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EXHIBIT 4.2
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LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 5, 1992
BETWEEN
CONTINENTAL BANK N.A.
and
RAINBOW HOME RENTALS, INC.
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TABLE OF CONTENTS
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Page
1. DEFINITIONS AND OTHER TERMS ........................................ 1
1.1 Definitions ................................................ 1
1.2 Other Definitional Provisions ..............................11
1.3 Interpretation of Agreement ................................11
1.4 Compliance with Financial Restrictions .....................11
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS ............................11
2.1 Loans ......................................................11
2.2 Letters of Credit ..........................................12
2.3 Loan Account; Demand Deposit Account .......................14
2.4 Interest and Fees ..........................................14
2.5 Requests for Loans; Borrowing Base
Certificates; Other Information ............................15
2.6 Statements . . . ......................................16
2.7 Overdraft Loans . ..........................................16
2.8 Over Advances ..............................................16
2.9 All Loans One Obligation ...................................17
2.10 Making of Payments; Application of
Collections; Charging of Accounts ..........................17
2.11 Lender's Election Not to Enforce ...........................18
2.12 Reaffirmation ..............................................19
2.13 Setoff .....................................................19
2.14 Closing Fee ................................................19
3. COLLATERAL .........................................................19
3.1 Grant of Security Interest .................................19
3.2 Accounts Receivable ........................................21
3.3 Inventory ..................................................24
3.4 Equipment ..................................................25
3.5 Supplemental Documentation .................................26
4. REPRESENTATIONS AND WARRANTIES .....................................26
4.1 Organization ...............................................26
4.2 Authorization ..............................................27
4.3 No Conflicts ...............................................27
4.4 Validity and Binding Effect ................................27
4.5 No Default .................................................27
4.6 Financial Statements .......................................27
4.7 Insurance ..................................................28
4.8 Litigation; Contingent Liabilities .........................28
4 .9 Liens ......................................................28
4.10 Subsidiaries ...............................................29
4.11 Partnerships; Joint Ventures . . ...........................29
4.12 Business and Collateral Locations . . .....................29
4.13 Real Property ..............................................30
4.14 Eligibility of Collateral . . . ...........................30
4.15 Control of Collateral; Lease of Property ...................30
4.16 Patents, Trademarks, etc ...................................30
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4.17 Solvency ..................................................30
4.18 Contracts; Labor Matters ..................................30
4.19 Pension and Welfare Plans .................................31
4.20 Regulation U ..............................................31
4.21 Compliance ................................................32
4.22 Taxes .....................................................32
4.23 Investment Company Act Representation . . ...............32
4.24 Public Utility Holding Company Act
Representation ............................................32
4.25 Environmental and Safety and Health Matters ............32
4.26 Related Agreements . . ...............................33
5. BORROWER COVENANTS ................................................33
5.1 Financial Statements and Other Reports ....................33
5.2 Notices ...................................................35
5.3 Existence .................................................38
5.4 Nature of Business ........................................38
5.5 Books, Records and Access .................................38
5.6 Insurance .................................................39
5.7 Insurance Survey ..........................................40
5.8 Repair ....................................................40
5.9 Taxes .....................................................40
5.10 Compliance ................................................40
5.11 Pension Plans .............................................41
5.12 Merger, Purchase and Sale .................................41
5.13 Restricted Payments .......................................41
5.14 Borrower's and Subsidiaries' Stock ........................41
5.15 Indebtedness ..............................................42
5.16 Liens .....................................................42
5.17 Guaranties ................................................42
5.18 Investments ...............................................42
5.19 Subsidiaries ..............................................43
5.20 Operating Leases ..........................................43
5.21 Change in Accounts Receivable .............................43
5.22 Future Environmental Assessments ..........................43
5.23 Related Agreements ........................................44
5.24 Unconditional Purchase Options ............................44
5.25 Use of Proceeds ...........................................44
5.26 Transactions with Related Parties .........................44
6. DEFAULT ...........................................................44
6.1 Event of Default ..........................................44
6.2 Effect of Event of Default; Remedies ......................47
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S
RIGHTS ............................................................48
7.1 Notice of Disposition of Collateral .......................48
7.2 Application of Proceeds of Collateral .....................48
7.3 Care of Collateral ........................................48
7.4 Performance of Borrower's Obligations .....................49
7.5 Lender's Rights ...........................................49
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8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER
MATTERS ..........................................................50
8.1 Conditions Precedent to Initial Revolving
Loans ....................................................50
8.2 Continuing Conditions Precedent to all Loans;
Certification ............................................54
9. INDEMNITY ........................................................55
9.1 Environmental and Safety and Health
Indemnity ................................................55
9.2 General Indemnity ........................................55
9.3 Capital Adequacy .........................................56
10. ADDITIONAL PROVISIONS ............................................56
11. GENERAL ..........................................................57
11.1 Borrower Waiver ..........................................57
11.2 Power of Attorney ........................................57
11.3 Expenses; Attorney's Fees ................................58
11.4 Lender Fees and Charges ..................................58
11.5 Lawful Interest ..........................................59
11.6 No Waiver by Lender; Amendments ..........................59
11.7 Termination of Credit ....................................59
11.8 Notices ..................................................60
11.9 Assignments and Participations; Information ..............60
11.10 Severability .............................................60
11.11 Successors ...............................................60
11.12 Construction .............................................60
11.13 Consent to Jurisdiction ..................................61
11.14 Subsidiary Reference .....................................61
11.15 Waiver of Jury Trial .....................................61
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LOAN AND SECURITY AGREEMENT
THIS AGREEMENT ("Agreement") is made as of this 5th day of October, 1992
by and between CONTINENTAL BANK N.A., a national banking association having its
principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Lender"), and RAINBOW HOME RENTALS, INC., an Ohio corporation having its
principal office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower may, from time to time, request loans or other
financial accommodations from Lender, and the parties wish to provide for the
terms and conditions upon which such loans or other financial accommodations
shall be made;
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit (including any loan or advance or grant of credit by renewal or
extension) hereafter made to Borrower by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. DEFINITIONS AND OTHER TERMS.
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement or any Supplement, Schedule or Exhibit hereto, when used herein, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
"Account Debtor" means any Person who is or who may become obligated to
Borrower under, with respect to, or on account of an Account Receivable,
Contract Right, General Intangible or other Collateral.
"Account Receivable" means any account of Borrower and any other right
of Borrower to payment for goods sold or leased or for services rendered,
whether or not evidenced by an instrument or chattel paper and whether or not
yet earned by performance (including without limitation any right of Borrower to
payment under any Rental Agreement).
"Agreement" means this Loan and Security Agreement, as it may be
amended, modified or supplemented from time to time.
"Application" means an application by Borrower, in a form and containing
terms and provisions acceptable to Lender, for the issuance by Lender of a
Letter of Credit.
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"Attorneys' Fees" means the reasonable value of the services (and costs,
charges and expenses related thereto) of the attorneys (and all paralegals,
secretaries, accountants and other staff employed by such attorneys) employed by
Lender (including but not limited to attorneys and paralegals who are employees
of Lender) from time to time (a) in connection with the negotiation,
preparation, execution, delivery, administration and enforcement of this
Agreement, any Related Agreement, any Supplemental Documentation and all other
documents or instruments provided for herein or in any thereof or delivered or
to be delivered hereunder or under any thereof or in connection herewith or with
any thereof, (b) to prepare documentation related to the Loans made and other
Liabilities incurred hereunder, (c) to prepare any amendment to or waiver under
this Agreement or any Related Agreement and any documents or instruments related
thereto, (d) to represent Lender in any litigation, contest, dispute, suit or
proceeding or to commence, defend or intervene in any litigation, contest,
dispute, suit or proceeding or to file a petition, complaint, answer, motion or
other pleading, or to take any other action in or with respect to, any
litigation, contest, dispute, suit or proceeding (whether instituted by Lender,
Borrower or any other Person and whether in bankruptcy or otherwise) in any way
or respect relating to the Collateral, any Third Party Collateral, this
Agreement or any Related Agreement, or Borrower's or any other obligor's or any
Subsidiary's affairs, (e) to protect, collect, lease, sell, take possession of,
or liquidate any of the Collateral or any Third Party Collateral, (f) to attempt
to enforce any security interest in any of the Collateral or any Third Party
Collateral or to give any advice with respect to such enforcement and (g) to
enforce any of Lender's rights to collect any of the Liabilities.
"Banking Day" means any day other than a Saturday, Sunday or legal
holiday on which banks are authorized or required to be closed for the conduct
of commercial banking business in Chicago, Illinois.
"Blocked Deposit Account" has the meaning ascribed to such term in
SECTION 3.2(d).
"Borrower" -- see Preamble.
"Borrowing Base" has the meaning ascribed to such term in Supplement A.
"Borrowing Base Certificate" has the meaning ascribed to such term in
SECTION 2.5(c).
"Capitalized Lease" means any lease which is or should be capitalized on
the balance sheet of the lessee in accordance with GAAP.
"Cash Receipts Availability" has the meaning ascribed to such term in
SUPPLEMENT A.
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"Closing Date" means the date the initial Revolving Loans are made
and/or the initial Letters of Credit are issued under this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
"Collateral" has the meaning ascribed to such term in SECTION 3.1.
"Contract Right" means any right of Borrower to payment under a
contract, which right is not yet earned by performance and not evidenced by an
instrument or chattel paper.
"Credit" means the facility established under this Agreement pursuant to
which Lender will make Revolving Loans to Borrower and issue Letters of Credit
for the account of Borrower.
"Default Rate" means, with respect to a Loan, the rate of interest which
is applicable to such Loan after any amount thereof is not paid when due,
whether by acceleration or otherwise, as determined pursuant to SUPPLEMENT A.
"Demand Deposit Account" has the meaning ascribed to such term in
SECTION 2.3.
"Eligible Inventory" means Inventory which meets the following
requirements:
(a) it is owned by Borrower, and is not subject to any prior
assignment, claim or Lien, other than (i) a Lien in favor of Lender and
(ii) Liens consented to by Lender in writing;
(b) it is in rentable condition (as determined in accordance
with Borrower's customary practices);
(c) except as Lender may otherwise consent, it is in the
possession and control of Borrower, or an Account Debtor pursuant to the
terms of a Rental Agreement;
(d) if it is in the possession or control of a bailee,
warehouseman, processor or other Person other than Borrower or an
Account Debtor pursuant to the terms of a Rental Agreement, Lender is in
possession of such agreements, instruments and documents as Lender may
require (each in form and content acceptable to Lender and duly
executed, as appropriate, by the bailee, warehouseman, processor or such
other Person in possession or control of such Inventory, as applicable)
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including but not limited to warehouse receipts in Lender's name
covering such Inventory;
(e) it is not Inventory which is dedicated to, identifiable
with, or is otherwise specifically to be used in the manufacture of,
goods which are to be sold or leased to the United States of America or
any department, agency or instrumentality thereof and in respect of
which Inventory such Borrower shall have received any progress or other
advance payment which is or may be against any Account Receivable
generated upon the sale or lease of any such goods;
(f) it is not Inventory produced in violation of the Fair Labor
Standards Act and subject to the "hot goods" provisions contained in
Title 29 U.S.C. Section 215 or any successor statute or section;
(g) it is not (i) packaging or shipping materials, (ii) goods
used in connection with maintenance or repair of Borrower's business,
properties or assets or (iii) general supplies;
(h) it is not Inventory which in any way fails to meet or
violates any warranty, representation or covenant contained in this
Agreement or any Related Agreement relating directly or indirectly to
Borrower's Inventory;
(i) Lender has determined in its sole and absolute discretion
that it is not unacceptable due to age, type, category, quality and/or
quantity; and
(j) it satisfies the Eligible Inventory Requirements, if any,
set forth in SUPPLEMENT A.
Inventory of Borrower which is at any time Eligible Inventory but which
subsequently fails to meet any of the foregoing requirements shall forthwith
cease to be Eligible Inventory.
"Environmental Laws" means the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act, any
so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, and
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree or other requirement regulating, relating to, or
imposing liability or standards of conduct (including but not limited to permit
requirements, and emission or effluent restrictions) concerning any Hazardous
Materials or any hazardous, toxic or dangerous waste, substance or constituent,
or any pollutant or contaminant or other substance, whether solid, liquid or
gas, as now or at any time hereafter in effect.
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"Environmental Lien" means a Lien in favor of any governmental entity
for (a) any liability under any Environmental Law or (b) damages arising from or
costs incurred by such governmental entity in response to a spillage, disposal
or release into the environment of any Hazardous Material or other hazardous,
toxic or dangerous waste, substance or constituent, or other substance.
"Equipment" means all equipment of Borrower of every description,
including without limitation fixtures, furniture, vehicles and trade fixtures,
together with any and all accessions, parts and equipment attached thereto or
used in connection therewith, and any substitutions therefor and replacements
thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" means any corporation, partnership, or other trade or
business (whether or not incorporated) that is, along with Borrower, a member of
a controlled group of corporations or a controlled group of trades or
businesses, as described in sections 414(b) and 414(c), respectively, of the
Code or section 4001 of ERISA, or a member of the same affiliated service group
within the meaning of section 414(m) of the Code.
"Event of Default" has the meaning ascribed to such term in SECTION 6.1.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve (12) consecutive calendar
months ending on the 31st day of December. References to a Fiscal Year with a
number corresponding to any calendar year (e.g. "Fiscal Year 1992") refer to the
Fiscal Year ending on the 31st day of December, 1992 occurring during such
calendar year.
"Fixtures" means all fixtures of Borrower of every description and all
substitutions and replacements of any thereof.
"GAAP" means generally accepted accounting principles as applied in the
preparation of the audited financial statement of Borrower referred to in
SECTION 4.6.
"General Intangibles" means all of Borrower's general intangibles,
intangible personal property, including things in action, causes of action and
all other personal property of Borrower of every kind and nature (other than
accounts, inventory, equipment, chattel paper, documents, instruments and
money),
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including without limitation corporate, partnership or other business records,
inventions, designs, patents, patent applications, trademarks, trademark
applications, trade names, trade styles, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, tax refund claims, claims
against carriers and shippers, guarantee claims, security interests, security
deposits or other security held by or granted to Borrower to secure any payment
from an Account Debtor, and any rights to indemnification.
"Hazardous Materials" means any toxic substance, hazardous substance,
hazardous material, hazardous chemical or hazardous waste defined or qualifying
as such in (or for the purposes of) any Environmental Law, or any pollutant or
contaminant, and shall include, but not be limited to, petroleum, including
crude oil or any fraction thereof which is liquid at standard conditions of
temperature or pressure (60 degrees Fahrenheit and 14.7 pounds per square inch
absolute), any radioactive material, including but not limited to any source,
special nuclear or by-product material as defined at 42 U.S.C. section 2011 ET
SEQ., as amended or hereafter amended, polychiorinated biphenyls and asbestos in
any form or condition.
"Indebtedness" of any Person means, without duplication, (a) any
obligation of such Person for borrowed money, including without limitation (i)
any obligation of such Person evidenced by bonds, debentures, notes or other
similar debt instruments and (ii) any obligation for borrowed money which is
non-recourse to the credit of such Person but which is secured by a Lien on any
asset of such Person, (b) any obligation of such Person on account of deposits
or advances, (c) any obligation of such Person for the deferred purchase price
of any property or services, except Trade Accounts Payable, (d) any obligation
of such Person as lessee under a Capitalized Lease and (e) any Indebtedness of
another Person secured by a Lien on any asset of such first Person, whether or
not such Indebtedness is assumed by such first Person. For all purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or joint
venturer.
"Inventory" means any and all of Borrower's goods, (including without
limitation goods in transit) wheresoever located which are or may at any time be
leased by Borrower to a lessee, held for sale or lease, furnished under any
contract of service, or held as raw materials, work in process, or supplies or
materials used or consumed in Borrower's business, or which are held for use in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods, and all goods the sale or other disposition of which
has given rise to an Account Receivable, Contract Right or General Intangible
which are returned to and/or repossessed and/or stopped in transit by or at any
time hereafter are in the possession or under the control of, Borrower or Lender
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or any agent or bailee of either of them, and all documents of title or other
documents representing the same.
"Inventory Availability" has the meaning ascribed to such term in
SUPPLEMENT A.
"Investment" of any Person means any investment, made in cash or by
delivery of any kind of property or asset, in any other Person, whether by
acquisition of shares of stock or similar interest, Indebtedness or other
obligation or security, or by loan, advance or capital contribution, or
otherwise.
"L/C Draft" means a draft drawn on Lender pursuant to a Letter of
Credit.
"Lender" -- See Preamble.
"Letter of Credit" means a letter of credit issued by Lender, in its
discretion, on the Application of Borrower.
"Letter of Credit Obligations" means at any time an amount equal to the
sum of (a) the aggregate outstanding face amount of all Letters of Credit plus
(b) the aggregate outstanding face amount of all accepted but unpaid L/C Drafts.
"Liabilities" means all of the liabilities, obligations and indebtedness
of Borrower to Lender of any kind or nature, however created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing or due or to become due, and including but not limited to (a)
Borrower's obligations under any Note, (b) Borrower's obligations under this
Agreement, (c) Borrower's obligations with respect to any Letter of Credit or
any Application therefor, (d) interest, charges, expenses, Attorneys' Fees and
other sums chargeable to Borrower by Lender under this Agreement or any Related
Agreement and (e) the obligations of Borrower under any Related Agreement,
including obligations of performance. "Liabilities" shall also include any and
all amendments, extensions, renewals, refundings or refinancings of any of the
foregoing.
"Lien" means any mortgage, pledge, hypothecation, judgment lien or
similar legal process, title retention lien, or other lien, encumbrance or
security interest, including without limitation the interest of a vendor under
any conditional sale or other title retention agreement and the interest of a
lessor under any Capitalized Lease.
"Loan" means (a) any Revolving Loan made pursuant to SECTION 2.1.1 and
(b) any other loan or advance made to Borrower by Lender under or pursuant to
this Agreement (including without limitation any Overdraft Loan).
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"Loan Account" has the meaning ascribed to such term in SECTION 2.3.
"Margin Stock" has the meaning ascribed to such term in Regulation U of
the Federal Reserve Board or any regulation substituted therefor, as in effect
from time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is maintained for employees of Borrower, any other
Obligor or any ERISA Affiliate.
"Note" means any promissory note of Borrower evidencing any loan or
advance (including but not limited to any Revolving Loans) made by Lender to
Borrower pursuant to this Agreement, as the same may be amended, modified or
supplemented from time to time.
"Obligor" means Borrower and each other Person who is or shall become
primarily or secondarily liable on any of the Liabilities, or who grants to
Lender a Lien on any property of such Person as security for any of the
Liabilities.
"Occupational Safety and Health Law" means the Occupational Safety and
Health Act of 1970 and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning employee health and/or
safety.
"Over Advance" has the meaning ascribed to such term in SECTION 2.8.
"Overdraft Loan" has the meaning ascribed to such term in SECTION 2.7.
"Participant" means any Person, now or at any time or times hereafter,
participating with Lender in the Loans made to Borrower pursuant to this
Agreement or any Related Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan," as such term is defined in
Section 3(2) of ERISA, which is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which Borrower, any other Obligor or
any ERISA Affiliate may have any liability, including any liability by reason of
being deemed to be a contributing sponsor under Section 4069 of ERISA.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, or government (whether national, federal, state, county,
city, municipal or
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otherwise, including without limitation any instrumentality, division, agency,
body or department thereof).
"Reference Rate" means, at any time, the rate of interest then most
recently announced by Lender at Chicago, Illinois as its reference rate. Each
change in the interest rate on any Loan shall take effect on the effective date
of the change in the Reference Rate.
"Related Agreement" means any agreement, instrument or document
(including without limitation notes, guarantees, mortgages, deeds of trust,
chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements,
subordination agreements, trust account agreements and all other written matter)
heretofore, now, or hereafter delivered to Lender with respect to or in
connection with or pursuant to this Agreement or any of the Liabilities, and
executed by or on behalf of Borrower or any other Obligor.
"Related Party" means any Person (other than a Subsidiary) (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, Borrower, (b) which beneficially
owns or holds ten percent (10%) or more of the equity interest of Borrower or
(c) ten percent (10%) or more of the equity interest of which is beneficially
owned or held by Borrower or a subsidiary. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Rental Agreements" means the chattel paper evidencing the obligations
of Borrower's Account Debtors with respect to the lease of Borrower's Inventory.
"Reportable Event" has the meaning given to such term in ERISA.
"Revolving Credit Amount" has the meaning ascribed to such term in
SUPPLEMENT A.
"Revolving Loan" has the meaning ascribed to such term in SECTION 2.1.1.
"Revolving Loan Availability" means the lesser of (a) the Revolving
Credit Amount minus the Letter of Credit Obligations and (b) the Borrowing Base
minus the Letter of Credit Obligations.
"Subordinated Debt" means that portion of any liabilities, obligations
or Indebtedness of Borrower which contains terms satisfactory to Lender and is
subordinated, in a manner
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satisfactory to Lender, as to right and time of payment of principal and
interest thereon, to all of the Liabilities.
"Subsidiary" means any Person of which or in which Borrower and its
other Subsidiaries own directly or indirectly fifty percent (50%) or more of (a)
the combined voting power of all classes of stock having general voting power
under ordinary circumstances to elect a majority of the board of directors of
such Person, if it is a corporation, (b) the capital interest or profits
interest of such Person, if it is a partnership, joint venture or similar entity
or (c) the beneficial interest of such Person, if it is a trust, association or
other unincorporated organization.
"Supplemental Documentation" has the meaning ascribed to such term in
SECTION 3.5.
"Tangible Net Worth" means at any time, the total assets (exclusive of
intangible assets) of Borrower and its consolidated Subsidiaries calculated in
accordance with GAAP, less the total liabilities (exclusive of Subordinated Debt
and deferred rent expense) of Borrower and its consolidated Subsidiaries
calculated in accordance with GAAP. Intangible assets shall include, without
limitation, unamortized debt discount and expense, unamortized deferred charges
and goodwill.
"Taxes" with respect to any Person means taxes, assessments or other
governmental charges or levies imposed upon such Person, its income or any of
its properties, franchises or assets.
"Termination Date" means October 5, 1995 or such later date to which it
may be extended pursuant to SECTION 11.7.
"Third Party Collateral" means any property of any Person other than
Borrower which secures payment or performance of any Liabilities.
"Trade Accounts Payable" of any Person means trade accounts payable of
such Person with a maturity of not greater than ninety (90) days incurred in the
ordinary course of such Person's business.
"Trademark Security Agreement" means the Collateral Trademark Security
Agreement between Borrower and Lender in the form of EXHIBIT C, with appropriate
insertions, as it may be amended, modified or supplemented from time to time.
"UCC" means the Uniform Commercial Code as in effect in the State of
Illinois, and any successor statute, together with any regulations thereunder,
in each case as in effect from time to time. References to sections of the UCC
shall be construed to also refer to any successor sections.
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"Unmatured Event of Default" means any event or condition which, with
the lapse of time or giving of notice to Borrower or both, would constitute an
Event of Default.
1.2 OTHER DEFINITIONAL PROVISIONS. Unless otherwise defined or the
context otherwise requires, all financial and accounting terms used herein or in
any certificate or other document made or delivered pursuant hereto shall be
defined in accordance with GAAP. Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in any
Related Agreement or Supplemental Documentation. Terms used in this Agreement
which are defined in any Supplement or Exhibit hereto shall, unless the context
otherwise indicates, have the meanings given them in such Supplement or Exhibit.
Other terms used in this Agreement shall, unless the context indicates
otherwise, have the meanings provided for by the UCC to the extent the same are
used or defined therein.
1.3 INTERPRETATION OF AGREEMENT. A SECTION, an EXHIBIT or a SCHEDULE is,
unless otherwise stated, a reference to a section hereof, an exhibit hereto or a
schedule hereto, as the case may be. Section captions used in this Agreement are
for convenience only and shall not affect the construction of this Agreement.
The words "hereof," "herein," "hereto" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Reference to "this Agreement" shall
include the provisions of SUPPLEMENT A.
1.4 COMPLIANCE WITH FINANCIAL RESTRICTIONS. Compliance with each of the
financial ratios and restrictions contained in SECTION 5 or Supplement A shall,
except as otherwise provided herein, be determined in accordance with GAAP
consistently followed.
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS.
2.1 LOANS.
2.1.1 REVOLVING LOANS.
(a) Subject to the terms and conditions of this Agreement and the
Related Agreements, and in reliance upon the warranties of Borrower set forth
herein and in the Related Agreements, Lender agrees to make such loans or
advances (individually each a "Revolving Loan" and collectively the "Revolving
Loans") from time to time before the Termination Date to Borrower as Borrower
may from time to time request, up to but not in excess of the Revolving Loan
Availability. Revolving Loans made by Lender may be repaid and, subject to the
terms and conditions hereof, reborrowed to but not including the Termination
Date unless the Credit extended under this Agreement is otherwise terminated as
provided in this Agreement.
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(b) In the event the aggregate outstanding principal balance of the
Revolving Loans exceeds the Revolving Loan Availability, Borrower shall, unless
Lender shall otherwise consent, without notice or demand of any kind,
immediately make such repayments of the Revolving Loans or take such other
actions as shall be necessary to eliminate such excess.
(c) All Revolving Loans hereunder shall be paid by Borrower on the
Termination Date, unless payable sooner pursuant to the provisions of this
Agreement, but may, at Borrower's election, be repaid in whole or in part at any
time prior to such date without premium or penalty.
2.1.2 PREPAYMENT OF ALL LIABILITIES; REDUCTION OF REVOLVING CREDIT
AMOUNT. Borrower may prepay all of the Liabilities in full at any time by
prepaying the outstanding principal balance of the Revolving Loans, together
with (a) all accrued and unpaid interest on the Liabilities, (b) all other
outstanding Liabilities and (c) cash in the amount of, or adequate (in Lender's
determination) cash collateral for, the Letter of Credit Obligations. Borrower
may not permanently reduce the Revolving Credit Amount except in connection with
the prepayment in full of all of the Liabilities.
2.1.3 MAXIMUM OUTSTANDING LOANS. Notwithstanding any other provision of
this Agreement, the aggregate outstanding principal balance of the Loans plus
Letter of Credit Obligations shall not exceed the Revolving Credit Amount;
PROVIDED, HOWEVER, that the foregoing shall not limit the right of Lender to
advance Revolving Loans to Borrower pursuant to the provisions of SECTION
2.2(b), 2.2(c), 2.2(d), 2.4.5,2.10(c), 3.2(c), 5.5, 5.6, 5.22, 7.4, 11.3, 11.4
or any other provision of this Agreement or any Related Agreement that permits
Lender to advance Revolving Loans to Borrower.
2.2 Letters of Credit.
(a) In addition to Revolving Loans made pursuant to SECTION 2.1, Lender
will, upon receipt of duly executed Applications and such other documents,
instruments and/or agreements as Lender may require, issue Letters of Credit on
such terms as are satisfactory to Lender, PROVIDED, HOWEVER that no Letter of
Credit will be issued if, before or after taking such Letter of Credit into
account, the Letter of Credit Obligations exceeds the lesser of (i) Revolving
Credit Amount minus the outstanding principal balance of the Revolving Loans and
(ii) the Borrowing Base minus the outstanding principal balance of the Revolving
Loans.
(b) Borrower agrees to pay Lender, on demand, Lender's standard
administrative operating fees and charges in effect from time to time for
issuing and administering any Letters of Credit. With respect to standby Letter
of Credit, Borrower further agrees
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to pay Lender a commission equal to two and three-quarters percent (2.75%) per
annum (calculated on the basis of a year consisting of three hundred sixty (360)
days and paid for actual days elapsed) of the daily average of the undrawn
amount of each such standby Letter of Credit and on each L/C Draft accepted by
Lender in connection therewith. Such standby Letter of Credit commissions shall
be paid at such frequency as Lender shall determine. With respect to commercial
and documentary Letters of Credit, Borrower further agrees to pay Lender a
commission equal to two and three quarters percent (2.75%) of the maximum
undrawn amount of each such Letter of Credit. Such commercial and documentary
Letter of Credit commissions shall be paid at the time of the acceptance of the
initial L/C Draft drawn under each such Letter of Credit. Lender may provide for
the payment of any fees, charges or commissions due hereunder by advancing the
amount thereof to Borrower as a Revolving Loan. At all times that any Default
Rate is being charged under this Agreement, the Letter of Credit commission
shall be equal to the otherwise applicable commission plus two percent (2.00%).
(c) Borrower agrees to reimburse Lender, on demand, for each payment
made by Lender under or pursuant to any Letter of Credit or L/C Draft. Borrower
further agrees to pay to Lender, on demand, interest at the rate applicable to
Revolving Loans on any amount paid by Lender under or pursuant to any Letter of
Credit or L/C Draft from the date of payment until the date of reimbursement to
Lender. Lender may provide for the payment of any reimbursement obligations and
any interest accrued thereon by advancing the amount thereof to Borrower as a
Revolving Loan.
