LOAN AND SECURITY AGREEMENT
(dated as of April 23, 1997)
GREENFIELD COMMERCIAL CREDIT, L.L.C. ("Lender")
Gentlemen:
This Agreement, effective as of the date accepted by you, sets forth the
terms and conditions upon which you will make loans and advances and extend
other financial accommodations (the "Loans") (as set forth herein and in riders
attached hereto) to the undersigned (as "Borrower") for the benefit of Borrower
and the other parties signing this Agreement as Guarantors, collectively
referred to herein as "we," "us" or "our"):
1. DEFINITIONS. As used herein:
(A) "Advances" means loans to Borrower under this Agreement and
the Revolving Credit Loan Rider and evidenced by the Revolving Credit Note.
(B) "Collateral" means all of our (except as to ▇▇▇▇ ▇▇▇▇▇▇▇)
presently owned and hereafter acquired:
(i) accounts (whether or not earned by performance),
proceeds of any letter of credit naming us as a
beneficiary, chattel paper, contracts, contract
rights, instruments and documents (individually and
collectively referred to as "Accounts");
(ii) general intangibles (including, without limitation,
tax refunds, tax refund claims, trade names,
goodwill, trademarks, copyrights, processes,
patents, patent rights, patent applications,
licenses, inventories, royalties, and/or commission
and permits, choses-in-action) (individually and
collectively referred to as "Intangibles");
(iii) goods, merchandise and other personal property,
wherever located, to be furnished under any
contract of service or held for sale or lease, all
raw materials, work in process, finished goods and
materials and supplies of any kind, nature or
description which are or might be used or consumed
in our business or used in connection with the
manufacture, packing, shipping, advertising,
selling or finishing of such goods, merchandise and
other personal property including without
limitation such goods which give rise to any
Accounts or Intangibles and which goods have been
returned to or repossessed or stopped in transit by
us ("Inventory");
(iv) tangible goods (other than Inventory), equipment
and fixtures, including, without limitation, office
machines, computer equipment and accessories,
tools, dies, furniture, and vehicles together with
all accessions, parts and appurtenances thereto
appertaining or attached or kept or used or
intended for use in
connection therewith, and all substitutions,
renewals, improvements and replacements of and
additions thereto (sometimes hereinafter
individually and collectively referred to as
"Equipment");
(v) all other property now or at any time hereafter in
your possession (including monies, deposit
accounts, claims and credit balances); and
(vi) all interests in any lease of real property or
personal property, whether as a lessor or lessee,
including all options to purchase any leased
property, and all leasehold improvements;
(vii) all stock owned by Borrower in each Guarantor;
(viii) books, blueprints, drawings and records related to
any of the foregoing as described in subsection (i)
through (v) above;
and all proceeds (including proceeds of any insurance policies) and products of
and accessions to all the foregoing described property in which we may have any
right, title or interest.
(C) "Consignment Inventory" means inventory acquired under a
consignment agreement.
(D) "Default" shall have the meaning set forth in Paragraph of
this Agreement.
(E) "Guarantor" means each of the parties executing this
Agreement as so identified on the signature pages below. The Guarantors that are
corporate entities are also sometimes referred to as the "Corporate Guarantors"
(and each a "Corporate Guarantor").
(F) "Indebtedness" means all of our present and future
obligations, liabilities, debts, claims and indebtedness, contingent, fixed or
otherwise, however evidenced, created, incurred acquired, owing or arising,
whether under written or oral agreement, operation of law, or otherwise, and
includes, without limiting the foregoing (i) Obligations, (ii) obligations and
liabilities of any Person secured by a lien, claim, encumbrance, or security
interest upon property owned by us, even though we have not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including capitalized leases) or conditional sales contract or other
title retention agreement with respect to property used or acquired by us, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities, and
(v) deferred taxes.
(G) "Loan Account" means the account established and maintained
by Lender on its books and records for each of the Loans.
(H) "Loan Documents" means this Agreement, the Notes and all
other documents and instruments executed pursuant to or in connection with this
Agreement and the Loans.
(I) "Notes" means the Revolving Credit Note and the Term Loan
Note.
(J) "Obligations" means all present and future loans, advances,
debts, liabilities, obligations, covenants, duties and Indebtedness owing by us
to you, whether evidenced by any note, or other instrument or document, whether
arising from an extension of credit, opening of a letter of credit, loan,
guaranty, indemnification
-2-
or otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by you in our debts owing to
others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorneys' fees and any other
sums chargeable to us hereunder or under any other agreement with you,
including, without limitation, the Notes.
(K) "Obligor" means Borrower or any Guarantor of the Obligations,
individually or collectively.
(L) "Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, government, or any agency or political division thereof, or any
other entity.
(M) "Prime Rate" means the interest rate published from day to
day in the Wall Street Journal in its "Money Rates" column as the "Prime Rate."
Should such publication not continue to publish the Prime Rate or a substitute
rate, then Lender will select a comparable announced rate. The Prime Rate will
change at any time the "Prime Rate" changes. From and after an event of default
or maturity, interest will be at the Prime Rate, plus twelve (12.0%) percent.
(N) "Term Sheet" means the document attached to this Agreement
and to each Rider which contains other terms and conditions of this transaction.
(O) Any accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings customarily given to them in accordance with
generally accepted accounting principles.
(P) All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Uniform Commercial Code of
the state set forth in Paragraph ("Code") to the extent the same are defined
therein.
2. LOANS.
(A) Revolving Credit Loan; Loan Advances. You will establish a
revolving credit loan facility (the "Revolving Credit Loan") and, subject to the
terms of this Agreement, you may, in your sole discretion and upon our request,
make Advances to us from time to time, pursuant to the Revolving Credit Loan
Rider attached hereto and made a part hereof (the "Rider"). You may, in your
sole discretion and without notice to us, disburse any or all of the proceeds of
any or all of the Advances made by you to such person or persons as you deem
necessary to insure that the security interest in or lien upon the Collateral
shall at all times have the priority represented by us in this Agreement. You
may, in your sole discretion, at any time reduce the Percentage Advance Rate or
the Advance amounts set forth in any Rider. You may, from time to time,
reimburse yourself for any loan, interest due, fees or expenses, or any third
party for any of our Obligations by charging our Loan Account with you. You may
deduct from the Advances under this Agreement reserves for accrued interest and
such other reserves as you deem proper and necessary.
(B) Term Loan. You will loan to us at closing an amount in the
aggregate principal sum of $350,000.00 (the "Term Loan"), which shall be
evidenced by a Term Loan Note in form acceptable to Lender executed
simultaneously herewith.
(C) Promissory Notes. The Loans shall be evidenced by the Notes
executed by us simultaneously herewith, in form satisfactory to you, and shall
be payable at your principal place of business.
-3-
Interest and principal payable by us under the Notes shall be paid at the times,
in the amounts, on the terms and at the rates set forth in the Rider and the
Term Note. All amounts owing to you as evidenced by the Notes or otherwise shall
constitute part of the Obligations.
(D) Interest and Other Charges. We shall pay you interest on the
daily outstanding balance of the Notes at a rate determined by reference to the
Prime Rate set forth in the Rider and the Term Note. In no event whatsoever
shall the interest rate and other charges charged hereunder exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
the final determination, deem applicable hereto. In the event that a court
determines that you have received interest or other charges hereunder in excess
of the highest rate applicable hereto, you shall promptly, in your sole
discretion, either apply such amount to the Obligations or refund such amount to
us and the provisions herein shall be deemed amended to provide for such
permissible rate.
(E) Term. The Term of this Agreement and of Loans shall be on
demand, but if demand is not made, then no later than:
(i) Revolving Credit Loan. July 22, 1997 (the "First
Maturity Date"), except that Borrower shall have
the option to extend the Revolving Credit Loan on
the same terms and conditions to the Final Maturity
Date (as defined below) upon payment to Lender of
the sum of $5,000.00 as a loan extension fee, by
not later than the fifteenth (15th) calendar day
prior to the First Maturity Date, provided that no
Default shall have occurred and be continuing as of
the First Maturity Date;
(ii) Term Loan. October 20, 1997 (the "Final Maturity
Date").
(F) Monthly Accounting. You will provide us, monthly, with an
account of advances, charges and payments made pursuant to this Agreement. Such
account shall be deemed correct, accurate and binding upon us and an account
stated (except for reverses and reapplications of payments made as provided in
Paragraph hereof, and corrections or errors discovered by you), unless we notify
you in writing to the contrary within thirty (30) days after each account is
rendered.
3. COLLATERAL.
(A) Grant of Security Interest. As security for the Obligations,
Borrower and each Guarantor hereby grant you a continuing first priority
perfected security interest in the Collateral, except that such security
interest shall be subordinate in right of priority to any Inventory which is
consigned inventory under the Code ("Consignment Inventory"). We acknowledge
that nothing contained in this Agreement or in any Rider shall be (i) construed
as your agreement to resort or look to a particular type of Collateral as
security for any loan to us, or limit in any way your right to resort to any or
all of the Collateral as security for any of the Obligations, or (ii) deemed to
limit or reduce any security interest in or lien upon any portion of the
Collateral for the Obligations.
(B) Perfection of Security Interest; Protection of Security
Interest. We shall, at our expense, perform all steps reasonably requested by
you at any time to perfect, maintain, protect, and enforce your security
interest in the Collateral, including, without limitation, executing and filing
financing or continuation statements, and amendments thereof, in form and
substance satisfactory to you, delivering Uniform Commercial Code search reports
before and after closing, placing notations on our books of account to disclose
your security interest therein, and taking such other steps as are reasonably
deemed necessary by you to maintain your control
-4-
of and security interest in the Collateral, and delivering to you all letters of
credit on which we are named beneficiary. You may file, without our signature,
one or more financing statements disclosing your security interest under this
Agreement. We agree that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of our agents or processors, we shall
notify such person of your security interest in such Collateral and, upon your
request, instruct them to hold all such Collateral for your account subject to
your instructions. From time to time, we shall, upon your request, execute and
deliver confirmatory written instruments pledging to you the Collateral, but our
failure to do so shall not affect or limit your security interest or other
rights in and to the Collateral. Until all Obligations have been fully
satisfied, your security interest in the Collateral shall continue in full force
and effect.
4. GUARANTIES. As an inducement to Lender to enter into the transactions
contemplated by this Agreement, each Guarantor agrees with Lender as follows:
(A) Guarantee of Obligations.
(i) Each Guarantor hereby (x) guarantees, as principal
obligor and not as surety only, to Lender the prompt payment of the principal of
and any and all accrued and unpaid interest (including interest which otherwise
may cease to accrue by operation of any insolvency law, rule, regulation or
interpretation thereof) on the Advances and all other Obligations including the
Notes, of Borrower to Lender under this Agreement when due, whether by scheduled
maturity, acceleration or otherwise, all in accordance with the terms of this
Agreement and the Notes, including, without limitation, default interest,
indemnification payments and all reasonable costs and expenses incurred by
Lender in connection with enforcing the Obligations of Borrower hereunder,
including without limitation the reasonable fees and disbursements of counsel,
(y) guarantees the prompt and punctual performance and observance of each and
every term, covenant or agreement contained in this Agreement and the Note to be
performed or observed on the part of Borrower and (z) agrees to make prompt
payment, on demand, of any and all reasonable costs and expenses incurred by
Lender in connection with enforcing the obligations of the Guarantors hereunder,
including, without limitation, the reasonable fees and disbursements of counsel
(all of the foregoing being collectively referred to as the "Guaranteed
Obligations.")
(ii) If for any reason any duty, agreement or obligation
of Borrower contained in this Agreement shall not be performed or observed by
Borrower as provided therein, or if any amount payable under or in connection
with this Agreement shall not be paid in full when the same becomes due and
payable, each Guarantor undertakes to perform or cause to be performed promptly
each of such duties, agreements and obligations and to pay forthwith each such
amount to Lender regardless of any defense or setoff or counterclaim which
Borrower may have or assert, and regardless of any other condition or
contingency.
