under or about the Premises (whether by the Borrower or
any employees, agents, contractor or subcontractors of the Borrower or any
predecessor in title or any third persons occupying or present on the Premises),
or the breach of any of the representations and warranties regarding the
Premises, including, without limitation: (a) those damages or expenses arising
under the Environmental Laws; (b) the costs of any required or necessary repair,
cleanup or detoxification of the Premises, including the soil and ground water
thereof, and the preparation and implementation of any closure, remedial or
other required plans; (c) damage to any natural resources; and (d) all
reasonable costs and expenses incurred by the Agent in connection with clauses
(a), (b) and (c) including, but not limited to reasonable attorneys' fees.
The indemnification provided for herein shall not apply to any
losses, liabilities, damages, injuries, expenses or costs which: (i) arise from
the gross negligence or willful misconduct of the Agent, or (ii) relate to
Hazardous Substances placed or disposed of on the Premises after the Agent
acquires Borrower's interest in the Premises through foreclosure or otherwise.
4.18 EMPLOYEE BENEFIT PLANS. Other than as set forth on
Schedule 4.18 hereto, Borrower has no Plans, which are subject to regulation
under Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and no other Plans, which if violated, would have a material
adverse effect on Borrower, its financial condition, operations or property.
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Borrower has not received any notice to the effect that it is not in full
compliance with any of the requirements of ERISA, and to Borrower's knowledge no
fact or situation, including but not limited to any "Reportable Event," or
"Prohibited Transaction," as such terms are defined in ERISA, exists which is or
is reasonably likely to be construed as a violation of ERISA in connection with
any Plan. Except as would not have a material adverse effect on Borrower,
Borrower (i) has complied with all applicable provisions of ERISA, including
minimum funding requirements, (ii) has made all filings required to be made by
Borrower or any of its Plans under ERISA, (iii) has not applied for any
extensions of time in which to make contributions to any Plan maintained by it
or to which it is required to contribute, (iv) has timely made all contributions
and paid all premiums required to be paid to the Pension Benefit Guaranty
Corporation, and (v) no matters are presently pending before the United States
Labor Department or the Internal Revenue Service concerning any Plan maintained
by Borrower to which it is required to contribute.
4.19 EMPLOYEE RELATIONS. Other than as set forth on Schedule
4.19, Borrower is not a party to any collective bargaining agreement, there are
no material grievances, disputes or controversies with any union or any other
organization of Borrower's employees, or threats of strikes, work stoppages or
any asserted pending demands for collective bargaining by any union or
organization.
4.20 INTELLECTUAL PROPERTY. Other than as set forth on
Schedule 4.20, Borrower does not own or utilize any patents, trademarks, trade
names, copyrights or similar intellectual property rights, whether by license or
otherwise.
4.21 MATERIAL AGREEMENTS. Except as disclosed on Schedule 4.21
hereto, as of the date hereof Borrower is not a party to nor is Borrower or any
of its property bound by (a) any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality which, if violated could have
a material adverse effect on Borrower, its financial condition, operations or
properties, (b) any debt instrument which, if violated, could have a material
adverse effect on Borrower, its financial condition, operations or properties,
(c) any security agreement, mortgage, deed of trust, pledge, assignment or other
document or arrangement where any lien upon any of Borrower's property exists in
favor of any person other than Agent which, if violated, could have a material
adverse effect on Borrower, its financial condition, operations or properties,
(d) any lease (capital, operating or otherwise), whether as lessee or lessor
thereunder, which, if violated, could have a material adverse effect on
Borrower, its financial condition, operations or properties (e) any contract,
commitment, agreement or other arrangement involving the purchase or sale of any
of its property by Borrower, or the license of any right to or by Borrower,
which, if terminated for any reason, could result in a material adverse effect
on Borrower, its financial conditions, operations or properties, (f) any
contract, commitment, agreement or other arrangement with any Affiliate which,
if violated, could have a material adverse effect on Borrower, its financial
condition, operations or properties, (g) any management or employment contract
or contract for personal services with any Person, not otherwise an Affiliate,
which is not otherwise terminable at will or on less than ninety (90) days
notice without liability which, if violated, could have a material adverse
effect on Borrower, its financial condition, operations or properties, (h) any
collective bargaining agreement which, if violated, could have a material
adverse effect on Borrower, its financial condition, operations or properties,
or (i) any other
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contract, agreement, understanding or arrangement which, if violated, could have
a material adverse effect on Borrower, its financial condition, operations or
properties.
4.22 SUBSIDIARIES AND PARTNERSHIP INTERESTS. Other than as set forth on
Schedule 4.22 hereto, Borrower has no wholly-owned subsidiaries, and owns no
interest in any corporation or partnership.
SECTION 5. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that
until all of the Obligations have been paid in full, unless the Agent shall
otherwise consent in writing, it shall:
5.1 BOOKS AND RECORDS. Maintain complete and accurate books of
account and records pertaining to the Collateral and the operations of the
Borrower, and all such books of account and records shall be kept and maintained
at the location specified in Section 4.11 or any new location of which Agent has
received prior written notice after the date hereof as provided below. The
Borrower shall not move such books of account and records or change its chief
executive office without giving the Agent at least sixty (60) days prior written
notice. Prior to moving any of such books of account and records or changing the
location of its chief executive office, the Borrower shall execute and deliver
to the Agent financing statements satisfactory to the Agent. All such books of
account and records and all financial statements and reports furnished to the
Agent shall be maintained and prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods.
5.2 ACCESS TO INFORMATION. Upon reasonable prior notice and at
reasonable intervals, grant the Agent and Lenders, or their representatives,
full and complete access to the Collateral and to all books of account, records,
correspondence and other papers relating to the Collateral during normal
business hours and the right to inspect, examine, verify and make abstracts from
the copies of such books of account, records, correspondence and other papers,
and to investigate such other records, activities and business of the Borrower
as they may deem necessary or appropriate at the time. Borrower acknowledges and
agrees that Agent, for the benefit of Lenders, shall have the absolute right, in
addition to any other inspection or request pursuant hereto, to conduct two (2)
audits during any fiscal year of the Borrower's facilities, its books and
records and the Collateral, and such additional audits as Agent deems necessary
or appropriate after an Event of Default occurs and is continuing.
5.3 EVIDENCE OF ACCOUNTS. From time to time as the Agent may
reasonably require, deliver to the Agent schedules of all outstanding Accounts.
Such schedules shall be in form satisfactory to the Agent and shall show the age
of such Accounts from date of invoice in intervals of not more than thirty (30)
days (current and past due amounts), and contain such other information and be
accompanied by such supporting documents as the Agent may from time to time
prescribe. The Borrower shall also deliver to the Agent such other schedules and
information as the Agent may reasonably request. The items to be provided under
this Section are to be prepared and delivered to the Agent from time to time
solely for its convenience in maintaining records of the Collateral and the
Borrower's failure to give any of such items to the Agent shall not affect,
terminate, modify or otherwise limit the Agent's security interest granted
herein.
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5.4 FINANCIAL INFORMATION. During the term of the Loans,
Borrower shall deliver the following to Agent:
(a) Deliver to the Agent within forty-five
(45) days after the close of each fiscal
quarter of the Borrower, (i) a statement
of condition and statement of income and
cash flows of Borrower for such period,
(it being agreed that a copy of
Borrower's Form 10-Q delivered to the
Agent shall satisfy this requirement)
accompanied by a calculation of the
financial ratios in this Agreement,
certified as complete and correct by the
president, chief accounting or financial
officer of Borrower, as well as a
compliance certificate signed by the
president, chief accounting or financial
officer of Borrower certifying that
Borrower is in compliance with all the
terms and conditions of this Agreement
and that all representations and
warranties of Borrower hereunder (other
than Section 4.21) are true and accurate
in all material respects and further
showing Borrower's compliance with all
financial covenants herein; and (ii) a
schedule reporting on gross sales from
all retail store locations, the operating
income from each location (before
allocation of corporate expenses) and all
direct and allocated expenses for each
location;
(b) within thirty (30) days after the close
of each fiscal month, a schedule, in form
acceptable to Agent, of (i) all retail
store locations opened by Borrower during
the previous fiscal month indicating the
dates of opening of such stores and (ii)
all leases to which Borrower is a party
or under which it occupies real property
for which landlord waiver and consent
agreements in form acceptable to Agent
have not been executed pursuant to
Section 5.19 herein;
(c) deliver to the Agent not more than one
hundred twenty (120) days after the close
of each fiscal year of the Borrower, or
within such further time as the Agent may
permit, audited financial statements for
Borrower including a balance sheet, a
related income statement and statement of
cash flows, prepared in accordance with
generally accepted accounting principles
by independent certified public
accountants acceptable to the Agent, who
shall give their unqualified opinion with
respect thereto (it being agreed that a
copy of Borrower's Form 10-K delivered to
the Agent shall
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satisfy this requirement) and, if any,
the auditor's letter to management,
provided that such financial statements
shall be accompanied by a certified
schedule of the Material Agreements as of
the date of such financial statements;
(d) within ten (10) days after the end of
each fiscal month, a month-end
reconciliation of the Borrowing Base
reports together with (i) an Accounts
aging; (ii) wholesale Inventory with
aging (which report shall only be
required on and after January 1, 1998),
and (iii) a statement in such form as
Agent may require of the current status
and value of all Accounts and Inventory,
including a breakdown of such Inventory
and Accounts as are not Eligible
Inventory or Eligible Accounts,
respectively.
5.5 OTHER INFORMATION. Furnish to the Agent for the benefit of
Lenders such other financial and business information and reports in form and
substance satisfactory to the Agent as and when the Agent may from time to time
reasonably request.
5.6 MAINTENANCE OF EXISTENCE AND LICENSES. While this
Agreement remains in effect and until the Obligations have been paid in full,
(a) maintain its existence in good standing; (b) make no change in the nature or
character of its business; (c) maintain and keep in full force and effect all
licenses and permits necessary to the proper conduct of its business where the
failure to do so would have a material adverse effect on Borrower, its financial
condition, operations or properties and (d) at the reasonable request of the
Agent, qualify as a foreign business and obtain all requisite licenses and
permits in each state (other than the state of its organization) where the
Borrower does business where the failure to do so would have a material adverse
effect on Borrower, its financial condition, operations or properties.