(d) Notwithstanding anything to the contrary herein or in any
Application, upon the occurrence of an Event of Default, an amount equal to the
aggregate amount of the outstanding Letter of Credit Obligations shall, at
Lender's option and without demand upon or further notice to Borrower, be deemed
(as between Lender and Borrower) to have been paid or disbursed by Lender under
the Letters of Credit and L/C Drafts accepted by Lender (notwithstanding that
such amounts may not in fact have been so paid or disbursed), and a Revolving
Loan to Borrower in the amount of such Letter of Credit Obligations to have been
made and accepted, which Revolving Loan shall be immediately due and payable. In
lieu of the foregoing, at the election of Lender at any time after an Event of
Default, Borrower shall, upon Lender's demand, deliver to Lender cash collateral
equal to the aggregate Letter of Credit Obligations. Any such cash collateral
and/or any amounts received by Lender in payment of the Revolving Loan made
pursuant to this PARAGRAPH (d) shall be held by Lender in a separate account
appropriately designated as a cash collateral account in relation to this
Agreement and the Letters of Credit and shall be retained by Lender as
collateral security in respect of, first, Borrower's Liabilities under or in
connection with the Letters of Credit and L/C Drafts and then, all other
Liabilities. Such amounts shall not be used by Lender to pay any amounts drawn
or paid under or
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pursuant to any Letter of Credit or L/C Draft, but may be applied to reimburse
Lender for drawings or payments under or pursuant to Letters of Credit or L/C
Drafts which Lender has paid, or if no such reimbursement is required, to
payment of such other Liabilities as Lender shall determine. Any amounts
remaining in any cash collateral account established pursuant to this PARAGRAPH
(d) following payment in full of all Liabilities shall be returned to Borrower.
2.3 LOAN ACCOUNT; DEMAND DEPOSIT ACCOUNT. Lender shall establish or
cause to be established on its books in Borrower's name one or more accounts
(each a "Loan Account") to evidence Loans made to Borrower. Lender will credit
or cause to be credited to a commercial account ("Demand Deposit Account")
maintained by Borrower at Lender's ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
office the amount of any sums advanced as Loans hereunder. Any amounts advanced
as Loans hereunder which are credited to Borrower's Demand Deposit Account,
together with any other amounts advanced to Borrower as a Loan pursuant to this
Agreement, will be debited to the applicable Loan Account and result in an
increase in the principal balance outstanding in such Loan Account in the amount
thereof.
2.4 INTEREST AND FEES.
2.4.1 INTEREST. The unpaid principal amount of each Revolving Loan
hereunder shall bear interest until maturity at the rate applicable to Revolving
Loans indicated in SUPPLEMENT A hereto. If any Revolving Loan or portion thereof
is not paid when due, whether by acceleration or otherwise, the entire unpaid
principal amount of the Revolving Loans shall bear interest thereafter until
such amount is paid in full at the Default Rate applicable to Revolving Loans
indicated in SUPPLEMENT A hereto. Until maturity, interest on the Revolving
Loans shall be paid by Borrower on the date(s) indicated in SUPPLEMENT A, and at
such maturity. After maturity, whether by acceleration or otherwise, accrued
interest shall be payable on demand.
2.4.2 NONUSE FEE. Borrower agrees to pay to Lender a fee equal to
one-half of one percent (0.50%) per annum on the daily average amount by which
the Revolving Credit Amount exceeds the outstanding principal balance of the
Revolving Loans plus the Letter of Credit Obligations. The fee provided for in
this SECTION 2.4.2 shall be payable monthly in arrears on the first day of each
month, and on the date the Credit terminates for the period then ended.
2.4.3 COLLATERAL MONITORING FEE. Borrower agrees to pay to Lender a fee
equal to $750 per month during the period between the Closing Date and the
second anniversary of the date hereof. The fee provided for in this SECTION
2.4.3 shall be payable monthly in arrears on the first day of each month, and on
the date the
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Credit terminates (if such termination occurs prior to the second anniversary of
the date hereof).
2.4.4 METHOD OF CALCULATING INTEREST AND FEES. Interest on the unpaid
principal amount of each Loan shall accrue from and including the date such Loan
is made to, but not including, the date such Loan is paid. Interest and any fee
shall be calculated on the basis of a year consisting of three hundred sixty
(360) days and paid for actual days elapsed.
2.4.5 PAYMENT OF INTEREST AND FEES. Lender may provide for the payment
of any unpaid accrued interest and any fees by charging the Demand Deposit
Account or any other bank account maintained by Borrower with Lender.
2.5 REQUESTS FOR LOANS; BORROWING BASE CERTIFICATES; OTHER INFORMATION.
(a) Loans shall be requested in writing or by telephone, except for
Overdraft Loans and Revolving Loans made pursuant to the provisions of SECTION
2.2(b), 2.2(c), 2.2(d), 2.4.5, 2.10(c), 3.2(c), 5.5, 5.6, 5.22, 7.4, 11.3, 11.4
or any other provision of this Agreement or any Related Agreement that permits
Lender to advance Revolving Loans to Borrower.
(b) In the event that Borrower shall at any time, or from time to time,
(i) make a request for a Revolving Loan hereunder or (ii) be deemed to have
requested an Overdraft Loan, Borrower agrees to forthwith provide Lender with
such information, at such frequency and in such format, as is reasonably
required by Lender, such information to be current as of the time of such
request.
(c) Borrower further agrees to provide to Lender a current Borrowing
Base Certificate at the end of each month and at such other times as Lender may
request. Such Borrowing Base Certificate shall be in substantially the same form
as that attached hereto as EXHIBIT A, executed and certified as accurate by such
officers or employees of Borrower as Borrower designates in writing to Lender
pursuant to duly adopted resolutions of Borrower's Board of Directors
authorizing such action.
(d) Borrower shall provide Lender with documentation satisfactory to
Lender indicating the names of those employees of Borrower authorized by
Borrower to sign Borrowing Base Certificates and/or to make telephonic requests
for Loans, and/or to authorize disbursement of the proceeds of Loans by wire
transfer or otherwise, and Lender shall be entitled to rely upon such
documentation until notified in writing by Borrower of any change(s) in the
names of the employees so authorized. Lender shall be entitled to act on the
instructions of anyone identifying himself as one of the persons authorized to
request Loans or disbursements of Loan proceeds by telephone and Borrower shall
be bound thereby in the
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same manner as if the person were actually so authorized. Borrower agrees to
indemnify and hold Lender harmless from any and all claims, damages,
liabilities, losses, costs and expenses (including Attorneys' Fees) which may
arise or be created by the acceptance of instructions for making or paying Loans
by wire transfer or telephone.
2.6 STATEMENTS. All Loans and payments hereunder shall be recorded on
Lender's books, which shall be rebuttably presumptive evidence of the amount
of such Loans outstanding at any time hereunder. Lender will account monthly as
to all Loans and payments hereunder and, absent demonstrable error, each monthly
accounting will be fully binding on Borrower unless, within fifteen (15) days of
Borrower's receipt thereof, Borrower shall provide Lender with a specific
listing of exceptions. Notwithstanding any term or condition of this Agreement
to the contrary, however, the failure of Lender to record the date and amount of
any Loan hereunder shall not limit or otherwise affect the obligation of
Borrower to repay any such Loan.
2.7 OVERDRAFT LOANS. Lender, in its sole and absolute discretion, and
subject to the terms hereof, may make a Revolving Loan to Borrower in an amount
equal to the amount of any overdraft which may from time to time exist with
respect to the Demand Deposit Account or any other bank account which Borrower
may now or hereafter have with Lender. The existence of any such overdraft shall
be deemed to be a request by Borrower for such Loan. Borrower acknowledges that
Lender is under no duty or obligation to make any Loan to Borrower to cover any
overdraft. Borrower further agrees that an overdraft shall constitute a separate
Loan under this Agreement (an "Overdraft Loan"), which shall bear, from the date
on which the overdraft occurred until paid, interest in an amount equal to the
greater of one hundred thirty percent (130%) of the highest rate of interest
then charged for Revolving Loans (other than Overdraft Loans) made hereunder,
and $50 per day. If Lender, in its sole and absolute discretion, decides not to
make a Loan to cover part or all of any overdraft, Lender may return any
check(s) which created such overdraft.
2.8 OVER ADVANCES. Lender, in its sole and absolute discretion, may make
Revolving Loans to Borrower in amounts which cause the outstanding principal
balance of the Revolving Loans to exceed the Revolving Loan Availability or
otherwise permit the outstanding principal balance of the Revolving Loans to at
any time exceed the Revolving Loan Availability, and no such event or occurrence
shall cause or constitute a waiver by Lender of its right to refuse to make any
further Revolving Loans or issue any Letters of Credit at any time that an Over
Advance exists or would result therefrom. During any period in which the
aggregate outstanding Revolving Loans exceeds the Revolving Loan Availability
(such excess Liabilities are herein referred to as "Over Advances"), the amount
of Over Advances shall bear interest at a rate equal to one hundred thirty
percent (130%) of the highest rate
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of interest then charged for Revolving Loans made hereunder; provided, that if
the Over Advances exist as a result of the failure of Lender to apply amounts
received from proceeds of Collateral as provided in SECTION 2.10(b), such Over
Advances shall bear interest at the rate applicable to Revolving Loans indicated
in SUPPLEMENT A hereto.
2.9 ALL LOANS ONE OBLIGATION. The Revolving Loans and all other Loans
under this Agreement shall constitute one Loan, and all Indebtedness and other
Liabilities of Borrower to Lender under this Agreement and any of the Related
Agreements shall constitute one general obligation secured by Lender's Lien on
all of the Collateral and Third Party Collateral and by all other Liens
heretofore, now, or at any time or times hereafter granted by Borrower or any
other Obligor to Lender. Borrower agrees that all of the rights of Lender set
forth in this Agreement shall apply to any modification of or supplement to this
Agreement, any Supplements or Exhibits hereto, and the Related Agreements,
unless otherwise agreed in writing.
2.10 MAKING OF PAYMENTS; APPLICATION OF COLLECTIONS; CHARGING OF
ACCOUNTS.
(a) All payments hereunder (including payment of Letter of Credit
Obligations and payments with respect to any Note) shall be made without set-off
or counterclaim and shall be made to Lender in immediately available funds
(except as Lender may otherwise consent) prior to 12:30 p.m., Chicago time, on
the date due at its office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
or at such other place as may be designated by Lender to Borrower in writing.
Any payments received after such time shall be deemed received on the next
Banking Day. Whenever any payment to be made hereunder or under any Note shall
be stated to be due on a date other than a Banking Day, such payment may be made
on the next succeeding Banking Day, and such extension of time shall be included
in the calculation of interest and any fees.
(b) Borrower authorizes Lender, and Lender will, subject to the
provisions of this PARAGRAPH (b), apply the whole or any part of any amounts
received by Lender from the collection of items of payment and proceeds of any
Collateral or Third Party Collateral (including without limitation payments
under Rental Agreements), against the principal and/or interest of any Loans
made hereunder and/or any other Liabilities, whether or not then due, in such
order of application as Lender may determine, unless such payments or proceeds
are, in Lender's sole and absolute discretion, released to Borrower; PROVIDED,
HOWEVER, that prior to the occurrence of an Event of Default, any such amounts
received by Lender shall be applied as follows: FIRST, to payment of amounts
then due with respect to fees (including Attorneys' Fees), charges and expenses
for which Borrower is liable pursuant to this Agreement and the Related
Agreements; SECOND, to payment of amounts then due with respect to interest on
the Loans; THIRD, to payment of amounts then
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due with respect to principal of the Loans; and FOURTH, to repayment of the
other Liabilities; PROVIDED, FURTHER, that no checks, drafts or other
instruments received by Lender shall constitute final payment to Lender unless
and until such item of payment has actually been collected. All items or amounts
which are delivered to Lender by or on behalf of Borrower or any Obligor or any
Account Debtor on account of partial or full payment or otherwise as proceeds of
any of the Collateral or Third Party Collateral may from time to time in
Lender's sole and absolute discretion be released to Borrower or may be applied
by Lender towards payment of the Liabilities, whether or not then due as
provided in the preceding sentence. Notwithstanding anything to the contrary
herein, (i) all cash, checks, instruments and other items of payment, solely for
purposes of determining the occurrence of an Event of Default, shall be deemed
received upon actual receipt by Lender in its account at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, unless the same is subsequently dishonored for any
reason whatsoever, (ii) for purposes of determining whether, under SECTIONS 2.1
and 2.2, there is availability for Loans or Letters of Credit, all cash, checks,
instruments and other items of payment shall be applied against the Liabilities
on the first Banking Day after receipt thereof by Lender in its account at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and (iii) solely for purposes of
interest calculation hereunder, all cash, checks, instruments and other items of
payment shall be deemed to have been applied against the Liabilities after
receipt by Lender of available funds with respect thereto in its account at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
(c) Borrower hereby authorizes Lender, and Lender may, in its sole and
absolute discretion, upon notice to Borrower charge to Borrower at any time when
due all or any portion of any of the Liabilities (and interest, if any, thereon)
including but not limited to any Attorneys' Fees and other costs and expenses of
Lender for which Borrower is liable pursuant to the terms of this Agreement or
any Related Agreement, by charging Borrower's Demand Deposit Account or any
other bank account of Borrower with Lender; PROVIDED, HOWEVER that Lender shall
not be required to provide notice to Borrower if Lender charges interest and the
fees set forth in SECTION 2.4 to Borrower, and the provisions of this SECTION
2.10(c) shall not affect Borrower's obligation to pay when due all amounts
payable by Borrower under this Agreement, any Note or any Related Agreement,
whether or not there are sufficient funds therefor in the Demand Deposit Account
or any such other bank account of Borrower.
2.11 LENDER'S ELECTION NOT TO ENFORCE. Notwithstanding any term or
condition of this Agreement to the contrary, Lender, in its sole and absolute
discretion, at any time and from time to time, may suspend or refrain from
enforcing any or all of the restrictions imposed in this SECTION 2, but no such
suspension or failure to enforce shall impair any right or power of Lender under
this Agreement, including without limitation any right of Lender to
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refrain from making a Loan or issuing a Letter of Credit if all conditions
precedent to Lender's obligation to making such Loan or issuing such Letter of
Credit have not been satisfied.
2.12 REAFFIRMATION. Each Loan or Letter of Credit requested by Borrower
pursuant to this Agreement shall constitute an automatic certification by
Borrower to Lender that (a) all of the representations and warranties of
Borrower in this Agreement and each of the Related Agreements are true and
correct on the date of such request to the same extent as if made on such date,
except for such changes as are specifically permitted hereunder (or under such
Related Agreement) and (b) immediately before and after making the requested
Loan or issuing the requested Letter of Credit, no Event of Default, or
Unmatured Event of Default, then exists or would result therefrom.
2.13 SETOFF. In addition to and not in limitation of all other rights
and remedies (including other rights of offset or banker's lien) that Lender or
any other holder of any Note may have under applicable law, Lender or such other
holder shall, upon the occurrence of any Event of Default described in SECTION
6.1, or any Unmatured Event of Default described in SECTION 6.1(e), have the
right to appropriate and apply to the payment of the Liabilities (whether or not
then due), in such order of application as Lender or such other holder may
elect, any and all balances, credits, deposits (general or special, time or
demand, provisional or final), accounts or moneys of Borrower then or thereafter
with Lender or such other holder. Lender shall promptly advise Borrower of any
such setoff and application but failure to do so shall not affect the validity
of such setoff and application.
2.14 CLOSING FEE. Borrower agrees to pay to Lender a closing fee of
$110,000 contemporaneously with the making of the initial Loan. With Lender's
consent, the amount of any closing fee due on the Closing Date may be advanced
to Borrower as a Revolving Loan.
3. COLLATERAL.
3.1 GRANT OF SECURITY INTEREST. As security for the payment of all Loans
now or hereafter made by Lender to Borrower hereunder or under any Note, and as
security for the payment or other satisfaction of all other Liabilities
(including without limitation all reimbursement obligations under any Letters of
Credit), Borrower hereby grants to Lender a security interest in and to the
following property of Borrower, whether now owned or existing, or hereafter
acquired or coming into existence, wherever now or hereafter located (all such
property is hereinafter referred to collectively as the "Collateral"):
(a) Accounts Receivable;
(b) Equipment and Fixtures;
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(c) Inventory (whether or not Eligible Inventory);
(d) General Intangibles;
(e) Contract Rights, documents and documents of title;
(f) All Rental Agreements, chattel paper and instruments
evidencing, arising out of or relating to any obligation to Borrower for
goods sold or leased or services rendered, or otherwise arising out of
or relating to any property described in CLAUSES (a) through (e) above;
(g) Any and all balances, credits, deposits (general or special,
time or demand, provisional or final), accounts or monies of or in the
name or Borrower now or hereafter with Lender and any and all property
of every kind or description of or in the name of Borrower now or
hereafter, for any reason or purpose whatsoever, in the possession or
control of, or in transit to, or standing to Borrower's credit on the
books of, Lender, any agent or bailee for Lender, or any Participant;
(h) All interest of Borrower in any goods the sale or lease of
which shall have given or shall give rise to, and in all guaranties and
other property securing the payment of or performance under, any
Accounts Receivable, Contract Rights, General Intangibles or any Rental
Agreements, chattel paper or instruments referred to in CLAUSE (f)
above;
(i) All interests of Borrower as lessor, sublessor, lessee or
sublessee of any real or personal property;
(j) Any and all other property of Borrower, of any kind or
description (including but not limited to Real Property of Borrower),
subject to a separate mortgage, pledge or security interest in favor of
Lender or in which Lender now or hereafter has or acquires a security
interest securing any Liabilities, whether pursuant to a written
agreement or instrument other than this Agreement or otherwise;
(k) All replacements, substitutions, additions or accessions to
or for any of the foregoing;
(1) To the extent related to the property described in CLAUSES
(a) through (k) above, all books, correspondence, credit files,
records, invoices and other papers and documents, including without
limitation, to the extent so related, all tapes, cards, computer runs,
computer programs and other papers and documents in the
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possession or control of Borrower or any computer bureau from time to
time acting for Borrower, and, to the extent so related, all rights in,
to and under all policies of insurance, including claims of rights to
payments thereunder and proceeds therefrom, including any credit
insurance; and
(m) All products and proceeds (including but not limited to any
Accounts Receivable or other proceeds arising from the sale or other
disposition of any Collateral, any returns of any Equipment or Inventory
sold by Borrower, and the proceeds of any insurance covering any of the
Collateral) of any of the foregoing.
3.2 ACCOUNTS RECEIVABLE.
(a) If requested by Lender at any time after the occurrence of an Event
of Default, Borrower shall advise Lender promptly of any Inventory returned by
or repossessed from any Account Debtor, or otherwise recovered, shall receive
such Inventory in trust and, unless instructed to deliver such Inventory to
Lender, shall resell or lease it for Lender. If requested by Lender at any time
after the occurrence of an Event of Default, Borrower shall notify Lender
immediately of all disputes and claims by any Account Debtor and settle or
adjust them at no expense to Lender. If Lender directs, no discount or credit
allowance shall be granted thereafter by Borrower to any Account Debtor. All
Account Debtor payments and all net amounts received by Lender in settlement,
adjustment or liquidation of any Account Receivable may be applied by Lender to
Borrower's Liabilities or credited to Borrower's Demand Deposit Account (subject
to collection) with Lender, as Lender may deem appropriate, as more fully
described in SECTION 2.10. If requested by Lender, Borrower will make proper
entries in its books and records, disclosing the assignment of Accounts
Receivable to Lender.
(b) Borrower warrants and covenants that: (i) all of the Accounts
Receivable are and will continue to be bona fide existing obligations created by
the sale or lease of goods, the rendering of services, or the furnishing of
other good and sufficient consideration to Account Debtors in the regular course
of business; and (ii) all Rental Agreements, shipping or delivery receipts and
other documents furnished or to be furnished to Lender in connection therewith
are and will be genuine.
(c) Lender is authorized and empowered (which authorization and power,
being coupled with an interest, is irrevocable until the last to occur of
termination of this Agreement and payment and performance in full of all of the
Liabilities under this Agreement) at any time in its sole and absolute
discretion:
(i) To request, in Lender's name, Borrower's name or the name of
a third party, confirmation from any
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Account Debtor or party obligated under or with respect to any
Collateral of the amount shown by the Accounts Receivable or other
Collateral to be payable, or any other matter stated therein;
(ii) After the occurrence of an Event of Default, to endorse in
Borrower's name and to collect any chattel paper, checks, notes, drafts,
instruments or other items of payment tendered to or received by Lender
in payment of any Account Receivable or other obligation owing to
Borrower;
(iii) After the occurrence of an Event of Default, to notify,
either in Lender's name or Borrower's name, and/or to require Borrower
to notify, any Account Debtor or other Person obligated under or in
respect of any Collateral, of the fact of Lender's Lien thereon and of
the collateral assignment thereof to Lender;
(iv) After the occurrence of an Event of Default, to direct,
either in Lender's name or Borrower's name, and/or to require Borrower
to direct, any Account Debtor or other Person obligated under or in
respect of any Collateral to make payment directly to Lender of any
amounts due or to become due thereunder or with respect thereto; and
(v) After the occurrence of an Event of Default, to demand,
collect, surrender, release or exchange all or any part of any
Collateral or any amounts due thereunder or with respect thereto, or
compromise or extend or renew for any period (whether or not longer than
the initial period) any and all sums which are now or may hereafter
become due or owing upon or with respect to any of the Collateral, or
enforce, by suit or otherwise, payment or performance of any of the
Collateral either in Lender's own name or in the name of Borrower.
Under no circumstances shall Lender be under any duty to act in regard to any of
the foregoing matters. The costs relating to any of the foregoing matters,
including Attorneys' Fees and out-of-pocket expenses, and the cost of any
Blocked Deposit Account or other bank account or accounts which may be required
hereunder, shall be borne solely by Borrower whether the same are incurred by
Lender or Borrower, and Lender may advance same to Borrower as a Revolving Loan.
(d) Unless otherwise consented to by Lender, Borrower will, forthwith
upon receipt by Borrower of all checks, drafts, cash and other remittances in
payment or as proceeds of, or on account of, any of the Accounts Receivable or
other Collateral, deposit the same in a special bank account (a "Blocked Deposit
Account") with such banks or financial institution as Lender shall
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consent, over which Lender alone has power of withdrawal, and will, to the
extent required by Lender, designate with each such deposit the particular
Account Receivable or other item of Collateral upon which the remittance was
made. Borrower acknowledges that the maintenance of the Blocked Deposit Accounts
is solely for the convenience of Lender in facilitating its own operations and
Borrower does not and shall not have any right, title or interest in the Blocked
Deposit Accounts or in the amounts at any time appearing to the credit thereof.
Said proceeds shall be deposited in precisely the form received except for
Borrower's endorsement where necessary to permit collection of items, which
endorsement Borrower agrees to make. Pending such deposit, Borrower agrees not
to commingle any such checks, drafts, cash and other remittances with any of its
funds or property, but will hold them separate and apart therefrom and upon an
express trust for Lender until deposit thereof is made in the Blocked Deposit
Accounts. Upon the full and final liquidation of all Liabilities, Lender will
pay over to Borrower any excess amounts received by Lender as payment or
proceeds of Collateral.
(e) Borrower appoints Lender, or any Person whom Lender may from time to
time designate, as Borrower's attorney and agent-in-fact with power: (i) after
the occurrence of an Event of Default, to notify the post office authorities to
change the address for delivery of Borrower's mail to an address designated by
Lender; (ii) after the occurrence of an Event of Default, to receive, open and
dispose of all mail addressed to Borrower; (iii) to send requests for
verification of Accounts Receivable or other Collateral to Account Debtors; (iv)
after the occurrence of an Event of Default, to open an escrow account or
Blocked Deposit Account under Lender's sole control for the collection of
Accounts Receivable or other Collateral, if not required contemporaneously with
the execution hereof and (v) to do all other things which Lender is permitted to
do under this Agreement or any Related Agreement or which are necessary to carry
out this Agreement and the Related Agreements. Neither Lender nor any of its
directors, officers, employees or agents will be liable for any acts of
commission or omission nor for any error in judgment or mistake of fact or law,
unless the same shall have resulted from gross negligence or willful misconduct.
The foregoing appointment and power, being coupled with an interest, is
irrevocable until all Liabilities under this Agreement are paid and performed in
full and this Agreement is terminated. Borrower expressly waives presentment,
demand, notice of dishonor and protest of all instruments and any other notice
to which it might otherwise be entitled.
(f) If any Account Receivable, Contract Right or General Intangible
arises out of a contract with the United States or any department, agency, or
instrumentality thereof, Borrower will, unless Lender shall otherwise agree,
immediately notify Lender in writing and execute any instruments and take any
steps required by Lender in order that all monies due and to become due under
such
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contract shall be assigned to Lender and notice thereof given to the government
under the Federal Assignment of Claims Act of 1940, as amended or other
applicable laws or regulations.
(g) If any Account Receivable or Contract Right is evidenced by chattel
paper or promissory notes, trade acceptances, or other instruments for the
payment of money, Borrower will, at the request of Lender, deliver the originals
of same to Lender, appropriately endorsed to Lender's order and, regardless of
the form of such endorsement, Borrower hereby expressly waives presentment,
demand, notice of dishonor, protest and notice of protest and all other notices
with respect thereto.
3.3 INVENTORY.
(a) Borrower warrants and covenants that: (i) all of the Inventory is,
and at all times shall be, owned by Borrower free of all claims and Liens
(except as set forth in SECTION 5.16); and (ii) Borrower will not make any
further assignment of any thereof or create or permit to exist any further Lien
thereon, unless approved in writing by Lender, nor permit any of Lender's rights
therein to be affected by any attachment, levy, garnishment or other judicial
process.
(b) Unless Lender shall otherwise agree, if Borrower sells Inventory for
cash, all full and partial payments therefor shall be immediately delivered by
Borrower to a Blocked Deposit Account in their original form for deposit. All
such cash shall be held by Borrower in trust for Lender and shall be remitted to
a Blocked Deposit Account not later than the end of the day received, or at such
other time as Lender may designate.
(c) Lender shall not be liable or responsible in any way for the
safekeeping of any Inventory delivered to it, to any bailee appointed by or for
it, to any warehouseman, or under any other circumstances. Lender shall not be
responsible for collection of any proceeds or for losses in collected proceeds
held by Borrower in trust for Lender. Any and all risk of loss for any or all of
the foregoing shall be upon Borrower, except for such loss as shall result from
Lender's gross negligence or willful misconduct.
(d) If requested by Lender, Borrower shall, upon acquiring an interest
in any Inventory, deliver to Lender schedules of such Inventory, together with
supplier's invoices, warranties, production, cost and other records as Lender
may request. If requested by Lender, Borrower shall deliver to Lender schedules
of the sale or lease of any Inventory immediately upon its sale or lease. Any
material change in the value or condition of any Inventory, and any errors
discovered in schedules delivered to Lender, shall be reported to Lender
immediately. Borrower confirms that the warranties and representations in this
Agreement shall apply to each schedule. Borrower represents and warrants that,
as to each schedule of Inventory delivered to Lender:
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(i) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all goods stated thereon, or on any attachment
thereto, are true and correct in all material respects;
(ii) None of the goods are defective, of second quality, used,
or goods returned after shipment, except where described as such; and
(iii) All Inventory not included on such schedule has been
previously scheduled.
(e) If requested by Lender at any time after the occurrence of an Event
of Default, Borrower will notify Lender immediately if Borrower obtains
possession (by return, repossession or otherwise) of any Inventory which has
been sold or leased, and will inform Lender of the identity of the returned or
repossessed Inventory, the applicable Account Debtor and the amount of the
applicable Account Receivable.
3.4 EQUIPMENT.
(a) Borrower warrants and covenants that: (i) all of the Equipment is,
and at all times shall be, owned by Borrower free of all claims and Liens
(except as set forth in SECTION 5.16); (ii) Borrower will not make any further
assignment of any thereof or create or permit to exist any further Lien thereon,
unless approved in writing by Lender, nor permit any of Lender's rights therein
to be affected by any attachment, levy, garnishment or other judicial process;
and (iii) none of the Equipment used by Borrower in its business is or will be
subject to a lease under which Borrower is the lessee (except as set forth on
SCHEDULE 4.15 hereto), or leases consented to in writing by Lender.
(b) Borrower shall at all times keep the Equipment in good operating
condition and repair, ordinary wear and tear excepted, and Borrower shall not,
without the prior written consent of Lender, sell, lease, or otherwise dispose
of any Equipment, or any part thereof or interest therein; PROVIDED, HOWEVER,
that without Lender's consent (but with notice to Lender) Borrower may (i) trade
in obsolete or unuseful Equipment in the ordinary course in connection with the
purchase of new Equipment, or (ii) dispose of obsolete or unuseful Equipment in
the ordinary course provided the Equipment disposed of in any Fiscal Year has an
aggregate market value of $150,000 or less.
(c) In the event any Equipment is sold, transferred or otherwise
disposed of, unless Lender shall agree otherwise, Borrower shall deliver all of
the proceeds of any such sale, transfer or disposition to Lender, which proceeds
shall be deposited in a Blocked Deposit Account or otherwise applied to the
repayment of the Liabilities.