(B) Nature of Guaranty. The obligations of each Guarantor
hereunder constitute an absolute and unconditional and irrevocable guaranty of
payment and not a guaranty of collection and are wholly independent of and in
addition to other rights and remedies of Lender and are not contingent upon the
pursuit by Lender of any such rights and remedies, such pursuit being hereby
waived by each Guarantor.
(C) Waivers and Other Agreements. Each Guarantor hereby
unconditionally (i) waives any requirement that Lender, upon the occurrence of a
Default first make demand upon, or seek to enforce remedies against, Borrower or
any other Guarantor before demanding payment under or seeking to enforce the
obligations of any Guarantor hereunder, (ii) covenants that the obligations of
the Guarantors hereunder will not be discharged except by complete performance
of all obligations of Borrower contained in this Agreement and the Notes, (iii)
agrees that the obligations of the Guarantors hereunder shall remain in full
force and effect without regard to,
-5-
and shall not be affected or impaired, without limitation, by any invalidity,
irregularity or unenforceability in whole or in part of this Agreement, the
Notes or any security agreement ("Security Document"), or any limitation on the
liability of Borrower thereunder, or any limitation on the method or terms of
payment thereunder which may or hereafter be caused or imposed in any manner
whatsoever (including, without limitation, usury laws), (iv) waives diligence,
presentment and protest with respect to, and any notice of default or dishonor
in the payment of any amount at any time payable by Borrower under or in
connection with this Agreement or the Notes, and further waives any requirement
of notice of acceptance of, or other formality relating to, the obligations of
the Guarantors hereunder and (v) agrees that the Guaranteed Obligations shall
include any amounts paid by Borrower to Lender which may be required to be
returned to Borrower or any Guarantor or to any representative, trustee,
custodian or receiver for Borrower or any such Guarantor.
(D) Obligations Absolute. The obligations, covenants, agreements
and duties of the Guarantors under this Agreement shall not be released,
affected or impaired by any of the following whether or not undertaken with
notice to or consent of any Guarantor: (i) an assignment or transfer, in whole
or in part, of the Advances made to Borrower or of this Agreement or any Note
although made without notice to or consent of the Guarantors, or (ii) any waiver
by Lender or by any other person, of the performance or observance by Borrower
of any of the agreements, covenants, terms or conditions contained in this
Agreement, any Note or any Security Document, or (iii) any indulgence in or the
extension of the time for payment by Borrower of any amounts payable under or in
connection with this Agreement or any Note, or of the time for performance by
Borrower of any other obligations under or arising out of this Agreement or any
Note, or the extension or renewal thereof, or (iv) the modification, amendment
or waiver (whether material or otherwise) of any duty, agreement or obligation
of Borrower set forth in the Loan Documents (the modification, amendment or
waiver from time to time of the Loan Documents being expressly authorized
without further notice to or consent of any Guarantors), or (v) the voluntary or
involuntary liquidation, sale or other disposition of all or substantially all
of the assets of Borrower or any receivership, insolvency, bankruptcy,
reorganization, or other similar proceedings, affecting Borrower or any of its
assets, or (vi) the merger or consolidation of Borrower or any Guarantor with
any other person, or (vii) the release or discharge, by operation of law, of
Borrower or any Guarantor from the performance or observance of any agreement,
covenant, term or condition contained in the Loan Documents, or (viii) any other
cause whether similar or dissimilar to the foregoing which would release, affect
or impair the obligations, covenants, agreements or duties of the Guarantors
hereunder.
(E) No Investigation by Lender. Each Guarantor hereby waives
unconditionally any obligation which, in the absence of such provision, Lender
might otherwise have to investigate or to assure that there has been compliance
with the law of any jurisdiction with respect to the Guaranteed Obligations
recognizing that, to save both time and expense, each Guarantor has requested
that Lender not undertake such investigation. Each Guarantor hereby expressly
confirms that the obligations of such Guarantor hereunder shall remain in full
force and effect without regard to compliance or noncompliance with any such law
and irrespective of any investigation or knowledge of Lender of any such law.
(F) Indemnity. As a separate, additional and continuing
obligation, each Guarantor unconditionally and irrevocably undertakes and agrees
with Lender that, should the Guaranteed Obligations not be recoverable from the
Guarantors under Section for any reason whatsoever (including, without
limitation, by reason of any provision of this Agreement or the Notes or any
other agreement or instrument executed in connection herewith being or becoming
void, unenforceable, or otherwise invalid under any applicable law) then,
notwithstanding any knowledge thereof by Lender at any time, each Guarantor as
sole, original and independent obligor, upon demand by Lender, will make payment
to Lender of the Guaranteed Obligations by way of a full indemnity in such
currency and otherwise in such manner as is provided in this Agreement and the
Notes.
-6-
(G) Subordination, Subrogation, Etc. Each Guarantor agrees that
any present or future indebtedness, obligations or liabilities of Borrower to
any Guarantor shall be fully subordinate and junior in right and priority of
payment to any present or future indebtedness, obligations or liabilities of
Borrower to Lender. Each Guarantor waives any right of subrogation to the rights
of Lender against Borrower or any other person obligated for payment of the
Guaranteed Obligations and any right of reimbursement or indemnity whatsoever
arising or accruing out of any payment which any Guarantor may make pursuant to
this Agreement and the Notes, and any right of recourse to security for the
debts and obligations of Borrower, unless and until the entire principal balance
of and interest on the Guaranteed Obligations shall have been paid in full.
(H) Waiver. To the extent that it lawfully may, each Guarantor
agrees that it will not at any time insist upon or plead, or in any manner
whatsoever claim or take any benefit or advantage of any applicable present or
future stay, extension or moratorium law, which may affect observance or
performance of the provisions of the Loan Documents; nor will it claim, take or
insist upon any benefit or advantage of any present of future law providing for
the evaluation or appraisal of any security for its obligations hereunder or
those of Borrower under this Agreement and under the Notes prior to any sale or
sales thereof which may be made under or by virtue of any instrument governing
the same; nor will it, after any such sale or sales claim or exercise any right,
under any applicable law, to redeem any portion of such security so sold.
5. CHARGES AND INSURANCE.
(A) Charges. You may, in your discretion, at any time discharge
any lien or encumbrance on or against any of the Collateral, or bond the same,
pay any insurance, maintain guards, pay any service bureau, or obtain any record
and charge the cost thereof to our loan account.
(B) Insurance. At your request, we shall insure the Collateral in
your name against loss or damage by fire, theft, burglary, pilferage, loss in
transit and such other hazards as you shall specify in amounts, under policies
and by insurers acceptable to you. Each policy shall include a provision for
thirty (30) days prior written notice to you of any cancellation or substantial
modification and shall show you as mortgagee/secured party and loss payee in a
manner acceptable to you. All premiums shall be paid by us and the policies
shall be delivered to you. If we fail to do so, you may (but shall not be
required to) procure such insurance at our expense.
6. EXAMINATION OF RECORDS; REPORTING.
(A) Examination of Records. You may at all reasonable times have
access to, examine, audit, make extracts from and inspect our records, files,
books of account and the Collateral. We will deliver to you any instrument
necessary for you to obtain records from any service bureau maintaining records
for us. All instruments and certificates prepared by us showing the value of any
of the Collateral shall be accompanied, upon request, by copies of related
purchase orders and invoices. You may, at any time after default, remove from
our premises our books and records or require us to deliver them to you and you
may, without expense to you, use such of our personnel, supplies and premises as
may be reasonably necessary for maintaining or enforcing your security interest.
(B) Reporting. We shall furnish you, upon request, information
and statements showing our business affairs, financial condition and the results
of our operations, including, but not limited to, the following ("Reports"):
(i) a consolidated financial statement for Borrower and
the Corporate Guarantors, containing an income
statement and balance sheet, and an accounts
payable
-7-
aging, by the fifteenth (15th) day of each month
for the immediately preceding month, together with
a certification signed by an officer of Borrower in
form acceptable to Lender;
(ii) weekly updated perpetual inventory certifications
with a computer disk and a weekly accounts
receivable aging;
(iii) copies of all tax returns, including payroll
withholding, unemployment, sales and income, as and
when filed; and
(iv) as of July 31, 1997, Borrower shall at its expense
hire an independent inventory accounting service to
conduct a physical inventory of all Inventory and
promptly provide a written report prepared by said
inventory accounting service to Lender. Borrower
may, at its option, elect not to conduct a physical
inventory of its bookstore operations, in which
case Lender will reduce the Percentage Advance Rate
for non-▇▇▇▇▇▇ bookstore inventory from sixty
percent (60%) to no more than thirty percent (30%)
for the remaining term of the Revolving Credit
Loan.
7. OTHER LIENS. We represent and warrant that all Collateral, except
Consignment Inventory, is and will continue to be owned by us free and clear of
all liens, claims and encumbrances whatsoever, whether prior or subordinate to
the liens we have granted you and that we will not, without your prior written
approval, which may be withheld in your sole discretion, sell, encumber or
dispose of or permit the sale, encumbrance or disposal of any Collateral, except
for sales of Inventory in the ordinary course of business.