5.7 MAINTENANCE AND INSURANCE OF PROPERTIES. Maintain and keep
all of its properties, real and personal, in good working order, condition and
repair and insure and keep insured all such properties at all times in such
amounts and against loss of damage by fire, theft, and such other risks and
hazards as are customarily insured against by businesses in similar
circumstances, or as the Agent may reasonably specify from time to time, with
insurers and in amounts reasonably acceptable to the Agent. Agent acknowledges
that Borrower's existing insurance satisfies the requirement of this Section
5.7. If the Borrower fails to do so, the Agent may obtain such insurance and
charge the cost thereof to the Borrower's account and add it to the Obligations.
Agent shall be named as an additional insured and loss payee on such insurance
policies to the extent that such policies insure the Collateral. All policies
shall provide for at least ten (10) days prior written notice of cancellation to
the Agent. Borrower shall deliver at least annually to Agent, or sooner if Agent
shall request, certificates of insurance evidencing the Borrower's compliance
herewith. After the occurrence and during the continuance of an Event of
Default, any and all sums received by Agent in payment of insurance losses,
returns or unearned premiums or any other proceeds of insurance may, at the
option of Agent, be applied
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to the payment of all or any part of the Obligations whether or not the same is
then due and payable, as the Agent may direct but, prior thereto, Borrower may
receive and be entitled to apply such proceeds in the ordinary course of
business. After the occurrence and during the continuance of an Event of
Default, Borrower hereby assigns to Agent any return or unearned premium which
may be due upon cancellation of any such policies for any reason and directs the
insurers to pay Agent any amount so due. Agent or Agent's designated agent is
hereby constituted and appointed Borrower's attorney-in-fact to (either in the
name of Borrower or in the name of Agent) make adjustments of all insurance
losses, sign all applications, receipts, releases and other papers necessary for
the collection of any such loss, and any return or unearned premium, execute
proof of loss, make settlements and endorse and collect all instruments payable
to Borrower or issued in connection therewith. Notwithstanding any action by
Agent hereunder, any and all risk of loss or damage to Borrower's Inventory,
Equipment and other assets, including any risk as to the extent of any and all
deficiencies in the effective insurance coverage thereof, is hereby expressly
assumed by Borrower. Agent agrees that it shall have no right to take any act
pursuant to such power of attorney until after the occurrence and during the
continuance of an Event of Default.
5.8 LIABILITY INSURANCE. At all times, maintain in full force
and effect such liability insurance with respect to its activities and business
interruption and other insurance as may be reasonably required by Agent, such
insurance to be provided by insurer(s) acceptable to Agent, and if requested by
Agent, such insurance shall name Agent as an additional insured. Copies of such
policies or certificates of insurance shall be provided to Agent promptly upon
issuance at the request of Agent. Agent acknowledges that Borrower's existing
insurance satisfies the requirement of this Section 5.8.
5.9 NOTICE OF CERTAIN EVENTS. Give prompt notice in writing to
the Agent of any of the following:
(a) Thirty (30) days prior written notice of
any new locations where Borrower's
Inventory is to be maintained, and a
notice confirming the occurrence of any
such change;
(b) The location of any new places of
business and the change in or close of
any of its existing places of business;
(c) Thirty (30) days prior notice of any
proposed change in Borrower's name or any
trade name of Borrower, and a notice
confirming the occurrence of any such
change;
(d) Any incident of any uninsured (determined
in the aggregate in any fiscal year) loss
or damage to Borrower's Equipment,
Inventory or other physical assets, the
cost of replacement of which exceeds Five
Hundred Thousand Dollars ($500,000.00);
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(e) Any event occurring after the execution
hereof which, if it had existed on the
date of this Agreement, would have
required qualification of the
representations and warranties set forth
herein and any material adverse change in
financial condition, operations or
properties of the Borrower or the ability
of the Borrower to perform its
obligations under this Agreement or the
Loan Documents including, but not limited
to, a default or receipt of a notice of
default under any Material Agreement;
(f) Any Event of Default hereunder, or any
fact or circumstance or a combination
thereof which with the delivery of notice
or the passage of time would constitute
an Event of Default hereunder; or
(g) Notwithstanding Section 5.9(a) above,
Borrower will provide five (5) business
days prior written notice of the location
of any Inventory purchased jointly with
any other Persons ("joint venture
Inventory"), provided however, such
notice is not required if Borrower
reasonably anticipates that such
Inventory will be held at such location
for less than thirty (30) days after the
date Borrower pays for such Inventory and
the fair market value of such Inventory
does not exceed One Million Dollars
($1,000,000.00).
5.10 PAYMENT OF TAXES. Pay all taxes, assessments or
governmental charges lawfully levied or imposed on or against it and its
properties prior to the date when such taxes, assessments or charges shall
become delinquent, unless the Borrower shall contest the validity thereof in
good faith with appropriate proceedings diligently pursued and shall post any
bond or other security required by applicable law or adequate book reserves in
accordance with GAAP have been established and are reasonably acceptable to
Agent.
5.11 DEALINGS IN INVENTORY. With respect to the Inventory,
sell or dispose of the Inventory only to buyers in the ordinary course of
business. Borrower will not sell Inventory on consignment in excess of Five
Hundred Thousand Dollars ($500,000.00), in the aggregate at any time. In the
event of any change in location of any of the Inventory, Borrower will, prior to
any such change, execute and deliver to the Agent such financing statements
satisfactory to the Agent as the Agent may request.
5.12 CLAIMS AGAINST BORROWER. Immediately upon learning
thereof, report to the Agent any claim or dispute asserted by any Debtor or
other obligor with respect to any non-retail inventory or transaction, and any
other matters materially affecting the value and enforceability or
collectibility of any of the Collateral and shall report to Agent, upon its
request, any reclamation, return (excluding any sales for value of Retail
Inventory in the ordinary course)
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or repossession of goods. In addition, the Borrower shall, at its sole cost and
expense (including reasonable attorney's fees), settle any and all such claims
and disputes and indemnify and protect the Agent against any liability, loss or
expense arising therefrom or out of any such reclamation, return or repossession
of goods, provided, however, if the Agent shall so elect, it shall have the
right upon and during the continuance of an Event of Default to settle,
compromise, adjust or litigate all claims or disputes directly with the Debtor
or other obligor upon such terms and conditions as it deems advisable and charge
all costs and expenses thereof (including attorneys' fees) to the Borrower's
account and add them to the Obligations.
5.13 DEFENSE OF COLLATERAL. Defend the Collateral against all
claims and demands of all persons at any time claiming the same or any interest
therein and pay all costs and expenses (including attorneys' fees) incurred in
connection with such defense.
5.14 FINANCING STATEMENTS. At the request of the Agent,
execute and deliver such financing statements, documents and instruments, and
perform all other acts as the Agent deems necessary or desirable, to carry out
and perform the intent and purpose of this Agreement, and pay, upon demand, all
expenses (including attorneys' fees) incurred by the Agent in connection
therewith. A photocopy of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof.
5.15 FINANCIAL COVENANTS. Maintain the following financial
covenants:
(a) Tangible Net Worth as follows: At all
times equal to or exceeding Fifty Five
Million Dollars ($55,000,000) and
increasing each calendar quarter
thereafter (on a cumulative basis) in the
amount equal to sixty-five percent (65%)
of the net income, after taxes, of
Borrower, if positive. This covenant
shall be tested quarterly.
(b) A ratio of Liabilities to Tangible Net
Worth as at all times of not more than
2.0 to 1.0.
(c) An Debt Service Ratio at all times not
less than 2.0 to 1.0. This covenant shall
be tested quarterly on a rolling twelve
(12) month basis.
(d) A ratio of Indebtedness owing to the
Lenders to EBITDA at all times not more
than 4.0 to 1.0. This covenant shall be
tested quarterly commencing fiscal
year-end January, 1999.
5.16 MAINTENANCE OF AGENT ACCOUNTS. Except as otherwise agreed
from time to time, concentrate all of its depository accounts with Agent,
including without limitation, all demand deposit, lock box, time deposit,
concentration and zero balance accounts except, however, certain accounts
necessary for the operation of its retail locations need not be maintained at
the
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Agent provided arrangements acceptable to the Agent have been established for
the immediate transfer of funds to accounts maintained at Agent. Borrower shall
provide Agent with a power of attorney with respect to each such account, which
Agent may only utilize after the occurrence and continuation of an Event of
Default. Borrower further agrees to cause Guarantor to concentrate all of its
depository accounts with Agent, including without limitation, all demand
deposit, lock box, time deposit, concentration and zero balance accounts.
Borrower shall also cause Guarantor to provide Agent with a power of attorney
with respect to each such account, which Agent may only utilize after the
occurrence and continuation of an Event of Default.
5.17 COMPLIANCE WITH LEASES. Borrower will comply in all
material respects with the provisions of all leases to which it is a party or
under which it occupies property, so as to prevent any loss or forfeiture
thereof or thereunder; PROVIDED, HOWEVER, that the Borrower may cancel,
surrender or modify any lease or leases or contest in good faith any provision
thereof if such action is reasonably deemed by the Borrower advantageous to its
business and if no forfeiture, other than reasonable settlement payments in
connection with such surrenders or cancellations, under any such lease results
therefrom.
5.18 ERISA. The Borrower shall, to the extent required by
applicable law, with respect to any Plan in effect now or in the future:
(a) at all times make timely payment of
contributions required to meet the
minimum funding standards set forth in
Section 302 through 305 of ERISA with
respect to its plan,
(b) promptly, after the filing thereof,
furnish to the Agent copies of each
annual report required to be filed
pursuant to Section 103 of ERISA in
connection with its plan for the plan
year, including any certified financial
statements or actuarial statements
required pursuant to said Section 103,
(c) notify the Agent immediately of any fact,
including, but not limited to, any
"Reportable Event," as that term is
defined in Section 4043 of ERISA, arising
in connection with the plan which would
constitute grounds for termination
thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the
appropriate United States District Court
of a Trustee to administer the plan,
(d) notify the Agent of any "Prohibited
Transaction" as that term is defined in
Section 406 of ERISA.