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(d) Borrower will, upon request of Lender, submit to Lender a current
listing of all of Borrower's Equipment, which listing shall indicate the type,
model, serial number and location of such Equipment.
3.5 SUPPLEMENTAL DOCUMENTATION. At Lender's request, Borrower shall
execute and/or deliver to Lender, at any time or times hereafter, such
agreements, documents, financing statements, warehouse receipts, bills of
lading, notices of assignment of Accounts Receivable, Schedules of Accounts
Receivable assigned, and other written matter necessary or reasonably requested
by Lender to perfect and maintain perfected Lender's security interest in the
Collateral (all the above hereinafter referred to as "Supplemental
Documentation"), in form and substance acceptable to Lender, and pay all taxes,
fees and other costs and expenses associated with any recording or filing of the
Supplemental Documentation. Borrower hereby irrevocably makes, constitutes and
appoints Lender (and all Persons designated by Lender for that purpose) as
Borrower's true and lawful attorney (and agent-in-fact) (which appointment and
power, being coupled with an interest, is irrevocable until the last to occur
of termination of this Agreement and payment and performance in full of all of
the Liabilities under this Agreement) to sign the name of Borrower on any of the
Supplemental Documentation if Borrower refuses to so sign such Supplemental
Documentation and to deliver any of the Supplemental Documentation to such
Persons as Lender in its sole and absolute discretion, may elect. Borrower
agrees to ▇▇▇▇ each Rental Agreement with a legend indicating that Lender has a
security interest in such Rental Agreement. Borrower agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.
4. REPRESENTATIONS AND WARRANTIES.
To induce Lender to make Loans to, and issue Letters of Credit for the
account of, Borrower under this Agreement, Borrower makes the following
representations and warranties, all of which shall be true and correct as of the
date the initial Revolving Loan is made and shall survive the execution of this
Agreement and the making of the initial Revolving Loan:
4.1 ORGANIZATION. Borrower and all of its corporate Subsidiaries are
corporations duly organized, validly existing and in good standing under the
laws of the jurisdictions of their respective incorporation. All of Borrower's
other Subsidiaries, if any, are entities duly organized, validly existing and in
good standing under the laws of the jurisdictions of their respective
organization. Borrower and all of its Subsidiaries are in good standing and are
duly qualified to do business in each jurisdiction where, because of the nature
of their respective activities or properties, such qualification is required. On
the date hereof, Borrower and each Subsidiary conducts business in its own name
exclusively. SCHEDULE 4.1 sets forth a complete and accurate list,
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as of the date of this Agreement, of (a) the state or other jurisdiction of
formation of Borrower, (b) each state in which Borrower is qualified to do
business and (c) all of Borrower's trade names, trade styles or doing business
forms.
4.2 AUTHORIZATION. Borrower is duly authorized to execute and deliver
this Agreement, any Note(s), and any Related Agreements or Supplemental
Documentation contemplated by this Agreement, and is and will continue to be
duly authorized to borrow monies hereunder and to perform its obligations under
this Agreement, any Notes and any such Related Agreements and Supplemental
Documentation. The execution, delivery and performance by Borrower of this
Agreement, any Note(s), and any Related Agreements or Supplemental Documentation
contemplated by this Agreement, and the borrowings hereunder, do not and will
not require any consent or approval of any governmental agency or authority.
4.3 NO CONFLICTS. The execution, delivery and performance by Borrower
of this Agreement, any Note(s), and any Related Agreements or Supplemental
Documentation contemplated by this Agreement do not and will not conflict with
(a) any provision of law, (b) the charter or by-laws of Borrower, (c) any
agreement binding upon Borrower or (d) any court or administrative order or
decree applicable to Borrower, and do not and will not require, or result in,
the creation or imposition of any Lien on any asset of Borrower or any of its
Subsidiaries except as provided herein.
4.4 VALIDITY AND BINDING EFFECT. This Agreement, any Note(s), and any
Related Agreements or Supplemental Documentation contemplated by this Agreement,
when duly executed and delivered will be legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms.
4.5 NO DEFAULT. Neither Borrower nor any of its Subsidiaries is in
default under any agreement or instrument to which Borrower or any Subsidiary is
a party or by which any of their respective properties or assets is bound or
affected, which default might materially and adversely affect (a) Lender's Lien
on or rights with respect to any Collateral or Third Party Collateral or (b) the
financial condition or operations of Borrower, any Subsidiary or Borrower and
its Subsidiaries taken as a whole. No Event of Default or Unmatured Event of
Default has occurred and is continuing.
4.6 FINANCIAL STATEMENTS. Borrower's audited financial statement as at
December 31, 1991 and Borrower's unaudited financial statement as at August 31,
1992, copies of which have been furnished to Lender, have been prepared in
conformity with generally accepted accounting principles applied on a basis
consistent with that of the preceding fiscal year and period and present fairly
the financial condition of Borrower and its Subsidiaries as at such dates and
the results of their operations for the periods then ended, subject (in the case
of the interim
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financial statement) to year-end audit adjustments. Since December 31, 1991,
there has been no material adverse change in the financial condition of
Borrower.
4.7 INSURANCE. Schedule 4.7 hereto is a complete and accurate summary of
the property and casualty insurance program carried by Borrower and its
Subsidiaries on the date hereof. SCHEDULE 4.7 includes the insurer's(s')
name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s) of
coverage, the annual premium(s), Best's policyholder's and financial size
ratings of the insurer(s), exclusions, deductibles and self-insured retention
and describes in detail any retrospective rating plan, fronting arrangement or
any other self-insurance or risk assumption agreed to by Borrower or any
Subsidiary or imposed upon Borrower or any Subsidiary by any such insurer. This
summary also includes any self-insurance program that is in effect.
4.8 Litigation; Contingent Liabilities.
(a) Except for those referred to in SCHEDULE 4.8, no claims, litigation,
arbitration proceedings or governmental proceedings are pending or threatened
against or are affecting Borrower or any Subsidiary, the results of which might
materially and adversely affect (i) the financial condition or operations of
Borrower, any Subsidiary or Borrower and its Subsidiaries taken as a whole or
(ii) Lender's interest in or Lien on any material Collateral or Third Party
Collateral.
(b) Other than any liability incident to the claims, litigation or
proceedings disclosed in SCHEDULE 4.8 or SCHEDULE 4.19, or provided for or
disclosed in the financial statements referred to in SECTION 4.6, neither
Borrower nor any of its Subsidiaries has any contingent liabilities which are
material to Borrower, any Subsidiary or Borrower and its Subsidiaries taken as a
whole.
4.9 LIENS. None of the Collateral or other property, revenues or assets
of Borrower or any Subsidiary is subject to any Lien (including but not limited
to Liens pursuant to Capitalized Leases under which Borrower or any Subsidiary
is a lessee) except: (a) Liens in favor of Lender; (b) Liens for current Taxes
not delinquent or Taxes being contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate provisions as
may be required by GAAP are being maintained; (c) carriers', warehousemen's,
mechanics', materialmen's and other like statutory Liens arising in the ordinary
course of business securing obligations which are not overdue or which are being
contested in good faith and by appropriate proceedings and as to which such
reserves or other appropriate provisions as may be required by GAAP are being
maintained; (d) Liens disclosed in the financial statements referred to in
SECTION 4.6; (e) Liens listed on SCHEDULE 4.9; and (f) Liens consented to in
writing by Lender.
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4.10 SUBSIDIARIES. Borrower has no Subsidiaries except as listed on
SCHEDULE 4.10. SCHEDULE 4.10 sets forth, for each Subsidiary, a complete and
accurate statement of (a) Borrower's and each Subsidiary's percentage ownership
of each of their respective Subsidiaries, (b) the state or other jurisdiction of
formation or incorporation of each Subsidiary, (c) each state in which each
Subsidiary is qualified to do business on the date of this Agreement and (d) all
of each Subsidiary's trade names, trade styles or doing business forms on the
date of this Agreement.
4.11 PARTNERSHIPS; JOINT VENTURES. Neither Borrower nor any of its
Subsidiaries is a partner or joint venturer in any partnership or joint venture
other than the partnerships and joint ventures listed on SCHEDULE 4.11. SCHEDULE
4.11 sets forth, for each such partnership or joint venture, a complete and
accurate statement of (a) Borrower's and each Subsidiary's percentage ownership
of each such partnership or joint venture, (b) the state or other jurisdiction
of formation or incorporation, as appropriate, of each such partnership or
joint venture, (c) each state in which each such partnership or joint venture is
qualified to do business on the date of this Agreement and (d) all of each such
partnership's or joint venture's trade names, trade styles or doing business
forms on the date of this Agreement.
4.12 BUSINESS AND COLLATERAL LOCATIONS.
(a) On the date hereof the office where Borrower keeps Borrower's books
and records concerning Borrower's Accounts Receivable and other Collateral, and
Borrower's chief place of business and chief executive office, is located at the
address of Borrower set forth on the signature pages of this Agreement. SCHEDULE
4.12 contains a complete and accurate list, as of the date of this Agreement, of
(i) all of Borrower's places of business other than that referred to in the
first sentence of this PARAGRAPH (a) and (ii) all locations and places of
business of each Subsidiary.
(b) SCHEDULE 4.12 contains a complete and accurate list, as of the date
of this Agreement, of (i) the locations of all of Borrower's Inventory (other
than Inventory in the possession of Account Debtors pursuant to the terms of
Rental Agreements), Equipment and Fixtures, (ii) if applicable, the locations of
all Third Party Collateral (except any part thereof which prior to the execution
of this Agreement Borrower shall have advised Lender in writing consists of
Collateral or Third Party Collateral, as applicable, normally used in more than
one state) and (iii) if any Inventory, Equipment or other Collateral, or any
Third Party Collateral is not in the possession or control of Borrower, an
Account Debtor pursuant to the terms of a Rental Agreement or the owner of such
Third Party Collateral, the name and mailing address of each bailee, processor,
warehouseman or other Person in possession or control thereof.
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4.13 REAL PROPERTY. SCHEDULE 4.13 contains a complete
and accurate list, as of the date of this Agreement, of (a) the
address and legal descriptions of any real property owned by
Borrower or on which any Fixtures are located and (b) in the case
of Fixtures located on property not owned by Borrower, the name(s)
and mailing addresses of the record owners of such property.
4.14 ELIGIBILITY OF COLLATERAL. Each item of Inventory which Borrower
shall, expressly or by implication (by inclusion on a Borrowing Base Certificate
or otherwise), request Lender to classify as Eligible Inventory will, as of the
time when such request is made, conform in all respects to the requirements of
such classification set forth in the definition of "Eligible Inventory" set
forth herein.
4.15 CONTROL OF COLLATERAL; LEASE OF PROPERTY. Borrower is not now
conducting, or permitting or suffering to be conducted, any activities pursuant
to or in conjunction with which any of the Collateral is now, or will be (while
any Liabilities exist or this Agreement is in effect), in the possession or
control of, any Subsidiary, Obligor (other than Borrower) or Related Party.
Except for Capitalized Leases included on SCHEDULE 5.15, SCHEDULE 4.15 contains
a complete and accurate list of (a) all leases under which Borrower or a
Subsidiary is the lessee covering any machinery, equipment or real property used
by Borrower or any Subsidiary and (b) the name and mailing address of each
lessor or owner of such machinery, equipment or real property.
4.16 PATENTS, TRADEMARKS, ETC. To the best of its knowledge, Borrower
and each of its Subsidiaries possesses adequate assets, licenses, patents,
patent applications, copyrights, trademarks, trademark applications, trade
styles, and tradenames to continue to conduct its respective business as
heretofore conducted by it, and all such licenses, patents, patent applications,
copyrights, trademarks, trademark applications, trade styles, and tradenames
existing on the date hereof and, in the case of patents, trademarks and
copyrights, the date of issuance thereof, are listed on SCHEDULE 4.16.
4.17 SOLVENCY. Each of Borrower and each of its Subsidiaries now has
capital sufficient to carry on its respective business and transactions and all
business and transactions in which it is about to engage, and is now solvent and
able to pay its respective debts as they mature, and each of Borrower and each
of its Subsidiaries now owns property having a value, both at fair valuation and
at present fair salable value, greater than the amount required to pay
Borrower's or such Subsidiary's debts.
4.18 CONTRACTS; LABOR MATTERS. Except as disclosed on Schedule 4.18: (a)
neither Borrower nor any Subsidiary is a party to any contract or agreement, or
is subject to any charge, corporate restriction, judgment, decree or order,
which materially and adversely affects its business, property, assets,
operations or
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condition, financial or otherwise; (b) no labor contract to which Borrower or
any Subsidiary is a party or is otherwise subject is scheduled to expire prior
to the initial Termination Date; (C) neither Borrower nor any Subsidiary has,
within the two-year period preceding the date of this Agreement, taken any
action which would have constituted or resulted in a "plant closing" or "mass
layoff" within the meaning of the Federal Worker Adjustment and Retraining
Notification Act of 1988 or any similar applicable federal, state or local law,
and Borrower has no reasonable expectation that any such action is or will be
required at any time prior to the initial Termination Date and (d) on the date
of this Agreement (i) neither Borrower nor any Subsidiary is a party to any
labor dispute and (ii) there are no strikes or walkouts relating to any labor
contracts to which Borrower or any Subsidiary is a party or is otherwise
subject.
4.19 PENSION AND WELFARE PLANS. Each Pension Plan complies, and has been
administered in compliance, in all material respects, with all applicable
statutes and governmental rules and regulations; no Reportable Event has
occurred and is continuing with respect to any Pension Plan; neither Borrower
nor any ERISA Affiliate has withdrawn from any Multiemployer Plan in a "complete
withdrawal" or a "partial withdrawal" as defined in Sections 4203 or 4205 of
ERISA, respectively; no steps have been instituted to terminate any Pension
Plan; no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA; no condition
exists or event or transaction has occurred in connection with any Pension Plan
or Multiemployer Plan which could result in the incurrence by Borrower, any
other Obligor or any ERISA Affiliate of any material liability, fine or penalty;
and neither Borrower nor any other Obligor nor any ERISA Affiliate is a
"contributing sponsor" as defined in Section 4001(a) (13) of ERISA of a
"single-employer plan" as defined in Section 4001(a) (15) of ERISA which has two
or more contributing sponsors at least two of whom are not under common control.
Except as listed in SCHEDULE 4.19, neither Borrower nor any ERISA Affiliate, to
the extent there is joint and several liability with Borrower to pay such
benefits, has any liability to pay any welfare benefits under any employee
welfare benefit plan within the meaning of Section 3(1) of ERISA to former
employees thereof or to current employees with respect to claims incurred after
the termination of their employment other than as required by Section 4980B of
the Code or Part 6 of Subtitle B of Title 1 of ERISA.
4.20 REGULATION U. Borrower is not engaged in the business of purchasing
or selling Margin Stock or extending credit to others for the purpose of
purchasing or carrying Margin Stock, and no part of the proceeds of any
borrowing hereunder will be used to purchase or carry any Margin Stock or for
any other purpose which would violate any of the margin regulations of the
Federal Reserve Board.
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4.21 COMPLIANCE. Except as described on SCHEDULE 4.21 or SCHEDULE 4.25,
Borrower and its Subsidiaries are in material compliance with all statutes and
governmental rules and regulations applicable to them.
4.22 TAXES. Each of Borrower and its Subsidiaries has filed all tax
returns which are required to have been filed and has paid, or made adequate
provisions for the payment of, all of its Taxes which are due and payable,
except such Taxes, if any, as are being contested in good faith and by
appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP have been maintained. The federal income
tax liability of Borrower and its Subsidiaries has been audited by the Internal
Revenue Service and has been finally determined and satisfied (or the time for
audit has expired) for all tax years up to and including the tax year ended
December 31, 1988. Borrower is not aware of any proposed assessment against
Borrower or any of its Subsidiaries for additional Taxes (or any basis for any
such assessment) which might be material to Borrower and its Subsidiaries taken
as a whole.
4.23 INVESTMENT COMPANY ACT REPRESENTATION. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
4.24 PUBLIC UTILITY HOLDING COMPANY ACT REPRESENTATION. Borrower is not
a "holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.25 ENVIRONMENTAL AND SAFETY AND HEALTH MATTERS. Except as disclosed on
SCHEDULE 4.25, Borrower and each of its Subsidiaries and/or each property,
operations and facility that Borrower or any Subsidiary may own, operate or
control (a) complies in all respects with (i) all applicable Environmental Laws
and (ii) all applicable Occupational Safety and Health Laws; (b) is not subject
to any judicial or administrative proceeding alleging the violation of any
Environmental Law or Occupational Safety and Health Law; (c) has not received
any notice (i) that it may be in violation of any Environmental Law or
Occupational Safety and Health Law, (ii) threatening the commencement of any
proceeding relating to allegedly unlawful, unsafe or unhealthy conditions or
(iii) alleging that it is or may be responsible for any response, cleanup, or
corrective action, including but not limited to any remedial
investigation/feasibility studies, under any Environmental Law or Occupational
Safety and Health Law; (d) is not the subject of federal or state investigation
evaluating whether any investigation, remedial action or other response is
needed to respond to (i) a spillage, disposal or release or threatened release
into the environment of any Hazardous Material or other hazardous, toxic or
dangerous waste, substance or constituent, or other substance or
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(ii) any allegedly unsafe or unhealthful condition; (e) has not filed any notice
under or relating to any Environmental Law or Occupational Safety and Health Law
indicating or reporting (i) any past or present spillage, disposal or release
into the environment of, or treatment, storage or disposal of, any Hazardous
Material or other hazardous, toxic or dangerous waste, substance or constituent,
or other substance or (ii) any potentially unsafe or unhealthful condition, and
there exists no basis for such notice irrespective of whether such notice was
actually filed; and (f) has no contingent liability in connection with (i) any
actual or potential spillage, disposal or release into the environment of, or
otherwise with respect to, any Hazardous Material or other hazardous, toxic or
dangerous waste, substance or constituent, or other substance, whether on any
premises owned or occupied by Borrower or any Subsidiary or on any other
premises or (ii) any unsafe or unhealthful condition. Except as disclosed on
SCHEDULE 4.25, there are no Hazardous Materials on, in or under any property or
facilities owned, operated or controlled by Borrower or any Subsidiary,
including but not limited to such Hazardous Materials that may be contained in
underground storage tanks, but excepting such Hazardous Materials used in
accordance with all applicable laws and in the same manner as an ordinary
consumer (e.g., gasoline in tanks of motor vehicles, small amounts of cosmetic
cleaners, etc.).
4.26 RELATED AGREEMENTS. All representations and warranties of Borrower
contained in any Related Agreements are true and correct as if made on the date
hereof and Borrower hereby adopts and affirms all such representations and
warranties which Borrower agrees shall be incorporated by reference herein and
made a part hereof.
4.27 CAPITALIZED LEASE OBLIGATIONS. As of the date hereof, Borrower's
Indebtedness under Capitalized Leases is as set forth on SCHEDULE 4.27.
5. BORROWER COVENANTS.
From the date of this Agreement and thereafter until the Credit is
terminated and all Liabilities of Borrower hereunder are paid in full, Borrower
agrees that unless Lender shall otherwise consent in writing, it will:
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Furnish to Lender in form
satisfactory to Lender:
5.1.1 FINANCIAL REPORTS:
(a) ANNUAL AUDIT REPORT. Within ninety (90) days after each Fiscal Year
of Borrower, a copy of the annual audit report of Borrower and its Subsidiaries
prepared on a consolidating and consolidated basis and in conformity with GAAP
and certified by an independent certified public accountant who shall be
satisfactory
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to Lender, together with a certificate from such accountant (i) acknowledging to
Lender such accountant's understanding that Lender and any Participant is
relying on such annual audit report, (ii) containing a computation of, and
showing compliance with, each of the financial ratios and restrictions contained
in this SECTION 5 or in SUPPLEMENT A, and (iii) to the effect that, in making
the examination necessary for the signing of such annual audit report, such
accountant has not become aware of any Event of Default or Unmatured Event of
Default that has occurred and is continuing, or, if such accountant has become
aware of any such event, describing it and the steps, if any, being taken to
cure it;
(b) QUARTERLY FINANCIAL STATEMENT. Within fifteen (15) days after each
Fiscal Quarter of each Fiscal Year of Borrower, a copy of the unaudited
financial statement of Borrower and its Subsidiaries prepared in the same manner
as the audit report referred to in preceding CLAUSE (a), signed by Borrower's
chief financial officer and consisting of at least a balance sheet as at the
close of such Fiscal Quarter and statements of earnings and cash flows for such
Fiscal Quarter and for the period from the beginning of such Fiscal Year to the
close of such Fiscal Quarter;
(c) MONTHLY FINANCIAL STATEMENT. Within fifteen (15) days after the end
of each month of each fiscal year of Borrower, a copy of the unaudited financial
statement of Borrower and its Subsidiaries prepared in the same manner as the
audit report referred to in preceding CLAUSE (a), signed by Borrower's chief
financial officer and consisting of at least a balance sheet as at the close of
such month and statements of earnings and cash flows for such month and for the
period from the beginning of such Fiscal Year to the close of such month; and
(d) OFFICER'S CERTIFICATE. Together with the financial statements
furnished by Borrower under the preceding CLAUSES (a), (b) and (c), a
certificate of Borrower's chief financial officer, dated the date of such annual
audit report or such quarterly or monthly financial statement, as the case may
be, containing a statement that no Event of Default or Unmatured Event of
Default has occurred and is continuing, or, if there is any such event,
describing it and the steps, if any, being taken to cure it, and containing a
computation of, and showing compliance with, each of the financial ratios and
restrictions contained in this Section 5 or in SUPPLEMENT A.
5.1.2 AGINGS. Within ten (10) days after the end of each month, an aging
of all amounts owing under Rental Agreements and an aging of all accounts
payable as of the end of such month, in form and content acceptable to Lender.
5.1.3 INVENTORY CERTIFICATION. Within ten (10) days after the end of
each month, an Inventory certification report as of the end of the month for all
Inventory locations, in form and content acceptable to Lender.
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5.1.4 CASH RECEIPTS REPORT. Within ten (10) days after the end of each
month, a report as at the end of the month, in form and content acceptable to
Lender, specifying the cash received during such month from rental and
non-rental payments under Rental Agreements.
5.1.5 OTHER REPORTS AND INFORMATION:
(a) SEC AND OTHER REPORTS. Copies of each filing and report made by
Borrower or any Subsidiary with or to any securities exchange or the Securities
and Exchange Commission and of each communication from Borrower or any
Subsidiary to shareholders generally, promptly upon the filing or making
thereof;
(b) REPORT OF CHANGE RELATING TO BORROWER, SUBSIDIARIES OR PARTNERSHIPS.
Promptly from time to time, a written report of any change in the information
set forth in SCHEDULE 4.1, SCHEDULE 4.10 or SCHEDULE 4.11 concerning Borrower,
any Subsidiary, or any partnership or joint venture;
(c) PATENTS, ETC. Promptly from time to time, a written report of any
change to the list of patents, trademarks, copyrights and other information set
forth in SCHEDULE 4.16; and
(d) OTHER REPORTS. Any information required to be provided pursuant to
other provisions of this Agreement, and such other reports or information from
time to time reasonably requested by Lender.
5.2 NOTICES. Notify Lender in writing of any of the following
immediately upon learning of the occurrence thereof (or, in the case of CLAUSES
(e) and (f) of this SECTION 5.2, at least thirty (30) days prior to the
occurrence thereof to the extent applicable to Borrower, any Subsidiary or any
other Obligor), describing the same and, if applicable, the steps being taken by
the Person(s) affected with respect thereto:
(a) DEFAULT. The occurrence of (i) an Event of Default or
Unmatured Event of Default and (ii) to the extent not included in CLAUSE
(i) of this SECTION 5.2(a), the default by Borrower, any other Obligor,
any Subsidiary or any Related Party under any material note,
indenture, loan agreement, mortgage, lease, deed or other material
similar agreement to which Borrower, any other Obligor, any Subsidiary
or any Related Party, as appropriate, is a party or by which it is
bound (including without limitation any document evidencing any Sub-
ordinated Debt);
(b) LITIGATION. The institution of any litigation, arbitration
proceeding or governmental proceeding affecting Borrower, any other
Obligor, any Subsidiary, any Related Party, any Collateral or any Third
Party
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Collateral, whether or not considered to be covered by insurance;
(c) JUDGMENT. The entry of any judgment or decree against
Borrower, any other Obligor, any Subsidiary or any Related Party, if the
amount of such judgment exceeds $50,000;
(d) PENSION PLANS AND WELFARE PLANS. The occurrence of a
Reportable Event with respect to any Pension Plan; the filing of a
notice of intent to terminate a Pension Plan by Borrower, any ERISA
Affiliate, or any other Obligor; the institution of proceedings to
terminate a Pension Plan by the PBGC or any other Person; the
withdrawal in a "complete withdrawal" or a "partial withdrawal" as
defined in Sections 4203 and 4205, respectively, of ERISA by Borrower,
any ERISA Affiliate or any other Obligor from any Multiemployer Plan;
the failure of Borrower, any other Obligor or any ERISA Affiliate to
make a required contribution to any Pension Plan, including but not
limited to any failure to pay an amount sufficient to give rise to a
Lien under Section 302(f) of ERISA; the taking of any action with
respect to a Pension Plan which could result in the requirement that
Borrower, any other Obligor or any ERISA Affiliate furnish a bond or
other security to the PBGC or such Pension Plan; the occurrence of any
other event with respect to any Pension Plan which could result in the
incurrence by Borrower, any other Obligor or any ERISA Affiliate of any
material liability, fine or penalty; or the establishment of a new plan
subject to ERISA or an amendment to any existing plan which will result
in a material increase in contributions or benefits under such plan or
the incurrence of any material increase in the liability of Borrower,
any other Obligor (or an ERISA Affiliate to the extent there is joint
and several liability with Borrower or any other Obligor) or any
Subsidiary, with respect to any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA which covers former employees thereof
or current employees and their beneficiaries with respect to claims
incurred after the termination of their employment;
(e) BUSINESS AND COLLATERAL INFORMATION. Any change or proposed
change in any of the information set forth on SCHEDULE 4.12, SCHEDULE
4.13 or SCHEDULE 4.15, including but not limited to (i) any change in
the location of any Inventory, or Equipment or any Third Party
Collateral, (ii) the identity any new bailee, processor, warehouseman or
other Person (other than an Account Debtor pursuant to the terms of a
Rental Agreement) in possession or control of any Inventory or Equipment
or other Collateral or Third Party Collateral,
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(iii) any change in the name or address of the lessor or owner of any
real property or equipment leased to Borrower, any subsidiary or any
other Obligor, (iv) any proposed change in the location of Borrower's or
any subsidiary's chief executive office or chief place of business, (v)
any proposed opening, closing or other change in the list of offices and
other places of business of Borrower and each Subsidiary and (vi) any
opening, closing or other change in the offices and other places of
business of each other Obligor and each Related Party;
(f) CHANGE OF NAME OR STATUS. Any change in the name or address
of any other Obligor or any Related Party;
(g) INSURANCE INFORMATION. Any material change in the
information set forth in SCHEDULE 4.7;
(h) ENVIRONMENTAL AND SAFETY AND HEALTH MATTERS. The occurrence
of any event, or the acquisition of any information which, if it had
occurred or was true on or before the Closing Date, would have been
required to have been disclosed and included on SCHEDULE 4.25, including
but not limited to existence of any Environmental Lien and receipt of
any notice from any federal, state or local government or agency with
respect to any actual or alleged violation of any Environmental Law or
any Occupational Safety and Health Law;
(i) MATERIAL ADVERSE CHANGE. The occurrence of a material
adverse change in the business, operations or financial condition of
Borrower, any other Obligor, any Subsidiary or any Related Party;
(j) DEFAULT BY OTHERS. Any material default by any Account
Debtor or other Person obligated to Borrower, any other Obligor, or any
Subsidiary, under any contract, chattel paper, note or other evidence of
amounts payable or due or to become due to Borrower, such Obligor or
Subsidiary if the amount payable under such contract, chattel paper,
note or other evidence of amounts payable or due or to become due is
material;
(k) MOVEABLE COLLATERAL. If any of the Collateral or Third Party
Collateral shall consist of goods of a type normally used in more than
one state, whether or not actually so used, any use of any such goods in
any state other than a state in which Borrower shall have previously
advised Lender such goods will be used. Borrower agrees that such goods
will not, unless Lender shall otherwise consent in writing, be used
outside the continental United States or in Louisiana;
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(l) CHANGE IN MANAGEMENT OR LINE(S) OF BUSINESS. Any substantial
change in the senior management of Borrower or any Subsidiary, or any
change in Borrower's or any Subsidiary's line(s) of business; and
(m) OTHER NOTICES. Any notices required to be provided pursuant
to any Related Agreement or the other provisions of this Agreement, and
notice of the occurrence of such other events as Lender may reasonably
from time to time specify.