8. GENERAL WARRANTIES AND REPRESENTATIONS.
We warrant and represent that:
(A) We are each duly organized and existing in good standing
under the laws of our respective states of incorporation set forth on Schedule
8(a), are qualified to do business and are in good standing in all states in
which qualification and good standing are necessary in order for us to conduct
our business and own our property and have all requisite power and authority to
conduct our business, to own our property and to execute, deliver and perform
all of our Obligations;
(B) We have not, during the preceding five (5) years, been known
by or used any other Assumed Names or Trade Names other than as set forth on
Schedule 8(B);
(C) The execution, delivery and performance by us of this
Agreement will not constitute a violation of any applicable law or of our
Articles or Certificate of Incorporation, By-Laws or Code of Regulations or any
agreement, or document to which we are a party or bound (except with respect to
the assignments delivered pursuant to Paragraph and );
(D) We possess adequate assets, licenses, patents, patent
applications, copyrights, trademarks, trademark applications, and tradenames for
the conduct of our business;
(E) We have capital sufficient to conduct our business, are
solvent and able to pay our debts as they mature and own property having a fair
value greater than the amount required to pay our debts;
-8-
(F) Except for trade payables arising in the ordinary course of
our business and except as heretofore disclosed to you in writing or herein, we
have (i) no pending or threatened litigation, actions or proceedings which would
materially and adversely affect our business assets, operations or condition,
financial or otherwise, or the Collateral and (ii) no Indebtedness, other than
the Obligations;
(G) We have good, indefeasible, and merchantable title to the
Collateral, and there is no lien or encumbrance thereon other than the security
interest granted to you, except as set forth on Schedule 8(G) attached and as
permitted by Paragraph ;
(H) We are not a party to any contract, or subject to any charge,
corporate restriction, judgment, decree or order materially and adversely
affecting our business, assets, operations or condition, financial or otherwise,
and are not subject to any labor dispute; and, no labor contract is scheduled to
expire during the term of this Agreement, except as heretofore disclosed to you
in writing;
(I) We are not in violation of any applicable statute, regulation
or ordinance, in any respect materially and adversely affecting the Collateral
or our business, assets, operations or condition, financial or otherwise;
(J) Except with respect to the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ note, and as
otherwise disclosed in Schedule 8(J), we are not in default beyond any
applicable grace period with respect to any note, indenture, loan agreement,
mortgage, lease, deed or other agreement to which we are a party or bound;
(K) The financial statements delivered to you fairly present our
financial condition and results of operations and those of such other Persons
described therein as of the date thereof; and there has been no material and
adverse change in such financial condition or operations since the date of the
statements;
(L) we have received no notice that we are not in full compliance
with any of the requirements of the Employee Retirement Income Security Act of
1974, as amended, ("ERISA") and its regulations and, to the best of our
knowledge, there exists no event described in Section 4043 of ERISA, excluding
subsections 4043(b)(2) and 4043(b)(3) thereof, with respect to us;
(M) We have filed all tax returns and other reports we are
required by law to file and have paid all taxes and similar charges that are due
and payable;
(N) Our Chief Executive Office, Principal Place of Business
and the Location of Collateral Records is at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇;
(O) We have not received any notice alleging and are not aware of
any facts indicating noncompliance with any State or Federal law governing the
use, generation, storage or release of any hazardous waste or substance;
(P) We have no Subsidiaries or Affiliates other than as set forth
on Schedule 8(A). For each subsidiary or affiliate shown on Schedule 8(A) the
Collateral and chief executive office of each such subsidiary or affiliate are
as set forth on Schedule 8(P);
(Q) We own all properties on which Collateral is located other
than the Leased Properties set forth on Schedule 8(P); and
-9-
(R) All Collateral which is tangible personal property is kept
only at the locations set forth on Schedule 8(P);
(S) Schedule 8(A) hereto correctly sets forth the corporate name,
jurisdiction of incorporation and ownership of Borrower and each Corporate
Guarantor ("Subsidiary"). Each such Subsidiary and each corporation becoming a
Subsidiary of Borrower or any Guarantor after the date hereof is and will be a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and is and will be duly qualified to do
business in each additional jurisdiction where such qualification is or may be
necessary under applicable law. Each Subsidiary of Borrower and each Corporate
Guarantor has and will have all requisite corporate power to own or lease the
properties used in its business and to carry on its business as now being
conducted and as proposed to be conducted. All outstanding shares of capital
stock of each class of each Subsidiary of Borrower and each Corporate Guarantor
have been and will be validly issued and are and will be fully paid and
nonassessable and are and will be owned, beneficially and of record, by Borrower
or such Corporate Guarantor, or another Subsidiary of Borrower or such Corporate
Guarantor, free and clear of any Liens;
(T) Borrower will use the proceeds of the Advances and the Term
Loan for its general corporate purposes and to repay in full at closing all
amounts owed to Bank One, Columbus, N.A. Neither Borrower nor any Corporate
Guarantor nor any of their respective Subsidiaries extends or maintains, in the
ordinary course of business, credit for the purpose, whether immediate,
incidental, or ultimate, of buying or carrying margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of any Advance will be used for the purpose, whether
immediate, incidental, or ultimate, of buying or carrying any such margin stock
or maintaining or extending credit to others for such purpose. After applying
the proceeds of each Advance, such margin stock will not constitute more than
25% of the value of the assets (either of Borrower or any Corporate Guarantor
alone or of Borrower and the Corporate Guarantors and their respective
Subsidiaries on a consolidated basis) that are subject to any provisions of this
Agreement or any Security Document that may cause the Advances to be deemed
secured, directly or indirectly, by margin stock;
(U) No report or other information furnished in writing by or on
behalf of Borrower or any Guarantor to Lender in connection with the negotiation
or administration of this Agreement contains any material misstatement of fact
or, when considered together with Borrower's filings with the SEC and all other
information so furnished to Lender, omits to state any material fact or any fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which they were made. Neither this Agreement, the Notes,
the Security Documents nor any other document, certificate, or report or
statement or other information furnished to Lender by or on behalf of Borrower
or any Guarantor in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or, when considered together
with Borrower's filings with the SEC and all other information so furnished to
Lender, omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading in light of the circumstances in
which they were made. There is no fact known to Borrower or any Guarantor which
materially and adversely affects, or which in the future may (so far as Borrower
or any Guarantor can now foresee) materially and adversely affect, the business,
properties, operations or condition, financial or otherwise, of Borrower, any
Guarantor or any of their respective Subsidiaries, which has not been set forth
in this Agreement or in the other documents, certificates, statements, reports
and other information furnished in writing, including Borrower's 1996 Form 10-K
filing with the SEC, to Lender by or on behalf of Borrower or the Guarantors in
connection with the transactions contemplated hereby;
(V) Borrower and the Guarantors are engaged as an integrated
group in the sale of (i) books and periodicals and (ii) cookware, through
various retail stores located in shopping malls in Ohio, Indiana and Kentucky.
The integrated operation requires financing on such a basis that credit supplied
can be made available from time to time to Borrower and the Guarantors, as
required for the continued successful operation of Borrower
-10-
and the Guarantors and the integrated operation as a whole, and Borrower and the
Guarantors have requested Lender to make credit available to Borrower primarily
for the purpose of financing the integrated operation of Borrower and
Guarantors, with each of Borrower and Guarantors expecting to derive benefit,
directly or indirectly, from the credit extended by Lender, both in its separate
capacity and as a member of the integrated group, inasmuch as the successful
operation and condition of each of Borrower and the Guarantors is dependent upon
the continued successful performance of the functions of the integrated group as
a whole;
(W) Each of Borrower and the Guarantors is solvent, able to pay
its Indebtedness as it matures, and has capital sufficient to carry on its
business and all businesses in which it is about to engage, and the present fair
saleable value of the assets of each of Borrower and each such Guarantor is
greater than the amount of Borrower's or such Guarantor's, as the case may be,
Indebtedness. Borrower and the Guarantors on a consolidated basis are solvent,
able to pay their Indebtedness as it matures, and have capital sufficient to
carry on their business and all businesses in which they are about to engage,
and the present fair saleable value of their assets on a consolidated basis is
greater than the amount of their Indebtedness on a consolidated basis.
9. CONDITIONS TO OBLIGATIONS OF LENDER.
(A) Conditions for Closing. The obligation of Lender to close the Loans
hereunder is subject to receipt by Lender of the following documents, fully
executed, and completion of the following matters, in form and substance
satisfactory to Lender:
(i) Charter Documents. Certificates of recent date of the
appropriate authority or official of Borrower's and each Guarantor's respective
state of incorporation (listing all charter documents of Borrower and each
Guarantor, respectively, on file in that office if such listing is available)
certifying as to the good standing and corporate existence of Borrower and each
Guarantor, respectively, together with copies of such charter documents of
Borrower and each Guarantor, certified as of a recent date by such authority or
official and certified as true and correct as of the Effective Date by a duly
authorized officer of Borrower and each such Guarantor, respectively;
(ii) By-Laws and Corporate Authorizations. Copies of the by-laws
of Borrower and each Guarantor together with all authorizing resolutions and
evidence of other corporate action taken by Borrower and each Guarantor to
authorize the execution, delivery and performance by Borrower and each Guarantor
of the Loan Documents to which Borrower and such Guarantor, respectively, is a
party and the consummation by Borrower and such Guarantor, respectively, of the
transactions contemplated hereby, certified as true and correct as of the
Effective Date by a duly authorized officer of Borrower and each Guarantor,
respectively;
(iii) Incumbency Certificates. Certificates of incumbency of
Borrower and each Guarantor containing, and attesting to the genuineness of, the
signatures of those officers authorized to act on behalf of Borrower and such
Guarantor in connection with the Loan Documents to which Borrower or such
Guarantor is a party and the consummation by Borrower and such Guarantor of the
transactions contemplated hereby, certified as true and correct as of the
Effective Date by a duly authorized officer of Borrower and each such Guarantor,
respectively;
(iv) Notes. The Revolving Credit Note and Term Note duly
executed on behalf of Borrower;
(v) Security Documents. This Loan and Security Agreement duly
executed on behalf of Borrower and each Guarantor granting to Lender, as
collateral security for the Indebtedness, the Collateral intended to be provided
pursuant to Section , together with the following in fully executed form:
-11-
a. Recording, Filing, Etc. Evidence of the
recordation, filing and other action (including
payment of any applicable taxes or fees) in such
jurisdictions as Lender may deem necessary or
appropriate with respect to any Security Interest,
including the filing of financing statements and
similar documents which Lender may deem necessary
or appropriate to create, preserve or perfect the
liens, security interests and other rights intended
to be granted to Lender thereunder, together with
Uniform Commercial Code record searches in such
offices as Lender may request;
b. Leased Property, Landlord Waivers. Assignments by
each lessee of all real property leases of Borrower
and each Guarantor, together with copies of the
related leases, certified as true and correct as of
the date hereof by a duly authorized officer of
Borrower, and an agreement of each landlord under
such leases, if obtainable based on Borrower's best
efforts, in form and substance acceptable to
Lender, waiving its distraint, lien and similar
rights with respect to any property subject to any
Security Interest and agreeing to permit Lender to
enter such premises in connection therewith;
provided that each such agreement of the landlords
may be provided to Lender not later than 30 days
after the Effective Date, provided further that
failure to obtain such consents shall not
constitute a Default;
c. Assignments of License Agreements. Assignments of
all license agreements between Little Professor
Book Centers, Inc. and any Guarantor in form
acceptable to Lender.
d. Assignments of Trademarks. Assignments of all
United States registered trademarks in a form which
will be accepted for filing or recording with the
United States Patent and Trademark Office.
e. Real Estate Mortgage; Title Insurance. ▇▇▇▇ ▇▇▇▇▇▇▇
shall cause to be executed and delivered to Lender
a Real Estate Mortgage (the "Mortgage") in form
acceptable to Lender granting a third priority
mortgage lien on the residence of ▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇ (the "Property") as security for the Term
Loans together with a marked-up commitment for a
mortgagee's policy of title insurance from First
American Title Insurance Company through its agent
Midland Title Security, Inc. so insuring the
Mortgage. ▇▇▇▇ ▇▇▇▇▇▇▇ shall not permit the amount
outstanding under all indebtedness and any liens or
charges of any kind against the Property, except
for real property taxes that are not delinquent
which are senior in priority to the Mortgage
("Senior Liens") to at any time exceed the sum of
Two Hundred Twenty-Five Thousand and 00/100 Dollars
($225,000.00). ▇▇▇▇ ▇▇▇▇▇▇▇ represents that all
Senior Liens and the amount owed to each holder of
a Senior Lien as of the date hereof are as set
forth on Schedule 9(A)(v)(e)
f. Casualty and Other Insurance. Evidence that the
casualty and other insurance required pursuant to
Section of this Agreement is in full force and
effect;
-12-
(vi) Closing Certificate. A closing certificate in form
acceptable to Lender duly executed by the chief financial officer of Borrower
and each Guarantor;
(vii) Turnaround Agreement. The Turnaround Agreement (as
defined below).
(viii) Legal Opinions. The favorable written opinion of counsel
for Borrower and each Guarantor with respect to such matters as Lender may
reasonably request;
(ix) Consents, Approvals, Etc. Copies of all governmental and
nongovernmental consents, approvals, authorizations, declarations, registrations
or filings, if any, required on the part of Borrower or any Guarantor in
connection with the execution, delivery and performance of the Loan Documents or
the transactions contemplated hereby or as a condition to the legality, validity
or enforceability of the Loan Documents, certified as true and correct and in
full force and effect as of the Effective Date by a duly authorized officer of
Borrower, or, if none is required, a certificate of such officer to that effect;
(x) Fee. The balance of the Commitment Fee in the amount of
Fifty Thousand and 00/100 Dollars ($50,000.00).
(xi) Payoff Letters and Lien Terminations. Payoff letters from
Bank One, Columbus, N.A. addressed to Lender, in form and substance acceptable
to Lender, together with UCC financing statement terminations and other
documents and instruments necessary or reasonably desired by Lender to effect
and evidence the release and discharge of all liens and security interests of in
their favor with respect to property of Borrower and the Guarantors.
(xii) Debt Extinguishment. Borrower shall use the proceeds of
the Loans disbursed at Closing to retire and extinguish the Debt as set forth on
the Debt Extinguishment Schedule attached hereto as Schedule 9(A)(xii).
(xiii) Subordination Agreement. A subordination agreement
executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually and as trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Family Trust FBO ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Family Trust FBO
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("Creditor"), Borrower and Lender subordinating all
indebtedness of Borrower to said Creditor to the Loans in all respects in form
acceptable to Lender.
(xiv) Other Matters. Such other documents, and completion of
such other matters, as Lender may reasonably request.
(B) Further Conditions for Disbursement. The obligation of Lender to
make any Advance (including the first Advance) is further subject to the
satisfaction of the following conditions precedent:
(i) The representations and warranties contained in Section
hereof and in any of the Loan Documents shall be true and correct on and as of
the date such Advance is made (both before and after such Advance is made) as if
such representations and warranties were made on and as of such date;
(ii) No Default shall exist or shall have occurred and be
continuing on the date such Advance is made (whether before or after such
Advance is made); and
-13-
(iii) In the case of any Advance under the Revolving Credit Loan,
Lender shall have received, when due, all Reports required pursuant to Section
6(B) as of the close of business on the last business day of the week next
preceding the date such Advance is made.