The Borrower will not:
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(e) engage in any "Prohibited Transaction,"
or
(f) terminate any such plan in a manner which
could result in the imposition of a lien
on the property of the Borrower pursuant
to Section 4068 of ERISA.
5.19 LANDLORD WAIVER AND CONSENT AGREEMENTS. The Borrower
agrees to assign to Agent for the benefit of Lenders, within sixty (60) days
from the date hereof, all leases to which it is a party or under which it
occupies property as additional security for Borrower's Obligations.
Borrower further agrees to assign to Agent for the benefit of Lenders, within
sixty (60) days from the date such location is occupied, all leases to which it
becomes a party to or under which it occupies property hereafter as additional
security for Borrower's Obligations. The Borrower further agrees to use
its best efforts to cause all the owners and/or landlord's of such real
properties currently occupied to execute landlord waiver and consent agreements
in form acceptable to Agent, provided the failure to cause the execution of any
of the foregoing landlord waiver and consent agreements shall not be deemed a
breach of this covenant if sufficient Reserves are maintained with the Lenders.
The Borrower further agrees to use its best efforts to cause all the owners
and/or landlord's of retail store locations opened by Borrower hereafter
to execute landlord waiver and consent agreements in form acceptable to Agent,
within sixty (60) days from the date such retail store location is occupied.
5.20 GUARANTY. Borrower agrees to cause Odd-Jobs Holding,
Inc., a Delaware corporation, and ZS Peddlers Mart, Inc., a Delaware
corporation, to execute a Guaranty Agreement and Security Agreement, in form
acceptable to Agent, as additional security for Borrower's Obligations.
5.21 LEGAL OPINION. Borrower shall deliver to Agent for the
benefit of Lenders a favorable opinion of counsel in form and substance
acceptable to Agent.
SECTION 6. NEGATIVE COVENANTS. The Borrower covenants and agrees that
until the Obligations have been paid in full, unless the Agent shall consent in
advance in writing, it shall not:
6.1 SALE OF ASSETS OR MERGER. Discontinue its business or
liquidate, sell, transfer, assign or otherwise dispose of a material part of its
assets or of the Collateral, by sale, merger, consolidation or otherwise,
provided, however, that it may (a) sell in the ordinary course of business and
for a full consideration in money or money's worth, any product, merchandise or
service produced, marketed or furnished by it and (b) sell any equipment owned
by Borrower which becomes obsolete.
6.2 LIENS AND ENCUMBRANCES. Except as set forth on Schedule
6.2, sell, assign, pledge, grant or suffer to exist a security interest, lien,
mortgage or other encumbrance on any of the Collateral to any person other than
the Agent, or permit any lien, encumbrance or security interest to attach to any
of the Collateral, except in favor of the Agent and except for Permitted Liens.
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6.3 CONTINGENT LIABILITIES. Except for Permitted Indebtedness,
endorse, guarantee or become surety for the obligations of any Person, firm or
corporation, except that the Borrower may endorse checks and negotiable
instruments for collection or deposit in the ordinary course of business.
6.4 LOANS. Except as set forth on Schedule 6.4, make any loans
or other advances of money, or grant extensions of credit which in the aggregate
exceed Fifty Thousand Dollars ($50,000.00) during any fiscal year (other than
normal extensions of trade credit in the ordinary course of business and
reasonable salary, travel or relocation advances, and other similar advances in
the ordinary course of business) to any Person. Borrower also shall not repay
any existing loans made to it by its Affiliates.
6.5 DIVIDENDS. Make any Dividends (by way of redemption or
otherwise) to any of its shareholders.
6.6 DEALINGS WITH ACCOUNTS. Compromise or discount any Account
except for ordinary trade discounts or allowances for prompt payment, or other
discounts or credits in the ordinary course of business.
6.7 INVESTMENTS. Change its name or consolidate or merge with
any other entity or, except as permitted here or as shown on Schedule 6.7
hereto, acquire or purchase any equity interest in any other entity, including
shares of stock of other corporations, or acquire or purchase any assets or
assume any obligations, except that the Borrower is permitted to own notes and
other receivables acquired in the ordinary course of business. Notwithstanding
the foregoing, the Borrower shall be permitted to (i) invest its cash in highly
liquid, investment grade corporate and governmental obligations, and (ii)
purchase or acquire assets of any other Person which is not an Affiliate where
the consideration paid (whether cash, assumption of liability or otherwise) is
less than $5,000,000.00 in the aggregate with any other transactions in any
fiscal year of Borrower.
6.8 CHANGE IN MANAGEMENT OR BUSINESS. Change its management or
make any material change in any of its business objectives, purposes and
operations which might in any way adversely affect the repayment of the Loans,
as determined by the Agent. Reuven Dessler shall continue to hold the positions
of Chairman of the Board and Chief Executive Officer of Borrower and perform the
duties of that position, and Brady Churches shall continue to hold the position
of President of Borrower and perform the duties of that position, provided,
however, if either Reuven Dessler or Brady Churches is terminated as a result of
death, long-term disability or otherwise, Borrower shall be in compliance with
this Section 6.8 if within ninety (90) days thereafter a replacement reasonably
acceptable to Agent is appointed.
6.9 TRANSACTIONS WITH AFFILIATES. Except as set forth on
Schedule 6.9 hereto, enter into, or be a party to, any transaction with any of
Borrower's Affiliates after the date hereof, except in the ordinary course of
business, pursuant to the reasonable requirements of Borrower's business, and
upon fair and reasonable terms which are fully disclosed to Agent and are no
less favorable to Borrower than Borrower could obtain in a comparable arm's
length transaction with
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a person not an Affiliate of Borrower. Notwithstanding the foregoing, transfers
of Inventory at cost, among the Borrower and its Affiliates, shall not be deemed
a violation of this provision.
6.10 AMENDMENTS TO PARTNERSHIP AGREEMENT. Borrower will not
cause or permit any material amendment to the terms and provisions of any
partnership agreement of any partnership(s) in which any of Borrower has an
interest if such amendment adversely affects the business affairs or operations
of Borrower or Borrower's ability to perform the Obligations.
6.11 INDEBTEDNESS. Borrower shall not directly or indirectly
create, incur, assume, guaranty or be or remain liable with respect to any
Indebtedness, except for (a) any Indebtedness to Agent pursuant to this
Agreement or the other Loan Documents; (b) other Permitted Indebtedness; and (c)
the Indebtedness listed on Schedule 6.11 of this Agreement.
6.12 OTHER LETTERS OF CREDIT. Borrower will not request or
obtain any letters of credit from any financial institution or other provider of
letters of credit other than Agent.
6.13 CAPITAL EXPENDITURES. Borrower shall not expend funds or
accrue expense for any machinery, equipment, real or personal property or any
other type of property including leasehold improvements, whether through direct
purchases and capitalized lease obligations, in excess of (i) Eight Million
Dollars ($8,000,000.00) in the aggregate during fiscal year-end January, 1999,
and an aggregate amount not to exceed fifty percent (50%) of EBITDA in any
fiscal year thereafter, (ii) a one time expense of One Million Five Hundred
Thousand Dollars ($1,500,000.0) for a point of sale inventory control system;
and (iii) Seven Hundred Thousand Dollars ($700,000.00) to fixture and equip each
new retail location. The capital expense limits contained herein are subject to
the continued compliance by the Borrower (prior to and after giving effect to
the expenditure) with the covenants and obligations herein. Borrower shall be
permitted to carry-forward as an additional capital expense allowance the amount
of any unexpended portion of the capital expense limitation which had been
designated for scheduled capital expenditures.
6.14 CHANGES IN CONTROL. So long as any of the Obligations
remain outstanding, permit to occur a change in record or beneficial ownership
of voting stock or voting control of either Borrower or any Guarantor
constituting a 20% or more change in ownership or voting power, without Agent's
prior written consent, which consent shall not be unreasonably withheld.
SECTION 7. COLLECTION OF COLLATERAL AND NOTICE OF ASSIGNMENT.
7.1 RECEIPTS IN RESPECT OF COLLATERAL. All collections on the
Collateral shall be directed to Agent, which shall, on a daily basis, will apply
all of the collected balance of such receipts against the Obligations to the
extent of the outstanding balance under the Revolving Note, the amount, order
and method of such application to be in the sole discretion of Agent provided
the Agent shall not utilize such funds as a prepayment of the Term Loan prior to
an Event of Default. Any part of the collected balance of such receipts which
the Agent elects not to apply to Borrower's Obligations shall be paid over and
deposited by Agent to the Borrower's commercial account (which will, prior to an
Event of Default, be made available to Borrower).
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7.2 NOTICE OF ASSIGNMENT. After the occurrence and during the
continuance of an Event of Default the Agent shall have the right at any time to
notify Debtors of its security interest in the Accounts and to require payments
to be made directly to the Agent. Upon request of the Agent after the occurrence
and during the continuance of an Event of Default Borrower will so notify the
Account Debtors and will indicate on all billings to the Account Debtors that
the Accounts are payable to the Agent. To facilitate direct collection, the
Borrower hereby appoints the Agent and any officer or employee of the Agent, as
the Agent may from time to time designate, as attorney-in-fact for the Borrower
to (a) receive, open and dispose of all mail addressed to the Borrower and take
therefrom any payments on or proceeds of Accounts; (b) take over the Borrower's
post office boxes or make other arrangements, in which the Borrower shall
cooperate, to receive the Borrower's mail, including notifying the post office
authorities to change the address for delivery of mail addressed to the Borrower
to such address as the Agent shall designate; (c) endorse the name of the
Borrower in favor of the Agent upon any and all checks, drafts, money orders,
notes, acceptances or other evidences or payment or Collateral that may come
into the Agent's possession; (d) sign and endorse the name of the Borrower on
any invoice or bill of lading relating to any of the Accounts, on verifications
of Accounts sent to any Debtor, to drafts against Debtors, to assignments of
Accounts and to notices to Debtors; and (e) do all acts and things necessary to
carry out this Agreement, including signing the name of the Borrower on any
instruments required by law in connection with the transactions contemplated
hereby and on financing statements as permitted by the Uniform Commercial Code.