5.3 EXISTENCE. Maintain and preserve, and cause each Subsidiary to
maintain and preserve, its respective existence as a corporation or other form
of business organization, as the case may be, and all rights, privileges,
licenses, patents, patent rights, copyrights, trademarks, trade names, trade
styles, franchises and other authority to the extent material and necessary for
the conduct of its respective business in the ordinary course as conducted from
time to time.
5.4 NATURE OF BUSINESS. Engage, and cause each Subsidiary to engage, in
substantially the same fields of business as it is engaged in on the date
hereof.
5.5 BOOKS, RECORDS AND ACCESS. Maintain, and cause each Subsidiary to
maintain, complete and accurate books and records (including but not limited to
records relating to Accounts Receivable, Inventory, Equipment and other
Collateral), in which full and correct entries in conformity with GAAP shall be
made of all dealings and transactions in relation to its respective business and
activities. Cause its books and records as at the end of any calendar month to
be posted and closed not more than ten (10) days after the last business day of
such month. Permit, and cause each Subsidiary to permit, access by Lender and
its agents or employees to the books and records of Borrower and such Subsidiary
at Borrower's or such Subsidiary's place or places of business at intervals to
be determined by Lender and without hindrance or delay, and permit and cause
each Subsidiary to permit Lender or its agents and employees to inspect
Borrower's Inventory and Equipment and such Subsidiary's inventory and
equipment, to perform appraisals of Borrower's Equipment and each Subsidiary's
equipment, and to inspect, audit, check and make copies and/or extracts from the
books, records, computer data and records, computer programs, journals, orders,
receipts, correspondence and other data relating to Inventory, Accounts
Receivable, Contract Rights, General Intangibles, Equipment and any other
Collateral or Third Party Collateral, or relating to any other transactions
between the parties hereto. Borrower shall pay Lender an audit fee of $750 per
auditor per day in connection with each audit performed by Lender or its agents
and reimburse Lender for all out-of-pocket expenses incurred by Lender or its
agents in connection with any and all such inspections and/or audits, and Lender
may advance same to Borrower as a Revolving Loan. Notwithstanding the foregoing,
as
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long as no Event of Default or Unmatured Event of Default has occurred or is
continuing Borrower shall not be required to reimburse Lender for appraisals of
Borrower's Equipment or the equipment of its Subsidiaries more frequently than
once each Fiscal Year.
5.6 INSURANCE. Maintain, and cause each Subsidiary to maintain,
insurance to such extent and against such hazards and liabilities as is commonly
maintained by companies similarly situated or as Lender may reasonably request
from time to time. Keep the Collateral properly housed and insured for its full
insurable value against loss or damage by fire, theft, explosion, sprinklers,
collision (in the case of motor vehicles) and such other risks as are
customarily insured against by persons engaged in business similar to that of
Borrower, with such companies, in such amounts and under policies in such form
as shall be satisfactory to Lender. Certificates of such policies of insurance
have been delivered to Lender prior to the date hereof together with evidence of
payment of all premiums therefor. Borrower shall cause each issuer of an
insurance policy to provide Lender, prior to the Closing Date, with an
endorsement or an independent instrument (a) substantially in the form of
EXHIBIT B or such other form and containing such other terms as shall be
acceptable to Lender and (b) showing loss payable to Lender and, if required by
Lender, naming Lender as an additional insured. Borrower hereby directs all
insurers under such policies of insurance to pay all proceeds payable thereunder
directly to Lender. Borrower appoints Lender and any Person whom Lender may from
time to time designate (and all officers, employees or agents designated by
Lender or such Person) as Borrower's true and lawful attorney and agent-in-fact
with power (i) to make, settle and adjust claims in excess of $50,000 under such
policies of insurance, and endorse the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance, and (ii) after the occurrence of an Event of Default, to make all
determinations and decisions with respect to such policies of insurance. The
foregoing appointment and power, being coupled with an interest, is irrevocable
until all Liabilities under this Agreement are paid and performed in full and
this Agreement is terminated. In the event Borrower at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required herein or to pay any premium in whole or in part relating thereto, then
Lender, without waiving or releasing any obligation of or default by Borrower
hereunder, may at any time or times thereafter (but shall be under no obligation
to do so) obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which Lender deems advisable. All
sums so disbursed by Lender, including reasonable Attorneys' Fees, court costs,
expenses and other charges relating thereto, shall be payable on demand by
Borrower to Lender, and Lender may, in its sole and absolute discretion, advance
such sums to Borrower as a Revolving Loan.
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5.7 INSURANCE SURVEY. Provide to Lender at least annually within ninety
(90) days of the end of Borrower's Fiscal Year, a certificate signed by its
chief financial officer that attests to and summarizes the property and casualty
insurance program carried by Borrower and its Subsidiaries. This summary shall
include the insurer's(s') name(s), policy number(s), expiration date(s),
amount(s) of coverage, type(s) of coverage, the annual premium(s), Best's
policyholder's and financial size ratings of the insurer(s), exclusions,
deductibles and self-insured retention and shall describe in detail any
retrospective rating plan, fronting arrangement or any other self-insurance or
risk assumption agreed to by Borrower or any Subsidiary or imposed upon Borrower
or any Subsidiary by any such insurer, as well as any self-insurance program
that is in effect. Borrower shall notify Lender in writing (a) at least twenty
(20) days prior to any cancellation or material change of any such insurance by
Borrower or any Subsidiary and (b) within five (5) business days after receipt
of any notice (whether formal or informal) of any cancellation or change in
any of its insurance by any of its insurers or any material change in the cost
thereof or which reduces the policyholder's or financial size ratings of the
insurance carriers of Borrower or any of its Subsidiaries, as established by
BEST'S INSURANCE REPORTS. Annually, Lender shall have the right to request
Borrower to have a risk management survey completed by a recognized independent
risk management consultant acceptable to it and Lender which will identify,
quantify and assess any catastrophic uninsured, underinsured or self-insured
exposures faced by Borrower and its Subsidiaries. The cost of such survey shall
be borne solely by Borrower. A copy of the results of each such a survey shall
be promptly delivered by Borrower to Lender.
5.8 REPAIR. Maintain, preserve and keep, and cause each Subsidiary to
maintain, preserve and keep, its properties in operating condition and repair,
ordinary wear and tear excepted, and from time to time make, and cause each
Subsidiary to make, all necessary and proper repairs, renewals, replacements,
additions, betterments and improvements thereto so that at all times the
efficiency thereof shall be fully preserved and maintained.
5.9 TAXES. Pay, and cause each Subsidiary to pay, when due, all of its
Taxes (including without limitation ninety percent (90%) of its estimated
Taxes), unless and only to the extent that Borrower or such Subsidiary is
contesting such Taxes in good faith and by appropriate proceedings and Borrower
or such Subsidiary has set aside on its books such reserves or other appropriate
provisions therefor as may be required by GAAP; not file a consolidated tax
return together with any other Person, unless consented to in writing by Lender;
and not change its Fiscal Year or tax year without Lender's prior written
consent.
5.10 COMPLIANCE. Comply, and cause each Subsidiary to comply, with all
statutes and governmental rules and regulations
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applicable to it (including without limitation all consumer credit statutes,
rules and regulations).
5.11 PENSION PLANS. Not permit, and not permit any Subsidiary to permit,
any condition to exist in connection with any Pension Plan which might
constitute grounds for the PBGC to institute proceedings to have such Pension
Plan terminated or a trustee appointed to administer such Pension Plan; not
fail, and not permit any Subsidiary to fail, to make a required contribution to
any Pension Plan if such failure is sufficient to give rise to a Lien under
Section 302(f) of ERISA; and not engage in, or permit to exist or occur, or
permit any of its Subsidiaries to engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Pension Plan which
could result in the incurrence by Borrower or any of its Subsidiaries of any
material liability, fine or penalty.
5.12 MERGER, PURCHASE AND SALE. Not, and not permit any Subsidiary to:
(a) be a party to any merger, liquidation or consolidation; (b) except for sales
or leases of Inventory in the normal course of its business, and except for
sales of Equipment permitted under SECTION 3.4(b), sell, transfer, convey, lease
or otherwise dispose of any of its assets; (c) sell or assign, with or without
recourse, any Accounts Receivable, Contract Rights, notes receivable or chattel
paper, except as provided in this Agreement; (d) purchase or otherwise acquire
all or a part of the assets or business of any Person outside the ordinary
course of business; or (e) open any new stores; provided that Borrower may
acquire stores and the assets and business of any Person or open new stores so
long as (i) after giving effect to such acquisition or opening, no Event of
Default exists, (ii) after giving effect to such acquisition or opening,
Borrower has availability for at least an additional $300,000 of Revolving Loans
(assuming all Trade Payables are current), (iii) the acquisition or opening
involves a business and/or assets related to Borrower's current line of
business, and (iv) the number of stores opened or acquired in any Fiscal Year of
Borrower does not exceed the number of stores projected to be opened during such
Fiscal Year as set forth on SCHEDULE 5.20.
5.13 RESTRICTED PAYMENTS. Not purchase or redeem any shares of its
stock, declare or pay any dividends thereon (other than stock dividends), make
any distribution to stockholders as such or set aside any funds for any such
purpose, and not prepay, purchase or redeem, and not permit any Subsidiary to
purchase, any subordinated Indebtedness of Borrower (including without
limitation any of the Subordinated Debt).
5.14 BORROWER'S AND SUBSIDIARIES' STOCK. Not permit any Subsidiary to
purchase or otherwise acquire any shares of the stock of Borrower, and not take
any action, or permit any Subsidiary to take any action, which will result in a
decrease in Borrower's or any Subsidiary's ownership interest in any Subsidiary.
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5.15 INDEBTEDNESS. Not, and not permit any Subsidiary to, incur or
permit to exist any Indebtedness (including but not limited to Indebtedness as
lessee under Capitalized Leases), except: (a) Indebtedness under the terms of
this Agreement; (b) other Indebtedness of Borrower having maturities and terms,
and which is subordinated to payment of the Liabilities in a manner, approved in
writing by Lender; (c) other Indebtedness outstanding on the date hereof and
listed on SCHEDULE 5.15; (d) Indebtedness hereafter incurred in connection with
Liens permitted under SECTION 5.16(d) and (e) other Indebtedness approved in
writing by Lender.
5.16 LIENS. Not, and not permit any Subsidiary to, create or permit to
exist any Lien with respect to any property, revenue or assets now owned or
hereafter acquired, except: (a) Liens for current Taxes not delinquent or Taxes
being contested in good faith and by appropriate proceedings and as to which
such reserves or other appropriate provisions as may be required by GAAP are
being maintained; (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, and other like statutory Liens arising in the ordinary course of
business securing obligations which are not overdue or which are being contested
in good faith and by appropriate proceedings and as to which such reserves or
other appropriate provisions as may be required by GAAP are being maintained;
(c) pledges or deposits in connection with workers' compensation, unemployment
insurance and other social security legislation; (d) Liens in connection with
the acquisition of Equipment after the date hereof by way of purchase money
mortgage, conditional sale or other title retention agreement, Capitalized Lease
or other deferred payment contract, and attaching only to the Equipment being
acquired, if (i) the Indebtedness secured thereby does not exceed seventy-five
percent (75%) of the fair market value of such Equipment at the time of the
acquisition thereof, (ii) the Indebtedness secured by any single piece of
Equipment does not exceed $35,000 and (iii) the aggregate outstanding amount of
such Indebtedness of Borrower and its Subsidiaries does not exceed $1,500,000;
(e) Liens in favor of Lender; (f) Liens referred to in SECTION 4.9 and (g) Liens
consented to in writing by Lender.
5.17 GUARANTIES. Not, and not permit any Subsidiary to, become or be a
guarantor or surety of, or otherwise become or be responsible in any manner
(whether by agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or services, or
otherwise) with respect to, any undertaking of any other Person, except for the
endorsement, in the ordinary course of collection, of instruments payable to it
or its order.
5.18 INVESTMENTS. Not, and not permit any Subsidiary to, make or permit
to exist any Investment in any Person, except for: (a) advances to employees of
Borrower or any of its Subsidiaries for travel or other ordinary business
expenses provided that the aggregate amount outstanding at any one time shall
not exceed $10,000 for any single employee and $50,000 in the aggregate for
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all employees; (b) advances to subcontractors and suppliers in maximum aggregate
amounts reasonably acceptable to Lender but in any event not exceeding an
aggregate outstanding amount of $50,000; (c) extensions of credit in the nature
of Accounts Receivable or notes receivable arising from the sale or lease of
goods and in the ordinary course of business; (d) shares of stock, obligations
or other securities received in settlement of claims arising in the ordinary
course of business; (e) Investments (other than Investments in the nature of
loans or advances) outstanding on the date hereof in Subsidiaries by Borrower
and other Subsidiaries; (f) Investments in the nature of loans and advances
constituting Indebtedness of Subsidiaries to Borrower and to other Subsidiaries
outstanding on the date hereof and listed on SCHEDULE 5.18; (g) other
Investments outstanding on the date hereof and listed on SCHEDULE 5.18 and (h)
other Investments consented to by Lender in writing.
5.19 SUBSIDIARIES. Not, and not permit any Subsidiary to, acquire any
stock or similar interest in any Person, and not create, establish or acquire
any Subsidiaries other than those existing on the date of this Agreement.
5.20 OPERATING LEASES. Not enter into or permit to exist, or permit any
Subsidiary to enter into or permit to exist, any arrangements for the leasing by
Borrower or such Subsidiary, as lessee under a lease which is not a Capitalized
Lease, of any real or personal property (or any interest therein) other than
under leases in existence on the date hereof and listed on SCHEDULE 4.15 or
other leases to which Lender has consented in writing; provided, that nothing
contained in this SECTION 5.20 shall prohibit Borrower from renegotiating any
leases and Borrower may enter into leases for the stores projected to be opened
during the term of this Agreement as described on SCHEDULE 5.20.
5.21 CHANGE IN ACCOUNTS RECEIVABLE. After the occurrence of an Event of
Default or Unmatured Event of Default, not permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account Receivable, including any of the terms
relating thereto.
5.22 FUTURE ENVIRONMENTAL ASSESSMENTS. Lender may cause an environmental
assessment of Borrower to be conducted because of non-compliance by Borrower
with Environmental Laws, and Borrower shall pay upon demand all costs and
expenses (including Attorney's Fees) connected with such assessment. Borrower
shall provide such information and certifications which Lender may reasonably
request from time to time pertaining to such environmental assessment. Lender,
may, in its discretion, provide for the payment of any amount due from Borrower
under this SECTION 5.22 by making Borrower a Revolving Loan. Nothing in this
SECTION 5.22, and no actions taken by Lender pursuant thereto, shall give, or be
construed as controlling or giving, to Lender the right or obligation to direct
or control the conduct or action or inaction of Borrower or any
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Subsidiary with respect to any environmental matters, including but not limited
to those pertaining to compliance with any Environmental Laws.
5.23 RELATED AGREEMENTS. Not enter into, or permit any Subsidiary to
enter into, any agreement containing any provision which would be violated or
breached by the performance by Borrower or such Subsidiary of its obligations
hereunder or under any Related Agreement or any instrument or document delivered
or to be delivered by Borrower or such Subsidiary in connection herewith.
5.24 UNCONDITIONAL PURCHASE OPTIONS. Not enter into or be a party to, or
permit any Subsidiary to enter into or be a party to any contract for the
purchase of materials, supplies or other property or services, if such contract
requires that payment be made by it regardless of whether or not delivery is
ever made of such materials, supplies or other property or services.
5.25 USE OF PROCEEDS. Not use or permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying" any Margin Stock, and
furnish to Lender upon request, a statement in conformity with the requirements
of Federal Reserve Form U-1 referred to in Regulation U of the Board of
Governors of the Federal Reserve System.
5.26 TRANSACTIONS WITH RELATED PARTIES. Not, and not permit any
Subsidiary to, (a) pay any management, consulting or similar fees to any Related
Party, whether for services rendered to Borrower or any Subsidiary, or otherwise
or (b) enter into or be a party to any other transaction or arrangement,
including without limitation the purchase, sale, lease or exchange of property
or the rendering of any service, with any Related Party, except in the ordinary
course of and pursuant to the reasonable requirements of Borrower's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
Borrower or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not a Related Party.
6. DEFAULT.
6.1 EVENT OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
(a) NON-PAYMENT. Default in the payment, when due or declared due, of
any of the Liabilities.
(b) NON-PAYMENT OF OTHER INDEBTEDNESS. Default in the payment when due,
whether by acceleration or otherwise (subject to any applicable grace period),
of aggregate Indebtedness in excess of $50,000 of, or guaranteed by, Borrower
(other than any Indebtedness under this Agreement and any Notes).
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(c) ACCELERATION OF OTHER INDEBTEDNESS. Any event or condition shall
occur which results in the acceleration of the maturity of aggregate
Indebtedness in excess of $50,000 of, or guaranteed by, Borrower (other than the
Indebtedness under this Agreement and any Notes) or enables the holder or
holders of such other Indebtedness or any trustee or agent for such holders (any
required notice of default having been given and any applicable grace period
having expired) to accelerate the maturity of such other Indebtedness.
(d) OTHER OBLIGATIONS. Default in the payment when due, whether by
acceleration or otherwise, or in the performance or observance (subject to any
applicable grace period or waiver of such default) of (i) any obligation or
agreement of Borrower to or with Lender (other than any obligation or agreement
of Borrower hereunder and under any Notes) or (ii) any material obligation or
agreement of Borrower to or with any other Person (other than (x) any such
material obligation or agreement constituting or related to Indebtedness and (y)
Trade Accounts Payable except to the extent that the existence of any such
default is being contested by Borrower in good faith and by appropriate
proceedings and Borrower shall have set aside on its books such reserves or
other appropriate provisions therefor as may be required by GAAP.
(e) INSOLVENCY. Borrower or any other Obligor becomes insolvent, or
generally fails to pay, or admits in writing its inability to pay, its debts as
they mature, or applies for, consents to, or acquiesces in the appointment of a
trustee, receiver or other custodian for Borrower or such other Obligor, or for
a substantial part of the property of Borrower or such other Obligor, or makes a
general assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian is
appointed for Borrower or any other Obligor, or for a substantial part of the
property of Borrower or any other Obligor and is not discharged or dismissed
within thirty (30) days; or any bankruptcy, reorganization, debt arrangement or
other proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is instituted by or against Borrower or any other
Obligor; or any warrant of attachment or similar legal process is issued against
any substantial part of the property of Borrower or any other Obligor.
(f) ERISA LIABILITIES. Any of the following events shall have occurred,
if such event would have a material adverse effect on Borrower: (i) the
existence of a Reportable Event, (ii) the withdrawal of Borrower or any ERISA
Affiliate from a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a) (2) of ERISA, (iii) the occurrence of an
obligation to provide affected parties with a written notice of intent to
terminate a Pension Plan in a distress termination under Section 4041 of ERISA,
(iv) the institution by PBGC of proceedings to terminate any Pension Plan, (v)
any event or condition which
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would require the appointment of a trustee to administer a Pension
Plan, (vi) the withdrawal of Borrower or any ERISA Affiliate from
a Multiemployer Plan, and (vii) any event that would give rise to
a Lien under Section 302(f) of ERISA.
(g) NON-COMPLIANCE WITH THIS AGREEMENT. Default in the performance of
any of Borrower's agreements set forth in SECTION 2, 3.2, 3.3, 3.4, 5.3, 5.5,
5.6, 5.9, 5.12 through 5.26 or SUPPLEMENT A (and not constituting an Event of
Default under any of the other subsections of this SECTION 6.1), and continuance
of such default after notice thereof to Borrower from Lender; or default in the
performance of any of Borrower's agreements set forth in SECTION 5.1.1, 5.1.2,
5.1.3, 5.1.4, 5.1.5 or 5.2 (and not constituting an Event of Default under any
of the other subsections of this SECTION 6.1), and continuance of such default
for three (3) days after notice thereof to Borrower from Lender; or default in
the performance of any of Borrower's other agreements herein set forth (and not
constituting an Event of Default under any of the other subsections of this
SECTION 6.1), and continuance of such default for thirty (30) days after notice
thereof to Borrower from Lender.
(h) NON-COMPLIANCE WITH RELATED AGREEMENTS. Default in the performance
by Borrower or any other Obligor of any of its agreements set forth in any
Related Agreement (and not constituting an Event of Default under any of the
other subsections of this SECTION 6.1), and continuance of such default after
notice from Lender and the expiration of the grace period (if any) set forth
therein.
(i) REPRESENTATIONS AND WARRANTIES. Any representation or warranty made
by Borrower or any other Obligor herein or in any Related Agreement is untrue or
misleading in any material respect when made or deemed made; or any schedule,
statement, report, notice, certificate or other writing furnished by Borrower or
any other Obligor to Lender is untrue or misleading in any material respect on
the date as of which the facts set forth therein are stated or certified; or any
certification made or deemed made by Borrower or any other Obligor to Lender is
untrue or misleading in any material respect on or as of the date made or deemed
made.
(j) LITIGATION. There shall be entered against Borrower, one or more
judgments or decrees in excess of $50,000 in the aggregate at any one time
outstanding, excluding those judgments or decrees (i) that shall have been
outstanding less than thirty (30) calendar days from the entry thereof or (ii)
for and to the extent which Borrower is insured and with respect to which the
insurer has assumed responsibility in writing or for and to the extent which
Borrower is otherwise indemnified if the terms of such indemnification are
satisfactory to Lender.
(k) DEATH OF OBLIGOR. If any natural person who is an Obligor, partner
in a partnership Obligor, or owner of a material interest in a corporate
Obligor, shall die or be declared legally
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incompetent and Borrower does not replace such Obligor with another
Person acceptable to Lender in its reasonable discretion within 90
days of such death or declaration of legal incompetence.
(1) VALIDITY. If the validity or enforceability of this Agreement or any
other Related Agreement shall be challenged by Borrower, any other Obligor or
any other Person, or shall fail to remain in full force and effect.
(m) CONDUCT OF BUSINESS. If Borrower is enjoined, restrained or in any
way prevented by court order, which has not been dissolved or stayed within five
(5) business days, from conducting all or any material part of its business
affairs.
(n) OWNERSHIP. If ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ fail to own ninety
percent (90%) of the voting stock of Borrower.
(o) MATERIAL ADVERSE CHANGE. Lender shall have determined in good faith
that (i) a material adverse change has occurred in the business, operations or
financial condition of Borrower, (ii) Lender's interest in any material
Collateral or Third Party Collateral has been adversely affected or impaired, or
the value thereof to Lender has been diminished to a material extent or (iii)
the prospect of payment or performance of any obligation or agreement of
Borrower or any other Obligor hereunder or under any Related Agreement is
materially impaired, and the condition giving rise to such determination does
not constitute an Event of Default under any of the other subsections of this
Section 6.1 and continues to exist after notice of such determination by Lender
to Borrower.
6.2 EFFECT OF EVENT OF DEFAULT; REMEDIES.
(a) In the event that one or more Events of Default described in SECTION
6.1(e) shall occur, then Lender's commitment and the Credit extended under this
Agreement shall terminate and all Liabilities hereunder and under any Notes
shall be immediately due and payable without demand, notice or declaration of
any kind whatsoever.
(b) In the event an Event of Default other than one described in SECTION
6.1(e) shall occur, then Lender's commitment shall terminate and Lender may
declare all Liabilities hereunder and under any Notes immediately due and
payable without demand or notice of any kind whatsoever, whereupon the Credit
extended under this Agreement shall terminate and all Liabilities hereunder and
under any Notes shall be immediately due and payable. Lender shall promptly
advise Borrower of any such declaration, but failure to do so shall not impair
the effect of such declaration.
(c) In the event of the occurrence of any Event of Default Lender may
exercise any one or more or all of the following remedies, all of which are
cumulative and non-exclusive:
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(i) Any remedy contained in this Agreement or in any of the
Related Agreements or any Supplemental Documentation;
(ii) Any rights and remedies available to Lender under the UCC,
and any other applicable law;
(iii) To the extent permitted by applicable law, Lender may,
without notice, demand or legal process of any kind, take possession of
any or all of the Collateral (in addition to Collateral which it may
already have in its possession), wherever it may be found, and for that
purpose may pursue the same wherever it may be found, and may enter into
any premises where any of the Collateral may be or is supposed to be,
and search for, take possession of, remove, keep and store any of the
Collateral until the same shall be sold or otherwise disposed of, and
Lender shall have the right to store the same in any of Borrower's
premises without cost to Lender;
(iv) At Lender's request, Borrower will, at Borrower's
expense, assemble the Collateral and make it available to Lender at a
place or places to be designated by Lender which is reasonably
convenient to Lender and Borrower; and
(v) Lender at its option, and pursuant to notification given
to Borrower as provided for below, may sell any Collateral actually or
constructively in its possession at public or private sale and apply
the proceeds thereof as provided below.
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND LENDER'S RIGHTS.
7.1 NOTICE OF DISPOSITION OF COLLATERAL. Any notification of intended
disposition of any of the Collateral required by law shall be deemed reasonably
and properly given if given at least five (5) calendar days before such
disposition.
7.2 APPLICATION OF PROCEEDS OF COLLATERAL. Any proceeds of any
disposition by Lender of any of the Collateral may be applied by Lender to the
payment of expenses in connection with the taking possession of, storing,
preparing for sale, and disposition of Collateral, including Attorneys' Fees and
legal expenses, and any balance of such proceeds may be applied by Lender toward
the payment of such of the Liabilities, and in such order of application, as
Lender may from time to time elect.
7.3 CARE OF COLLATERAL. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as Borrower requests in
writing, but failure of Lender to
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comply with such request shall not, of itself, be deemed a failure to exercise
reasonable care, and no failure of Lender to preserve or protect any rights with
respect to such Collateral against prior parties, or to do any act with respect
to the preservation of such Collateral not so requested by Borrower, shall be
deemed a failure to exercise reasonable care in the custody or preservation of
such Collateral.
7.4 PERFORMANCE OF BORROWER'S OBLIGATIONS. Lender shall have the right
upon notice, but shall not be obligated, to discharge any claims against or
Liens, and any Taxes at any time levied or placed upon any or all Collateral,
including without limitation those arising under statute or in favor of
landlords, taxing authorities, government, public and/or private warehousemen,
common and/or private carriers, processors, finishers, draymen, coopers, dryers,
mechanics, artisans, laborers, attorneys, courts, or others. Lender may also pay
for maintenance and preservation of Collateral. Lender may, but is not obligated
to, perform or fulfill any of Borrower's responsibilities under this Agreement
which Borrower has failed to perform or fulfill. Lender may advance to Borrower
as a Revolving Loan any payment made or expense incurred by Lender under this
SECTION 7.4.
7.5 LENDER'S RIGHTS. None of the following shall affect the obligations
of Borrower to Lender under this Agreement or Lender's right with respect to the
remaining Collateral or any Third Party Collateral (any or all of which actions
may be taken by Lender at any time, whether before or after an Event of Default,
at its sole and absolute discretion and without notice to Borrower):
(a) acceptance or retention by Lender of other property or
interests in property as security for the Liabilities, or acceptance or
retention of any Obligor(s), in addition to Borrower, with respect to
any of the Liabilities;
(b) release of its Lien on, or surrender or release of, or the
substitution or exchange of or for, all or any part of the Collateral or
any Third Party Collateral or any other property securing any of the
Liabilities (including but not limited to any property of any Obligor
other than Borrower), or any extension or renewal for one or more
periods (whether or not longer than the original period), or release,
compromise, alteration or exchange, of any obligations of any guarantor
or other Obligor with respect to any Collateral or any such property;
(c) extension or renewal for one or more periods (whether or not
longer than the original period), or release, compromise, alteration or
exchange of any of the Liabilities, or release or compromise of any
obligation of any Obligor with respect to any of the liabilities; or
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(d) failure by Lender to resort to other security or pursue any
Person liable for any of the Liabilities before resorting to the
Collateral.
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.
8.1 CONDITIONS PRECEDENT TO INITIAL REVOLVING LOANS AND LETTERS OF
CREDIT. The obligation of Lender to make the initial Revolving Loans and issue
the initial Letters of Credit is subject to satisfaction of the following
conditions precedent (in addition to those provided in SECTION 8.2):
8.1.1 AUDIT. Lender shall have completed its due diligence audit of the
business, operations and assets of Borrower and each other Obligor, the results
of which shall provide Lender with results and information which, in Lender's
sole determination, are satisfactory to permit Lender to enter into the secured
financing transaction described in this Agreement and the Related Agreements.
Lender's due diligence examination may include but need not be limited to (a) a
final field examination of Borrower's and each other Obligor's books and
records, (b) a physical audit and inspection of Borrower's and each other
Obligor's real and personal property, (c) an analysis of all of Borrower's and
each other Obligor's contingent liabilities, including but not limited to those
pertaining to environmental and health and safety matters, union contracts,
employee benefit plans and pending or threatened litigation, (d) a review of
such fair market value and/or liquidation value appraisals of the assets of
Borrower and each other Obligor as Lender shall determine to be necessary, in
each case prepared by independent appraisers and using such assumptions and
methods of analysis as Lender shall determine to be acceptable, (e) a review of
Borrower's and each other Obligor's current financial condition and the pro
forma financial condition of Borrower and each other Obligor, and (f) a review
of Borrower's and each other Obligor's business plan and projections, including
without limitation projected cash flow statements and statements of earnings.