Borrower shall be deemed to have made a representation and warranty to Lender at
the time of the making of, and the continuation or conversion of, each Advance
to the effects set forth in clauses (A) and (B) of this Section . For purposes
of this Section , the representations and warranties contained in Section hereof
shall be deemed made with respect to both the financial statements referred to
therein and the most recent financial statements delivered pursuant to Section
6.
10. AFFIRMATIVE COVENANTS. We covenant that, so long as any
Obligations remain outstanding and this Agreement is in effect, we shall:
(A) Pay to you on demand all fees and expenses which you incur in
connection with (i) the forwarding of loan proceeds, (ii) the processing of loan
advances, (iii) the establishment and maintenance of the lock box and of all
other accounts created in connection with the transaction contemplated hereby,
and (iv) examination of the Collateral;
(B) Promptly file all tax returns and other reports which we are
required to file and promptly pay all taxes, assessments and other charges,
except as are contested in good faith and for which adequate reserves are
established and maintained;
(C) Promptly notify you in writing of any litigation affecting
us, whether or not the claim is covered by insurance, and of any suit or
administrative proceeding which may materially and adversely affect the
Collateral or our business, assets, operations or condition, financial or
otherwise;
(D) Notify you in writing (i) promptly upon the occurrence of any
event described in Section 4043 of ERISA, other than a termination, partial
termination or merger of a "Plan" (as defined in ERISA) or a transfer of a
Plan's assets, and (ii) prior to any termination, partial termination or merger
of a Plan or a transfer of a Plan's assets;
(E) Give you thirty (30) days prior written notice of our
opening or closing any place of business;
(F) Maintain our corporate existence and our qualification and
good standing in all states necessary to conduct our business and own our
property and maintain adequate assets, licenses, patents, copyrights, trademarks
and tradenames to conduct our business;
(G) Promptly notify you in writing of any labor dispute to which
we are or may become subject and the expiration of any labor contract to which
we are a party or bound;
(H) Promptly notify you in writing of any violation of any law,
statute, regulation or ordinance of any governmental entity, or of any agency
thereof, applicable to us which may materially and adversely affect the
Collateral or our business, assets, operations or condition, financial or
otherwise;
(I) Notify you in writing within five (5) business days of our
default beyond any applicable cure period under any note, indenture, loan
agreement, mortgage, lease, or other agreement to which we are a party or bound
-14-
(J) Promptly notify you in writing of any default beyond any
applicable cure period under any Indebtedness or indebtedness owing to us;
(K) Promptly notify you in writing of the making of any capital
expenditures materially affecting our business, assets, operations or
conditions, financial or otherwise;
(L) Execute and deliver to you, upon request, such documents and
agreements as you may, from time to time, reasonably request to carry out the
terms and conditions of this Agreement;
(M) Promptly, and in any event within five (5) days of the
receipt thereof, deliver any communication in any way concerning any act or
omission on our part regarding the use, generation, storage or release of a
hazardous waste or substance. We agree to indemnify and hold you harmless from
any and all loss, damage, cost, liability or expense (including reasonable
attorney fees) arising out of our use, generation, storage or release of any
hazardous waste or substance;
(N) Promptly, and in any event within five (5) days of the
receipt thereof, deliver to you a copy of any communication from the Federal
Department of Labor concerning any alleged wrongful act or omission on our part
in connection with the payment of minimum and/or overtime wages to an employee;
(O) Promptly, and in any event within five (5) days of the
receipt thereof, deliver to you a copy of any communication concerning any
violation of a state or Federal law which could result in the forfeiture of the
Collateral;
(P) Maintain the liens and security interests granted to you as
first, prior and only liens upon the Collateral, except as permitted under
Paragraph ; and
(Q) Cause the Corporate Shares (as defined in the Turnaround
Agreement) to be endorsed with a written legend disclosing the irrevocable proxy
provided for therein and provide Lender written certification thereof within 10
business days of the date hereof.
11. NEGATIVE COVENANTS. Without your prior written consent, we
covenant that, so long as any Obligations remain outstanding and this Agreement
is in effect, we shall not:
(A) Merge or consolidate with or acquire any other Person;
(B) Declare or pay cash dividends upon any of our stock (except
$9,000 per quarter on preferred stock) or distribute any of our property or make
(except in the ordinary course of business) any loans or extensions of credit,
or investments in, any Person, or redeem, retire, purchase or acquire, directly
or indirectly any of our stock, or make any material change in our capital
structure or in our business or operations which might adversely affect the
repayment of the Obligations or issue any capital stock except as permitted by
the Turnaround Agreement;
(C) Enter into any transaction which materially and adversely
affects the Collateral or our ability to repay the Obligations;
(D) Become liable for the indebtedness of any Person, except
by endorsement of instruments for deposit;
-15-
(E) Incur Indebtedness, other than trade payables arising in the
ordinary course of our business, and the Obligations;
(F) Make a sale to any customer on a ▇▇▇▇-and-hold, guaranteed
sale, sale and return, sale on approval, consignment, or any other repurchase or
return basis;
(G) Remove the Collateral which is tangible personal property
from the Collateral Locations set forth on Schedule 8(P) unless we give you
thirty (30) days prior written notice and the same is removed to a location
within the continental United States of America;
(H) Use any other corporate or fictitious name;
(I) Pay any Indebtedness, other than the Obligations and trade
payables, or as otherwise permitted hereunder;
(J) Pay salaries, bonuses or commissions to any person named on
Schedule 11(J) in excess of the amounts set forth thereon;
(K) Pay any Indebtedness to any of the persons named on Schedule
11(K);
(L) Permit Consolidated Equity and Subordinated Debt to be less
than Five Hundred Thousand and 00/100 Dollars ($500,000.00). Consolidated Equity
and Subordinated Debt hereinabove shall mean the equity and all subordinated
indebtedness of Borrower and all Corporate Guarantors on a combined basis as set
forth on the monthly financial statement required to be delivered to Lender
pursuant to Paragraph ;
(M) Create, assume or otherwise suffer to exist any mortgage,
lien or other encumbrance of any kind against the Collateral, without Lender's
prior written approval, except for miscellaneous liens which arise in the
ordinary course of business, such as landlord liens, liens for taxes not due and
payable and similar miscellaneous liens, provided that the related obligation is
paid when due and the related lien is thereupon discharged; or
(N) Sell, assign or transfer any of the Subsidiary Shares (as
defined in the Turnaround Agreement) or any other voting securities of the
Subsidiaries to any person other than Borrower.
12. TURNAROUND PLAN.
(A) Implementation by Borrower. Borrower acknowledges and agrees
that it has experienced financial difficulties as a result of an overhead
structure designed to accommodate significant expansion in the number of its
retail bookstore and cookstore operations. Borrower agrees that if it is unable
to find replacement financing and expansion capital by the Maturity Date (the
Initial Maturity, or, if the Initial Maturity Date has been extended, the Final
Maturity Date), then Borrower must immediately implement a turnaround plan to
reduce costs and increase operational efficiencies so as to reestablish
profitability ("Turnaround Plan").
(B) Turnaround Agreement and Irrevocable Proxy. In consideration
of the making of the Loans by Lender under these circumstances, Borrower, the
Corporate Guarantors and the controlling shareholders of Borrower have agreed
that a Turnaround Plan must be implemented if Lender is not paid in full on the
Maturity Date and have evidenced this agreement in a Turnaround Agreement and
Irrevocable Proxy of even date herewith (the "Turnaround Agreement") (which has
been delivered in escrow to Lender's counsel), pursuant to which the
-16-
Borrower agrees to engage the professional turnaround consulting services of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Associates of Troy, Michigan (the "Consultant") commencing
on, or at Borrower's option, prior to the Maturity Date, and implementing the
recommendations of the Consultant.
To assure Lender that Borrower will implement the Turnaround Plan
by engaging the Consultant and implementing his recommendations, the controlling
shareholders of Borrower and Borrower have executed and delivered the Turnaround
Agreement to Lender's counsel in escrow. In the event of a Default under this
Agreement, Lender may, at its option, elect to demand delivery from its counsel
of the Turnaround Agreement out of escrow to Lender and vote the shares of stock
of Borrower so as to cause Borrower to implement the Turnaround Plan, including
all other reasonable and necessary actions incident thereto.
(C) Indemnification. Borrower and each Guarantor hereby agree to
indemnify and hold Lender harmless from and against all claims, actions, causes
of action, demands, obligations, liabilities, losses, costs and expenses in
connection with, on account of, or in any way relating to or arising out of
Lender's exercise of its rights under the Turnaround Agreement and Irrevocable
Proxy.
13. TERMINATION. Either party shall have the right to terminate this
Agreement at the end of the Term of this Agreement or at any time thereafter by
giving the other party written notice by registered or certified mail, which
termination shall be effective upon receipt. Upon the effective date of
termination, all Obligations shall become immediately due and payable. This
Agreement shall also terminate upon payment in full of all Obligations at any
time, which payment may be made without premium or penalty at any time.
14. DEFAULT. Any one or more of the following events shall constitute a
default ("Default") under this Agreement: (a) we shall fail to pay when due, or
breach, any Obligations, or (b) Obligor shall (i) become insolvent, (ii)
generally not pay its respective debts as they become due, (iii) make an
assignment for the benefit of creditors, (iv) attempt to enter into a
composition of debts, or (v) make any material misrepresentation to you or fail
to observe or perform in any material respect any covenants or conditions in
connection with this Agreement, any Rider or any other instrument related to the
Loan hereto, or (c) there shall be filed by or against any Obligor a petition in
bankruptcy for liquidation or for reorganization, or a custodian, receiver or
agent is appointed or authorized to take charge of its properties, or any
Obligor authorizes any such action, or (d) there hereafter occur any material
and adverse change in the business, assets, operations and condition, financial
or otherwise, of any Obligor, or (e) any Obligor shall be in default beyond any
applicable cure period under any agreement to which it is a party, or (f) any
guaranty of the Obligations shall be terminated or revoked.
Obligor acknowledges that while there are events of default set forth,
the Indebtedness is due upon demand, and if demand is not made, then upon the
First Maturity Date or the Final Maturity Date, as applicable. Demand may occur
with or without there being an event of default.
15. YOUR RIGHTS AND REMEDIES.
(A) If a Default occurs under this Agreement, or any Rider or any
other document or instrument executed by the undersigned or any Guarantor, you
may, at your election, without notice of your election and without demand, do
any one or more of the following: (a) declare our Obligations, whether evidenced
by a revolving credit note, a term note or otherwise, to be immediately due and
payable; (b) stop advancing money or extending credit to or for our benefit
under the Agreement or any Rider; (c) exercise any and all of the rights
accruing to a secured party under the Code and any other applicable law; (d)
take possession of the Collateral and keep it on our premises, at no cost to
you, or remove any part of it to such other place(s) as you may desire or we
-17-
shall, upon your demand, at our cost, assemble the Collateral and make it
available to you at a place reasonably convenient to you; (e) exercise your
rights under the Turnaround Agreement.
(B) You may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at such prices and upon such terms as
you deem commercially reasonable, at your discretion, and may, if you deem it
reasonable, postpone or adjourn any sale of the Collateral by an announcement at
the time and place of sale of such postponed or adjourned sale without giving a
new notice of sale. We agree that you have no obligation to preserve rights to
the Collateral or ▇▇▇▇▇▇▇▇ any Collateral for the benefit of any Person. You are
hereby granted a license or other right to use, without charge, our labels,
patents, copyrights, name, trade secrets, trade names, trademarks and
advertising matter, or any similar property, in completing production,
advertising or selling any Collateral and our rights under all licenses and all
franchise agreements shall inure to your benefit. Any requirement of reasonable
notice shall be met if such notice is mailed postage prepaid to us at our
address set forth below at least five (5) business days before sale or other
disposition. The proceeds of sale shall be applied first to all expenses of
sale, including attorneys' fees, and second to (in whatever order you elect) all
Obligations. You will return any excess to us and we shall remain liable for any
deficiency.