The Borrower hereby ratifies and approves all acts of such attorneys-in-fact,
and neither the Agent nor any other such attorney-in-fact shall be liable for
any acts of commission or omission, or for any error of judgment or mistake of
fact or law. This power, being coupled with an interest, is irrevocable so long
as any of the Obligations remain unsatisfied. Agent agrees that it shall no
right to take any act pursuant to such power of attorney until after the
occurrence and during the continuance of an Event of Default.
7.3 ENFORCEMENT OF ACCOUNTS. The Agent shall not, under any
circumstances, be liable for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any Accounts or any
instruments received in payment thereof or for any damage resulting therefrom,
except for its gross negligence or willful misconduct. The Agent may, after the
occurrence and during the continuance of an Event of Default and without notice
to or consent from the Borrower, sue upon or otherwise collect, extend the time
of payment of, or compromise or settle for cash, credit or otherwise upon any
terms, any of the Accounts or any securities, instruments or insurance
applicable thereto and/or release the obligator thereon. The Agent is authorized
to accept the return of the goods represented by any of the Accounts, without
notice to or consent by the Borrower, or without discharging or any way
affecting the Obligations hereunder.
7.4 RETURNED OR REJECTED GOODS. After the occurrence and
during the continuance of an Event of Default or upon receipt of any returned or
rejected non-retail goods in an amount in excess of Five Hundred Thousand
Dollars ($500,000.00) the Borrower shall immediately issue and deliver a copy of
a credit memo to the Agent with respect thereto. Or, at the Agent's election,
the Borrower shall set aside such goods, mark them in the Agent's name and hold
them in trust for the Agent at the Borrower's expense, and, upon request, shall
pay the Agent the sales price thereof. If the Agent shall request the Borrower
to pay the sales price of such
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goods and the Borrower fails to forthwith pay the sales price to the Agent, the
Agent may take possession of such goods and sell or cause the goods to be sold,
at public or private sale, at such prices, to such purchasers and upon such
terms as the Agent deems advisable. The Borrower shall remain liable to the
Agent for any deficiency and shall pay the costs and expenses of such sale,
including reasonable attorneys' fees.
7.5 VERIFICATION OF ACCOUNTS. The Agent may confirm and verify
all Accounts in any reasonable manner at any time after prior notice to the
Borrower. Borrower agrees to cooperate with Agent in the confirmation and
verification of any Accounts, or reconciling any discrepancy between those
amounts verified by the Agent and information provided to the Agent by the
Borrower.
7.6 LIMITATION OF AGENT'S LIABILITY. The Agent shall not be
liable for or prejudiced by any loss, depreciation or other damage to Accounts
or other Collateral unless caused by the Agent's gross negligence or willful
misconduct, and the Agent shall have no duty to take any action to preserve or
collect any Account or other Collateral; except that the Agent shall use
reasonable care with respect to all Collateral in its possession. Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral if the Collateral is accorded treatment substantially equal to that
which the Agent accords its own property, it being understood that the Agent
shall not have any responsibility or liability for (a) ascertaining or taking
action with respect to the collection or collectibility of any Accounts, (b)
taking any necessary steps to preserve rights against any parties claiming an
interest in the Collateral, or (c) the inspection of Inventory for defects
therein.
SECTION 8. SERVICE CHARGES. In addition to the principal and interest on
the Loans and the reimbursement of expenses to Agent pursuant to this Agreement.
Borrower shall pay to (i) Agent, for the benefit of Lenders, an annual facility
fee of one-eighth (1/8) of one percent (1%) of the unused portion of the
Revolving Loan (determined at the end of each fiscal quarter based upon the
average daily balance outstanding {which for this purpose shall include amounts
reserved for drawings under outstanding Letters of Credit} under the Revolving
Loan Note during the preceding quarter) payable quarterly in arrears; and (ii)
Agent, for the benefit of the Letter of Credit Lender, a negotiation commission
of (x) one percent (1%) of the stated amount of any Standby Letter of Credit
issued pursuant hereto or (y) one-quarter (1/4%) of one percent of the
stated amount of any Commercial Letter of Credit issued pursuant hereto, payable
quarterly in arrears based upon the Letter of Credits negotiated in the previous
quarter, plus an issuance fee of Sixty-Five Dollars ($65.00) for each such
Letter of Credit. All such fees shall be payable in full within ten (10) days of
a billing from Agent in respect thereof. Letter of Credit Lender shall be
permitted to alter the Letter of Credit issuance fee stated herein at such time
as the Letter of Credit Lender is changing its fees generally charged its
customers, and shall give notice to Borrower thereof.
SECTION 9. ONE GENERAL OBLIGATION: CROSS COLLATERAL. All loans and
advances by Agent to Borrower under this Agreement and under the other Loan
Documents constitute one loan, and all indebtedness and obligations of Borrower
to Agent under this and such other agreements, present and future, constitute
one general obligation secured by the Collateral and security held and to be
held by Agent hereunder and by virtue of all other Loan Documents
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between Borrower and Agent now and hereafter existing. It is expressly
understood and agreed that all of the rights of Agent contained in this
Agreement shall likewise apply insofar as applicable to any modification of or
supplement to this Agreement and to any other Loan Document, present and future,
between Agent and Borrower. In the event that this Agreement is terminated, the
Agent agrees to release its liens and security interest in the Collateral and
the Obligations shall no longer be secured by the Collateral.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENTS OF DEFAULT. The following shall constitute Events
of Default under this Agreement, it being agreed that time is of the essence
hereof: (a) failure of the Borrower to pay when due any of the Obligations; (b)
failure of the Borrower and/or Guarantor to observe or perform any covenant
contained in this Agreement or in any other Loan Document; (c) discovery that
any representation or warranty at any time made by the Borrower and/or Guarantor
to the Agent in this Agreement or in any Loan Document (including documents and
materials delivered to the Agent for the purpose of obtaining the Loans) is,
untrue or misleading in any material respect at the time made; and (d)
suspension by the Borrower and/or Guarantor of the operation of its present
business, or the insolvency of the Borrower and/or Guarantor, or the inability
of the Borrower and/or Guarantor to meet its debts as they mature, or its
admission in writing to such effect, or its calling any meeting of all or any of
its creditors or committing any act of bankruptcy, or the filing by or against
the Borrower and/or Guarantor of any petition under any provision of the
Bankruptcy Act, as amended, or the entry of any judgment or filing of any lien
against the Borrower and/or Guarantor. Notwithstanding the foregoing, Agent
shall provide Borrower with (i) two (2) business days' notice and opportunity to
cure any default arising from the failure of Borrower to pay when due any of the
monetary Obligations owed to Agent, (ii) fifteen (15) calendar days' notice and
opportunity to cure any violation of the covenants contained in Section 5.15,
(iii) thirty (30) calendar days' notice and opportunity to cure any other act or
omission constituting an Event of Default under the Loan Documents OTHER THAN as
set forth in Section 10.1 (c) and (d) and Sections 6 and 7 of this Agreement for
which no notice is required and no opportunity to cure is available without the
written consent of Agent and (iv) sixty (60) days opportunity to cause the
dismissal of any involuntary proceeding commenced against Borrower under the
Bankruptcy Act in which the Agent is not a petitioner.
10.2 RIGHTS OF AGENT UPON DEFAULT. Upon the occurrence and
during the continuance of an Event of Default described in Section 10.1, the
Agent at its option may: (a) declare the Obligations of the Borrower immediately
due and payable, without presentment, notice, protest or demand of any kind for
the payment of all or any part of the Obligations (all of which are expressly
waived by Borrower) and exercise all of its rights and remedies against the
Borrower and any Collateral provided herein or in any other agreement between
Borrower and Agent and (b) exercise all rights granted to a secured party under
the Ohio Uniform Commercial Code or otherwise. Upon the occurrence and during
the continuance of an Event of Default, Agent may take possession of the
Collateral, or any part thereof, and Borrower hereby grants Agent authority to
enter upon any premises on which the Collateral may be situated, and remove the
Collateral from such premises or use such premises, together with the materials,
supplies, books and records of Borrower, to maintain possession and/or the
condition of the Collateral and to prepare the Collateral for sale. Borrower
shall, upon demand by Agent, assemble the Collateral
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and make it available at a place designated by Agent which is reasonably
convenient to both parties. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent will give Borrower reasonable notice of the time and place of any
public sale thereof or of the time after which any private sales or other
intended disposition thereof is to be made. The requirement of reasonable notice
shall be met if such notice is mailed, postage prepaid, to the address of the
Borrower shown at the beginning of this Agreement at least ten (10) days prior
to the time of such sale or disposition.
10.3 APPLICATION OF PROCEEDS. The Agent shall have the right
to apply the proceeds of any disposition of the Collateral to the payment of the
Obligations in such order of application as the Agent may, in its sole
discretion, elect.
10.4 REMEDIES CUMULATIVE. The rights, options and remedies of
the Agent shall be cumulative and no failure or delay by the Agent in exercising
any right, option or remedy shall be deemed a waiver thereof or of any other
right, option or remedy, or waiver of any Event of Default hereunder, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. Agent shall not be deemed to have waived any of the Agent's
rights hereunder or under any other agreement, instrument or paper signed by
Borrower unless such waiver be in writing and signed by the Agent.
10.5 ADVANTAGE. Each Lender agrees with the other Lenders that
if at any time it shall obtain any Advantage over the other Lenders or any
thereof in respect of the Advances it will purchase from such other Lender or
Lenders, for cash and at par, such additional participation in the Advances
owing to the other or others as shall be necessary to nullify the Advantage. If
any such Advantage resulting in the purchase of an additional participation as
aforesaid shall be recovered in whole or in part from the Lender receiving the
Advantage, each such purchase shall be rescinded, and the purchase price
restored (with interest and other charges if and to the extent actually incurred
by the Lender receiving the Advantage) ratably to the extent of the recovery.
During the existence of any Potential Default, any payment (whether made
voluntarily or involuntarily, by offset of any deposit or other indebtedness or
otherwise) of any indebtedness owing by the Borrower to any Lender shall be
applied to the Obligations owing to that Lender until the same shall have been
paid in full before any thereof shall be applied to other indebtedness owing to
that Lender.