8.1.2 SECURITY INTEREST. The security interest in the Collateral granted
under this Agreement and the Related Agreements, and in any Third Party
Collateral, and all other Liens granted to Lender to secure the Liabilities,
shall be a senior, perfected Lien except as otherwise agreed by Lender, and all
financing statements and other documents relating to Collateral and Third Party
Collateral shall have been filed or recorded, as appropriate.
8.1.3 SOLVENCY. Lender shall be satisfied that Borrower shall have
sufficient assets (excluding goodwill and other intangible assets not capable of
valuation) having a value, both at present fair salable value and at fair
valuation, greater than the amount of Borrower's liabilities (including trade
debt and Indebtedness to Lender). Lender shall be satisfied that all of the
assets supporting Lender's Loans and Letters of Credit under this
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Agreement shall be sufficient in value to provide Borrower with sufficient cash
flow and working capital to enable it to profitably operate its business and to
meet its obligations as they become due.
8.1.4 LOAN AVAILABILITY. Immediately after making the initial Revolving
Loans and issuing the initial Letters of Credit and the payment of all amounts
required to be paid on the Closing Date, Borrower shall, under the terms and
conditions of the Agreement, have availability for at least an additional
$250,000 of Revolving Loans.
8.1.5 BLOCKED ACCOUNT; LOCK BOX. Borrower shall have entered into
blocked account and/or lock box agreements with Lender for the collection and
remittance to Lender of cash proceeds of Collateral.
8.1.6 EFFECT OF LAW. No law or regulation affecting Lender's entering
into the secured financing transaction contemplated by this Agreement shall
impose upon Lender any material obligation, fee, liability, loss, penalty, cost,
expense or damage.
8.1.7 EXHIBITS; SCHEDULES. All Exhibits and Schedules to this Agreement
shall have been completed and submitted to Lender, shall be in form and
substance satisfactory to Lender and shall contain no facts or information which
Lender, in its sole judgment, determines to be unacceptable.
8.1.8 LICENSES. PERMITS AND CONSENTS. All licenses, permits, consents,
judicial and regulatory approvals and corporate action necessary to consummate
the transactions contemplated by this Agreement shall have been obtained on
terms acceptable to Lender.
8.1.9 FEES. If not funded with the proceeds of the initial Revolving
Loans, Lender shall have received the closing fee referred to in SECTION 2.14
and any other fees due and payable by Borrower or any other Person on the
funding of the initial Loans.
8.1.10 TITLE TO ASSETS. Borrower shall have good, indefeasible and
merchantable title to the Collateral, free and clear of all Liens, except as
otherwise permitted in SECTION 5.16 hereof, all financing statements or other
documents relating to any such Collateral shall have been filed or recorded, as
appropriate, and the priority of Lender's Liens on the Collateral shall be
supported by such agreements as Lender shall request.
8.1.11 MATERIAL ADVERSE CHANGE; LITIGATION. No material adverse change,
as determined by Lender, in the condition or operations (financial or otherwise)
of Borrower or any other Obligor, shall have occurred from December 31, 1991
through the time of the making of the initial Revolving Loans and the issuance
of the initial Letters of Credit and no material adverse change as
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determined by Lender, shall have occurred in the facts and information disclosed
to Lender or otherwise relied upon by Lender in making its decision to enter
into this Agreement and Lender shall not have become newly aware of any material
adverse facts or information, as determined by Lender, with respect to Borrower
or any other Obligor or the business, operations or prospects of Borrower or any
other Obligor. In addition, there shall not have been instituted or threatened
any litigation or proceedings in any court or administrative forum affecting or
threatened to affect Borrower or any other Obligor, which may materially
adversely affect Borrower or any other Obligor, in each case as determined by
Lender.
8.1.12 DOCUMENTS. Lender shall have received all of the following, each
duly executed where appropriate and dated as of the date of the initial
Revolving Loan (or such other date as shall be satisfactory to Lender), in form,
and containing terms and provisions, acceptable to Lender:
(a) BORROWER RESOLUTIONS. A copy, duly certified by the
secretary or an assistant secretary of Borrower of (i) resolutions of
the Board of Directors of Borrower authorizing (A) the borrowings by
Borrower hereunder, (B) the execution, delivery and performance by
Borrower of this Agreement and each Related Agreement to which Borrower
is a party or by which it is bound, and (C) certain officers or
employees of Borrower to request borrowings by telephone and to execute
Borrowing Base Certificates, and the consent of the shareholders of
Borrower thereto, (ii) all documents evidencing any other necessary
corporate action with respect to this Agreement and the Related
Agreements, (iii) all approvals or consents, if any, with respect to
this Agreement and the Related Agreements, (iv) a list of the names of
all officers and directors of Borrower, together with the true
signatures of such officers and directors, and specifying those
authorized to sign this Agreement and the Related Agreements, (v) the
by-laws of Borrower, (vi) the Articles of Incorporation of Borrower and
(vii) a list of all shareholders of Borrower and the number of shares of
Borrower's stock owned by each;
(b) BORROWER'S CLOSING CERTIFICATE. The certificate of the
President or Chairman of the Board of Borrower certifying to the
fulfillment of all conditions precedent to closing and funding the
secured financing transaction contemplated by this Agreement and to the
truth and accuracy, as of such date, of the representations and
warranties of Borrower contained in this Agreement and each Related
Agreement to which Borrower is a party or by which it is bound and the
absence or any defaults under any such agreements;
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(c) ACCOUNTANT'S LETTER. With respect to the financial
statements referred to in SECTION 4.6, a "reliance letter" from the
accountants who prepared such statements in form and content acceptable
to Lender;
(d) BORROWER'S ARTICLES OF INCORPORATION. A copy, duly certified
by the Secretary of State of Ohio, of Borrower's Articles of
Incorporation;
(e) BORROWER'S REGISTRATION; GOOD STANDING. A copy, duly
certified by the applicable Secretary of State of (i) a certificate of
good standing issued by the Secretary of the State of Ohio and each
other state where Borrower is qualified to do business or where, because
of the nature of its business or properties, qualification to do
business is required, (ii) a certificate of qualification, registration
to do business or other documents required to be filed by Borrower to
qualify to do business in each state referred to in CLAUSE (i), and
(iii) in any state in which Borrower is doing business under an assumed
name, a certificate or other document issued by the Secretary of State
of each such state evidencing Borrower's authority to use such name;
(f) LEGAL OPINION. Legal opinion from counsel for Borrower;
(g) INSURANCE. Evidence satisfactory to Lender of the existence
of insurance on the Collateral, Third Party Collateral and business of
Borrower in amounts and with insurers acceptable to Lender, together
with evidence establishing that Lender is named as a loss payee with
respect to property and casualty insurance, collateral assignee with
respect to business interruption insurance and additional insured with
respect to liability insurance;
(h) AUTHORIZATION TO PAY PROCEEDS. Written authorization and
instructions from Borrower, in form satisfactory to Lender, for
disbursement of the proceeds of the initial Revolving Loans and issuance
and delivery of the initial Letters of Credit;
(i) TRADEMARK SECURITY AGREEMENT. The Trademark Security
Agreement;
(j) GUARANTIES. Guaranties, duly executed by each of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, and their wives; and
(k) OTHER DOCUMENTS. Such other documents as Lender shall
determine to be necessary or desirable.
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8.1.13 DEFAULT. No Event of Default or Unmatured Event of Default shall
have occurred and be continuing or would be caused thereby.
8.2 CONTINUING CONDITIONS PRECEDENT TO ALL LOANS; CERTIFICATION. The
obligation of Lender to make the initial Revolving Loans and each subsequent
Loan and issue the initial Letters of Credit and each subsequent Letter of
Credit, is subject to satisfaction of the following conditions precedent in
addition to those provided in SECTION 8.1:
(a) NO CHANGE IN CONDITION. No change in the condition or
operations, financial or otherwise, of Borrower, any Subsidiary or any
other Obligor, shall have occurred which change, in the reasonable
credit judgment of Lender, may have a material adverse effect on
Borrower, any Subsidiary or any other Obligor, or on any Collateral or
Third Party Collateral;
(b) DEFAULT. Before and after giving effect to such Loan and/or
Letter of Credit, no Event of Default or Unmatured Event of Default
shall have occurred and be continuing;
(c) INSURANCE. There shall have been no material change, or
notice of prospective material change (whether such notice is formal or
informal), in the nature, extent, scope or cost of the insurance
policies of Borrower or any Subsidiary listed on SCHEDULE 4.7 which
change would have a material adverse effect on the financial condition
of Borrower, any Subsidiary or Borrower and its Subsidiaries taken as a
whole, or would significantly adversely affect Borrower's ability to
perform its obligations under this Agreement, any Note(s), or any
Related Agreement to which it is a party or by which it is bound;
(d) REPRESENTATIONS AND WARRANTIES. Before and after giving
effect to such Loan and/or Letter of Credit, the representations and
warranties in SECTION 4 shall be true and correct as though made on the
date of such Loan and/or Letter of Credit, except for such changes as
are specifically permitted hereunder;
(e) NO MATERIAL TRANSACTION. None of Borrower, and Subsidiary,
any other Obligor or any Related Party shall have entered into any
material (as determined by Lender) commitment or transaction, including
without limitation transactions for borrowings and capital expenditures,
which are not in the ordinary course of their respective businesses; and
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(f) ACCOUNTING METHODS. Borrower shall not have made any
material (as determined by Lender) change in its accounting methods or
principles except as required by GAAP.
Each request for a Loan or a Letter of Credit hereunder made or deemed to have
been made by Borrower shall be deemed to be a certificate of Borrower as to the
matters set out in the foregoing provisions of this SECTION 8.2.
9. INDEMNITY.
9.1 ENVIRONMENTAL AND SAFETY AND HEALTH INDEMNITY. Borrower hereby
indemnifies Lender and agrees to hold Lender harmless from and against any and
all losses, liabilities, damages, injuries, costs, expenses and claims of any
and every kind whatsoever (including without limitation court costs and
Attorneys' Fees) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, Lender for, with respect to, or as a direct or
indirect result of the violation by Borrower or any of its Subsidiaries of any
Environmental Law or Occupational Safety and Health Law, or with respect to, or
as a direct or indirect result of (a) the presence on or under, or the escape,
seepage, leakage, spillage, disposal, discharge, emission or release from,
properties utilized by Borrower and/or any Subsidiary in the conduct of its
business into or upon any land, the atmosphere, or any watercourse, body of
water or wetland, of any Hazardous Material or other hazardous, toxic or
dangerous waste, substance or constituent, or other substance (including without
limitation any losses, liabilities, damages, injuries, costs, expenses or claims
asserted or arising under any Environmental Law) or (b) the existence of any
unsafe or unhealthful condition on or at any premises utilized by Borrower
and/or any Subsidiary in the conduct of its business. The provisions of and
undertakings and indemnification set out in this SECTION 9.1 shall survive
satisfaction and payment of the Liabilities and termination of this Agreement.
9.2 GENERAL INDEMNITY. In addition to the payment of expenses pursuant
to SECTION 11.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender and any holder of
any Notes, and the officers, directors, employees, agents, and affiliates of
Lender and such holders (collectively, the "Indemnitees") harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or
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arising out of this Agreement, any Related Agreement or any other agreements
executed and delivered by Borrower or any other Obligor in connection herewith,
the statements contained in any commitment letter delivered by Lender, Lender's
agreement to make the Loans or to issue Letters of Credit hereunder, the use or
intended use of any Letters of Credit, or the use or intended use of the
proceeds of any of the Loans hereunder (the "indemnified liabilities"); PROVIDED
that Borrower shall have no obligation to an Indemnitee hereunder with respect
to indemnified liabilities arising from the gross negligence or willful
misconduct of such Indemnitee. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in the preceding sentence may be unenforceable
because it violates any law or public policy, Borrower shall contribute the
maximum portion that it is permitted to pay under applicable law to the payment
and satisfaction of all indemnified liabilities incurred by the Indemnitees or
any of them. The provisions of the undertakings and indemnification set out in
this SECTION 9.2 shall survive satisfaction and payment of the Liabilities and
termination of this Agreement.
9.3 CAPITAL ADEQUACY. If Lender shall reasonably determine that the
application or adoption of any law, rule, regulation, directive, interpretation,
treaty or guideline regarding capital adequacy, or any change therein or in the
interpretation or administration thereof, whether or not having the force or law
(including without limitation application of changes to Regulation H and
Regulation Y of the Federal Reserve Board issued by the Federal Reserve Board on
January 19, 1989 and regulations of the Comptroller of the Currency, Department
of the Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the
Currency on January 27, 1989) increases the amount of capital required or
expected to be maintained by Lender or any Person controlling Lender in excess
of any such increases affecting Lender as of the date hereof, and such increase
is based upon the existence of Lender's obligations hereunder and other
commitments of this type, then from time to time, within sixty (60) days after
demand from Lender, Borrower shall pay to Lender such amount or amounts as will
compensate Lender or such controlling Person, as the case may be, for such
increased capital requirement. The determination of any amount to be paid by
Borrower under this SECTION 9.3 shall take into consideration the policies of
Lender or any Person controlling Lender with respect to capital adequacy and
shall be based upon any reasonable averaging, attribution and allocation
methods. A certificate of Lender setting forth the amount or amounts as shall be
necessary to compensate Lender as specified in this SECTION 9.3 shall be
delivered to Borrower and shall be conclusive in the absence of manifest error.
10. ADDITIONAL PROVISIONS.
Additional provisions are set forth in SUPPLEMENT A.
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11. GENERAL.
11.1 BORROWER WAIVER. Except as otherwise provided for in this
Agreement, Borrower waives (a) presentment, demand and protest and notice of
presentment, protest, default, non-payment, maturity, release, compromise,
settlement, one or more extensions or renewals of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Lender on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard; (b) all rights to
notice and a hearing prior to Lender's taking possession or control of, or
Lender's relevy, attachment or levy on or of, the Collateral or any bond or
security which might be required by any court prior to allowing Lender to
exercise any of Lender's remedies and (c) the benefit of all valuation,
appraisement and exemption laws. Borrower acknowledges that it has been
advised by counsel of its choice with respect to this Agreement and the
transactions evidenced by this Agreement.
11.2 POWER OF ATTORNEY. Borrower appoints Lender, or any
Person whom Lender may from time to time designate, as Borrower's
attorney and agent-in-fact with power (which appointment and power,
being coupled with an interest, is irrevocable until all Liabilities under
this Agreement are paid and performed in full and this
Agreement is terminated), without notice to Borrower, to:
(a) At such time or times hereafter as Lender or said agent, in
its sole and absolute discretion, may determine in Borrower's or
Lender's name (i) after the occurrence of an Event of Default, endorse
Borrower's name on any checks, notes, drafts or any other items of
payment relating to and/or proceeds of the Collateral which come into
the possession of Lender or under Lender's control and apply such
payment or proceeds to the Liabilities; (ii) after the occurrence of an
Event of Default, endorse Borrower's name on any chattel paper,
document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar
document or agreement in Lender's possession relating to Accounts
Receivable, Inventory or any other Collateral; (iii) use the information
recorded on or contained in any data processing equipment and computer
hardware and software to which Borrower has access relating to Accounts
Receivable, Inventory and/or other Collateral; (iv) use Borrower's
stationery and sign the name of Borrower to verification of Accounts
Receivable and notices thereof to Account Debtors and (v) if not done by
Borrower, do all acts and things determined by Lender to be necessary,
to fulfill Borrower's obligations under this Agreement; and
(b) At such time or times after the occurrence of an Event of
Default, as Lender or said agent, in its sole and absolute discretion,
may determine, in Borrower's or
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Lender's name: (i) demand payment of the Accounts Receivable; (ii)
enforce payment of the Accounts Receivable, by legal proceedings or
otherwise; (iii) exercise all of Borrower's rights and remedies with
respect to the collection of the Accounts Receivable and other
Collateral; (iv) settle, adjust, compromise, extend or renew the
Accounts Receivable; (v) settle, adjust or compromise any legal
proceedings brought to collect the Accounts Receivable; (vi) if
permitted by applicable law, sell or assign the Accounts Receivable
and/or other Collateral upon such terms for such amounts and at such
time or times as Lender may deem advisable; (vii) discharge and release
the Accounts Receivable and/or other Collateral; (viii) prepare, file
and sign Borrower's name on any proof of claim in bankruptcy or similar
document against any Account Debtor; (ix) prepare, file and sign
Borrower's name on any notice of lien, assignment or satisfaction of
lien or similar document in connection with the Accounts Receivable
and/or other Collateral and (x) do all acts and things necessary, in
Lender's sole and absolute discretion, to obtain repayment of the
Liabilities and to fulfill Borrower's other obligations under this
Agreement.
11.3 EXPENSES; ATTORNEY'S FEES. Borrower agrees, whether or not any Loan
is made or Letter of Credit is issued hereunder, to pay upon demand all
Attorneys' Fees and all other reasonable expenses incurred by Lender in
connection with (a) the preparation, negotiation and execution of this
Agreement, any Related Agreement and any document required to be furnished in
connection herewith or therewith, (b) the preparation of any and all amendments
to this Agreement or any of the Related Agreements and all other instruments
or documents provided for therein or delivered or to be delivered thereunder or
in connection therewith, (c) the collection or enforcement of Borrower's or any
other Obligor's obligations hereunder or under any Related Agreement and (d) the
collection or enforcement of any of Lender's rights in or to any Collateral or
Third Party Collateral. Lender may advance all such amounts to Borrower as a
Revolving Loan. Borrower also agrees (y) to indemnify and hold Lender harmless
from any loss or expense which may arise or be created by the acceptance of
telephonic or other instructions for making Loans and (z) to pay, and save
Lender harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Agreement, or any
Related Agreement or Supplemental Documentation, or the issuance of any Note or
of any other instruments or documents provided for herein or to be delivered
hereunder or in connection herewith. Borrower's foregoing obligations shall
survive any termination of this Agreement.
11.4 LENDER FEES AND CHARGES. Borrower agrees to pay Lender on demand
the customary fees and charges of Lender for maintenance of accounts with Lender
or for providing other services
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to Borrower. Lender may, in its sole and absolute discretion,
provide for such payment by advancing the amount thereof to
Borrower as a Revolving Loan.
11.5 LAWFUL INTEREST. In no contingency or event whatsoever shall the
interest rate charged pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. In the event that such a court
determines that Lender has received interest hereunder in excess of the highest
applicable rate, Lender shall promptly refund such excess interest to Borrower.
11.6 NO WAIVER BY LENDER; AMENDMENTS. No failure or delay on the part of
Lender in the exercise of any power or right, and no course of dealing between
Borrower and Lender shall operate as a waiver of such power or right, nor shall
any single or partial exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or right. The remedies
provided for herein are cumulative and not exclusive of any remedies which may
be available to Lender at law or in equity. No notice to or demand on Borrower
not required hereunder shall in any event entitle Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the right of Lender to any other or further action in any
circumstances without notice or demand. No amendment, modification or waiver
of, or consent with respect to, any provision of this Agreement or any Related
Agreement shall in any event be effective unless the same shall be in writing
and signed and delivered by Lender. Any waiver of any provision of this
Agreement, and any consent to any departure by Borrower from the terms of any
provision of this Agreement, shall be effective only in the specific instance
and for the specific purpose for which given.
11.7 TERMINATION OF CREDIT. Unless otherwise terminated pursuant to the
terms of this Agreement, the Credit shall terminate on the Termination Date.
Borrower may terminate the Credit at any time upon notice to Lender and payment
in full of the outstanding principal balance of the Loans and all other
Liabilities under this Agreement and the Related Agreements, as provided in
SECTION 2.1.2. All of Lender's rights and remedies, the liens and security
interests of Lender in the Collateral and all of Borrower's duties and
obligations under this Agreement shall survive termination of the Credit
extended to Borrower hereunder until all of the Liabilities hereunder have been
finally paid and performed in full. The termination or cancellation of the
Credit shall not affect or impair the liabilities and obligations of Borrower or
any one or more of the Obligors to Lender or Lender's rights with respect to any
Loans and advances made and other Liabilities incurred prior to such termination
or with respect to the Collateral or any Third Party Collateral.
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11.8 NOTICES. Except as otherwise expressly provided
herein, any notice hereunder to Borrower or Lender shall be in
writing (including telegraphic, telex, or facsimile communication)
and shall be given to Borrower or Lender at its address, telex
number or facsimile number set forth on the signature pages hereof
or at such other address, telex number or facsimile number as
Borrower or Lender may, by written notice, designate as its
address, telex number or facsimile number for purposes of notices
hereunder. All such notices shall be deemed to be given when
transmitted by telex and the appropriate answerback is received,
transmitted by facsimile, delivered to the telegraph office,
delivered by courier, personally delivered or, in the case of
notice by mail, three (3) Banking Days following deposit in the
United States mails, properly addressed as herein provided, with
proper postage prepaid; provided, however, that notice to Lender of
Borrower's intent to terminate the Credit shall not be effective
until actually received by Lender.
11.9 ASSIGNMENTS AND PARTICIPATIONS; INFORMATION. Borrower hereby
consents to Lender's grant of participations in or sale, assignment, transfer or
other disposition, at any time and from time to time hereafter, of this
Agreement or any Related Agreement, or of any portion of any thereof, including
without limitation Lender's rights, titles, interests, remedies, powers and/or
duties. Lender may furnish any information concerning Borrower in the possession
of Lender from time to time to assignees of the rights and/or obligations of
Lender hereunder and to participants in any Loan (including prospective
assignees and participants) and may furnish information in response to credit
inquiries consistent with general banking practice. Lender shall promptly notify
Borrower of Lender's grant of any participation in or sale, assignment, transfer
or other disposition of this Agreement or any Related Agreement, or of any
portion of any thereof. Borrower shall use its best efforts to assist Lender in
its efforts to sell assignments and participations.
11.10 SEVERABILITY. Any provision of this Agreement which is prohibited
or 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.
11.11 SUCCESSORS. This Agreement shall be binding upon Borrower and
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower and Lender and the successors and assigns of Lender.
Borrower shall not assign its rights or duties hereunder without the consent of
Lender.
11.12 CONSTRUCTION. Borrower acknowledges that this Agreement shall not
be binding upon Lender or become effective until and unless accepted by Lender,
in writing. If so accepted by Lender, this Agreement and the Related Agreements
and Supplemental
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Documents shall, unless otherwise expressly provided therein, be deemed to have
been negotiated and entered into in, and shall be governed and controlled by the
laws of, the State of Illinois as to interpretation, enforcement, validity,
construction, effect, choice of law, and in all other respects, including but
not limited to the legality of the interest rate and other charges, but
excluding perfection of security interests and liens which shall be governed and
controlled by the laws of the relevant jurisdiction.
11.13 CONSENT TO JURISDICTION. To induce Lender to accept this
Agreement, Borrower irrevocably agrees that, subject to Lender's sole and
absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS, OR
THE SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS
HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
BY REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE
PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL
RECEIPT THEREOF.
11.14 SUBSIDIARY REFERENCE. Any reference herein to a Subsidiary or
Subsidiaries of Borrower, and any financial definition, ratio, restriction or
other provision of this Agreement which is stated to be applicable to "Borrower
and its Subsidiaries" or which is to be determined on a "consolidated" or
"consolidating" basis, shall apply only to the extent Borrower has any
Subsidiaries and, where applicable, to the extent any such Subsidiaries are
consolidated with Borrower for financial reporting purposes.
11.15 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a)
UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
CONTINENTAL BANK N.A.
By /s/ ▇. ▇. ▇▇▇▇
-------------------------------------
Title Vice President
-------------------------------
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Business Credit Group
RAINBOW HOME RENTALS, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Title Secretary
-------------------------------
Address ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
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WAIVER AND AMENDMENT NO. 1 TO
LOAN AND SECURITY AGREEMENT
---------------------------
This Waiver and Amendment No. 1 to Loan and Security
Agreement is made as of December 9, 1993, between Rainbow Home
Rentals, Inc. ("Borrower") and Continental Bank N.A. ("Lender").
Reference is made to that certain Loan and Security Agreement between
Borrower and Lender dated October 5, 1992 (as amended, the "Loan Agreement").
Borrower has informed Lender that in connection with the
execution of that certain Asset Purchase Agreement dated as of July 14, 1993
between Borrower and Rent-It-Rite, Inc., Borrower issued a promissory note in
the principal amount of $165,000 (the "Rent-It-Rite Note"). Borrower
acknowledges that the issuance of the Rent-It-Rite Note has resulted in a breach
of Section 5.15 of the Loan Agreement and an Event of Default (the "Rent-It-Rite
Indebtedness Default"), and has requested that Lender waive such default. In
addition, Borrower and Lender have agreed to amend the Loan Agreement in certain
respects.
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. WAIVER. Lender hereby waives the Rent-It-Rite Indebtedness Default
existing as of the date hereof. The foregoing waiver is limited to the matters
and by the terms set forth herein and shall not be deemed to constitute a waiver
of any Event of Default existing as of the date hereof and not specified above
(including the Event of Default existing as a result of Borrower's failure to
deliver all of the blocked account agreements required pursuant to that certain
Letter Agreement dated October 5, 1992 between Borrower and Lender) or any Event
of Default arising after the date hereof, or otherwise prejudice the exercise of
any and all of the rights and remedies of Lender under the Loan Agreement or any
other agreement, instrument or document delivered or to be delivered in
connection therewith.
3. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended
as follows:
3.1. AMENDMENT TO SECTION 2.1 OF SUPPLEMENT A. Section 2.1 of
Supplement A to the Loan Agreement is hereby amended and restated in its
entirety, as follows.
2.1 REVOLVING CREDIT AMOUNT. The maximum amount of Revolving Loans
which Lender, in its discretion, will make available to Borrower (such
amount, as adjusted from time to time, is herein called the "Revolving
Credit Amount") is $6,200,000; provided, that the Revolving
68
Credit Amount shall reduce to $4,916,000 on April 1, 1994 and thereafter shall
further reduce by $83,333 on May 1, 1994 and on the first day of each month
thereafter until reduced to zero.
3.2 AMENDMENT TO SECTION 2.3 OF SUPPLEMENT A. Section 2.3 of
Supplement A to the Loan Agreement is hereby amended and restated in its
entirety, as follows:
2.3 INVENTORY SUBLIMIT. Inventory Sublimit shall mean the lesser
of (A) $1,500,000 (the "Inventory Amount") and (B) 30% (the "Inventory
Sublimit Rate") of Cash Receipts Availability; provided, that the
Inventory Amount shall reduce to $750,000 on April 1, 1994 and thereafter
shall further reduce by $187,500, commencing on April 30, 1994 and
continuing on the same day of each calendar quarter thereafter until the
Inventory Amount is zero, and the Inventory Sublimit Rate shall reduce to
25% on April 1, 1994 and thereafter shall further reduce by five
percentage points, commencing on April 30, 1994 and continuing on the
same day of each calendar quarter thereafter until the Inventory Sublimit
Rate is reduced to zero.
4. CONDITIONS PRECEDENT. The waiver and amendment to the Loan
Agreement set forth in this Waiver and Amendment shall become effective as of
the date of this Waiver and Amendment upon the satisfaction of the following
conditions precedent:
4.1. NO DEFAULT. No Event of Default, or event which, with the giving
of notice or the passage of time, or both, would become an Event of Default,
shall have occurred and be continuing (other than as specified herein).
4.2. AMENDED FEE. Borrower shall have paid Lender a fee in the amount
of $10,000, in addition to, and not in lieu of, all other fees described in the
Loan Agreement.
4.3 RESOLUTIONS AND OPINION OF COUNSEL. Borrower shall have delivered
corporate resolutions and an opinion of counsel, in form and substance
satisfactory to Lender, with respect to this Waiver and Amendment.
5. MISCELLANEOUS.
5.1. EXPENSES. Borrower agrees to pay on demand all costs and
expenses of Lender (including the reasonable fees and expenses of outside
counsel for Lender) in connection with the preparation, negotiation, execution,
delivery and administration of this Waiver and Amendment and all other
instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. In addition, Borrower agrees to pay, and
save Lender harmless from all liability for, any stamp or other taxes
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which may be payable in connection with the execution or delivery of this
Waiver and Amendment, the borrowings under the Loan Agreement, as amended
hereby, and the execution and delivery of any instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection herewith.
All obligations provided in this SECTION 5.1 shall survive any termination of
this Waiver and Amendment or the Loan Agreement as amended hereby.
5.2. GOVERNING LAW. This Waiver and Amendment shall be a contract
made under and governed by the internal laws of the State of Illinois.
5.3. COUNTERPARTS. This Waiver and Amendment may be executed in any
number of counterparts, and by the parties hereto on the same or separate
counterparts, and each such counterpart, when executed and delivered, shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same Waiver and Amendment.
5.4. REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendment to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Waiver and Amendment.