(C) IN THE EVENT OF A DEFAULT HEREUNDER, WE HEREBY WAIVE ALL
RIGHTS TO NOTICE AND HEARING PRIOR TO THE EXERCISE BY YOU OF YOUR RIGHTS TO
REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY
UPON SUCH COLLATERAL WITHOUT NOTICE OR HEARING AND ALL RIGHTS OF SET-OFF AND
COUNTERCLAIM AGAINST YOU.
16. BANKRUPTCY PROVISIONS. In consideration of the agreements of Lender
hereunder and under the Loan Documents, Borrower and Corporate Guarantors each
agree that, in the event any one or more of them (as a "Debtor" or "Debtors")
files for relief under Title 11 of the United States Code ("Bankruptcy Code") or
is otherwise subject to an order for relief under the Bankruptcy Code.
(A) Relief From Stay. Lender shall be entitled to relief from the
automatic stay imposed by Bankruptcy Code Section 362 on or against the exercise
of any and all rights and remedies otherwise available to Lender under this
Agreement, the Loan Documents or applicable law, if Debtor fails to file a Plan
of Reorganization within 120 days or fails to obtain confirmation of a Plan of
Reorganization within 180 days, after entry of the order for relief. Borrower
specifically acknowledges that "cause" exists for such relief within the meaning
of Section 362(d) of the Bankruptcy Code.
(B) Cash Collateral. Any attempt by Debtor to use "Cash
Collateral" (as defined in Section 363 of the Bankruptcy Code) shall be subject
to the prior entry of an order pursuant to Section 363 of the Bankruptcy Code
("Cash Collateral Order") specifically incorporating the principal terms set
forth on Schedule 16(B) attached hereto and Borrower shall under no
circumstances seek to use Cash Collateral other than on the terms provided in
this Agreement. Any such Cash Collateral Order shall permit the use of Cash
Collateral only until the earliest to occur of: (i) a Default under any of the
provisions of this Agreement or the Loan Documents (other than a Default
occasioned solely by the bankruptcy of Debtor), (ii) the appointment of a
Chapter 11 trustee or examiner in Debtor's case, (iii) the dismissal of Debtor's
case or its conversion to a case under Chapter 7 of the Bankruptcy Code, or (iv)
the entry of an order modifying or terminating the automatic stay or prohibiting
the further use of cash collateral. Upon the occurrence of any of the events
described in (i) through (iv) of the preceding sentence, Debtor's ability to use
Cash Collateral shall terminate immediately and automatically; such termination
shall not, however, affect or impair the rights, interests or liens granted to
Lender under this Agreement or the other Loan Documents.
-18-
All existing and future revenue and cash shall constitute Cash
Collateral, subject to Lender's ▇▇▇▇▇▇, fully perfected and presently
enforceable liens and security interests, and, to the extent they are used and
consumed by Debtor after filing of the petition or entry of the order for
relief, Debtor specifically agrees that they are collateral for Lender's secured
claims under Section 506 of the Bankruptcy Code in the amount so used.
To the extent it is determined that Section 552(a) of the Bankruptcy
Code applies to limit Lender's interest under the Loan Documents and this
Agreement Lender shall be deemed to have, as adequate protection for the use of
Cash Collateral, a continuing perfected protection for the use of Cash
Collateral, a continuing perfected post-bankruptcy lien and security interest in
all Collateral, and all revenue and cash, whether derived from operations prior
to or subsequent to or the filing of a voluntary of involuntary petition for
relief with respect to Debtor. As further adequate protection for Debtor's use
of Cash Collateral, Debtor shall maintain at all times an adequate and
appropriate amount and type of coverage of insurance, including endorsements
issued therewith covering the Collateral in amounts not less than that required
under the Loan Documents. To the extent that the collateral securing Lender's
claims in Debtor's bankruptcy case is deemed or proves to be insufficient to pay
Lender's claims in full, Lender's secured claims shall be deemed to have been
inadequately protected by the provisions of the Cash Collateral Order, and they
shall therefore have administrative expenses of the kind specified in Sections
503(b) and 507(b) of the Bankruptcy Code, which superpriority shall be equal to
the priority provided under the provisions of Section 364(c)(1) of the
Bankruptcy Code over all other costs and administrative expenses incurred in the
case of the kind specified in, or ordered pursuant to, Sections 105, 326, 327,
330, 331, 503(b), 506(c), 507(a), 507(b) or 726 of the Bankruptcy Code and shall
at all times be senior to the rights of Debtor or any successor trustee in the
resulting bankruptcy proceeding or any subsequent proceeding under the
Bankruptcy Code.
During the pendency of Debtor's bankruptcy, if it is determined that any
of the rights granted hereunder or by any of the Loan Documents are security
interests or liens, they shall be deemed perfected without the necessity of the
filing of any documents or commencement of proceedings otherwise required under
non-bankruptcy law for the perfection of security interests, with such
perfection being binding upon any subsequently appointed trustee, either in
Chapter 11 or under any other Chapter of the Bankruptcy Code, and upon other
creditors of Borrower who have or may hereafter extend secured or unsecured
credit to Debtor.
(C) Surcharge Waiver. Debtor and/or any other representative
of Debtor's bankruptcy estate waives any right to seek a surcharge of Lender's
collateral under 11 U.S.C. ss. 506(c) or any other provision of applicable law.
(D) Other Waivers. Borrower waives any right to seek an order
under 11 U.S.C. ▇▇.▇▇. 363, 364, 1129 or any other provision of the Bankruptcy
Code, imposing liens or security interests of senior or equal priority with the
liens and security interests of Lender in the Collateral or the Cash Collateral.
(E) Other Actions Not Prohibited. Nothing contained in this
Section shall be deemed to limit or restrict Lender's rights to seek in the
bankruptcy court any relief that Lender and the applicable Agent under the
applicable Loan may deem appropriate in the event of a bankruptcy commenced by
or against Borrower or any Corporate Guarantor, and in particular, Lender shall
be free to seek the dismissal or conversion of any case filed by Borrower or any
Corporate Guarantor, the appointment of a trustee or examiner, and relief from
the automatic stay.
17. WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS. Your failure to
exercise any right, remedy or option under this Agreement or any Rider or other
agreement between you and us or delay by you in exercising the same will not
operate as a waiver. No waiver by you will be effective unless in writing and
then only to the extent stated. No waiver by you shall affect your right to
require strict performance of this Agreement.
-19-
Your rights and remedies will be cumulative and not exclusive. This Agreement
cannot be changed or terminated orally. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind your
and our respective representatives, successors and assigns.
18. MISCELLANEOUS.
(A) If any provision of this Agreement shall be prohibited or
invalid, under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.
(B) This Agreement shall be interpreted in accordance with the
Governing Law of the State Michigan.
(C) All of our representations and warranties contained in this
Agreement shall survive the execution, delivery and acceptance thereof by the
parties.
(D) No termination of this Agreement or of any guaranty of the
Obligations shall affect or impair the powers, obligations, duties, rights,
warranties, representations or liabilities of the parties hereto and all shall
survive such termination.
(E) Each Obligation may, in your discretion, be evidenced by
notes or other instruments issued or made by us to you. If not so evidenced,
such Obligation shall be evidenced solely by entries upon your books and
records.
(F) All Obligations shall constitute one loan secured by the
Collateral. You may, in your sole discretion: (i) exchange, enforce, waive or
release any of the Collateral or (ii) apply Collateral and direct the order or
manner without affecting your right to take any other action with respect to any
other Collateral.
(G) You shall have the continuing and exclusive right to apply or
reverse and re-apply any and all payments to any portion of the Obligations. To
the extent that we make a payment or you receive any payment or proceeds of the
Collateral for our benefit, which are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by you.
(H) We shall reimburse you for all expenses incurred or to be
incurred by you in connection with (a) the negotiation, preparation and closing
of this Agreement (to be paid at closing); (b) the protection, perfection or
preservation of your security interest in or lien upon the Collateral; (c) your
inspection or verification of the Collateral and the filing of UCC Financing
Statements; (d) any court or bankruptcy proceeding relating to the Agreement or
any claim or action by any Person against you which would not have been asserted
were it not for your relationship with us hereunder or otherwise; (e) actions
taken with respect to the Collateral and your security interest or lien therein;
and (f) enforcement of any of your rights and remedies with respect to the
Obligations or Collateral. The foregoing expenses shall include, without
limitation: (i) reasonable fees, costs and expenses of your attorneys and
paralegals; (ii) interest on the foregoing at the highest applicable interest
rate provided under the Rider, which shall be part of the Obligations, payable
on demand and secured by the Collateral. In addition, we shall pay to you a fee
of Seven Hundred Fifty and 00/100 Dollars ($750.00) per day plus expenses for
each inspection and verification of the Collateral, which shall occur not less
frequently than every ninety (90) days. In recognition of your right to have all
your expenses incurred or to be incurred in connection with this
-20-
Agreement and the fees due you secured by the Collateral, you shall not be
required to record any discharge of your lien or termination of your security
interest unless and until we deliver to you a general release acceptable to you.
(I) We agree to give you written notice of any action or omission
by you or your agents in connection with this Agreement that may be actionable
against you or that may be a defense to payment of the Obligations for any
reasons. We further agree that unless such a notice specifically describing the
action or omission is given by us within thirty (30) days after we have
knowledge or with the exercise of reasonable diligence should have had knowledge
of the occurrence of said action or omission we shall not assert, and we shall
be deemed to have waived, any claim or defense arising therefrom.
(J) If you shall breach your obligation under this Agreement to
make an advance under the terms of this Agreement, notwithstanding our
conformance with the provisions thereof, we agree that our sole remedy on
account thereof shall be to recover liquidated damages on account of such
breach, computed as hereinafter provided, in recognition of the fact that the
damages which we might incur are uncertain and speculative. Liquidated damages
to which we shall be entitled shall be equal to sixty (60) times the interest
payable for one day on the loans outstanding as of the day that you are deemed
to have failed to fund. In any event, you shall never be liable to us for
special, indirect and consequential damages, whatever the nature of your breach
hereunder.
(K) We authorize and direct you to disburse, for our account, the
proceeds of loans made by you to us to such Person as any of our chairman and
chief executive officer or president shall direct, whether in writing or orally.
(L) Any notice required hereunder shall be in writing, and
addressed to the party to be notified as follows:
If to Greenfield: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., President
Greenfield Commercial Credit, L.L.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Borrower and/or any Guarantor: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇,
Chairman and Chief Executive Officer
▇▇▇▇▇▇▇ Companies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
or to such other address as each party may designate for itself by like notice.
(M) We represent and warrant to you that, with respect to the
financing transaction herein contemplated, no Person is entitled to any
brokerage fee or other commission and we agree to indemnify and hold you
harmless against any and all such claims.
(N) The paragraph titles contained in this Agreement are without
substantive meaning and are not part of the Agreement.
-21-
19. WAIVER OF JURY TRIAL.
Our legal counsel has advised us that (i) there may be a constitutional
right to a jury trial in connection with any claim, dispute or lawsuit arising
out of this Agreement or any Rider and (ii) such constitutional right may be
waived. After consultation with our counsel (which has included our counsel's
review of this Agreement), we believe that it is in our best interest in this
commercial transaction to waive such right. Accordingly, we hereby waive our
right to a jury trial, and further agree that the best forum for hearing any
claim, dispute or lawsuit, if any, arising in connection with this Agreement or
any Rider or our relationship with you, shall be a court of competent
jurisdiction sitting without a jury.
20. NO ORAL AGREEMENTS.
We acknowledge that this Agreement and each Rider represents the final
agreement between you and us and the terms of such documents may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements that may have or will be exchanged between you (including your
officers, employees and agents) and us.