SECTION 11. THE AGENT.
11.1 THE AGENT. Each Lender irrevocably appoints the Agent to
act as agent under this Agreement and the Loan Documents for the benefit of such
Lender, with full authority to take such actions, and to exercise such powers,
on behalf of the Lenders in respect of this Agreement and the Loan Documents as
are herein and therein respectively delegated to the Agent or as are reasonably
incidental to those delegated powers. The Agent in such capacity shall be deemed
to be an independent contractor of the Lenders. Notwithstanding anything herein
to the contrary, the Agent is hereby expressly and irrevocably authorized by
each of the Lenders, as agent on behalf of itself and the other Lenders:
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(a) To receive on behalf of each of the
Lenders any payment or collection on
account of the Obligations and to
distribute to each Lender its Ratable
Portion of all such payments and
collections so received as provided in
this Agreement;
(b) To receive all documents and items to be
furnished to the Lenders under the Loan
Documents (nothing contained herein shall
relieve the Borrower of any obligation to
deliver any item directly to the Lenders
to the extent expressly required by the
provisions of this Agreement);
(c) To act or refrain from acting in this
Agreement and in the other Loan Documents
with respect to those matters so
designated for the Agent;
(d) To act as nominee for and on behalf of
the Lenders in and under this Agreement
and the other Loan Documents;
(e) To arrange for the means whereby the
funds of the Lenders are to be made
available to the Borrower;
(f) To distribute promptly to the Lenders, if
required by the terms of this Agreement,
all written information, requests,
notices, payments, prepayments, documents
and other items received from the
Borrower or other Person;
(g) To waive any provisions of this Agreement
or the other Loan Documents on behalf of
the Lenders subject to the requirement
that certain of the Lenders' consent be
obtained in certain instances as provided
in Section 11.20 or Section 11.21;
(h) To deliver to the Borrower and other
Persons, all requests, demands,
approvals, notices, and consents received
from any of the Lenders;
(i) To exercise on behalf of each Lender all
rights and remedies of the Lenders upon
the occurrence of any Event of Default
and/or Default specified in this
Agreement and/or in any of the other Loan
Documents or applicable Laws;
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(j) To execute any of the Loan Documents on
behalf of the Lenders as the secured
party for the benefit of the Agent and
the Lenders; and
(k) To take such other actions as may be
requested by the requisite Lenders.
11.2 NATURE OF APPOINTMENT. The Agent shall have no fiduciary
relationship with any Lender by reason of this Agreement and the Loan Documents.
The Agent shall not have any duty or responsibility whatsoever to any Lender
except those expressly set forth in this Agreement and the Loan Documents.
Without limiting the generality of the foregoing, each Lender acknowledges that
the Agent is acting as such solely as a convenience to the Lenders and not as a
manager of the commitments or the Obligations evidenced by the Notes. This
Section 11 does not confer any rights upon the Borrower or anyone else (except
the Lenders), whether as a third party beneficiary or otherwise.
11.3 AGENT AS A LENDER; OTHER TRANSACTIONS. The Agent's rights
as a Lender under this Agreement and the Loan Documents shall not be affected by
its serving as the Agent. The Agent and its Affiliates may generally transact
any banking, financial, trust, advisory or other business with the Borrower
(including, without limitation, the acceptance of deposits, the extension of
credit and the acceptance of fiduciary appointments) without notice to the
Lenders, without accounting to the Lenders, and without prejudice to the Agent's
rights as a Lender under this Agreement and the Loan Documents except as may be
expressly required under this Agreement. Each of the Lender's and their
respective Affiliates may generally transact any banking, financial, trust,
advisory or other business with the Borrower (including, without limitation, the
acceptance of deposits, the extension of credit and the acceptance of fiduciary
appointments) without notice to the other Lenders, without accounting to such
Lenders, and without prejudice to its rights as a Lender under this Agreement
and the Loan Documents except as may be expressly required under this Agreement
as to such Lender or prohibited hereunder as to the Borrower.
11.4 INSTRUCTIONS FROM LENDERS. The Agent shall not be
required to exercise any discretion or take any action as to matters not
expressly provided for by this Agreement and the Loan Documents (including,
without limitation, collection and enforcement actions in respect of any
Obligations under the Notes or this Agreement and any collateral therefor)
EXCEPT that the Agent shall take such action (or omit to take such action) other
than actions referred to in Section 12.1 of this Agreement, as may be reasonably
requested of it in writing by each of the Lenders with instructions and which
actions and omissions shall be binding upon all of the Lenders: PROVIDED,
HOWEVER, that the Agent shall not be required to act (or omit any act) if, in
its judgment, any such action or omission might expose the Agent to personal
liability or might be contrary to this Agreement, any Loan Document or any
applicable Law.
11.5 LENDER'S DILIGENCE. Each Lender (a) represents and
warrants that it has made its decision to enter into this Agreement and the Loan
Documents and (b) agrees that it will make its own decision as to taking or not
taking future actions in respect of this Agreement and the Loan Documents; in
each case without reliance on the Agent or any other Lender and on the
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basis of its independent credit analysis and its independent examination of and
inquiry into such documents and other matters as it deems relevant and material.
11.6 NO IMPLIED REPRESENTATIONS. The Agent shall not be liable
for any representation, warranty, agreement or obligation of any kind of any
other party to this Agreement or anyone else, whether made or implied by any
Borrower in this Agreement or any Loan Document or by a Lender in any notice or
other communication or by anyone else or otherwise.
11.7 SUB-AGENTS. The Agent may employ agents and shall not be
liable (except as to money or property received by it or its agents) for any
negligence or misconduct of any such agent selected by it with reasonable care.
11.8 AGENT'S DILIGENCE. The Agent shall not be required: (a)
to keep itself informed as to anyone's compliance with any provision of this
Agreement or any Loan Document, (b) to make any inquiry into the properties,
financial condition or operation of the Borrower or any other matter relating to
this Agreement or any Loan Document, (c) to report to any Lender any information
(other than which this Agreement or any Loan Document expressly requires to be
so reported) that the Agent or any of its Affiliates may have or acquire in
respect of the properties, business or financial condition of the Borrower or
any other matter relating to this Agreement or any Loan Document or (d) to
inquire into the validity, effectiveness or genuineness of this Agreement or any
Loan Document.
11.9 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge of any Potential Default or Event of Default unless and until it shall
have received a written notice describing it and citing the relevant provision
of this Agreement or any Loan Document. The Agent shall give each Lender
reasonably prompt notice of any such written notice except, of course, to any
Lender that shall have given the written notice.
11.10 AGENT'S LIABILITY. Neither the Agent nor any of its
directors, officers, employees, attorneys, and other agents shall be liable for
any action or omission on their respective parts except for gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, the
Agent: (i) may treat the payee of any Revolving Credit Note as the holder
thereof until the Agent receives a fully executed copy of the Assignment
Agreement required by Section 12.1(b) of this Agreement signed by such payee and
in form satisfactory to the Agent and the fee required by Section 12.1(b) of
this Agreement; (ii) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice or such counsel, accountants or experts which have been selected by the
Agent with reasonable care; (iii) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement or any other
Loan Document, including, without limitation, the truth of the statements made
in any certificate delivered by the Borrower pursuant to this Agreement or any
other similar notice or delivery, the Agent being entitled for the purposes of
determining fulfillment of the conditions set forth therein to rely conclusively
upon such certificates, (iv) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of this Agreement, the Notes or any other Loan Document or to inspect the
property (including the
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books and records) of the Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, or collateral covered by any agreement
or any other Loan Document and (vi) shall incur no liability under or in respect
of this Agreement, the Notes or any other Loan Document by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telegram, telecopy, cable or telex) believed by it in good faith to be genuine
and correct and signed or sent by the proper party or parties.
Neither the Agent nor any of its directors, officers, employees or
agents shall have any responsibility to the Borrower, with the exception of any
intentional misconduct or gross negligence of such parties, on account of the
failure of or delay in performance or breach by any Lender of any of its
obligations hereunder or to any Lender on account of the failure of or delay in
performance or breach by any other Lender or the Borrower of any of their
respective obligations hereunder or under any Loan Document or in connection
herewith or therewith.
The Lenders each hereby acknowledge that the Agent shall be under no
duty to take any discretionary action permitted to be taken by it pursuant to
the provisions of this Agreement, the Notes or any other Loan Document unless it
shall be requested in writing to do so by each of the Lenders.
11.11 AGENT'S INDEMNITY. The Lenders shall indemnify the
Agent, in its capacity as Agent and as Letter of Credit Lender (to the extent
the Agent is not reimbursed by the Borrower) from and against (a) any loss or
liability (other than any caused by the Agent's gross negligence or willful
misconduct) incurred by the Agent as such in respect of this Agreement, the
Notes, the Letters of Credit or any Loan Document (as the Agent or Letter of
Credit Lender) and (b) any out-of-pocket expenses incurred in defending itself
or otherwise related to this Agreement, the Notes, any Letter of Credit or any
Loan Document (other than any caused by the Agent's gross negligence or willful
misconduct) including, without limitation, reasonable fees and disbursements of
legal counsel of its own selection (including, without limitation, the
reasonable interdepartmental charges of its salaried attorneys) in the defense
of any claim against it or in the prosecution of its rights and remedies as the
Agent (other than the loss, liability or costs incurred by the Agent in the
defense of any claim against it by the Lenders arising in connection with its
actions in its capacity as Agent); PROVIDED, HOWEVER, that each Lender shall be
liable for only its Ratable Portion of the whole loss or liability.
11.12 LENDER PURPOSE. Each Lender represents and warrants to
the Agent, the other Lenders and the Borrower that such Lender is familiar with
the Securities Act of 1933, as amended, and the rules and regulations thereunder
and is not entering into this Agreement with any intention to violate such Act
or any rule or regulation thereunder. Each Lender shall at all times retain full
control over the disposition of its assets subject only to Section 12.1 and 12.2
of this Agreement and to all applicable Law.