5.5. SUCCESSORS. This Waiver and Amendment shall be binding upon
Borrower, Lender and their respective successors and assigns, and shall inure to
the benefit of Borrower, Lender and the successors and assigns of Borrower and
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment to be executed by their respective officers thereunto duly authorized
and delivered at Chicago, Illinois as of the date first above written.
RAINBOW HOME RENTALS, INC.
By /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Its Treasurer/Secretary
--------------------------
CONTINENTAL BANK, N.A.
By /s/▇▇▇▇▇▇▇ Geravalio
---------------------------
Its Vice President
------------------------
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ACKNOWLEDGEMENT
---------------
The undersigned hereby acknowledge that they have read the foregoing
Waiver and Amendment and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5, 1992.
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
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ACKNOWLEDGEMENT
---------------
The undersigned hereby acknowledge that they have read the foregoing
Waiver and Amendment and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5, 1992.
/s/▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/▇▇▇▇ ▇▇▇▇▇▇
------------------------
▇▇▇▇ ▇▇▇▇▇▇
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WAIVER AND AMENDMENT NO. 2 TO
LOAN AND SECURITY AGREEMENT
---------------------------
This Waiver and Amendment No. 2 to Loan and Security Agreement is
made as of March 31, 1994, between Rainbow Rentals, Inc. (formerly known as
"Rainbow Home Rentals, Inc.") ("Borrower") and Continental Bank N.A. ("Lender").
Reference is made to that certain Loan and Security Agreement between
Borrower and Lender dated October 5, 1992 (as amended, the "Loan Agreement").
Borrower has informed Lender that (i) Borrower has breached Section
5.9 of the Loan Agreement by failing to pay at least ninety percent (90%) of its
estimated Taxes for Fiscal Year 1993, (ii) Borrower has breached Section 5.16 of
the Loan Agreement by incurring Indebtedness in excess of seventy-five percent
(75%) of the fair market value of Equipment purchased in connection with the
incurrance of such Indebtedness, (iii) Borrower has breached Section 5.18 of the
Loan Agreement by making advances to Don Vokle in excess of $10,000, (iv)
Borrower has breached Section 5.20 of the Loan Agreement by entering into two
new leases in connection with the transactions contemplated by that certain
Asset Purchase Agreement dated as of July 14, 1993 (the "Rent-It-Rite Purchase
Agreement") between Borrower and Rent-It-Rite, Inc., and (v) Borrower has
breached the terms of that certain Letter Agreement dated as of October 5, 1992
(the "Letter Agreement"), by failing to deliver all of the blocked account
agreements required thereunder, Borrower acknowledges that the foregoing
breaches constitute Events of Default under the Loan Agreement and has requested
that Lender waive such Events of Default.
In addition, Borrower has requested that Lender permit Borrower to
deliver Borrower's annual audit report required under Section 5.1.1(a) of the
Loan Agreement for Fiscal Year 1993 on or before April 30, 1994.
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. WAIVER. Lender hereby waives the Events of Default arising as a
result of (i) a breach by Borrower of Section 5.9 of the Loan Agreement for
failure of Borrower to pay at least ninety percent (90%) of its estimated Taxes
for Fiscal Year 1993, (ii) a breach by Borrower of Section 5.16 of the Loan
Agreement as a result of Borrower incurring Indebtedness in excess of
seventy-five percent (75%) of the fair market value of Equipment purchased in
connection with incurring such Indebtedness, (iii) a breach by Borrower of
Section 5.18 of the Loan Agreement as a result of Borrower advancing $10,000 to
Don Vokle, (iv) a breach by Borrower of Section 5.20 of the Loan Agreement as a
result of Borrower
73
entering into two new leases in connection with the Rent-It-Rite Purchase
Agreement, and (v) a breach by Borrower of the Letter Agreement for failure to
deliver all of the blocked account agreements required thereunder. The foregoing
waiver is limited to the matters and by the terms set forth herein and shall not
be deemed to constitute a waiver of any Event of Default existing as of the date
hereof and not specified above or any Event of Default arising after the date
hereof (including without limitation as a result of a breach of Sections 5.9,
5.16, 5.18 or 5.20 of the Loan Agreement), or otherwise prejudice the exercise
of any and all of the rights and remedies of Lender under the Loan Agreement or
any other agreement, instrument or document delivered or to be delivered in
connection therewith.
3. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended
as follows:
3.1 AMENDMENT TO SECTION 5.1.1 OF THE LOAN AGREEMENT. Clause (a) of
Section 5.1.1 of the Loan Agreement is hereby amended in its entirety as
follows:
5.1.1 ANNUAL AUDIT REPORT. Within one hundred twenty (120) days after
Fiscal Year 1993 and within ninety (90) days after each other Fiscal Year of
Borrower, a copy of the annual audit report of Borrower and its Subsidiaries
prepared on a consolidating and consolidated basis and in conformity with
GAAP and certified by an independent certified public accountant who shall
be satisfactory to Lender, together with a certificate from such accountant
(i) acknowledging to Lender such accountant's understanding that Lender and
any Participant is relying on such annual audit report, (ii) containing a
computation of, and showing compliance with, each of the financial ratios
and restrictions contained in this SECTION 5.1.1 or in SUPPLEMENT A, and
(iii) to the effect that, in making the examination necessary for the
signing of such annual audit report, such accountant has not become aware of
any Event of Default or Unmatured Event of Default that has occurred and is
continuing, or, if such accountant has become aware of any such event,
describing it and the steps, if any, being taken to cure it.
3.2. AMENDMENT TO SECTION 2.1 OF SUPPLEMENT A. Section 2.1 of Supplement
A to the Loan Agreement is hereby amended and restated in its entirety, as
follows:
2.1 REVOLVING CREDIT AMOUNT. The maximum amount of Revolving Loans
which Lender, in its discretion, will make available to Borrower (such
amount, as adjusted from time to time, is herein called the "Revolving
Credit Amount") is $6,200,000; provided, that the Revolving Credit Amount
shall reduce to $4,916,000 on May 1, 1994
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and thereafter shall further reduce by $83,333 on June 1, 1994 and on the first
day of each month thereafter until reduced to zero.
3.3 AMENDMENT TO SECTION 2.3 OF SUPPLEMENT A. Section 2.3 of Supplement A
to the Loan Agreement is hereby amended and restated in its entirety, as
follows:
2.3 INVENTORY SUBLIMIT. Inventory Sublimit shall mean the lesser of (A)
$1,500,000 (the "Inventory Amount") and (B) 30% (the "Inventory Sublimit
Rate") of Cash Receipts Availability; provided, that the Inventory Amount
shall reduce to $750,000 on May 1, 1994 and thereafter shall further reduce
by $187,500, commencing on June 30, 1994 and continuing on the same day of
each calendar quarter thereafter until the Inventory Amount is zero, and
the Inventory Sublimit Rate shall reduce to 25% on May 1, 1994 and
thereafter shall further reduce by five percentage points, commencing on
June 30, 1994 and continuing on the same day of each calendar quarter
thereafter until the Inventory Sublimit Rate is reduced to zero.
4. CONDITIONS PRECEDENT. The waiver and amendment to the Loan
Agreement set forth in this Waiver and Amendment shall become effective as of
the date of this Waiver and Amendment upon the satisfaction of the following
conditions precedent:
4.1. NO DEFAULT. No Event of Default, or event which, with the giving
of notice or the passage of time, or both, would become an Event of Default,
shall have occurred and be continuing (other than as specified herein).
4.2 RESOLUTIONS. Borrower shall have delivered corporate resolutions,
in form and substance satisfactory to Lender, with respect to this Waiver and
Amendment.
5. MISCELLANEOUS.
5.1. EXPENSES. Borrower agrees to pay on demand all costs and expenses
of Lender (including the reasonable fees and expenses of outside counsel for
Lender) in connection with the preparation, negotiation, execution, delivery and
administration of this Waiver and Amendment and all other instruments or
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. In addition, Borrower agrees to pay, and save Lender
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Waiver and Amendment, the
borrowings under the Loan Agreement, as amended hereby, and the execution and
delivery of any instruments or documents provided for herein or delivered or to
be delivered hereunder or in connection herewith. All obligations
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75
provided in this SECTION 5.1 shall survive any termination of this Waiver and
Amendment or the Loan Agreement as amended hereby.
5.2. GOVERNING LAW. This Waiver and Amendment shall be a contract
made under and governed by the internal laws of the State of Illinois.
5.3. COUNTERPARTS. This Waiver and Amendment may be executed in any
number of counterparts, and by the parties hereto on the same or separate
counterparts, and each such counterpart, when executed and delivered, shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same Waiver and Amendment.
5.4. REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendment to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Waiver and Amendment.
5.5. SUCCESSORS. This Waiver and Amendment shall be
binding upon Borrower, Lender and their respective successors and
assigns, and shall inure to the benefit of Borrower, Lender and the
successors and assigns of Borrower and Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment to be executed by their respective officers thereunto duly authorized
and delivered at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Its Secretary/Treasurer
----------------------
CONTINENTAL BANK N.A.
By /s/ ▇▇▇▇▇▇▇ Garavalio
-------------------------
Its Vice President
----------------------
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ACKNOWLEDGEMENT
---------------
The undersigned hereby acknowledge that they have read the foregoing
Waiver and Amendment and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5, 1992.
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
77
ACKNOWLEDGEMENT
---------------
The undersigned hereby acknowledge that they have read the foregoing
Waiver and Amendment and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5, 1992.
/s/▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/▇▇▇▇ ▇▇▇▇▇▇
-------------------------
▇▇▇▇ ▇▇▇▇▇▇
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AMENDMENT NO. 3 TO
LOAN AND SECURITY AGREEMENT
---------------------------
This Amendment No. 3 to Loan and Security Agreement is
made as of June 1, 1994, between Rainbow Rentals, Inc. (formerly
known as Rainbow Home Rentals, Inc.) ("Borrower") and Continental
Bank N.A. ("Lender").
Reference is made to that certain Loan and Security Agreement between
Borrower and Lender dated October 5, 1992 (as amended, the "Loan Agreement").
Borrower has requested that the Loan Agreement be amended in
certain respects.
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended
as follows:
2.1 AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT. The definition of
"Termination Date" in Section 1.1 of the Loan Agreement is hereby amended in its
entirety, as follows:
"Termination Date" means April 30, 1996.
2.2 AMENDMENT TO SECTION 3.2 OF THE LOAN AGREEMENT. Clause (d) of
Section 3.2 of the Loan Agreement is hereby amended in its entirety as follows:
(d) Borrower will, forthwith upon the receipt by Borrower of all
checks, drafts, cash and other remittances in payment or as proceeds of, or
on account of, any of the Accounts Receivable or other Collateral, deposit
the same with such banks or financial institutions as Lender shall consent,
and the funds deposited at such banks and financial institutions shall be
transferred, by automated clearinghouse, to NDC, and then immediately
transferred by NDC, by automated clearinghouse, to Lender; provided, that
(i) all credit card remittances shall be deposited at Society National Bank
and, on a monthly basis, transferred, by wire transfer, to Lender, and (ii)
any miscellaneous receipt not in excess of Fifty Thousand Dollars ($50,000)
may be deposited in Borrower's checking account at Society National Bank.
Notwithstanding anything contained herein to the contrary, upon the
occurrence of an Unmatured Event of Default or an Event of Default, Lender
shall have the option to require that Borrower cause all checks, drafts,
cash and other remittances in payment or
79
as proceeds of, or on account of, any of the Accounts Receivable or other
Collateral, received by Borrower to be deposited in a special bank account
(a "Blocked Deposit Account") with such banks or financial institutions as
Lender shall consent, over which Lender alone has the power of withdrawal
and will to the extent required by Lender, designate with each such deposit
the particular Accounts Receivable or other item of Collateral upon which
the remittance was made.
2.3 AMENDMENT TO SECTION 5.1.1 OF THE LOAN AGREEMENT. Clause (a) of
Section 5.1.1 of the Loan Agreement is hereby amended in its entirety as
follows:
(a) ANNUAL AUDIT REPORT. With respect to Fiscal Year 1993, within five
(5) days after Amendment No. 3 to Loan and Security Agreement becomes
effective, and with respect to any other Fiscal Year, within ninety (90)
days after each such other Fiscal Year of Borrower, a copy of the annual
audit report of Borrower and its Subsidiaries prepared on a consolidating
and consolidated basis and in conformity with GAAP and certified by an
independent certified public accountant who shall be satisfactory to
Lender, together with a certificate from such accountant (i) acknowledging
to Lender such accountant's understanding that Lender and any Participant
is relying on such annual audit report, (ii) containing a computation of,
and showing compliance with, each of the financial ratios and restrictions
contained in this SECTION 5.1.1 or in SUPPLEMENT A, and (iii) to the
effect that, in making the examination necessary for the signing of such
annual audit report, such accountant has not become aware of any Event of
Default or Unmatured Event of Default that has occurred and is continuing,
or, if such accountant has become aware of any such event, describing it
and the steps, if any, being taken to cure it.
2.4 AMENDMENT TO SECTION 5.1.1 OF THE LOAN AGREEMENT. Clause (c) of
Section 5.1.1 of the Loan Agreement is hereby amended in its entirety as
follows:
(c) MONTHLY FINANCIAL STATEMENT. Within fifteen (15) days after the end
of each month of each fiscal year of Borrower, a copy of the unaudited
financial statement of Borrower and its Subsidiaries prepared in the same
manner audit report referred to in preceding CLAUSE (a), signed by
Borrower's chief financial officer and consisting of at least a balance
sheet as at the close of such month, statements of earnings and cash flows
for such month and for the period from the beginning of such Fiscal Year to
the close of such month and the information described on SCHEDULE 5.1.1
hereto; and
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2.5 AMENDMENT TO SECTION 2.1 OF SUPPLEMENT A. Section 2.1 of
Supplement A to the Loan Agreement is hereby amended in its entirety as follows:
2.1 REVOLVING CREDIT AMOUNT. The maximum amount of Revolving Loans
which Lender, in its discretion, will make available to Borrower (such
amount, as adjusted from time to time, is herein called the "Revolving
Credit Amount") is $7,500,000; provided, that so long as no Event of
Default then exists, the Revolving Credit Amount shall increase to
$8,000,000 on June 30, 1994 and to $8,250,000 on December 1, 1994.
2.6 AMENDMENT TO SECTION 2.2 OF SUPPLEMENT A. Clause (ii) of Section
2.2 of Supplement A to the Loan Agreement is hereby amended to replace the
percentage "20%" with the percentage "30%."
2.7 AMENDMENT TO SECTION 2.3 OF SUPPLEMENT A. Section 2.3 of
Supplement A to the Loan Agreement is hereby amended in its entirety as follows:
2.3 INVENTORY SUBLIMIT. Inventory Sublimit shall mean the lesser of
(A) $1,500,000 (the "Inventory Amount") and (B) 30% (the "Inventory
Sublimit Rate") of Cash Receipts Availability; provided, that the Inventory
Amount shall be $1,750,000 during the period October 1, through December 31
of each year.
2.8 AMENDMENT TO SECTION 3.1 OF SUPPLEMENT A. Clause (a) of Section
3.1 of Supplement A to the Loan Agreement is hereby amended in its entirety as
follows:
(a) INTEREST TO MATURITY. The unpaid principal balance of the
Revolving Loans (other than Overdraft Loans and Over Advances) shall bear
interest to maturity at a per annum rate equal to the Reference Rate in
effect from time to time plus 1.75%.
2.9 AMENDMENT TO SECTION 4.1 OF SUPPLEMENT A. Section 4.1 of
Supplement A to the Loan Agreement is amended in its entirety as follows:
4.1 TANGIBLE NET WORTH. Not permit Borrower's Tangible Net Worth at
any time during any period set forth below to be less than the amount set
forth opposite such period:
Period Amount
------ ------
From the date hereof thru $1,500,000
June 29, 1993
June 30, 1993 thru December 30, 1993 1,750,000
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December 31, 1993 thru December 30, 1994 4,000,000
December 31, 1994 and thereafter 5,000,000
2.10 AMENDMENT TO SECTION 4.2 OF SUPPLEMENT A. The last sentence of
Section 4.2 of Supplement A to the Loan Agreement is amended in its entirety as
follows:
For purposes of this SECTION 4.2, (i) net earnings shall not include
any gains on the sale or other disposition of Investments of fixed
assets and any extraordinary or nonrecurring items of income to the
extent that the aggregate of all such gains and extraordinary or
nonrecurring items of income exceeds the aggregate of losses on such
sale or other disposition and extraordinary or nonrecurring charges,
and (ii) interest expense shall include, without limitation, implicit
interest expense on Capitalized Leases, and shall exclude the
amortization of the closing fee paid to Lender upon the initial
funding of the Revolving Loans.
2.11 ADDITION OF SCHEDULE 5.1.1. Schedule 5.1.1 attached hereto is
added as a Schedule to the Loan Agreement.
3. BANK AGENCY AGREEMENT. Borrower agrees to deliver to Lender bank
agency agreements in the form of Exhibit A hereto duly executed by the banks
listed on Exhibit B hereto within 30 days of the date hereof and Borrower
further agrees that Borrower's failure to so deliver such executed bank agency
agreements shall constitute an Event of Default.
4. CONDITIONS PRECEDENT. The amendment to the Loan Agreement set forth
in this Amendment shall become effective as of the date of this Amendment upon
the satisfaction of the following conditions precedent:
4.1. NO DEFAULT. No Event of Default, or event which, with the giving
of notice or the passage of time, or both, would become an Event of Default,
shall have occurred and be continuing (other than as specified herein).
4.2 RESOLUTIONS. Borrower shall have delivered corporate resolutions,
in form and substance satisfactory to Lender, with respect to this Amendment.
4.3 MODIFICATION FEE. Borrower shall have paid Lender a modification
fee of $30,000.
5. MISCELLANEOUS.
5.1. EXPENSES. Borrower agrees to pay on demand all costs and expenses
of Lender (including the reasonable fees and expenses of outside counsel for
Lender) in connection with the
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preparation, negotiation, execution, delivery and administration of this
Amendment and all other instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. In addition,
Borrower agrees to pay, and save Lender harmless from all liability for, any
stamp or other taxes which may be payable in connection with the execution or
delivery of this Amendment, the borrowings under the Loan Agreement, as amended
hereby, and the execution and delivery of any instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection herewith.
All obligations provided in this SECTION 5.1 shall survive any termination of
this Amendment or the Loan Agreement as amended hereby.
5.2. GOVERNING LAW. This Amendment shall be a contract
made under and governed by the internal laws of the State of
Illinois.
5.3. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.
5.4. REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendment to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Amendment.
5.5. SUCCESSORS. This Amendment shall be binding upon Borrower, Lender
and their respective successors and assigns, and shall inure to the benefit of
Borrower, Lender and the successors and assigns of Borrower and Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized and delivered
at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Its Treasurer
-----------------------
CONTINENTAL BANK N.A.
By /s/▇▇▇▇▇▇▇ Garavalio
--------------------------
Its Vice President
------------------------
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ACKNOWLEDGEMENT
---------------
The undersigned hereby acknowledge that they have read the foregoing
Amendment and hereby ratify and reaffirm their guaranty of the obligations of
Borrower to Lender pursuant to that certain Guaranty executed by the
undersigned dated October 5, 1992.
/s/▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇▇▇▇▇▇
85
ACKNOWLEDGEMENT
The undersigned hereby acknowledge that they have read the foregoing
Amendment and hereby ratify and reaffirm their guaranty of the obligations of
Borrower to Lender pursuant to that certain Guaranty executed by the undersigned
dated October 5, 1992.
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
86
CONSENT AND AMENDMENT NO. 4 TO
LOAN AND SECURITY AGREEMENT
---------------------------
This Consent and Amendment No. 4 ("Amendment") to Loan and Security
Agreement is made as of March __, 1995, between Rainbow Rentals, Inc. (formerly
known as Rainbow Home Rentals, Inc.) ("Borrower") and Bank of America Illinois
(formerly known as Continental Bank Illinois, formerly known as Continental Bank
N.A. ("Lender").
Reference is made to that certain Loan and Security Agreement between
Borrower and Lender dated October 5, 1992 (as amended, the "Loan Agreement").
Borrower has informed Lender that Borrower desires to enter into that
certain Secured Party Asset Sale Agreement dated as of March 1, 1995 (the "Asset
Purchase Agreement) among Borrower, CWD Enterprises Two, Ltd., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(as the secured party for the properties and assets of CWD Enterprises Two,
Ltd.), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (individually
and as the partners of CWD Enterprises Two, Ltd.), and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (as guarantors of certain
debt of CWD Enterprises Two, Ltd.). Borrower acknowledges that the execution
and delivery of the Asset Purchase Agreement requires the consent of Lender and
has requested that Lender provide such consent.
Borrower has also requested that the Loan Agreement be amended to (i)
increase the Revolving Credit Amount from $8,250,000 to $9,000,000, (ii) modify
the Inventory Sublimit, (iii) extend the Termination Date to February 28, 1998,
(iv) change the interest rate, (v) change the Tangible Net Worth and Interest
Coverage Ratio, and (vi) make certain other changes to the Loan Agreement.
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. CONSENT. Lender hereby consents to the execution and delivery of
the Asset Purchase Agreement. This consent shall not constitute (a) a
modification or alteration of the terms, conditions or covenants of the Loan
Agreement or any document entered into in connection therewith, or (b) a waiver,
release or limitation upon the exercise by Lender of any of its rights, legal or
equitable, hereunder, except as to the matters to which Lender herein expressly
consents. Except as set forth above, Lender reserves any and all rights and
remedies which it has had, has or may have under the Loan Agreement.
3. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended
as follows:
87
3.1 AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT. The definition of
"Termination Date" in Section 1.1 of the Loan Agreement is hereby amended in its
entirety, as follows:
"Termination Date" means February 28, 1998.
3.2 AMENDMENT TO SECTION 5.1.1 OF THE LOAN AGREEMENT. Clause (c) of
Section 5.1.1 of the Loan Agreement is hereby amended in its entirety as
follows:
(c) MONTHLY FINANCIAL STATEMENT. Within fifteen (15) days after the end
of each month of each fiscal year of Borrower, a copy of the unaudited
financial statement of Borrower and its Subsidiaries prepared (i) in the
same manner as the audit report referred to in preceding CLAUSE (a), and
(ii) on a store-by-store basis with respect to any stores acquired within
12 months prior to the end of such month, in each case signed by Borrower's
chief financial officer and consisting of at least a balance sheet as at
the close of such month, statements of earnings and cash flows for such
month and for the period from the beginning of such Fiscal Year to the
close of such month and the information described on SCHEDULE 5.1.1 hereto;
and
3.3 AMENDMENT TO SECTION 2.1 OF SUPPLEMENT A. Section 2.1 of Supplement
A to the Loan Agreement is hereby amended in its entirety as follows:
2.1 REVOLVING CREDIT AMOUNT. The maximum amount of Revolving Loans
which Lender, in its discretion, will make available to Borrower (such
amount, as adjusted from time to time, is herein called the "Revolving
Credit Amount") is $9,000,000.
3.4 AMENDMENT TO SECTION 2.3 OF SUPPLEMENT A. Section 2.3 of
Supplement A to the Loan Agreement is hereby amended in its entirety as follows:
2.3 INVENTORY SUBLIMIT. Inventory Sublimit shall mean the lesser of (A)
the Inventory Amount (as defined below) and (B) 30% (the "Inventory
Sublimit Rate") of Cash Receipts Availability; provided that the Inventory
Sublimit shall be $2,250,000 during the period from March 1, 1995 through
August 31, 1995 and the Inventory Sublimit shall be $2,000,000 during the
period from September 1, 1995 through February 28, 1996. The "Inventory
Amount" shall be $1,500,000 during the period from January 1 through
September 30 of each year and $1,750,000 during the period from October 1
through December 31 of each year.
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88
3.5 AMENDMENT TO SECTION 3.1 OF SUPPLEMENT A. Clause (a) of
Section 3.1 of Supplement A to the Loan Agreement is hereby amended in its
entirety as follows:
(a) INTEREST TO MATURITY. The unpaid principal balance of
the Revolving Loans (other than Overdraft Loans and Over Advances)
shall bear interest to maturity at a per annum rate equal to the
Reference Rate in effect from time to time plus 1.50%.
3.6 AMENDMENT TO SECTION 4.1 OF SUPPLEMENT A. Section 4.1 of
Supplement A to the Loan Agreement is amended in its entirety as follows:
4.1 TANGIBLE NET WORTH. Not permit Borrower's Tangible Net Worth at any
time during any period set forth below to be less than the amount set
forth opposite such period:
Period Amount
------ ------
From the date hereof thru June 29, 1995 $6,000,000
June 30, 1995 thru December 30, 1995 6,250,000
December 31, 1995 thru June 29, 1996 6,500,000
June 30, 1996 thru December 30, 1996 7,000,000
December 31, 1996 thru June 29, 1997 7,500,000
June 30, 1997 and thereafter 8,000,000
3.7 AMENDMENT TO SECTION 4.2 OF SUPPLEMENT A. Section 4.2 of
Supplement A to the Loan Agreement is amended in its entirety as follows:
4.2 INTEREST COVERAGE RATIO. Not permit the ratio of (a)
Borrower's consolidated net earnings before interest expense and provision
for Taxes and depreciation and amortization, for any period set forth
below, to (b) Borrower's consolidated interest expense for such period, to
be less than the following for the corresponding period:
Interest
Period Coverage
------ --------
Three month period commencing January 1,
1995 and ending March 31, 1995 5.0
Six month period commencing January 1,
1995 and ending June 30, 1995 5.0
Nine month period commencing January 1,
1995 and ending September 30, 1995 5.0
Twelve month period commencing January 1,
1995 and ending December 31, 1995 5.0
Three month period commencing January 1,
1996 and ending March 31, 1996 6.0
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89
Six month period commencing January 1,
1996 and ending June 30, 1996 6.0
Nine month period commencing January 1,
1996 and ending September 30, 1996 6.0
Twelve month period commencing January 1,
1996 and ending December 31, 1996 6.0
Three month period commencing January 1,
1997 and ending March 31, 1997 7.0
Six month period commencing January 1,
1997 and ending June 30, 1997 7.0
Nine month period commencing January 1,
1997 and ending September 30, 1997 7.0
Twelve month period commencing January 1,
1997 and ending December 31, 1997 7.0
For purposes of this SECTION 4.2, (i) net earnings shall not
include any gains on the sale or other disposition of Investments of
fixed assets and any extraordinary or nonrecurring items of income to
the extent that the aggregate of all such gains and extraordinary or
nonrecurring items of income exceeds the aggregate of losses on such
sale or other disposition and extraordinary or nonrecurring charges,
and (ii) interest expense shall include, without limitation, implicit
interest expense on Capitalized Leases, and shall exclude the
amortization of the closing fee, the modification fee, or any other
fee paid to Lender in connection with the Revolving Loans.
4. BANK AGENCY AGREEMENT. Borrower agrees to deliver to Lender bank
agency agreements in the form of Exhibit A hereto duly executed by the banks
listed on Exhibit B hereto within 30 days of the date hereof and Borrower
further agrees that Borrower's failure to so deliver such executed bank agency
agreements shall constitute an Event of Default.
5. GUARANTOR FINANCIAL STATEMENT. Borrower agrees to deliver to Lender
the most recent financial statements from each guarantor of the Liabilities
within 30 days of the date hereof and Borrower further agrees that Borrower's
failure to deliver such financial statements shall constitute an Event of
Default.
6. CONDITIONS PRECEDENT. The amendment to the Loan Agreement set forth
in this Amendment shall become effective as of the date of this Amendment upon
the satisfaction of the following conditions precedent:
6.1 NO DEFAULT. No Event of Default, or event which, with the giving of
notice or the passage of time, or both, would become an Event of Default, shall
have occurred and be continuing.
6.2 RESOLUTIONS. Borrower shall have delivered corporate resolutions,
in form and substance satisfactory to Lender, with respect to this Amendment.
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6.3 MODIFICATION FEE. Borrower shall have paid Lender a modification
fee of $100,000.
6.4 EXECUTION. The delivery of an executed copy of this Agreement and
the acknowledgements hereto to Lender.
7. MISCELLANEOUS.
7.1 EXPENSES. Borrower agrees to pay on demand all costs and expenses
of Lender (including the reasonable fees and expenses of outside counsel for
Lender) in connection with the preparation, negotiation, execution, delivery and
administration of this Amendment and all other instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection herewith.
In addition, Borrower agrees to pay, and save Lender harmless from all liability
for, any stamp or other taxes which may be payable in connection with the
execution or delivery of this Amendment, the borrowings under the Loan
Agreement, as amended hereby, and the execution and delivery of any instruments
or documents provided for herein or delivered or to be delivered hereunder or
in connection herewith. All obligations provided in this SECTION 7.1 shall
survive any termination of this Amendment or the Loan Agreement as amended
hereby.
7.2 GOVERNING LAW. This Amendment shall be a contract made under and
governed by the internal laws of the State of Illinois.
7.3 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.