Very truly yours,
▇▇▇▇▇▇▇ COMPANIES, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and CEO
Accepted at: Bloomfield Hills, Michigan
on April 23, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ CREDIT L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Its: President
-22-
GUARANTORS:
▇▇▇▇▇▇▇ BOOK COMPANY, THE COOKSTORE, INC.,
an Ohio corporation an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------ ------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Its: Chairman and Chief
Executive Officer Executive Officer
SAWWORTH BOOK COMPANY, THE COOKSTORE WORTHINGTON, INC.
an Ohio corporation an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------ ------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Its: Chairman and Chief
Executive Officer Executive Officer
GAYLORD'S, INC., ▇▇▇▇▇▇▇ ENTERPRISES, INC.,
an Ohio corporation an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------ ------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Its: Chairman and Chief
Executive Officer Executive Officer
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, individually
-23-
SCHEDULE 8(A)
STATES OF INCORPORATION
Borrower: State:
--------- ------
▇▇▇▇▇▇▇ Companies, Inc. Delaware
Guarantors:
-----------
▇▇▇▇▇▇▇ Book Company Ohio
The Cookstore, Inc. Ohio
Sawworth Book Company
(f/k/a Little Professor Enterprises, Inc.) Ohio
Gaylord's, Inc. (f/k/a ▇▇▇▇▇▇▇ Companies, Inc.) Ohio
The Cookstore Worthington, Inc. Ohio
▇▇▇▇▇▇▇ Enterprises, Inc. Ohio
SCHEDULE 8(B)
ASSUMED NAMES; TRADE NAMES
Little Professor Book Company
Little Professor Bargain Bookstore
Cookstore
SCHEDULE 8(G)
SCHEDULE OF LIENS ON COLLATERAL
Lien Holder Collateral Description/Location Current Balance
----------- ------------------------------- ---------------
M&I First National Leasing Corp.
Computer equipment @
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ $21,010.30
Madison Leasing Company
Canon copier @
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ 2,966.80
Madison Leasing Company
2 Canon copiers @
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ 520.22
General Electric Capital Corp.
Sensomatic Article
Surveillance System @
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ 3,900 (est)
▇▇▇▇▇▇ Book Company
Various consignment inventory
notice filings
SCHEDULE 8(J)
SCHEDULE OF PAST DUE PAYMENTS
Creditor Approx. Balances
-------- ----------------
M&I Leasing $ 2,000.00
GE Capital 1,000.00
Madison Leasing 500.00
Standard Management Co. 35,000.00
Glimcher Realty Trust 12,000.00
▇▇▇▇▇-▇▇▇▇▇▇▇▇▇ 30,000.00
Gator Investments 18,000.00
General Growth 8,000.00
Sawmill Place Plaza Associates 20,000.00
▇▇▇▇▇▇ Industries and ▇▇▇▇▇▇ Book Company,
as described in 1996 10KSB.
SCHEDULE 8(P)
SCHEDULE OF SUBSIDIARIES AND AFFILIATES
% Stock Chief
Owned Executive Collateral Locations
Name by Borrower Officers (Address/County)
----------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Book Company 100% ▇▇▇▇ ▇▇▇▇▇▇▇ (1) Little Professor Book Company Store
(2) and Little Professor Bargain Bookstore
Lane Avenue Shopping Center
1655 and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
----------------------------------------------------------------------------------------------------------------
The Cookstore, Inc. 100% ▇▇▇▇ ▇▇▇▇▇▇▇ Cookstores at:
(1) Lane Avenue Shopping Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
(2) Summit Mall
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(3) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Shopping Mall
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
(4) Florence Mall
2010 Florence Mall
Florence, Kentucky
----------------------------------------------------------------------------------------------------------------
Sawworth Book Company 100% ▇▇▇▇ ▇▇▇▇▇▇▇ Little Professor Book Company Bookstores at:
(1) Worthington Mall
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
(2) Plaza at Sawmill Place
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
----------------------------------------------------------------------------------------------------------------
Gaylord's, Inc. 100% ▇▇▇▇ ▇▇▇▇▇▇▇ Little Professor Book Company Bookstore at:
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
----------------------------------------------------------------------------------------------------------------
The Cookstore 100% ▇▇▇▇ ▇▇▇▇▇▇▇ Cookstores at:
Worthington, Inc.
(1) ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
(2) The Mall at Fairfield Commons
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
----------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Enterprises, Inc. 100% ▇▇▇▇ ▇▇▇▇▇▇▇ Little Professor Book Company Bookstore at:
▇▇▇▇▇▇▇▇ Plaza
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
----------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Companies, Inc. Parent ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
================================================================================================================
-2-
SCHEDULE 9(A)(v)(c)
SCHEDULE OF SENIOR LIENS ON PROPERTY
Lien Holder Type of Lien Balance Due @ 4/23/97
Residence at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
Citfed Mortgage Corporation 1st mortgage $191,700*
Bank One
Columbus, Ohio 2nd mortgage $33,300*
----------
*not more than
SCHEDULE 9(A)(xii)
DEBT EXTINGUISHMENT SCHEDULE
Creditor Debt Current Balance
-------- ---- ---------------
Bank One, Columbus, N.A. Revolving & term loans $553,349.58
plus $166.07 interest
per day after 4/23/97
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ $60,000 Note $60,000 plus interest
SCHEDULE 11(J)
SCHEDULE OF OFFICERS SUBJECT TO COMPENSATION LIMITATION
Officer Name/Employer Name 1997 Compensation Limit
-------------------------- -----------------------
▇▇▇▇ ▇▇▇▇▇▇▇/Borrower $140,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇/Borrower 140,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇/Borrower 155,000
SCHEDULE 11(K)
SCHEDULE OF INDEBTEDNESS REPAYMENT LIMITATION
Creditor Debt @ 4/23/97 Payment Limitation
-------- -------------- ------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $50,000.00 semi-annual interest only on
May 1 and November 1
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Family Trust
FBO ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $125,000.00 semi-annual interest only on
May 1 and November 1
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Family Trust
FBO ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $125,000.00 semi-annual interest only on
May 1 and November 1
SCHEDULE 16(A)
CASH COLLATERAL ORDER PRINCIPAL TERMS
In addition to such terms and conditions as Debtor and Lender shall
mutually agree, the Cash Collateral Order shall contain the following principal
terms:
1. An acknowledgment by Debtor that the indebtedness owed to Lender
constitutes the valid and binding obligation of Debtor and is secured by liens
and security interests granted by Debtor to Lender in Debtor's tangible and
intangible personal property as described in the Loan Documents; and Lender's
security interests and liens in the Collateral are valid, properly perfected and
recorded and are unavoidable and indefeasible in the pending bankruptcy
proceeding; nor are they subject to avoidance, defeasance, offset, defense or
counterclaim of any kind.
2. Debtor may use Cash Collateral only for "necessary operating
expenses." The term "necessary operating expenses" shall be limited to the
payment of current taxes incurred after the petition date, unpaid withholding
taxes for the last pay period before and pay periods after the petition date,
wages and salaries, property insurance, necessary repairs and maintenance,
utilities, purchase of inventory and other ordinary charges necessary for
Debtor's operations. The term "necessary operating expenses" does not include
payments to pay or cure any prepetition obligations of Debtor including any
arrearages under any lease, equipment or a statutory contract obligation, except
that such defenses may be paid with the written consent of Lender.
3. All principal, interest, costs and expenses, including reasonable
attorneys' fees heretofore, now or hereafter incurred by Lender in connection
with the indebtedness or in the administration of this bankruptcy proceeding,
and all sums at any time owing by Debtor under this Cash Collateral Order, the
Notes or any other notes or other agreements with Lender, is and shall continue
to be subject to the Guaranties (as set forth in the Loan and Security Agreement
between Debtor and Lender) and is and shall continue to be secured by a
post-petition first and senior security interest in and lien upon all property
of Debtor and property of the estate of whatever kind or nature, acquired by
Debtor or the estate on or after the petition date.
4. Lender shall continue to receive all reports as provided under the
Loan Documents. Lender shall continue to have access to Debtor's books and
records for the purpose of conducting audits of the Collateral. All of the
provisions of the Loan Documents shall remain in full force and effect and
Debtor shall continue to provide to Lender all other documents and information
required to be provided to Lender under the Loan Documents.
5. Interest will continue to accrue and be paid at the non-default rate
or the default rate of interest, whichever is in effect as of the petition date
and shall continue to accrue under the Notes.
6. Until the indebtedness to Lender is repaid in full, Debtor will not
without the prior written consent of Lender engage in any transaction which is
not in the ordinary course of its business, including the dispositions of any
assets, engaging in any new or different business activities, increase its
investment in fixed or capital assets, or create, assume or suffer to exist any
lien or security interest in favor of any person other than Lender in any of the
collateral.
7. Such other reasonable and ordinary terms and conditions as Lender
shall require subject to approval of the bankruptcy court.
REVOLVING CREDIT LOAN RIDER #1
(to Loan and Security Agreement dated as of April 23, 1997)
GREENFIELD COMMERCIAL CREDIT, L.L.C.
This Revolving Credit Loan Rider and the attached Term Sheet
(collectively, the "Rider") sets forth the terms upon which you will make
certain revolving loans to us and is a supplement to and is hereby incorporated
into that Loan and Security Agreement between you and us, as amended (the
"Agreement").
1. Definitions. As used herein:
A. "Borrower" means each of the Guarantors.
B. "Eligible Receivable" is an account arising in the ordinary
course of Borrower's business from the sale or lease of goods which have been
delivered to and accepted by the Receivable Debtor. The following are not
Eligible Receivables:
(i) sales by Borrower to any affiliate to any person
controlled by an affiliate or any subsidiary of Borrower;
(ii) an account which is due or unpaid more than sixty (60)
days after the original invoice date;
(iii) if ten (10%) percent or more of the accounts of a single
Receivable Debtor are not deemed to be eligible
hereunder;
(iv) the Receivable Debtor is also a creditor or supplier of
Borrower or has disputed liability with respect to such
account or such account is subject to any right of set
off by the Receivable Debtor:
(v) the Receivable Debtor is a debtor under Federal
Bankruptcy Laws or has filed or filed against it an
application for relief under such laws;
(vi) the Receivable Debtor has suspended business;
(vii) a receiver, trustee, liquidator or custodian has been
appointed for the Receivable Debtor or a significant part
of its assets;
(viii) the account arises from a sale outside of the United
States;
(ix) the account arises from a ▇▇▇▇ and hold, guaranteed sale,
sell or return, sale on approval, consignment or any
other repurchase or return basis;
(x) the Receivable Debtor is the United States of America or
any department thereof;
(xi) the goods giving rise to such account have not been
delivered to or accepted by the receivable Debtor;
(xii) the total unpaid accounts of a Receivable Debtor exceeds
a credit limit determined by Lender in its discretion;
(xiii) there is an agreement with the Receivable Debtor for any
deduction beyond those shown on the face of the invoice
related to such account;
(xiv) Lender, in Lender's sole and absolute discretion,
believes that the collection of the account is doubtful
or will be delayed.
C. "Eligible Inventory" means Inventory (net of freight and container
costs) which you, in your sole judgment, shall deem Eligible Inventory, based on
such considerations as you may, from time to time, deem appropriate. Without
limiting your discretion, we understand the following Inventory is not Eligible
Inventory:
(i) Inventory which is work-in-process;
(ii) Inventory which is obsolete or damaged, or not useful;
(iii) Inventory in which you do not have a first perfected
security interest or in which any other Person claims a
security interest or lien;
(iv) Inventory which is in transit or in locations other than
described in Paragraph 6 of this Rider;
(v) Inventory which is uninsured or under-insured;
(vi) Inventory which is held on consignment for or is subject
to a bailment arrangement with any other Person;
(vii) Inventory which is trade-in Inventory or returned goods;
(viii) Inventory which is used in packaging or shipping of
Inventory; and
(ix) Inventory which is nonconforming to standards imposed by
any governmental agency regulating such Inventory or the
sale or use thereof.
D. "Receivable Debtor" means an account debtor of Borrower.
E. All terms defined in the Agreement which are used herein shall
have the meanings as defined in the Agreement, unless specifically defined
otherwise herein.