11.13 LENDER INDEMNIFICATION. Each Lender providing cash
management or similar services to the Borrower agrees to indemnify each of the
other Lenders (the "Other Lenders") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be
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imposed on, incurred by, or asserted against any Other Lender in any way
relating to or arising out of the cash management or similar services provided
by such Lender to the Borrower or any action or inaction of such Lender in
connection therewith.
11.14 RELEASE OF COLLATERAL. The Lenders hereby irrevocably
authorize the Agent, at its option and in its discretion, to release any lien
granted to or held by the Agent upon any property covered by this Agreement or
the Loan Documents:
(i) upon termination of the commitments set
forth in this Agreement and payment and
satisfaction of all Obligations;
(ii) constituting property being sold or
disposed of if the Borrower certifies to
the Agent that the sale or disposition is
made in compliance with the provisions of
this Agreement (and the Agent may rely in
good faith conclusively on any such
certificate, without further inquire);
(iii) constituting property leased to the
Borrower under a lease which has expired
or been terminated in a transaction
permitted under this Agreement or is
about to expire and which has not been,
and is not intended by the Borrower to
be, renewed or extended; or
(iv) constituting property covered by
Permitted Liens with lien priority
superior to those liens in favor or for
the benefit of the Lenders.
11.15 CONFIRMATION OF AUTHORITY, EXECUTION OF RELEASES.
Without in any manner limiting the Agent's authority to act without any
specific or further authorization or consent by the Lenders as set forth in
Section 11.1, each Lender agrees to confirm in writing, upon request by the
Borrower, the authority to release any property covered by this Agreement or the
Loan Documents conferred upon the Agent under Section 11.1 So long as no Event
of Default is then continuing, upon receipt by the Agent of confirmation from
the requisite percentage of the Lenders, of its authority to release any
particular item or types of property covered by this Agreement or the Loan
Documents, and upon at least five (5) Business Days prior written request by the
Borrower, the Agent shall (and is hereby irrevocably authorized by the Lenders
to) execute such documents as may be necessary to evidence the release of the
liens granted to the Agent for the benefit of the Lenders herein or pursuant
hereto upon such Collateral; PROVIDED, HOWEVER, that (i) the Agent shall not be
required to execute any such document on terms which, in the Agent's
opinion, would expose the Agent to liability or create any obligation or entail
any consequence other than the release of such liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any liens upon (or obligations of any Person, in
respect of), all interests retained by any Person, including, without
limitation, the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.
11.16 AGENCY FOR PERFECTION. Each Lender hereby appoints the
Agent and each other Lender as agent for the purpose of perfecting the Lenders'
liens in Collateral which, in accordance with Article 9 of the Uniform
Commercial Code in any applicable jurisdiction or otherwise, can be perfected
only by possession. Should any Lender (other than the Agent) obtain
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possession of any such Collateral, such Lender shall notify the Agent thereof,
and, promptly upon the Agent's request therefor, shall deliver such Collateral
to the Agent or in accordance with the Agent's instructions.
11.17 EXERCISE OF REMEDIES. Each Lender agrees that it will
not have any right individually to enforce or seek to enforce this Agreement or
any Loan Document or to realize upon any collateral security for the Loans, it
being understood and agreed that such rights and remedies may be exercised only
by the Agent.
11.18 CONSENTS. In the event the Agent requests the consent of
a Lender and does not receive a written denial thereof, or a written notice from
a Lender that due course consideration of the request requires additional time,
in each case, within ten (10) Business Days after such Lender's receipt of such
request, then such Lender will be deemed to have given such consent.
11.19 AMENDMENTS; WAIVERS. Except as set forth herein, this
Agreement and the other Loan Documents may not be amended, modified, or changed
in any respect except by an agreement in writing signed by the Agent and the
Borrower, and, to the extent provided in Sections 11.20 and 11.21, the consent
of the requisite Lenders. No waiver of any provision of this Agreement or of any
of the other Loan Documents, nor consent to any departure by the Borrower
therefrom, shall in any event by effective unless the same shall be in writing
signed by the Lenders. No course of dealing between the Borrower and the Agent
and/or any of the Lenders and no act or failure to act from time to time on the
part of the Agent and/or any of the Lenders shall constitute a waiver, amendment
or modification of any provision of this Agreement or any of the other Loan
Documents or any right or remedy under this Agreement, under any of the other
Loan Documents or under applicable Laws. Without implying any limitation on the
foregoing, and subject to the provisions of Section 11.20:
(a) Any waiver or consent shall be effective only in the specific
instance, for the terms and purpose for which given, subject
to such conditions as the Agent and Lenders may specify in any
such instrument.
(b) No waiver of any Default or Event of Default shall extend to
any subsequent or other Default or Event of Default, or impair
any right consequent thereto.
(c) No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand
in the same, similar or other circumstance.
(d) No failure or delay by the Lenders to insist upon the strict
performance of any term, condition, covenant or agreement of
this Agreement or of any of the other Loan Documents, or to
exercise any right, power or remedy consequent upon a breach
thereof, shall constitute a waiver, amendment or modification
of any such term, condition, covenant, amendment or
modification of any such term, condition, covenant or
amendment or of any breach or preclude the Lenders from
exercising any such right, power or remedy at any time or
times.
(e) By accepting payment after the due date of any amount payable
under this Agreement or under any of the other Loan Documents,
the Lenders shall not be deemed to waive
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the right either to require prompt payment when due of all
other amounts payable under this Agreement or under any of the
other Loan Documents, or to declare a default for failure to
effect such prompt payment of any such other amount.
11.20 CIRCUMSTANCES WHERE UNANIMOUS CONSENT OF LENDERS IS
REQUIRED.
Notwithstanding anything to the contrary contained herein, no amendment,
modification, change or waiver shall be effective without the consent of all of
the Lenders:
(a) to extend the maturity of the principal of, or
interest on, any Note;
(b) to reduce the principal amount of any Note, the
rate of interest thereon or the fees due to the
Lenders, except as expressly permitted therein;
(c) to increase the aggregate loan commitments pursuant
to this Agreement;
(d) to extend the date of payment of principal or, or
interest on, any Note;
(e) to change the manner of pro rata application by the
Agent of payments made by the Borrower, or any
other payments required hereunder or under the
other Loan Documents;
(f) to modify this Section, Section 11.21 or Section
11.14;
(g) to waive any failure of the Borrower to pay when
due any of the Obligations.
11.21 CIRCUMSTANCES WHERE CONSENT OF LENDERS IS REQUIRED.
Notwithstanding anything to the contrary contained herein, no amendment,
modification, change or waiver shall be effective without the consent of Lenders
whose aggregate Ratable Portion comprises at least fifty-one percent (51%) and
the consent of a minimum of two (2) Lenders:
(a) to change the method of calculation utilized in
connection with the computation of interest and
fees;
(b) to release or agree to subordinate any portion of
any Collateral or Loan Document (except to the
extent provided herein or therein) in excess of One
Million Dollars ($1,000,000);
(c) to, except for any standards for which Agent has
been granted discretion herein, change the
standards used in determining Eligible Accounts or
Eligible Inventory if the Borrowing Base is
materially increased as a result of the change;
(d) to change the definition of "Borrowing Base";
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(e) to release or waive any indemnification provision
set forth in the Loan Documents;
(f) to modify the covenants in Section 5.15 herein; or
(g) to modify any use of proceeds provision set forth
herein.
Additionally, no change may be made to the amount of a Lender's loan
commitment or to the Lender's Ratable Portion without the prior written consent
of the Lender.
SECTION 12. TRANSFERS AND ASSIGNMENTS.
12.1 TRANSFER OF COMMITMENTS. Each Lender shall have the right
at any time or times to transfer to another financial institution, without
recourse, all or any part of: such Lender's Revolving Credit Commitment, or Term
Loan Commitment; any Advance made by such Lender; any Note executed in favor of
such Lender, and such Lender's participations, if any, purchased pursuant to
Section 10.5 of this Agreement; PROVIDED, HOWEVER, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) PRIOR CONSENT. No transfer may be
consummated pursuant to this Section 12
without the prior written consent of the
Borrower, which shall not be unreasonably
withheld, and the Agent (other than a
transfer by any Lender to any Affiliate
of such Lender). Notwithstanding anything
to the contrary, any Lender may at any
time assign all or any portion of its
rights under this Agreement and its Notes
to a Federal Reserve Lender, and no such
assignment shall release such assigning
Lender from its obligations hereunder.
(b) AGREEMENT; TRANSFER FEE. The transferor:
(i) shall remit to the Agent an
administrative fee of Two Thousand Five
Hundred Dollars ($2,500) and (ii) shall
cause the transferee to execute and
deliver to the Borrower, the Agent and
each Lender (A) an Assignment Agreement,
in form and substance satisfactory to the
Agent and its counsel (an "Assignment
Agreement") together with the consents
and releases referenced therein and (B)
such additional amendments, assurances
and other writings as the Agent may
reasonably require.
(c) NOTES. The Borrower shall execute and
deliver: (i) to the Agent, the transferor
and the transferee, any consent or
release (of all or a portion of the
obligations of the transferor) to be
delivered in connection with the
Assignment Agreement, (ii) if a Lender's
entire interest in its Revolving Credit
Commitment, its Term Loan
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Commitment, and its LC Exposure and in
all of its Advances have been
transferred, to the transferee
appropriate Notes against return of the
Notes (marked "replaced") held by the
transferor and (iii) if only a portion of
a Lender's interest in its Revolving
Credit Commitment its Term Loan
Commitment, and its LC Exposure and its
Advances has been transferred, a new
Revolving Credit Note to each of the
transferor and the transferee against
return of the original such Notes of the
transferor (marked "replaced") held by
the transferor.
(d) PARTIES. Upon satisfaction of the
requirements of this Section 12.1,
including the payment of the fee and the
delivery of the documents set forth in
Section 12.1(b) above, (i) the transferee
shall become and thereafter be deemed to
be a "Lender" for the purposes of this
Agreement and (ii) the transferor (A)
shall continue to be a "Lender" for the
purposes of this Agreement only if and to
the extent that the transfer shall not
have been a transfer of its entire
interest in its Revolving Credit
Commitment, its LC Exposure and its
Advances, (B) shall cease to be and
thereafter shall no longer be deemed to
be a "Lender" in the case of any transfer
of its entire interest in its Revolving
Credit Commitment,, its Term loan
Commitment, and its LC Exposure and its
Advances and (C) the signature pages
hereto and Annex I hereto shall be
automatically amended, without further
action, to reflect the result of any such
transfer.