7.4 REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendments to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Amendment.
7.5 SUCCESSORS. This Amendment shall be binding upon Borrower, Lender
and their respective successors and assigns, and shall inure to the benefit of
Borrower, Lender and the successors and assigns of Borrower and Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized and delivered
at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Its Treasurer
-------------------------
BANK OF AMERICA ILLINOIS
By
----------------------------
Its
-------------------------
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WAIVER AND AMENDMENT NO. 5 TO
LOAN AND SECURITY AGREEMENT
---------------------------
THIS WAIVER AND AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT
is made as of March 24, 1995, between Rainbow Rentals, Inc.
(formerly known as Rainbow Home Rentals, Inc.) ("Borrower"), and
Bank Of America Illinois (formerly known as Continental Bank, N.A.)
("Lender").
R E C I T A L S
- - - - - - - -
A. Borrower and Lender have entered into that certain Loan and Security
Agreement dated as of October 5, 1992 (as amended from time to time, the "Loan
Agreement).
B. Borrower has informed Lender that Borrower has breached Sections
5.1.1(a) (iii), 5.l.l(c), 5.1.1(d) and 5.1.2 of the Loan Agreement by failing to
provide Lender with copies of an accountant's certificate regarding Events of
Default, monthly financial statements, officers certificates and agings as
required by said sections. Borrower acknowledges that the foregoing breaches
constitute Events of Default under the Loan Agreement and has requested that
Lender waive such Events of Default.
C. In addition, Borrower has requested that Lender permit Borrower to
deliver Borrower's annual financial report required under Section 5.1.1(a) of
the Loan Agreement for Fiscal Year 1994 within 120 days after the expiration of
said Fiscal Year.
D. Therefore, in consideration of the promises and mutual agreements
herein contained and of any loans or extensions of credit heretofore, now or
hereafter made to or for the benefit of the Borrower by the Lender, the parties
hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meaning ascribed to such terms in the Loan Agreement.
2. RECITALS. The recitals set forth above are incorporated herein by
reference, as if fully restated herein.
3. WAIVER. Subject to the terms of Section 7 hereof, for the Fiscal
Year ending December 31, 1994 only, Lender hereby waives the Events of Default
arising as a result of breaches by Borrower of Sections 5.1.1(a) (iii),
5.1.1(c), 5.1.1(d) and 5.1.2 of the Loan Agreement for failure of Borrower to
provide copies of an accountant's certificate regarding Events of Default,
monthly statements, officers certifications and agings as required by said
sections.
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4. TERMINATION OF WAIVER. The waiver granted in Section 3 of this
Waiver and Amendment shall be effective until the date on which Lender becomes
aware that the Borrower has failed to comply with any provision of this Waiver
and Amendment or with the terms and conditions of the Loan Agreement which were
not waived hereunder or that an Event of Default has occurred and is continuing.
5. EFFECT OF WAIVER. This Waiver shall be effective only to the extent
specifically set forth herein and shall not be construed as a waiver of any
breach or default other than those specifically waived herein nor as a waiver of
any breach or default of which the Lender has not been informed by the Borrower.
All other terms and conditions of the Loan Agreement remain in full force and
effect.
6. AMENDMENT TO SECTION 5.1.1(a) OF THE LOAN AGREEMENT. Subsection (a)
of Section 5.1.1 of the Loan Agreement is hereby deleted in its entirety and the
following shall be substituted in lieu thereof:
"5.1.1 ANNUAL AUDIT REPORT. Within one hundred twenty (120) days after
Fiscal Year 1994, and within ninety (90) days after each other Fiscal
Year of Borrower, a copy of the annual audit report of Borrower and
its Subsidiaries prepared on a consolidating and consolidated basis
and in conformity with GAAP and certified by an independent public
accountant who shall be satisfactory to Lender, together with a
certificate from such accountant (i) acknowledging to Lender such
accountant's understanding that Lender (and any Participant) is
relying on such annual audit report, (ii) containing a computation of,
and showing compliance with, each of the financial ratios and
restrictions contained in this SECTION 5 or in SUPPLEMENT A, and (iii)
to the effect that, in making the examination necessary for the
signing of such annual audit report, such accountant has not become
aware of any Event of Default or Unmatured Event of Default that has
occurred or is continuing, or, if such accountant has become aware of
any such event, describing it and the steps, if any, being taken to
cure it;"
7. CONDITIONS PRECEDENT. The waiver and amendment to Loan Agreement set
forth in this Waiver and Amendment shall become effective as of the date of this
Waiver and Amendment upon the satisfaction of the following conditions
precedent:
7.1 AMENDMENT. Borrower and Lender shall have executed and delivered
four (4) counterpart copies of this Waiver and Amendment.
7.2 NO DEFAULT. No event of Default, or Unmatured Event of Default,
shall have occurred and be continuing (other than as specified herein).
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8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Waiver and Amendment shall be a contract under
and governed by the internal laws of the State of Illinois.
8.2 COUNTERPARTS. This Waiver and Amendment may be executed in any
number of counterparts, and by the parties hereto on the same or separate
counterparts, and each such counterpart, when executed and delivered, shall
together constitute but one and the same Waiver and Amendment.
8.3 REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendment to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Waiver and Amendment.
8.4 SUCCESSORS. This Waiver and Amendment shall be binding upon
Borrower, Lender and their respective successors and assigns, and shall inure to
the benefit of Borrower, Lender and the successors and assigns of Borrower and
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment to be executed by their respective officers thereunto duly authorized
and delivered at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------
Its: Treasurer
----------------------
BANK OF AMERICA ILLINOIS
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
Its: Vice President
----------------------
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AMENDMENT NO.6 TO
LOAN AND SECURITY AGREEMENT
This Amendment No.6 ("Amendment") to Loan and Security Agreement is
made as of April 22,1996, between Rainbow Rentals, Inc. (formerly known as
Rainbow Home Rentals, Inc.) ("Borrower") and Bank of America Illinois (formerly
known as Continental Bank Illinois, formerly known as Continental Bank N.A.)
("Lender").
Reference is made to that certain Loan and Security Agreement between
Borrower and Lender dated October 5, 1992 (as amended, the "Loan Agreement").
Borrower has requested that the Loan Agreement be amended to (i)
increase the Revolving Credit Amount from $9,000,000 to $10,000,000 until May
31, 1996 and (ii) provide additional availability under the Borrowing Base of
$1,000,000 until May 31, 1996.
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended
as follows:
2.1. AMENDMENT TO SECTION 2.1 OF SUPPLEMENT A. Section 2.1 of
Supplement A to the Loan Agreement is hereby amended in its entirety as follows:
2.1 REVOLVING CREDIT AMOUNT. The maximum amount of Revolving Loans
which Lender, in its discretion, will make available to Borrower (such amount,
as adjusted from time to time, is herein called the "Revolving Credit Amount")
is $10,000,000; provided, that at all times after May 31, 1996 the Revolving
Credit Amount shall be $9,000,000.
2.2. AMENDMENT TO SECTION 2.2 OF SUPPLEMENT A. Section 2.2 of
Supplement A to the Loan Agreement is hereby amended in its entirety as follows:
2.2 BORROWING BASE. The term "Borrowing Base," as used herein, shall
mean:
(i) an amount (the "Cash Receipts Availability") of up to 100% of the
net amount of Borrower's actual cash collections of Accounts Receivable from
Account Debtors pursuant to the terms of Rental Agreements for the
immediately preceding two calendar months (exclusive of collections for
delivery, insurance, merchandise, sales and other non-rental payments and
after deduction of such reserves and allowances as Lender deems proper and
necessary); PLUS
96
(ii) an amount (the "Inventory Availability") of up to the lesser of
(A) up to 30% of the net value (as determined by Lender and after deduction
of such reserves and allowances as Lender deems proper and necessary) of
Borrower's Eligible Inventory and (B) the "Inventory Sublimit" (as defined
in Section 2.3 below). Without limiting Lender's discretion to establish
reserves with respect to Inventory Availability, Lender shall establish a
reserve equal to one-third of the value of Borrower's Eligible Inventory;
plus
(iii) the "Additional Amount (as defined below). "Additional Amount"
means $1,000,000; provided, that at all times after May 31, 1996, the
Additional Amount means zero.
3. CONDITIONS PRECEDENT. The amendment to the Loan Agreement set
forth in this Amendment shall become effective as of the date of this
Amendment upon the satisfaction of the following conditions precedent:
3.1. NO DEFAULT. No Event of Default, or event which, with the giving
of notice or the passage of time, or both, would become an Event of Default,
shall have occurred and be continuing.
3.2. RESOLUTIONS. Borrower shall have delivered corporate resolutions,
in form and substance satisfactory to Lender, with respect to this Amendment.
3.3. MODIFICATION FEE. Borrower shall have paid Lender a modification
fee of $10,000.
3.4. EXECUTION. The delivery of an executed copy of this Agreement and
the acknowledgments hereto to Lender.
4. MISCELLANEOUS.
4.1. EXPENSES. Borrower agrees to pay on demand all costs and expenses
of Lender (including the reasonable fees and expenses of outside counsel for
Lender) in connection with the preparation, negotiation, execution, delivery and
administration of this Amendment and all other instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection herewith.
In addition, Borrower agrees to pay, and save Lender harmless from all liability
for, any stamp or other taxes which may be payable in connection with the
execution or delivery of this Amendment, the borrowings under the Loan
Agreement, as amended hereby, and the execution and delivery of any instruments
or documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. All obligations provided in this SECTION 4.1 shall survive
any termination of this Amendment or the Loan Agreement as amended hereby.
4.2. GOVERNING LAW. This Amendment shall be a contract made under and
governed by the internal laws of the State of Illinois.
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4.3. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.
4.4. REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendments to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Amendment.
4.5. SUCCESSORS. This Amendment shall be binding upon Borrower, Lender
and their respective successors and assigns, and shall inure to the benefit of
Borrower, Lender and the successors and assigns of Borrower and Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized and delivered at
Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Its Treasurer
-----------------------------
BANK OF AMERICA ILLINOIS
By /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
Its V.P.
----------------------------
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ACKNOWLEDGMENT
The undersigned hereby acknowledge that they have read the
foregoing Amendment and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5,1992.
/s/▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/▇▇▇▇ ▇▇▇▇▇▇
----------------------------
▇▇▇▇ ▇▇▇▇▇▇
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ACKNOWLEDGMENT
The undersigned hereby acknowledge that they have read the
foregoing Amendment and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5,1992.
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
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WAIVER AND AMENDMENT NO.7 TO
LOAN AND SECURITY AGREEMENT
This Waiver and Amendment No. 7 ("Waiver and Amendment") to Loan and
Security Agreement is made as of May 31, 1996, between Rainbow Rentals, Inc.
(formerly known as Rainbow Home Rentals, Inc.) ("Borrower") and Bank of America
Illinois (formerly known as Continental Bank Illinois, formerly known as
Continental Bank N.A.) ("Lender").
Reference is made to that certain Loan and Security Agreement between
Borrower and Lender dated October 5,1992 (as amended, the "Loan Agreement").
Borrower has informed Lender that Borrower has breached Section 5.1.1
(a)(ii) of the Loan Agreement by failing to cause its accountant, KPMG Peat
Marwick, to provide a certificate stating that it has not become aware of the
occurrence of any Event of Default or Unmatured Event of Default. Borrower
acknowledges that such breach constitutes an Event of Default under the Loan
Agreement and has requested that Lender waive such Event of Default.
In addition, Borrower has requested that the Loan Agreement be amended
to, among other things (i) provide a term loan facility and (ii) provide
Borrower with an interest rate option with respect to the Loans that is based on
a LIBOR rate.
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. WAIVER. Lender hereby waives the Event of Default arising as a
result of a breach by Borrower of Section 5.1.1(a)(ii) of the Loan Agreement for
failure of Borrower to cause its accountant, KPMG Peat Marwick, to provide a
certificate stating that it has not become aware of the occurrence of any Event
of Default or Unmatured Event of Default. The foregoing waiver is limited to the
matters and by the terms set forth herein and shall not be deemed to constitute
a waiver of any other Event of Default existing as of the date hereof or any
Event of Default arising after the date hereof, or otherwise prejudice the
exercise of any and all of the rights and remedies of Lender under the Loan
Agreement or any other agreement, instrument or document delivered or to be
delivered in connection therewith.
3. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended
as follows:
3.1. SECTION 1.1 of the Loan Agreement is hereby amended by inserting
a proviso at the end of the definition of the term "Banking Day," as follows:
; provided, that with respect to LIBOR Rate Loans, Banking Days shall
not include a day on which dealings in U.S. Dollars may not be carried
on by Lender in the London interbank LIBOR market.
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3.2. AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT. The definition of
"Credit" in Section 1.1 of the Loan Agreement is hereby amended in its entirety
as follows:
"Credit" means the facility established under this Agreement pursuant
to which Lender will make Revolving Loans and the Term Loan to Borrower and
issue Letters of Credit for the account of Borrower.
3.3. AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT. The definition of
"Loan" in Section 1.1 of the Loan Agreement is hereby amended in its entirety as
follows:
"Loan" means (a) any Revolving Loan made pursuant to Section 2.1.1 (b)
the Term Loan made pursuant to SECTION 2.1.1 A and (c) any other loan or advance
made to Borrower by Lender under or pursuant to this Agreement (including
without limitation any Overdraft Loan).
3.4. AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT. The definition of
"Termination Date" in Section 1.1 of the Loan Agreement is hereby amended in its
entirety as follows:
"Termination Date" means May 31, 1999.
3.5. SECTION 1.1 Of the Loan Agreement is hereby amended by inserting
the following defined terms in the appropriate places, alphabetically:
"Eurocurrency Reserve Requirement" means, with respect to
any LIBOR Rate Loan for any Interest Rate Period, a percentage equal
to the daily average during such Interest Rate Period of the
percentages in effect on each day of such Interest Rate Period, as
prescribed by the Federal Reserve Board, for determining the aggregate
maximum reserve requirements (including all basic, supplemental,
marginal and other reserves) applicable to "Eurocurrency liabilities"
pursuant to Regulation D or any other then applicable regulation of
the Federal Reserve Board which prescribes reserve requirements
applicable to "Eurocurrency liabilities," as presently defined in
Regulation D. Without limiting the effect of the foregoing, the
Eurocurrency Reserve Requirement shall reflect any other reserves
required to be maintained by Lender or any Related Party of Lender
against (i) any category of liabilities that includes deposits by
reference to which the LIBOR Rate is to be determined, or (ii) any
category of extensions of credit or other assets that includes LIBOR
Rate Loans. For purposes of this Agreement, any LIBOR Rate Loan
hereunder shall be deemed to be "Eurocurrency liabilities," as defined
in Regulation D, and, as such, shall be deemed to be subject to such
reserve requirements without the benefit of, or credit for, proration,
exceptions or offsets which may be available to Lender or any Related
Party of Lender from time to time under Regulation D.
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"Interest Rate Period" means with respect to any LIBOR Revolving
Portion or LIBOR Term Portion, the period commencing on the date on which the
LIBOR Rate is deemed applicable to such LIBOR Revolving Portion or LIBOR Term
Portion, and ending on the numerically corresponding day one (1), two (2) or
three (3) months thereafter, as selected by Borrower pursuant to SECTION 3.1.3
of SUPPLEMENT A; provided, however, that:
(a) any Interest Rate Period which would otherwise end on a
day which is not a Banking Day shall end on the next succeeding
Banking Day unless such next succeeding Banking Day falls in another
calendar month, in which case such Interest Rate Period shall end on
the next preceding Banking Day;
(b) any Interest Rate Period which begins on the last
Banking Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Rate Period) shall end on the last Banking Day of the
calendar month at the end of such Interest Rate Period; and
(c) no Interest Rate Period shall extend beyond the
Termination Date.
"LIBOR Base Rate" means (i) with respect to each Interest Rate Period
for any LIBOR Rate Loan, the rate per annum at which U.S. Dollar deposits in
immediately available funds are offered to Lender two (2) Banking Days prior
to the beginning of such Interest Rate Period by major banks in the London
interbank eurodollar market at or about 11:00 a.m., London time, for delivery on
the first day of such Interest Rate Period, for the number of days comprised
therein and in an amount equal to the amount of the LIBOR Rate Loan to be
outstanding during such Interest Rate Period.
"LIBOR Option" means the option granted to Borrower pursuant to SECTION
3.1.3 of SUPPLEMENT A to have the interest on all or any portion of the
principal amount of the Revolving Loans or the Term Loan based on a LIBOR Rate.
"LIBOR Rate" means, with respect to each Interest Rate Period for a
LIBOR Rate Loan, a rate per annum (rounded upward, if necessary, to the nearest
one hundredth of one percent (1/100th of 1%)) determined pursuant to
the following formula:
LIBOR Rate = LIBOR Base Rate
-----------------------------------
I -Eurocurrency Reserve Requirement
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103
"LIBOR Rate Loan" means any LIBOR Revolving Portion or LIBOR
Term Portion;
"LIBOR Request" means a written notice from Borrower to Lender
requesting that interest on all or a portion of the Revolving Loan or the Term
Loan be based on the then applicable LIBOR Rate, specifying (i) a dollar amount
of the LIBOR Revolving Portion or LIBOR Term Portion consistent with the
definitions of such terms; (ii) the date on which the applicable Interest Rate
Period shall begin; and (iii) the Interest Rate Period applicable thereto.
"LIBOR Revolving Portion" means, collectively, that portion of the
Revolving Loans specified in a LIBOR Request (including any portion of the
Revolving Loans which is being borrowed by Borrower concurrently with such LIBOR
Request) which is not less than $100,000 and is an integral multiple of $10,000,
which does not exceed the outstanding balance of the Revolving Loans not already
subject to a LIBOR Option and, which as of the date of the LIBOR Request
specifying such LIBOR Revolving Portion, has met the conditions for basing
interest at the LIBOR Rate in SECTION 3.1.3 of SUPPLEMENT A and the Interest
Rate Period of which has commenced and has not been terminated.
"LIBOR Term Portion" means, collectively, that portion of the Term
Loan specified in a LIBOR Request which is not less than $100,000 and is an
integral multiple of $10,000, which does not exceed the outstanding balance of
the Term Loan not already subject to the LIBOR Option, and which, as of the date
of the LIBOR Request specifying such LIBOR Term Portion, has met the conditions
for bearing interest at the LIBOR Rate in SECTION 3.1.3 of SUPPLEMENT A and the
Interest Rate Period of which has commenced and has not been terminated."
"Net Worth" means at any time, the total assets of Borrower and its
consolidated Subsidiaries calculated in accordance with GAAP, less the total
liabilities of Borrower and its consolidated Subsidiaries calculated in
accordance with GAAP.
"Reference Rate Loan" means any Reference Revolving Portion or
Reference Term Portion.
"Reference Revolving Portion" means that portion of the Revolving
Loans that is not subject to a LIBOR Option.
"Reference Term Portion" means that portion of the Term Loan that is
not subject to a LIBOR Option.
"Term Loan" means the Term Loan referred to in SECTION 2.1.1 A.
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3.6. SECTION 2.1 of the Loan Agreement is hereby amended by inserting
a new SECTION 2.1.IA thereto as follows:
2.1.1A TERM LOAN.
(a) Subject to the terms and conditions of this Agreement and the
Related Agreements, and in reliance upon the warranties and representations
of Borrower set forth herein and in the Related Agreements, Lender agrees
to make a term loan (the "Term Loan") to Borrower on or before February 28,
1997; provided that (i) Borrower shall be permitted to make only two draws
hereunder in minimum increments of $500,000; and (ii) the aggregate amount
of such advances shall not exceed the sum of $3,000,000.
(b) Unless otherwise required to be sooner paid pursuant to SECTION
2.1.2 or any other provision of this Agreement, the principal balance of
each draw against the Term Loan shall be repaid in 72 equal monthly
installments equal to 1/72nd of the principal amount of such advance
commencing on the first day of the month after such advance by Lender to
Borrower hereunder and continuing on the same day of each month thereafter.
(c) Notwithstanding the foregoing, if not theretofore paid in full,
the outstanding principal balance of the Term Loan shall be due and payable
in full on the Termination Date.
(d) Subject to SECTION 2.1.2, Borrower may, upon at least three Banking
Days' notice to Lender, prepay the principal of the Term Loan in whole
or in part without any premium or penalty (other than as expressly provided
in SECTION 3.5 of SUPPLEMENT A with respect to LIBOR Rate Loans repaid
prior to the end of the applicable Interest Rate Period). Any partial
prepayment of principal shall be in a minimum amount of $100,000 and in an
integral multiple of $10,000 thereafter, and shall be applied to the unpaid
installments of the Term Loan in the inverse order of their maturities.
3.7. SECTION 2.1.1(c) of the Loan Agreement is hereby amended by
inserting a parenthetical at the end of such section, as follows:
"(other than as expressly provided in SECTION 3.5 of SUPPLEMENT A with
respect to LIBOR Rate Loans repaid prior to the end of the applicable
Interest Rate Period)."
3.8. SECTION 2.1.2 of the Loan Agreement is hereby amended by deleting
the first sentence thereof in its entirety and inserting the following in lieu
thereof:
"Borrower may prepay all of the Liabilities in full at any time without
premium or penalty (other than as expressly provided in SECTION 3.5 of
SUPPLEMENT A
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with respect to LIBOR Rate Loans repaid prior to the end of the applicable
Interest Rate Period), by prepaying the outstanding principal balance of
the Revolving Loans and the Term Loan, together with (a) all accrued and
unpaid interest on the Liabilities, (b) all other outstanding Liabilities
and (c) cash in the amount of, or adequate (in Lender's determination) cash
collateral for, the Letter of Credit Obligations."
3.9. SECTION 2.1.3 of the Loan Agreement is hereby amended by deleting
the phrase "Revolving Credit Amount" in the fourth line thereof and inserting
the amount "$12,000,000" in lieu thereof.
3.10. SECTION 2.12 of the Loan Agreement is hereby amended by inserting
the phrase", each LIBOR Request" after the phrase "Each Loan" and before the
phrase "or Letter of Credit" in the first line thereof.
3.11. SECTION 2.4.1 of the Loan Agreement is hereby amended in its
entirety as follows:
2.4.1 INTEREST.
(a) REVOLVING LOANS. The unpaid principal amount of each
Revolving Loan hereunder shall bear interest until maturity at the
rate applicable to Revolving Loans indicated in SUPPLEMENT A hereto.
If any Revolving Loan or portion thereof is not paid when due, whether
by acceleration or otherwise, the entire unpaid principal amount of
the Revolving Loans shall bear interest thereafter until such amount
is paid in full at the Default Rate applicable to Revolving Loans
indicated in SUPPLEMENT A hereto. Until maturity, interest on the
Revolving Loans shall be paid by Borrower on the date(s) indicated in
SUPPLEMENT A and at such maturity. After maturity, whether by
acceleration or otherwise. accrued interest shall be payable on
demand.
(b) TERM LOAN. The unpaid principal amount of the Term Loan
shall bear interest until maturity at the rate applicable to the Term
Loan indicated in SUPPLEMENT A hereto. If any installment of the Term
Loan is not paid when due, whether by acceleration or otherwise, the
entire unpaid principal amount of the Term Loan shall bear interest
thereafter until such amount is paid in full at the Default Rate
applicable to the Term Loan indicated in SUPPLEMENT A hereto. Until
maturity, interest on the Term Loan shall be paid by Borrower on the
date(s) indicated in SUPPLEMENT A and at such maturity. After
maturity, whether by acceleration or otherwise, accrued interest shall
be payable on demand.
3.12. AMENDMENT TO SECTION 5.1.1 OF THE LOAN AGREEMENT. Clause (a) to
Section 5.1.1 of the Loan Agreement is hereby amended in its entirety as
follows:
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"(a) ANNUAL AUDIT REPORT. No later than May 31, 1996 for
Fiscal Year 1995, and within one hundred twenty (120) days after each
other Fiscal Year of Borrower, a copy of the annual audit report of
Borrower and its Subsidiaries prepared on a consolidating and
consolidated basis and in conformity with GAAP and certified by an
independent public accountant who shall be satisfactory to Lender,
together with a certificate from such accountant (i) acknowledging to
Lender such accountant's understanding that Lender (and any
Participant) is relying on such annual audit report, and (ii)
containing a computation of, and showing compliance with, each of the
financial ratios and restrictions contained in this SECTION 5 or in
SUPPLEMENT A."
3.13. AMENDMENT TO SECTION 5.1.1 OF THE LOAN AGREEMENT. Clause (c) of
Section 5.1.1 of the Loan Agreement is hereby amended to replace the number
"fifteen (15)" contained in the first and second lines thereof with the number
"twenty (20)".
3.14. AMENDMENT AND RESTATEMENT OF SUPPLEMENT A OF THE LOAN AGREEMENT.
Supplement A of the Loan Agreement is hereby amended in its entirety in the form
attached hereto as EXHIBIT A.
4. CONDITIONS PRECEDENT. The amendment to the Loan Agreement set forth
in this Amendment shall become effective as of the date of this Amendment upon
the satisfaction of the following conditions precedent.
4.1. NO DEFAULT. No Event of Default, or event which, with the giving
of notice or the passage of time, or both, would become an Event of Default,
shall have occurred and be continuing.
4.2. RESOLUTIONS. Borrower shall have delivered corporate resolutions,
in form and substance satisfactory to Lender, with respect to this Waiver and
Amendment.
4.3. TERM NOTE. The delivery of an executed copy of the $3,000,000
Term Note.
4.4. EXECUTION. The delivery of an executed copy of this Waiver
and Amendment and the acknowledgments hereto to Lender.
4.5. CLOSING FEE. Borrower shall have paid Lender a closing fee of
$50,000.
5. MISCELLANEOUS.
5.1. EXPENSES. Borrower agrees to pay on demand all costs and expenses
of Lender (including the reasonable fees and expenses of outside counsel for
Lender) in connection with the preparation, negotiation, execution, delivery and
administration of this Waiver and Amendment and all other instruments or
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. In addition, Borrower agrees to pay, and save
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Lender harmless from all liability for, any stamp or other taxes which may be
payable in connection with the execution or delivery of this Waiver and
Amendment, the borrowings under the Loan Agreement, as amended hereby, and the
execution and delivery of any instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. All
obligations provided in this SECTION 5.1 shall survive any termination of this
Waiver and Amendment or the Loan Agreement as amended hereby.
5.2. GOVERNING LAW. This Waiver and Amendment shall be a contract made
under and governed by the internal laws of the State of Illinois.
5.3. COUNTERPARTS. This Waiver and Amendment may be executed in any
number of counterparts, and by the parties hereto on the same or separate
counterparts, and each such counterpart, when executed and delivered, shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same Waiver and Amendment.
5.4. REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendments to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Waiver and Amendment.
5.5. SUCCESSORS. This Waiver and Amendment shall be binding upon
Borrower, Lender and their respective successors and assigns, and shall inure to
the benefit of Borrower, Lender and the successors and assigns of Borrower and
Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized and delivered
at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Its Treasurer
---------------------------
BANK OF AMERICA ILLINOIS
By/s/▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------
Its Vice President
---------------------------
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ACKNOWLEDGMENT
The undersigned hereby acknowledge that they have read the foregoing
Waiver and Amendment and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5, 1992.
/s/▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇
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ACKNOWLEDGMENT
The undersigned hereby acknowledge that they have read the foregoing
Waiver and Amendment and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5, 1992.
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
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CONSENT AND AMENDMENT NO. 8 TO
LOAN AND SECURITY AGREEMENT
This Consent and Amendment No. 8 ("Amendment") to Loan and Security
Agreement is made as of April 21, 1997, between Rainbow Rentals, Inc. (formerly
known as Rainbow Home Rentals, Inc.) ("Borrower") and Bank of America Illinois
(formerly known as Continental Bank Illinois, formerly known as Continental Bank
N.A. ("Lender").
Reference is made to that certain Loan and Security Agreement between
Borrower and Lender dated October 5, 1992 (as amended, the "Loan Agreement").
Borrower has requested that Lender consent to (A) the execution and
delivery by Borrower of the Redemption Agreement attached hereto as Exhibit A
(the "Redemption Agreement") pursuant to which Borrower will redeem all of the
capital stock of Borrower held by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇ ▇. ▇▇▇▇▇▇
("▇▇▇▇"), Saint ▇▇▇▇ Limited Partnership ("SLRP") and ▇▇▇▇▇▇ Limited Partnership
("ALP") in exchange for a cash payment of $2,751,850 (the "Cash Redemption
Payment") and the issuance of a $1,660,748.50 Subordinated Non-Negotiable Note
to ALP, a $1,660,478.50 Subordinated Non-Negotiable Note to ▇▇▇▇▇, a
$2,283,007.46 Subordinated Non-Negotiable Note to ▇▇▇▇, and a $2,790,340.54
Subordinated Non-Negotiable Note to SRLP (such notes to be in the form of
Exhibits A, B, and C, respectively, to the Redemption Agreement (the
"Subordinated Redemption Notes")), (B) the execution, and delivery of the
Employment Severance, Non-Competition and Non-Disclosure Agreement attached
hereto as Exhibit B (the "Severance Agreement") pursuant to which Borrower will
pay ▇▇▇▇▇ $248,150 (the "Cash Severance Payment") and issue a $1,593,065
Subordinated Non-Negotiable Note to ▇▇▇▇▇ (such note to be in the form of the
exhibit attached to the Severance Agreement (the "Subordinated Severance
Note")), and (C) the execution and delivery of the Consulting Agreement attached
hereto as Exhibit C (the "Consulting Agreement") pursuant to which Borrower will
issue a $500,125 Subordinated Non-Negotiable Note to ▇▇▇▇▇ (such note to be in
the form of the exhibit attached to the Consulting Agreement (the "Subordinated
Consulting Note")).