2. Loans.
A. Loan Advances. Subject to the terms of the Agreement, you may
in your sole discretion and upon our request, make Advances to us in an amount
which is the lesser of (i) the Maximum Loan Amount as set forth on the Term
Sheet or (ii) an amount up to the sum of (x) the applicable Percentage Advance
Rate as set forth
-2-
on the Term Sheet times the face amount (less maximum discounts, credits and
allowances which may be taken by or granted to account debtors in connection
therewith) of Eligible Receivables ("Receivables Loan Portion"); plus (y) the
applicable Percentage Advance Rate as set forth on the Term Sheet times the
value of our Eligible Inventory (less freight and container costs) calculated at
the lower of cost or market value; plus (z) $30,000; which Advances we may
borrow, repay and reborrow during the term of the Agreement. All Advances and
amounts payable pursuant to this Rider shall constitute part of the Obligations.
B. Interest Rate. We shall pay you interest on the daily outstanding
balance of our Receivables Loan account at a per annum rate equal to the
Effective Rate as set forth on the Term Sheet. In the event any payments of
principal are not paid when due or declared due, whether at maturity, by
acceleration, by lapse of time or otherwise, including any fees, costs or
expenses advanced or paid by you, the principal balance shall bear interest
thereafter, at your option, and without affecting any of your rights and
remedies provided for in the Agreement, this Rider or any promissory note
evidencing our Obligations, at a per annum rate equal to Default Rate as set
forth on the Term Sheet. Any change in any of the above interest rates resulting
from a change in the Prime Rate shall become effective immediately with each
change in the Prime Rate. Interest charges shall be computed on the basis of a
year of 360 days for the actual days elapsed in a month and, except as set forth
in Paragraph 10 of the Agreement, will be payable to you on the first day of
each month hereafter at your address shown at Paragraph 14 of the Agreement.
C. Principal Payments. In the event that the principal amount
outstanding under the Loan is in excess (for whatever reason) of the amount
permitted under Paragraph 2(A) of this Rider, we agree to remit to you within
one (1) business day such amount as may be necessary to reduce the total
outstanding amount to the amount permitted under Paragraph 2(A). All principal
and interest due under the Loan shall be due upon termination of the Agreement.
D. Use of Proceeds. We shall use the proceeds of the Loan solely
for the purposes as set forth in the Agreement.
3. Receivables Collection.
A. Cash Collection Receivable. If Lender elects to place Borrower on a
dominion of funds arrangement, all cash, checks, drafts and other instruments
for the payment of money (properly endorsed, where required, so that such items
may be collected by you), which may be received by us at any time in full or
partial payment of any of the Receivables ("Remittances") shall be deposited to
a non-interest bearing deposit account in your name (the "Cash Collection
Receivable") as security for payment of the Obligations. We shall have no right
to withdraw any funds deposited in the Cash Collection Receivable. In the event
that we repay the Obligations in full at any time hereafter, the balance in the
Cash Collection Receivable or such other accounts holding the proceeds thereof
will be delivered to us five (5) business days after the date of pay off. Unless
you shall (acting in your sole discretion) notify us to the contrary,
Remittances shall be administered on the basis set forth on the Term Sheet.
B. Return of Inventory. If at any time prior to our Default under the
Agreement or this Rider, any account debtor returns any Inventory to us in the
ordinary course of our business, we shall promptly determine the reason for such
return and issue a credit memorandum to the account debtor in the appropriate
amount. We agree to give you prompt notice of the return of such Inventory. In
the event any attempted return occurs after our Default hereunder, we shall (i)
hold the returned Inventory in trust for you, (ii) segregate all returned
Inventory from all of our other property and (iii) conspicuously label the
returned Inventory as your property.
-3-
4. Sale of Inventory. Until our Default under the Agreement or this Rider, we
may, in any lawful manner, sell Inventory, but only in the ordinary course of
our business, provided, however, our sale shall not cause a breach of our
warranties and representations as set forth in this Rider. We acknowledge that
any sale of Inventory in the ordinary course of business does not include a
transfer of partial or total satisfaction of Indebtedness.
5. Covenants.
A. Receivables. Unless or until you notify us in writing that you
have dispensed with any one or more of the following requirements, we shall:
(i) Immediately upon our learning thereof, inform you in
writing of the rejection of goods by any account debtor,
delays in delivery of goods, nonperformance of contracts
and of any assertion of any claims, offsets or
counterclaims by any account debtor;
(ii) 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 Receivables, including any
of the terms relating thereto;
(iii) Immediately upon our learning thereof, furnish to and
inform you of all information relating to the financial
condition of any account debtor;
(iv) Immediately upon our learning thereof, notify you in
writing of those Receivables which are not Eligible
Receivables;
(v) Keep all goods returned by any account debtor and all
good repossessed or stopped in transit by us from any
account debtor segregated from our other property,
holding the same as trustee for you until otherwise
directed in writing by you;
(vi) Not re-date any invoice or sale or make sales on extended
dating terms beyond that customary in our industry; and
(vii) Immediately deliver to you any promissory note, trade
acceptance or any other instrument for the payment of
money evidencing any Receivables and endorsed to your
order.
B. Inventory. Unless or until you notify us in writing that you
have dispensed with one or any one or more of the following requirements, we
shall:
(i) not remove the Inventory from the Inventory Locations
described on Schedule 8(P);
(ii) promptly, and in any event within five (5) days of the
receipt thereof, deliver such certification schedules and information relating
to the Inventory and Eligible Inventory as you may reasonably request;
(iii) keep correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, our costs,
therefore, selling price thereof, and the daily withdrawals therefrom and
additions thereto, all of which records shall be available to you, your
officers, employees and agents upon demand for inspection and copying;
-4-
(iv) concurrently, with the delivery of any of the Inventory
to a bailee, warehousemen or similar party deliver to you, in form acceptable to
you, warehouse receipts in your name evidencing the storage of Inventory;
(v) allow you to have the right upon the demand and at any
time or times hereafter during our usual business hours to inspect and examine
Inventory and to check and test the same as to quality, quantity, value and
condition. We agree to reimburse you for your reasonable costs and expenses in
doing so;
(vi) conduct a physical count of the Inventory at such
intervals as you may request and promptly supply you with a copy of such counts
accompanied by a report of the value (valued at the lower of cost or market
value) of the Inventory;
(vii) if sales of Inventory are made for cash, we shall
immediately deliver to you the identical checks, cash or other forms of payment
which we receive (only in the event Lender elects to place Borrower on a
dominion of funds arrangement or on Default);
(viii) not acquire Consigned Inventory from anyone other than
▇▇▇▇▇▇ Industries, Inc. (except miscellaneous consignments at any store location
that at any one time may not exceed $500) without your prior written consent
which shall not be unreasonably withheld.
6. Representations.
A. Receivables. With respect to all Receivables now in existence or
hereafter created, we warrant and represent to you that, except as disclosed to
Lender in writing:
(i) all Receivables are genuine in all respects, are what
they purport to be and are not evidenced by a judgment;
(ii) all Receivables represent undisputed, bona fide
transactions completed in accordance with the terms and
provisions contained in the invoices and purchase orders
relating thereto;
(iii) the amounts shown on all certifications provided to you,
our books and records and all invoices and statements
delivered to you with respect thereto are actually and
absolutely owing to us and are not contingent for any
reason;
(iv) if you have requested us to do so, all payments thereon
following such request have been or shall be turned over
to you by us;
(v) there are no setoffs, counterclaims or disputes existing
or asserted with respect thereto and we have not made any
agreement with any account debtor thereof for any
deduction or discount of the sum payable thereunder
except regular discounts allowed by us in the ordinary
course of our business for prompt payment;
(vi) there are not now and there shall not be at any time or
times hereafter any facts, events or occurrences which in
any way impair the validity or enforcement thereof or
tend to reduce the amount payable thereunder from the
amounts thereof as shown on the certifications provided
to you, our books and records and the invoices and
statements delivered to you with respect thereto;
-5-
(vii) all account debtors thereof have the capacity to contract
and are solvent to the best of our knowledge;
(viii) the goods sold or transferred and the services furnished,
giving rise thereto are not subject to a lien, claim,
encumbrance or security interest except your security
interest;
(ix) we have no knowledge of any fact or circumstance which
would impair the validity or collectability thereof;
(x) there are no proceedings or actions which are threatened
or pending against any account debtor which might result
in any material adverse change in its financial
condition; and
(xi) with respect to those Receivables upon which we rely for
Receivables Loan advances, all are Eligible Receivables.
B. Inventory. With respect to all Inventory now in existence or
hereafter required, we warrant and represent to you that, except as disclosed to
Lender in writing:
(i) Inventory is kept only at the Inventory Locations
described on Schedule 8(P) to this Agreement;
(ii) The amount shown on all certifications provided to you
and on our books and records is actually owned by us without any claim or
ownership by any other Person;
(iii) With respect to that Inventory upon which we rely for
Inventory Loan advances, all is Eligible Inventory.
(iv) Each Borrower operating a bookstore presently has
agreements to acquire Consigned Inventory only with ▇▇▇▇▇▇ Industries, Inc.
7. Notification and Collection.
We understand that you will:
(A) At your option, notify all account debtors that
Receivables have been assigned to you, you have a
security interest therein and payment is to be made to a
lockbox;
(B) To the extent you have not given notice previously, you
may request all account debtors to make payments on
Receivables directly to you;
(C) If deemed necessary by you, enforce payment and collect
in your name, by legal proceedings or otherwise, our
Receivables and to charge the collection costs and
expenses to our Receivables Loan account; and
(D) If deemed necessary by you, take control in any manner of
any cash or non-cash proceeds of Receivables and of any
rejected, returned, stopped in transit or repossessed
goods relating to Receivables.
-6-
8. Power of Attorney. We hereby irrevocably designate, make, constitute and
appoint you (and any agents designated by you) as our true and lawful attorney,
with power, without notice to us and at such time or times hereafter as you may
in your sole discretion determine, in our name or your name and at our expense:
(A) To demand payment of Receivables;
(B) To enforce payment of Receivables, by legal proceedings
or otherwise;
(C) To exercise all of our rights and remedies with respect
to the collection of Receivables;
(D) To settle, adjust, compromise, extend or renew any
Receivables;
(E) To settle, adjust or compromise any legal proceedings
brought to collect Receivables;
(F) To sell or assign any Receivables upon such terms, for
such amount and at such time as you deem advisable;
(G) To discharge and release any Receivables;
(H) To prepare, file and sign our name on any proof of claim
in bankruptcy or similar document against any account
debtor;
(I) To prepare, file and sign our name on any financing
statement, notice of lien, claim of mechanic's lien,
assignment or satisfaction of lien or mechanics lien, or
similar document in connection with any Receivables;
(J) To do all acts and things necessary, in your sole
discretion, to fulfill our obligations under the
Agreement and this Rider;
(K) To endorse our name upon any checks, notes, acceptances,
money orders or other forms of payment and to deposit the
same in the Cash Collateral Receivable on account of our
Obligations;
(L) To endorse our name upon any chattel paper, document,
instrument, freight ▇▇▇▇, ▇▇▇▇ of lading or similar
document or agreement relating to any Receivables or
goods pertaining thereto;
(M) To sign our name to verifications of Receivables and
notices thereof to account debtors; and
(N) To notify the post office authorities, after our Default
under this Agreement, to change the address for delivery
of our mail to an address designated by you and to open
such mail for purposes of collecting Receivables.
We ratify and approve all acts of you and your designee. Neither you nor your
designee will be liable for any acts or omissions nor for any error of judgment
or mistake of fact or law. This power, being coupled with an interest, is
irrevocable until the Obligations have been fully satisfied.
-7-
9. Costs and Expenses. All costs and expenses incurred by you in any manner or
way with respect to your enforcement of your rights and remedies under the
Agreement or this Rider or with respect to your collection of Receivables or
protection of your security interest in Receivables and the Collateral, whether
by suit or otherwise, or with respect to your notification of account debtors or
verification of Receivables shall be a part of the Obligations and payable on
demand. Without limiting the generality of the foregoing, such costs and
expenses include reasonable attorneys' fees, court costs, court reporting
expenses, long distance telephone charges, postage, telegram charges, wire
transfer expenses, expenses of auditors, collectors, clerks and investigators,
expenses for travel, lodging and food and expenses for repairing, altering or
supplying goods, if any, necessary to fulfill in whole or in part any purchase
order of any account debtor from which the Receivables involved have arisen.