12.2 SALE OF PARTICIPATIONS. Each Lender shall have the right
at any time or times to sell one or more participations or subparticipations to
a financial institution in all or any part of: such Lender's Revolving Credit
Commitment, or Term Loan Commitment; any Advance made by such Lender; any Note
executed in favor of such Lender; PROVIDED, HOWEVER, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) BENEFITS OF PARTICIPANT. The provisions
of Section 13 of this Agreement shall
inure to the benefit of each purchaser of
a participation or subparticipation
(provided that each such participant
shall look solely to the seller of its
participation for those benefits and the
Borrower's liabilities, if any, under any
of those sections shall not be increased
as a result of the sale of any such
participation) and Agent shall continue
to
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distribute payments pursuant to this
Agreement as if no participation has been
sold.
(b) RIGHTS RESERVED. In the event any Lender
shall sell any participation or
subparticipation, that Lender shall, as
between itself and the purchaser, retain
all of its rights (including, without
limitation, rights to enforce against the
Borrower this Agreement and the Loan
Documents) and duties pursuant to this
Agreement and the Loan Documents, EXCEPT
if and to the extent that any such
waiver, consent or amendment would (A)
reduce any fee or commission allocated to
the participation or subparticipation, as
the case may be, (B) reduce the amount of
any principal payment on any Advance
allocated to the participation or
subparticipation, as the case may be, or
reduce the principal amount of any
Advance so allocated or the rate of
interest payable thereon, or (C) extend
the time for payment of any amount
allocated to the participation or
subparticipation, as the case may be.
(c) NO DELEGATION. No participation or
subparticipation shall operate as a
delegation of any duty of the seller
thereof. Under no circumstance shall any
participation or subparticipation be
deemed a novation in respect of all or
any part of the seller's obligations
pursuant to this Agreement.
12.3 CONFIDENTIALITY. Each Lender hereby (a) acknowledges that
the Borrower has many trade secrets and much financial, environmental and other
data and information the confidentiality of which is important to its business
and (b) agrees to keep confidential any such trade secret, data or information
designated in writing by the Borrower as confidential, except that this Section
shall not preclude any Lender from furnishing any such secret, data or
information: (i) as may be required by order of any court of competent
jurisdiction or requested by any governmental agency having any regulatory
authority over that Lender or its securities or in response to legal process,
(ii) to any other party to this Agreement, (iii) or to any Affiliate of any
Lender or to any actual or prospective transferee, participant or subparticipant
of all or part of that Lender's rights arising out of or in connection with the
Loan Documents and this Agreement or any thereof so long as such Affiliate,
prospective transferee, participant or subparticipant to whom disclosure is made
agrees to be bound by the provisions of this Section 12.3 and as to which the
Borrower has consented pursuant to Section 12.1 or 12.2 above, as the case may
be, (iv) to anyone if it shall have been already publicly disclosed (other than
by that Lender in contravention of this Section 12.3), (v) to the extent
reasonably required in connection with the exercise of any right or remedy under
this Agreement or any Loan Document, (vi) to that Lender's legal counsel,
auditors and accountants and (vii) in connection with any legal proceedings
instituted by or against
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the Agent or any Lender in its respective capacities as the Agent and a Lender
under this Agreement.
SECTION 13. INDEMNITIES.
13.1 INCREASED COSTS. If, due to either: (i) the introduction
of or any change (other than any change by way of imposition or increase of
reserve requirements in respect of Libor Rate Advances otherwise included in the
Eurocurrency Reserve Percentage) in or in the interpretation of any Law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of Law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Revolving Credit Advances, then the Borrower
shall from time to time, upon demand by such Lender (with a copy of such demand
to the Agent), pay to the Agent for the account of such Lender additional
amounts sufficient to indemnify such Lender for such increased cost. Agent
agrees not to seek reimbursement pursuant to this Section 13.1 for the benefit
of Lenders unless Agent is also generally seeking similar reimbursement from its
other borrowers or customers who are subject to similar laws and advances.
13.2 RISK-BASED CAPITAL. If any Lender determines that: (i)
compliance with any Law or regulation or any interpretation thereof or (ii)
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of Law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital required to be so maintained is increased by or based upon the existence
of such Lender's Revolving Credit Commitment to lend hereunder and other
commitments of this type, then, upon demand by such Lender (with a copy of such
demand to the Agent), the Borrower shall immediately pay to the Agent for the
account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to indemnify such Lender or such corporation, to
the extent that such Lender reasonably determines such increase in capital to be
allocable to the existence of such Lender's Revolving Credit Commitment to lend
hereunder. Lender agrees not to seek such funds pursuant to this Section 13.2
for the benefit of Lenders unless Agent is also generally seeking similar
reimbursement from its other borrowers or customers who have revolving credit
commitments.
13.3 TAXES.
(a) TAXES; WITHHOLDING. Any and all payments
by the Borrower hereunder, under the
Notes or the other Loan Documents shall
be made, in accordance with the
provisions of Section 2, free and clear
of and without deduction for any and all
present or future taxes, levies, imposts,
deductions, charges or withholdings, and
all liabilities with respect thereto,
EXCLUDING, in the case of each Lender,
taxes imposed on its income, and
franchise taxes imposed on it, by the
jurisdiction under the Laws of which such
Lender is organized or any political
subdivision thereof (all such
non-excluded
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taxes, levies, imposts, deductions,
charges, withholdings and liabilities
being hereinafter referred to as
"Taxes"). If the Borrower shall be
required by Law to deduct any Taxes from
or in respect of any sum payable
hereunder or under any Note to any Lender
or the Agent, (i) the sum payable shall
be increased as may be necessary so that
after making all required deductions
(including deductions applicable to
additional sums payable under this
Section 13.3) such Lender receives an
amount equal to the sum it would have
received had no such deductions been
made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall
pay the full amount deducted to the
relevant taxation authority or other
authority in accordance with applicable
Law. All such Taxes shall be paid by the
Borrower prior to the date on which
penalties attach thereto or interest
accrues thereon; PROVIDED, HOWEVER, that,
if any such penalties or interest become
due, the Borrower shall make prompt
payment thereof to the appropriate
governmental authority. The Borrower
shall indemnify each Lender for the full
amount of such Taxes (including any Taxes
on amounts payable under this Section
13.3(a) paid by the Lender and any
liability (including penalties, interest
and expenses) arising therefrom or with
respect thereto, whether or not such
Taxes were correctly or legally asserted.
Any indemnification payment shall be made
within thirty (30) days from the date the
Lender makes written demand therefor. In
the event that there is duplication in
the payment of such Taxes by Borrower,
Agent and Lenders shall use their best
efforts to cause such duplicative
payments to be remitted to Borrower as
soon as practicable.
(b) STAMP TAXES. The Borrower agrees to pay,
and will indemnify each Lender and the
Agent for, any present or future stamp or
documentary taxes or any other excise or
property taxes, charges or similar levies
which arise from any payment made
hereunder or under the Notes or from the
execution, delivery or registration of,
or otherwise with respect to, this
Agreement or the Notes (hereinafter
referred to as "Other Taxes").
(c) OTHER TAXES. The Borrower will indemnify
each Lender and the Agent for the full
amount of Taxes or Other Taxes
(including, without limitation, any Taxes
or
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Other Taxes imposed by any jurisdiction
on amounts payable under this Section
13.3) paid by such Lender or the Agent
(as the case may be) and any liability
(including penalties, interest and
expenses) arising therefrom or with
respect thereto, whether or not such
Taxes or Other Taxes were correctly or
legally asserted. Any indemnification
payment shall be made within thirty (30)
days from the date such Lender or the
Agent (as the case may be) makes written
demand therefor. In the event that there
is duplication in the payment of such
Taxes or Other Taxes by Borrower, Agent
and Lenders shall use their best efforts
to cause such duplicative payments to be
remitted to Borrower as soon as
practicable.
(d) REQUEST FOR REFUND. At the reasonable
request of the Borrower, a Lender or the
Agent shall apply at the Borrower's
expense for a refund in respect of Taxes
or Other Taxes previously paid by the
Borrower pursuant to this Section 13.3 if
in the opinion of such Lender or the
Agent there is a reasonable basis for
such refund. Notwithstanding the
foregoing, none of the Lenders or the
Agent shall be obligated to pursue such
refund if, in its sole good faith
judgment, such action would be
disadvantageous to it. If any Lender
subsequently receives from a taxing
authority a refund of any Tax previously
paid by the Borrower and for which the
Borrower has indemnified the Lender
pursuant to this Section 13.3, such
Lender shall within thirty (30) days
after receipt of such refund, and to the
extent permitted by applicable law, pay
to the Borrower the net amount of any
such recovery after deducting taxes and
expenses attributable thereto.
(e) EXEMPTION CERTIFICATE. Not later than the
Closing Date or, in the case of any bank
or financial institution that becomes a
Lender after the Closing Date, pursuant
to Section 13 of this Agreement, the date
of the instrument of assignment pursuant
to which such bank or financial
institution became a Lender, and annually
on each Anniversary Date thereafter or at
such other times as the Agent or the
Borrower may reasonably request, (i) each
Lender organized under the laws of a
jurisdiction outside the United States
shall provide the Agent and the Borrower
with duly completed copies of Form 1001
or Form 4224 or any successor form
prescribed by the
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Internal Revenue Service of the United
States certifying that such Lender is
exempt from United States withholding
taxes with respect to all payments to be
made to such Lender hereunder or other
document satisfactory to the Borrower and
the Agent indicating that all payments to
be made to such Lender hereunder are not
subject to such taxes and (ii) each other
Lender shall provide the Agent and the
Borrower with a written statement which
certifies that such Lender is not a non-
resident alien or foreign corporation and
which otherwise satisfies Treasury
Regulation Section 1.1441-5(b) or any
successor regulation under the Internal
Revenue Code (each such certificate or
statement, an "Exemption Certificate").