Borrower has also requested that the Loan Agreement be amended in certain
respects.
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. CONSENT. Subject to the terms and conditions of this Amendment,
Lender hereby consents to (A) the execution and delivery by Borrower of the
Redemption Agreement, the Severance Agreement and the Consulting Agreement, and
the redemption of the capital stock of Jason, Ruth, SRLP and ALP pursuant to the
Redemption Agreement, (B) the issuance by Borrower of the Subordinated
Redemption Notes, the Subordinated Severance Note and the Subordinated
Consulting Note, and (C) the payment by Borrower of the Cash Redemption Payment,
the Cash Severance Payment and the Cash Consulting Payment. This consent shall
not constitute (a) a modification or alteration of the terms, conditions or
112
covenants of the Loan Agreement (other than to Sections 5.13 and 5.15 of the
Loan Agreement as expressly set forth above) or any document entered into in
connection therewith, or (b) a waiver, release or limitation upon the exercise
by Lender of any of its rights, legal or equitable, hereunder. Except as set
forth above, Lender reserves any and all rights and remedies which it has had,
has or may have under the Loan Agreement. Subject to the terms and conditions of
this Amendment, Lender will release ▇▇▇▇▇ and ▇▇▇▇ from their obligations under
that certain Guaranty dated October 3, 1992 executed by them and any other
documents executed by them in connection with such Guaranty, if any (but not the
Subordination Agreement referred to below).
3. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as follows:
3.1. AMENDMENT TO SECTION 6.1(n) OF THE LOAN AGREEMENT. Section
6.1(n) of the Loan Agreement is hereby amended and restated as follows:
(n) OWNERSHIP. If ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ fails to own seventy percent (70%)
of the voting stock of Borrower.
3.2. AMENDMENT TO SECTION 2.1 OF SUPPLEMENT A. Section 2.1 of
Supplement A to the Loan Agreement is hereby amended in its entirety as follows:
2.1 REVOLVING CREDIT AMOUNT. The maximum amount of Revolving Loans
which Lender, in its discretion, will make available to Borrower (such
amount, as adjusted from time to time, is herein called the "Revolving
Credit Amount") is $11,500,000; provided, that at all times after May 21,
1997 the Revolving Credit Amount shall be $9,000,000.
3.3. AMENDMENT TO SECTION 2.2 OF SUPPLEMENT A. Section 2.2 of
Supplement A to the Loan Agreement is hereby amended in its entirety as follows:
2.2 BORROWING BASE. The term "Borrowing Base," as used herein, shall
mean:
(i) an amount (the "Cash Receipts Availability") of up to 100%
of the net amount of Borrower's actual cash collections of Accounts
Receivable from Account Debtors pursuant to the terms of Rental Agreements
for the immediately preceding two calendar months (exclusive of
collections for delivery, insurance, merchandise, sales and other
non-rental payments and after deduction of such reserves and allowances as
Lender deems proper and necessary); plus
(ii) an amount (the "Inventory Availability") of up to the
lesser of (A) up to 30% of the net value (as determined by Lender and
after deduction of such reserves and allowances as Lender deems proper and
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necessary) of Borrower's Eligible Inventory and (B) the "Inventory
Sublimit" (as defined in Section 2.3 below). Without limiting Lender's
discretion to establish reserves with respect to Inventory Availability,
Lender shall establish a reserve equal to one-third of the value of
Borrower's Eligible Inventory; plus
(iii) the "Additional Availability (as defined below). "Additional
Availability" means $2,000,000; provided, that at all times after May 21,
1997, the Additional Availability means zero.
4. CONDITIONS PRECEDENT. The amendment to the Loan Agreement set
forth in this Amendment shall become effective as of the date of this Amendment
upon the satisfaction of the following conditions precedent:
4.1. NO DEFAULT. No Event of Default, or event which, with the
giving of notice or the passage of time, or both, would become an Event of
Default, shall have occurred and be continuing.
4.2. RESOLUTIONS. Borrower shall have delivered corporate
resolutions, in form and substance satisfactory to Lender, with respect to this
Amendment.
4.3. AMENDMENT FEE. Borrower shall have paid Lender an amendment fee
of $40,000.
4.4. EXECUTION. The delivery of an executed copy of this Agreement
and the acknowledgments hereto to Lender.
4.5. SUBORDINATION AGREEMENT. Each of Jason, Ruth, SRLP and ALP
shall have executed a subordination agreement in form and substance satisfactory
to Lender.
5. MISCELLANEOUS.
5.1. PERSONAL FINANCIAL STATEMENTS. Within 30 days following the
date hereof, Borrower will cause Wayland and ▇▇▇▇▇ ▇▇▇▇▇▇▇ to deliver to Lender
their personal financial statements.
5.2. EXPENSES. Borrower agrees to pay on demand all costs and
expenses of Lender (including the reasonable fees and expenses of outside
counsel for Lender) in connection with the preparation, negotiation, execution,
delivery and administration of this Amendment and all other instruments or
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. In addition, Borrower agrees to pay, and save Lender
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Amendment, the borrowings
under the Loan Agreement, as amended hereby, and the execution and delivery of
any instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided in this SECTION
5.1 shall survive any termination of this Amendment or the Loan Agreement as
amended hereby.
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5.3. GOVERNING LAW. This Amendment shall be a contract made under
and governed by the internal laws of the State of Illinois.
5.4. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.
5.5. REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendments to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Amendment.
5.6. SUCCESSORS. This Amendment shall be binding upon Borrower,
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower, Lender and the successors and assigns of Borrower and
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized and delivered
at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Its President
---------------------------
BANK OF AMERICA ILLINOIS
By /s/ ▇▇▇▇ ▇.
----------------------------
Its Senior Vice President
---------------------------
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ACKNOWLEDGMENT
The undersigned hereby acknowledge that they have read the foregoing
Consent and Amendment No.8 (and understand that the guaranty of ▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇ will be released) and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5,1992.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
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AMENDMENT NO. 9 TO
LOAN AND SECURITY AGREEMENT
This Amendment No. 9 ("Amendment") to Loan and Security Agreement is made
as of May 21, 1997, between Rainbow Rentals, Inc. (formerly known as Rainbow
Home Rentals, Inc.)("Borrower") and Bank of America Illinois (formerly known
as Continental Bank Illinois, formerly known as Continental Bank
N.A.)("Lender").
Reference is made to that certain Loan and Security Agreement between
Borrower and Lender dated October 5, 1992 (as amended, the "Loan Agreement").
Borrower has requested that the Loan Agreement be amended in certain
respects.
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Loan Agreement.
2. PAYMENT OF TERM LOAN. The outstanding principal balance of the Term
Loan is $2,652,777.75. Upon the date this Amendment becomes effective pursuant
to Section 4 hereof, Borrower agrees to prepay the Term Loan in full.
3. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended as
follows:
3.1 SECTION 1.1 of the Loan Agreement is hereby amended by amending and
restating the proviso at the end of the definition of the term "Banking Day,"
as follows:
;provided, that with respect to IBOR Rate Loans, Banking days shall not
include a day on which dealings in U.S. Dollars may not be carried on by
Lender in the interbank IBOR market.
3.2 SECTION 1.1 of the Loan Agreement is hereby amended by amending and
restating the definition of "Eurocurrency Reserve Requirement" as follows:
"Eurocurrency Reserve Requirement" means, with respect to any IBOR
Rate Loan for any Interest Rate Period, a percentage equal to the daily
average during such Interest Rate Period of the percentages in effect on
each day of such Interest Rate Period, as prescribed by the Federal Reserve
Board, for determining the aggregate maximum reserve requirements
(including all basic, supplemental, marginal and other reserves) applicable
to "Eurocurrency liabilities" pursuant to Regulation D or any other then
applicable regulation of the Federal Reserve Board which prescribes
reserve requirements applicable to "Eurocurrency liabilities," as presently
defined in Regulation D. Without limiting the effect of the foregoing, the
Eurocurrency Reserve Requirement shall reflect any other reserves required
to be maintained by Lender or any Related Party of Lender against (i) any
category of liabilities that includes
117
deposits by reference to which the IBOR Rate is to be determined, or (ii)
any category of extensions of credit or other assets that includes IBOR
Rate Loans. For purposes of this Agreement, any IBOR Rate Loan hereunder
shall be deemed to be "Eurocurrency liabilities," as defined in Regulation
D, and, as such, shall be deemed to be subject to such reserve
requirements without the benefit of, or credit for, proration, exceptions
or offsets which may be available to Lender or any Related Party of Lender
from time to time under Regulation D.
3.3. SECTION 1.1 of the Loan Agreement is hereby amended by amending
and restating the definition of "Interest Rate Period" as follows:
"Interest Rate Period" means with respect to any IBOR Revolving
Portion, the period commencing on the date on which the IBOR Rate is
deemed applicable to such IBOR Revolving Portion, and ending on the
numerically corresponding day one (1), two (2) or three (3) months
thereafter, as selected by Borrower pursuant to SECTION 3.1.3 of
SUPPLEMENT A, provided, however, that;
(a) any Interest Rate Period which would otherwise end on a
day which is not a Banking Day shall end on the next succeeding
Banking Day unless such next succeeding Banking Day falls in another
calendar month, in which case such Interest Rate Period shall end on
the next preceding Banking Day;
(b) any Interest Rate Period which begins on the last Banking
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Rate Period) shall end on the last Banking Day of the
calendar month at the end of such Interest Rate Period; and
(c) no Interest Rate Period shall extend beyond thc
Termination Date.
3.4. SECTION 1.1 of the Loan Agreement is hereby amended by
amending and restating the definition of "Reference Revolving Portion" as
follows:
"Reference Revolving Portion" means that portion of the
Revolving Loans that is not subject to an IBOR Option.
3.5. SECTION 1.1 of the Loan Agreement is hereby amended by amending
and restating in its entirety the definition of "Termination Date" as follows:
"Termination Date" means May 21, 2000.
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3.6. SECTION 1.1 of the Loan Agreement is hereby amended by Inserting
the following definitions in the appropriate places, alphabetically:
"IBOR Base Rate" means (i) with respect to each Interest Rate Period
for any IBOR Rate Loan, the rate per annum at which U.S. Dollar deposits
in immediately available funds are offered to the IBOR Office of Lender
two (2) Banking Days prior to the beginning of such Interest Rate Period
by major banks in the interbank eurodollar market at or about 10:00 a.m.,
Chicago time, for delivery on the first day of such Interest Rate Period,
for the number of days comprised therein and in an amount equal to the
amount of the IBOR Rate Loan to be outstanding during such Interest Rate
Period.
"IBOR Office" means the office or offices selected by Lender which
shall be making or maintaining IBOR Rate Loans hereunder or such other
office or offices selected by Lender through which Lender determines its
IBOR Base Rate. An IBOR Office may be, at the option of Lender, a United
States or Canadian or other foreign office.
"IBOR Option" means the option granted to Borrower pursuant to
SECTION 3.1.3 of SUPPLEMENT A to have the interest on all or any portion
of the principal amount of the Revolving Loans based on a IBOR Rate.
"IBOR Rate" means, with respect to each Interest Rate Period for a
IBOR Rate Loan, a rate per annum (rounded upward, if necessary, to the
nearest one hundredth of one percent (1/100th of 1%)) determined pursuant
to the following formula:
IBOR Rate = IBOR Base Rate
----------------------------------
1-Eurocurrency Reserve Requirement
"IBOR Rate Loan" means any IBOR Revolving Portion.
"IBOR Request" means a written notice from Borrower to Lender
requesting that interest on all or a portion of the Revolving Loan be
based on the then applicable IBOR Rate, specifying (i) a dollar amount of
the IBOR Revolving Portion consistent with the definitions of such terms;
(ii) the date on which the applicable Interest Rate Period shall begin;
and (iii) the Interest Rate Period applicable thereto.
"IBOR Revolving Portion" means, collectively, that portion of the
Revolving Loans specified in a IBOR Request (including any portion of the
Revolving Loans which is being borrowed by Borrower concurrently with such
IBOR Request) which is not less than $100,000 and is an integral multiple
of $10,000, which does not exceed the outstanding balance of the Revolving
Loans not already subject to a IBOR Option and, which as of the date of
the
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IBOR Request specifying such IBOR Revolving Portion, has met the conditions
for basing interest at the IBOR Rate in Section 3.1.3 of Supplement A and
the Interest Rate Period of which has commenced and has not been
terminated.
3.7. SECTION 1.1 of the Loan Agreement is hereby amended to delete
the definitions of "LIBOR Base Rate," "LIBOR Option," "LIBOR Rate," "LIBOR Rate
Loan," "LIBOR Request," "LIBOR Revolving Portion" and "LIBOR Term Portion" in
their entirety.
3.8. SECTION 2.1.1(c) of the Loan Agreement is hereby amended by
amending and restating the parenthetical at the end of such section, as
follows:
"(other than as expressly provided in SECTION 3.5 of SUPPLEMENT A with
respect to IBOR Rate Loans repaid prior to the end of the applicable
Interest Rate Period)."
3.9. SECTION 2.1.2 of the Loan Agreement is hereby amended by
amending and restating the first sentence thereof in its entirety and inserting
the following in lieu thereof:
"Borrower may prepay all of the Liabilities in full at any time without
premium or penalty (other than as expressly provided in SECTION 3.5 of
SUPPLEMENT A with respect to IBOR Rate Loans repaid prior to the end of
the applicable Interest Rate Period), by prepaying the outstanding
principal balance of the Revolving Loans, together with (a) all accrued
and unpaid interest on the Liabilities, (b) all other outstanding
Liabilities and (c) cash in the amount of, or adequate (in Lender's
determination) cash collateral for, the Letter of Credit Obligations."
3.10. SECTION 2.1.3 of the Loan Agreement is hereby amended by
deleting the phrase "$12,000,O00" in the fourth line thereof and inserting the
phrase "Revolving Credit Amount" in lieu thereof.
3.11. SECTION 2.12 of the Loan Agreement is hereby amended by
deleting each reference to ", each LIBOR Request" and inserting the phrase
", each IBOR Request" after the phrase "Each Loan" and before the phrase "or
Letter of Credit" in the first line thereof.
3.12. SECTION 2.4.2 of the Loan Agreement is hereby amended to
replace the phrase "one-half of one percent (0.50%)" with the phrase
"three-eighths of one percent (0.375%)."
3.13. AMENDMENT AND RESTATEMENT OF SUPPLEMENT A OF THE LOAN AGREEMENT.
SUPPLEMENT A of the Loan Agreement is hereby amended in its entirety in the form
attached hereto as EXHIBIT A.
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4. CONDITIONS PRECEDENT. The amendment to the Loan Agreement set
forth in this Amendment shall become effective as of the date of this Amendment
upon the satisfaction of the following conditions precedent:
4.1. NO DEFAULT. No Event of Default, or event which, with the
giving of notice or the passage of time, or both, would become an Event of
Default, shall have occurred and be continuing.
4.2. RESOLUTIONS. Borrower shall have delivered corporate
resolutions, in form and substance satisfactory to Lender, with respect to this
Waiver and Amendment.
4.3. EXECUTION. The delivery of an executed copy of this Waiver and
Amendment and the acknowledgments hereto to Lender.
4.4. CLOSING FEE. Borrower shall have paid Lender a closing fee of
$100,000.
5. MISCELLANEOUS.
5.1 EXPENSES. Borrower agrees to pay on demand all costs and
expenses of Lender (including the reasonable fees and expenses of outside
counsel for Lender) in connection with the preparation, negotiation, execution,
delivery and administration of this Waiver and Amendment and all other
instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. In addition, Borrower agrees to pay, and
save Lender harmless from all liability for, any stamp or other taxes which may
be payable in connection with the execution or delivery of this Waiver and
Amendment, the borrowings under the Loan Agreement, as amended hereby, and the
execution and delivery of any instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. All
obligations provided in this Section 5.1 shall survive any termination of this
Waiver and Amendment or the Loan Agreement as amended hereby.
5.2 GOVERNING LAW. This Waiver and Amendment shall be a contract
made under and governed by the internal laws of the State of Illinois.
5.3 COUNTERPARTS. This Waiver and Amendment may be executed in any
number of counterparts, and by the parties hereto on the same or separate
counterparts, and each such counterpart, when executed and delivered, shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same Waiver and Amendment.
5.4. REFERENCE TO LOAN AGREEMENT. Except as herein amended, the Loan
Agreement shall remain in full force and effect and is hereby ratified in all
respects. On and after the effectiveness of the amendments to the Loan Agreement
accomplished hereby, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference to
the Loan Agreement in any note and in any Related Agreements, or other
agreements, documents or other instruments executed and delivered pursuant to
the Loan
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Agreement, shall mean and be a reference to the Loan Agreement, as amended by
this Waiver and Amendment.
5.5. SUCCESSORS. This Waiver and Amendment shall be binding upon
Borrower, Lender and their respective successors and assigns, and shall inure to
the benefit of Borrower, Lender and the successors and assigns of Borrower and
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective officers thereunto duly authorized and
delivered at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Its President-CEO
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BANK OF AMERICA ILLINOIS
By______________________________________
Its_____________________________________
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ACKNOWLEDGMENT
The undersigned hereby acknowledge that they have read the
foregoing Amendment No. 9 and hereby ratify and reaffirm their guaranty of the
obligations of Borrower to Lender pursuant to that certain Guaranty executed by
the undersigned dated October 5, 1992.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
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SECOND AMENDED AND RESTATED SUPPLEMENT A
TO LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 5, ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
AND RAINBOW RENTALS, INC.
1. LOAN AGREEMENT REFERENCE. This Second Amended and Restated Supplement
A, as it may be amended or modified from time to time, is a part of the Loan
and Security Agreement dated as of October 5, 1992 between Lender and Borrower
(together with all amendments, modifications and supplements thereto, the "Loan
Agreement") and amends and restates in its entirety that certain Amended and
Restated Supplement A dated June 17, 1996. Terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Loan Agreement.
2. REVOLVING CREDIT AMOUNT; BORROWING BASE.
2.1. REVOLVING CREDIT AMOUNT. The maximum amount of Revolving Loans
which Lender, in its discretion, will make available to Borrower (such amount,
as adjusted from time to time, is herein called the "Revolving Credit Amount")
is $16,000,000.
2.2. BORROWING BASE. The term "Borrowing Base," as used herein, shall
mean an amount (the "Cash Receipts Availability") equal to (A) the product of up
to the "Cash Collection Percentage" (as defined below) multiplied by the net
amount of Borrower's actual cash collections of Accounts Receivable from Account
Debtors pursuant to the terms of Rental Agreements for the immediately
preceding two calendar months (exclusive of collections for delivery,
insurance, merchandise, sales and other non-rental payments and after
deduction of such reserves and allowances as Lender deems proper and
necessary), divided by (B) two. "Cash Collection Percentage" (as defined below)
means (i) 375% at all times during the period (inclusive) commencing on the
date hereof and ending November 20, 1998 and (ii) 350% at all times on and after
November 21, 1998.
2.3. LENDER'S RIGHTS. Borrower agrees that nothing contained in
Supplement A (i) shall be construed as Lender's agreement to resort or look to
a particular type or item of Collateral as security for any specific Loan or
portion of the Liabilities or advance or in any way limit Lender's right to
resort to any or all of the Collateral as security for any of the Liabilities,
(ii) shall be deemed to limit or reduce any Lien upon any portion of the
Collateral or other security for the Liabilities or (iii) shall supersede
Section 2.9 of the Loan Agreement.
3. INTEREST.
3.1.1. REVOLVING LOANS.
(a) INTEREST TO MATURITY. The unpaid principal balance of the Revolving
Loans (other than Overdraft Loans and Over Advances) shall bear interest to
maturity at a per annum rate equal to the Reference Rate in effect from time to
time plus 0.25%, provided that
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pursuant to the provisions of SECTION 3.1.3 below, from time to time Borrower
may elect to have all or any portion of the Revolving Loans bear interest at the
IBOR Rate plus 3.00%.
(b) DEFAULT RATE. If any amount of the Revolving Loans is not paid when
due, whether by acceleration or otherwise, the entire unpaid principal balance
of the Revolving Loans (other than Overdraft Loans and Over Advances) shall bear
interest until paid at a rate per annum equal to the greater of (i) the rate
otherwise from time to time if effect plus 2.00% and (ii) 2.00% above the rate
otherwise in effect at the time such amount becomes due.
3.1.2. INTENTIONALLY OMITTED.
3.1.3. IBOR OPTION.
Borrower shall have the right, from time to time, to designate IBOR
Revolving Portions by means of an IBOR Request. All IBOR Requests must be
received by Lender not later than 10:00 a.m., Chicago time, two (2) Banking Days
prior to the date the applicable Interest Rate Period is to begin (or is to be
continued). Notwithstanding the foregoing, (x) all undesignated portions of the
Revolving Loan shall constitute Reference Rate Loans, (y) Borrower shall not
have the right to designate IBOR Rate Loans at any time that an Event of Default
or an Unmatured Event of Default is in existence, notwithstanding a contrary
designation by Borrower, and (z) in no event may more than four (4) IBOR Rate
Loans having different Interest Rate Periods be outstanding at any one time.
Each designation by Borrower of a IBOR Rate Loan shall be irrevocable; provided,
however, that Borrower may specify in any such IBOR Request a maximum IBOR Rate
which it will accept for the related Interest Rate Period and the IBOR Option
elected in such IBOR Request shall not become effective if the applicable IBOR
Rate determined by Lender shall exceed such specified maximum.
3.2. OVERDRAFT LOANS; OVER ADVANCES. Overdraft Loans and Over Advances
shall bear interest at the rate(s) determined pursuant to Section 2.7 or Section
2.8 of the Loan Agreement, as applicable.
3.3. COMPUTATION. Interest shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed; provided, that the
computation of interest on IBOR Rate Loans shall include the date on which the
applicable Interest Rate Period began, but shall exclude the last day of the
applicable Interest Rate Period. IBOR Rate Loans not repaid on the last day of
the Interest Rate Period applicable thereto shall be continued or converted
into Reference Rate Loans and shall bear interest at the applicable rate for
Reference Rate Loans of such type from and including the last day of such
Interest Rate Period. Changes in any interest rate provided for herein which
are due to changes in the Reference Rate shall take effect on the date of the
change in the Reference Rate.
3.4. PAYMENT. Until maturity, interest on the Loans shall be payable on
the first day of each month, and at maturity. After maturity, whether by
acceleration or otherwise, accrued interest shall be payable on demand;
provided, that interest on IBOR Rate Loans shall
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be payable in arrears on the last day of the Interest Rate Period applicable
thereto and at maturity.
3.5. FUNDING INDEMNIFICATION. If any payment of a IBOR Rate Loan
occurs on a date which is not the last day of the applicable Interest Rate
Period, whether because of acceleration, prepayment or otherwise, Borrower will
indemnify Lender for any loss or cost incurred by it resulting therefrom,
including without limitation any loss or cost in liquidating or employing
deposits acquired to fund or maintain such Loan. Lender shall deliver a written
statement as to the amount due, if any, under this SECTION 3.5. Such written
statement shall set forth in reasonable detail the calculations upon which
Lender determined such amount and shall be final, conclusive and binding on
Borrower in the absence of manifest error. Determination of amounts payable
under this SECTION 3.5 shall be calculated as though Lender funded its IBOR Rate
Loans through the purchase of a deposit of the type and maturity corresponding
to the IBOR Rate Loan and applicable Interest Rate Period bearing interest at
the IBOR Base Rate, whether or not Lender actually funded the Loan in that
manner. The amount specified in the written statement shall be payable on demand
after receipt by Borrower of the written statement. This SECTION 3.5 shall apply
to all payments of IBOR Rate Loans prior to the last day of the applicable
Interest Rate Period, including without limitation any such payment required to
be made in order to permit Borrower to pay any installment of principal due in
respect of the Revolving Loan under this Agreement.
3.6. AVAILABILITY OF INTEREST RATE OPTIONS. If Lender determines that
maintenance of any of its IBOR Rate Loans would violate any applicable law,
rule, regulation or directive, whether or not having the force of law, Lender
shall suspend the availability of such IBOR Rate Loans and require any IBOR
Rate Loans outstanding and so affected to be repaid; or if Lender determines
that (i) deposits of a type or maturity appropriate to match fund IBOR Rate
Loans are not available, (ii) the IBOR Rate does not accurately reflect the
cost of making such Loans, or (iii) Lender's ability to make or maintain IBOR
Rate Loans has been materially adversely affected by the occurrence of any
event after the date hereof, then Lender shall suspend the availability of the
IBOR Rate Loans, as applicable, after the date of any such determination.
4. ADDITIONAL COVENANTS. From the Closing Date and thereafter until all
of Borrower's Liabilities under the Loan Agreement are paid in full, Borrower
agrees that, unless Lender otherwise consents in writing, it will:
4.1. NET WORTH. Not permit Borrower's Net Worth at any time during any
period set forth below to be less than the amount set forth opposite such
period:
Period Amount
------ ------
March 31, 1997 through June 29, 1997 $600,000
June 30, 1997 through September 29, 1997 $700,000
September 30, 1997 through December 30, 1997 $800,000
December 31, 1997 through March 30, 1998 $1,100,000
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Period Amount
------ ------
March 31, l998 through June 29, 1998 $1,450,000
June 30, 1998 through September 29, 1998 $1,800,000
September 30, 1998 through December 30, 1998 $2,150,000
December 31, 1998 through March 30, 1999 $2,500,000
March 31, 1999 through June 29, 1999 $2,900,000
June 30, 1999 through September 29, 1999 $3,300,000
September 30, 1999 through December 30, 1999 $3,700,000
December 31, 1999 through March 30, 2000 $4,000,000
March 31, 2000 and thereafter $4,500,000
4.2. CAPITAL EXPENDITURES. Not and not permit any of its Subsidiaries
to purchase or otherwise acquire (including without limitation, acquisition by
way of capitalized lease), or commit to purchase or acquire, any fixed asset, if
after giving effect to such purchase or other acquisition, the aggregate cost of
all such fixed assets purchased or otherwise acquired would exceed $1,500,000 in
any Fiscal Year.
4.3. MAXIMUM FUNDED DEBT TO EARNINGS RATIO. Not permit, for the twelve
month period ending on the last day of each month ending during any period
(inclusive) set forth below, the ratio of (a) Borrower's Indebtedness for
interest bearing borrowed money on the last day of each such month during such
period set forth below (excluding Indebtedness subordinated to Lender in a
manner satisfactory to Lender) to (b) Borrower's consolidated net earnings
before interest expense and provision for Taxes for such twelve month period, to
be greater than the ratio set forth below opposite such twelve month period;
Period Maximum Ratio
------- -------------
April 30, 1997 through December 30, 1997 3.75:1.00
December 31, 1997 through December 30, 1998 3.50:1.00
December 31, 1998 and the twelve month period ending 3.25:1:00
on the last day of each month thereafter
For purposes of this SECTION 4.3 and SECTION 4.4 (i) net earnings shall not
include any gains on the sale or other disposition of Investments of fixed
assets and any extraordinary or nonrecurring items of income to the extent that
the aggregate of all such gains and extraordinary or nonrecurring items of
income exceeds the aggregate of losses on such sale or other disposition and
extraordinary or nonrecurring charges, and (ii) interest expense shall include,
without limitation, implicit interest expense on Capitalized Leases, and shall
exclude the amortization of the closing fee, the modification fee, or any other
fee paid to Lender in connection with the Loans.
4.4. MINIMUM FIXED CHARGE COVERAGE RATIO. Not permit, for the twelve
month period ending on the last day of each month ending during any period
(inclusive) set forth below, the ratio of (a) Borrower's consolidated net
earnings before interest expense and
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provision for Taxes plus the rental payments for Borrower's stores for such
twelve month period to (b) the sum of (i) Borrower's accrued cash interest
expense for such twelve month period, (ii) scheduled principal payments with
respect to Borrower's Indebtedness for borrowed money during such twelve month
period, and (iii) the rental payments for Borrower's stores, to be less than the
ratio set forth below opposite such twelve month period:
Period Minimum Ratio
------ -------------
April 30, 1997 through March 31, 1998 1.40:1.00
April 30, 1998 through June 30, 1998 1.25:1.00
July 31, 1998 and the twelve month period ending on the 1.50:1.00
last day of each month thereafter
Borrower's Initials /s/ WJR
-------
Lender's Initials
Date: , 1997
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