Unless the Agent and the Borrower have
received an Exemption Certificate from
such Lender, the Borrower, or the Agent
if the Borrower has not withheld, may
withhold taxes from such payments at the
applicable statutory rate (subject, in
the case of the Borrower to the
requirements of Section 13.3(a) above);
PROVIDED, HOWEVER, that if the Borrower
has withheld the Borrower shall so notify
the Agent. If the Borrower is required to
pay additional amounts to any Lender
pursuant to this Section 13.3, such
Lender shall use reasonable efforts to
designate a different Lending Office if
such designation will thereafter avoid
the need for any additional payments
under this Section 13.3 and will not, in
the sole judgment of such Lender, be
otherwise disadvantageous to such Lender.
A Lender which ceases to be exempt from
United States withholding taxes shall
notify the Agent and the Borrower
promptly thereof.
(f) FURNISHING OF CERTIFICATE. Within 30 days
after the date of any payment of Taxes,
the Borrower will furnish to the Agent,
at its address referred to in Section
14.6 of this Agreement, the original or a
certified copy of a receipt evidencing
payment thereof. If Taxes ever become
payable in respect of any payment
hereunder or under the Notes, thereafter
the Borrower will furnish to the Agent,
within thirty (30) after the end of each
fiscal quarter, at such address a
certificate from the Borrower stating
that any payments made during such fiscal
quarter are exempt from or not subject to
Taxes.
(g) SURVIVAL OF PROVISION. Without prejudice
to the survival of any other agreement of
the Borrower hereunder, the
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agreements and liabilities of the
Borrower contained in this Section 13.3
shall survive for ninety-one (91) days
following the payment in full of the
Obligations.
SECTION 14. MISCELLANEOUS.
14.1 GOVERNING LAW; JURISDICTION AND VENUE. The provisions of
this Agreement shall be governed by and interpreted in accordance with the laws
of the State of Ohio. The Agent and Borrower hereby designate all courts of
record sitting in Cleveland, Ohio, both state and federal, as forums where any
action, suit or proceeding in respect of or arising out of this Agreement or the
transactions contemplated by this Agreement may be prosecuted as to all parties,
their successors and assigns, and by the foregoing designation the Agent and
Borrower consent to the jurisdiction and venue of such courts.
14.2 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED
INDUCEMENT FOR THE LENDERS TO EXTEND CREDIT TO BORROWER, AND AFTER HAVING THE
OPPORTUNITY TO CONSULT COUNSEL, BORROWER HEREBY EXPRESSLY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO THIS AGREEMENT OR ARISING
IN ANY WAY FROM THE OBLIGATIONS.
14.3 OTHER WAIVERS. The Borrower waives notice of nonpayment,
demand, notice of demand, presentment, protest and notice of protest with
respect to the Obligations, or notice of acceptance hereof, notice of Loans
made, credit extended, Collateral received or delivered, or any other action
taken in reliance hereon, and all other demands and notices of any description,
except such as are expressly provided for herein.
14.4 COLLECTION COSTS. All costs and expenses incurred by the
Agent to obtain, enforce or preserve the security interests granted by this
Agreement and to collect the Obligations, including, without limitation,
stationery and postage, telephone and telegraph, secretarial and clerical
expenses, the fees or salaries of any collection agents utilized, all costs to
maintain and preserve the Collateral and all reasonable attorneys' fees and
legal expenses incurred in obtaining or enforcing payment of any of the
Obligations or foreclosing the Agent's security interest in any of the
Collateral, whether through judicial proceedings or otherwise, or in enforcing
or protecting its rights and interests under this Agreement or under any other
instrument or document delivered pursuant hereto, or in protecting the rights of
any holder or holders with respect thereto, or in defending or prosecuting any
actions or proceedings arising out of or relating to the Agent's transactions
with the Borrower, shall be paid by the Borrower to the Agent, upon demand, or,
at the Agent's election, charged to the Borrower's account and added to the
Obligations, and the Agent may take judgment against the Borrower for all such
costs, expense and fees in addition to all other amounts due from the Borrower
hereunder.
14.5 EXPENSES. The Borrower shall reimburse the Agent for all
out-of-pocket costs and expenses incurred by the Agent in connection with the
preparation of this Agreement and the making of the Loans hereunder, including
the reasonable fees and expenses of the Agent's counsel not to exceed Forty
Thousand Dollars ($40,000.00), and for all Uniform Commercial
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Code searches, filing, recording and other costs connected with the perfection
of the Agent's security interest in the Collateral.
14.6 NOTICES. All notices, requests, directions, demands,
waivers and other communications provided for herein shall be in writing and
shall be deemed to have been given or made when delivered personally or sent by
registered or certified mail, postage prepaid and return receipt requested,
addressed to the Borrower or the Agent, as the case may be, at their respective
addresses set forth at the beginning of this Agreement. Notices of changes of
address shall be given in the same manner.
14.7 SEVERABILITY. Any provision of this Agreement which is
prohibited and unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
14.8 ENTIRE AGREEMENT, MODIFICATION, BENEFIT. This Agreement
shall constitute the entire agreement of the parties and no provision of this
Agreement, including the provisions of this Section, may be modified, deleted or
amended in any manner except by agreement in writing executed by the parties.
All terms of this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties hereto and their respective successors and
assigns, provided, however, that the Borrower shall not assign or transfer its
rights hereunder.
14.9 CONSTRUCTION. All references in this Agreement to the
single number and neuter gender shall be deemed to mean and include the plural
number and all genders, and vice versa, unless the context shall otherwise
require.
14.10 HEADINGS. The underlined headings contained herein are
for convenience only and shall not affect the interpretation of this Agreement.
14.11 COUNTERPARTS. This Agreement may be executed in more
than one counterpart, each of which shall be deemed an original.
14.12 NONLIABILITY OF AGENT. The relationship between the
Borrower and the Agent shall be solely that of borrower and lender. The Agent
shall not have any fiduciary responsibilities to the Borrower. The Agent
undertakes no responsibility to the Borrower to review or inform the Borrower of
any matter in connection with any phase of the Borrower's business or
operations.
14.13 INSOLVENCY; FRAUDULENT CONVEYANCES. Stores and Odd-Job
each acknowledge that they are each jointly and severally liable for the full
amount of the Loans. Notwithstanding anything to the contrary contained herein,
it is the intention of each Borrower and Agent that, in any proceeding involving
the bankruptcy, reorganization, arrangement, adjustment of debts, relief of
debtors, dissolution or insolvency or any similar proceeding with respect to any
Borrower or its assets, the amount of such Borrower's obligations with respect
to the obligations arising hereunder (the "Loan Obligations") shall be in, but
not in excess of, the maximum amount thereof not subject to avoidance or
recovery by operation of applicable law governing bankruptcy,
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reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution, insolvency, fraudulent transfers or conveyances or other similar
laws (including, without limitation, 11 U.S.C. Section 547, Section 548, Section
550 and other "avoidance" provisions of Title 11 of the United States Code)
applicable in any such proceeding to such Borrower and this Agreement
(collectively, "Applicable Insolvency Laws"). To that end, but only in the event
and to the extent that such Borrower's individual obligations with respect to
the Loan Obligations or any payment made pursuant to the Loan Obligations would,
but for the operation of the foregoing proviso, be subject to avoidance or
recovery in any such proceeding under Applicable Insolvency Laws, the amount of
such Borrower's individual obligations with respect to the Loan Obligations
shall be limited to the largest amount which, after giving effect thereto, would
not, under Applicable Insolvency Laws, render such Borrower's individual
obligations with respect to the Loan Obligations unenforceable or avoidable or
otherwise subject to recovery under Applicable Insolvency Laws. To the extent
any payment actually made pursuant to the Loan Obligations exceeds the
limitation of the foregoing proviso and is otherwise subject to avoidance and
recovery in any such proceeding under Applicable Insolvency Laws, the amount
subject to avoidance shall in all events be limited to the amount by which such
actual payment exceeds such limitation and the Loan Obligations as limited by
the foregoing proviso shall in all events remain in full force and effect and be
fully enforceable against such Borrower. The foregoing proviso is intended
solely to preserve the rights of Agent hereunder against such Borrower in such
proceeding to the maximum extent permitted by Applicable Insolvency Laws and
neither such Borrower, any other Borrower nor any other person shall have any
right or claim under such proviso that would not otherwise be available under
Applicable Insolvency Laws in such proceeding.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers.
AGENT,
LETTER OF CREDIT LENDER, AND
LENDER:
THE PROVIDENT BANK
By: /s/ John R. Mirlisena, Jr.
-------------------------------
John R. Mirlisena, Jr.
Senior Vice President
LENDER:
NATIONAL CITY BANK LASALLE NATIONAL BANK
By: /s/ Gregory M. Jelinek By: /s/ Henry J. Munez
------------------------------- -----------------------------------
Gregory M. Jelinek Name: Henry J. Munez
Vice President ---------------------------------
Its: Commercial Banking Officer
----------------------------------
BORROWER:
HIA TRADING ASSOCIATES MAZEL STORES, INC.
a New York general partnership a Delaware corporation
By: ODD-JOB ACQUISITION CORP., By: /s/ Sue Atkinson
a Delaware corporation -----------------------------------
Name: Sue Atkinson
----------------------------------
Its: SR. V.P. and CFO
-----------------------------------
By: /s/ Sue Atkinson
--------------------------------
Name: Sue Atkinson ODD-JOB ACQUISITION CORP.,
------------------------------- a Delaware corporation
Its: CFO
---------------------------------
By: /s/ Sue Atkinson
---------------------------------
Name: Sue Atkinson
--------------------------------
Its: CFO
----------------------------------
69
70
ANNEX 1
COMMITMENTS OF LENDERS
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NAME OF LENDER REVOLVING TERM LOAN RATABLE PORTION
CREDIT COMMITMENT
COMMITMENT
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THE PROVIDENT BANK $25,000,000.00 $5,000,000.00 50%
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LASALLE NATIONAL BANK $12,500,000.00 $2,500,000.00 25%
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NATIONAL CITY BANK $12,500,000.00 $2,500,000.00 25%
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TOTAL $50,000,000.00 $10,000,000.00 100%
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