10. Termination. This Rider and your and our respective obligations
hereunder shall terminate upon payment in full of the Obligations or upon our
execution and your acceptance of a subsequently numbered and/or dated Term Sheet
and Receivables Loan Rider.
Very truly yours,
▇▇▇▇▇▇▇ COMPANIES, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
▇▇▇▇▇▇▇ BOOK COMPANY,
an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
THE COOKSTORE, INC.,
an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
-8-
SAWWORTH BOOK COMPANY,
an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
GAYLORD'S, INC.,
an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
THE COOKSTORE WORTHINGTON, INC.,
an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
▇▇▇▇▇▇▇ ENTERPRISES, INC.,
an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
Accepted on April 23, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ CREDIT, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Its: President
-9-
TERM SHEET
ATTACHMENT TO
REVOLVING CREDIT LOAN RIDER #1
DATED AS OF APRIL 23, 1997
TO LOAN AND SECURITY AGREEMENT
DATED AS OF APRIL 23, 1997
Paragraph Provisions Terms
--------- ---------- -----
2(A)(i Maximum Loan Amount $1,000,000.00
2(A)(ii) Percentage Advance Rate
Eligible Receivables 60%
Eligible Inventory
Cookstore 60%
Data Base Bookstore* 60%**
2(B) Effective Rate 8% plus the Prime Rate
Default Rate 12% plus the Prime Rate
2(D) Use of Proceeds - working capital for operations
and funds to repay all indebtedness to Bank One,
Columbus, N.A. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
We understand that this Term Sheet defines certain terms used in the
Revolving Credit Loan Rider (the "Rider") to which this Term Sheet is attached.
We have read the Rider and this Term Sheet and fully understand their
relationship. By executing both documents, we acknowledge the foregoing.
GREENFIELD COMMERCIAL CREDIT, L.L.C. ▇▇▇▇▇▇▇ COMPANIES, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------- -----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
Its: President Its: Chairman and Chief
Executive Officer
*Bookstore inventory on data base only and excluding all Consigned
Inventory.
**Lender may lower the Percentage Advance Rate to 30% after 90 days if
Borrower has not delivered to Lender a complete physical inventory of the
bookstore inventory.
TS-1
REVOLVING CREDIT NOTE
$1,000,000
Due Date: The earlier of Demand
or July 22, 1997 Dated: April 23, 1997
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay to the
order of GREENFIELD COMMERCIAL CREDIT, L.L.C., a Michigan limited liability
company (the "Lender"), at its office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, or at such other place as Lender may designate in writing, the
principal sum of One Million and 00/100 Dollars ($1,000,000.00), or such lesser
sum as shall have been advanced by Lender to Borrower pursuant to that certain
Loan and Security Agreement dated as of the date hereof, between Borrower and
Lender (which, together with all amendments and modifications thereof, is
hereinafter referred to as the "Loan Agreement"), plus interest as hereinafter
provided, all lawful money of the United States of America, in accordance with
the terms hereof.
The unpaid principal balance of this Revolving Credit Note ("Note")
shall bear interest computed upon the basis of a year of 360 days for the actual
number of days elapsed in a month, at a per annum rate of interest (the
"Effective Rate") which is equal to the Prime Rate (hereafter defined) plus
eight percent (8%), as such rate shall vary from time to time, upwards and
downwards, and each such Prime Rate change shall cause an identical change in
the Effective Rate to occur effective immediately. "Prime Rate" means that rate
of interest published from day to day in the Wall Street Journal in its "Money
Rates" column as the "Prime Rate." Should such publication not continue to
publish the Prime Rate or a substitute rate, then Lender will select a
comparable announced rate.
Interest on all principal amounts advanced by Lender from time to time
and unpaid by Borrower shall be paid on the first day of the month hereafter and
on the first day of each month thereafter until the Due Date, upon which date
the entire unpaid principal balance of this Note, together with all accrued and
unpaid interest, shall be due and payable in full. In addition to the foregoing,
Borrower shall pay to Lender on the first day of each month with respect to the
prior calendar month or portion thereof, the amount, if any, necessary to pay
the fees as set forth in the Loan Agreement.
Advances of principal, repayment, and readvances may be made under this
Note from time to time, upon the terms set forth in the Loan Agreement and said
Loan Agreement is incorporated herein by reference. Mandatory repayments of
principal before the Due Date shall be made by Borrower to Lender pursuant to
the Loan Agreement. All Advances made hereunder shall be charged to a Loan
Account in Borrower's name on Lender's books, and Lender shall debit to such
account the amount of each Advance made to, and credit to such account the
amount of each repayment made by Borrower. Lender shall furnish Borrower with a
monthly statement of Borrower's loan account, which statement shall be deemed to
be correct, accepted by, and binding upon Borrower, unless Lender receives a
written statement of exceptions from Borrower within thirty (30) days after such
statement has been furnished. Borrower expressly assumes all risks of loss or
delay in the delivery of any payments made by mail, and no course of conduct or
dealing shall affect Borrowers assumption of these risks.
Upon the Due Date, which Borrower acknowledges may be upon demand,
Lender, without prior notice to Borrower, may declare the entire unpaid
principal balance of this Note and all accrued interest, together with all other
indebtedness of Borrower to Lender, to be immediately due and payable. Upon the
occurrence of any Default specified in the Loan Agreement or upon demand, the
unpaid principal balance of this Note shall bear interest at a rate which is
four percent (4.0%) greater than the Effective Rate otherwise applicable. After
Default or Demand, Lender may apply its own indebtedness or liability to
Borrower to any indebtedness due under this Note. Borrower agrees to pay all of
the Lender's costs incurred in the collection of this Note as provided in the
Loan Agreement.
Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only. Upon any Default,
neither the failure of the Lender promptly to exercise its right to declare the
outstanding principal and accrued unpaid interest hereunder to be immediately
due and payable, nor the failure of the Lender to demand strict performance of
any other obligation of the Borrower or any other person who may be liable
hereunder, shall constitute a waiver of any such rights, nor a waiver of such
rights in connection with any future default on the part of the Borrower or any
other person who may be liable hereunder.
Borrower acknowledges that no Default is necessary for Lender to make
Demand.
Borrower and all endorsees, sureties and guarantors hereof hereby
jointly and severally waive presentment for payment, demand, notice of
non-payment, notice of protest or protest of this Note, and Lender diligence in
collection or bringing suit, and do hereby consent to any and all extensions of
time, renewals, waivers or modifications as may be granted by Lender with
respect to payment or any other provisions of this Note, and to the release of
any collateral or any part thereof, with or without substitution. The liability
of Borrower under this Note shall be absolute and unconditional, without regard
to the liability of any other party. This Note has been executed in the State of
Michigan, and all rights and obligations hereunder shall be governed by the laws
of such state.
In no event whatsoever shall the interest rate and other charges charged
hereunder exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in the final determination, deem applicable
hereto. In the event that a court determines that Lender has received interest
or other charges hereunder in excess of the highest rate applicable hereto,
Lender shall, either in its sole discretion, promptly apply such amounts to the
principal due hereunder or refund such amount to Borrower and the provisions
herein shall be deemed amended to provide for such permissible rate.
This Note is issued pursuant to the terms of the Loan Agreement and is
secured by the Collateral, as defined in the Loan Agreement. All of the terms,
covenants and conditions of the Loan Agreement are hereby made a part of this
Note and are hereby incorporated by reference.
"BORROWER"
▇▇▇▇▇▇▇ COMPANIES, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
-2-
TERM LOAN NOTE
$350,000.00
Due Date: The earlier of Demand
or October 20, 1997 Dated: April 23, 1997
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay to the
order of GREENFIELD COMMERCIAL CREDIT, L.L.C., a Michigan limited liability
company (the "Lender"), at its office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, or at such other place as Lender may designate in writing, the
principal sum of Three Hundred Fifty Thousand and 00/100 Dollars ($350,000.00),
or such lesser sum as shall have been advanced by Lender to Borrower pursuant to
that certain Loan and Security Agreement dated as of the date hereof, between
Borrower and Lender (which, together with all amendments and modifications
thereof, is hereinafter referred to as the "Loan Agreement"), plus interest as
hereinafter provided, all lawful money of the United States of America, in
accordance with the terms hereof.
The unpaid principal balance of this Term Loan Note ("Note") shall bear
interest computed upon the basis of a year of 360 days for the actual number of
days elapsed in a month, at a per annum rate of interest (the "Effective Rate")
which is equal to the Prime Rate plus five and eighty-five hundredths (5.85%)
percent, as such rate shall vary from time to time, upwards and downwards, and
each such Prime Rate change shall cause an identical change in the Effective
Rate to occur effective immediately. "Prime Rate" means that rate of interest
published from day to day in the Wall Street Journal in its "Money Rates" column
as the "Prime Rate." Should such publication not continue to publish the Prime
Rate or a substitute rate, then Lender will select a comparable announced rate.
Interest on all principal amounts advanced by Lender from time to time
and unpaid by Borrower shall be paid on the first day of the month hereafter and
on the first day of each month thereafter until the Due Date, upon which date
the entire unpaid principal balance of this Note, together with all accrued and
unpaid interest, shall be due and payable in full. In addition to the foregoing,
Borrower shall pay to Lender on the first day of each month with respect to the
prior calendar month or portion thereof, the amount, if any, necessary to pay
the fees as set forth in the Loan Agreement.
Upon the Due Date, which Borrower acknowledges may be upon demand,
Lender, without prior notice to Borrower, may declare the entire unpaid
principal balance of this Note and all accrued interest, together with all other
indebtedness of Borrower to Lender, to be immediately due and payable. Upon the
occurrence of any Default specified in the Loan Agreement or upon demand, the
unpaid principal balance of this Note shall bear interest at a rate which is six
and 15/100ths percent (6.15%) greater than the Effective Rate otherwise
applicable. After Default or Demand, Lender may apply its own indebtedness or
liability to Borrower to any indebtedness due under this Note. Borrower agrees
to pay all of the Lender's costs incurred in the collection of this Note as
provided in the Loan Agreement.
Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only. Upon any Default,
neither the failure of the Lender promptly to exercise its right to declare the
outstanding principal and accrued unpaid interest hereunder to be immediately
due and payable, nor the failure of the Lender to demand strict performance of
any other obligation of the Borrower or any other person who may be liable
hereunder, shall constitute a waiver of any such rights, nor a waiver of such
rights in connection with any future default on the part of the Borrower or any
other person who may be liable hereunder.
Borrower acknowledges that no Default is necessary for Lender to make
Demand.
Borrower and all endorsees, sureties and guarantors hereof hereby
jointly and severally waive presentment for payment, demand, notice of
non-payment, notice of protest or protest of this Note, and Lender diligence in
collection or bringing suit, and do hereby consent to any and all extensions of
time, renewals, waivers or modifications as may be granted by Lender with
respect to payment or any other provisions of this Note, and to the release of
any collateral or any part thereof, with or without substitution. The liability
of Borrower under this Note shall be absolute and unconditional, without regard
to the liability of any other party. This Note has been executed in the State of
Michigan, and all rights and obligations hereunder shall be governed by the laws
of such state.
In no event whatsoever shall the interest rate and other charges charged
hereunder exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in the final determination, deem applicable
hereto. In the event that a court determines that Lender has received interest
or other charges hereunder in excess of the highest rate applicable hereto,
Lender shall, either in its sole discretion, promptly apply such amounts to the
principal due hereunder or refund such amount to Borrower and the provisions
herein shall be deemed amended to provide for such permissible rate.
This Note is issued pursuant to the terms of the Loan Agreement and is
secured by the Collateral, as defined in the Loan Agreement. All of the terms,
covenants and conditions of the Loan Agreement are hereby made a part of this
Note and are hereby incorporated by reference.
"BORROWER"
▇▇▇▇▇▇▇ COMPANIES, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
-2-
TURNAROUND AGREEMENT AND IRREVOCABLE PROXY
TURNAROUND AGREEMENT AND IRREVOCABLE PROXY (the "Agreement"), dated as
of April 21, 1997, by and among THE ▇▇▇▇▇▇▇ COMPANIES, INC., a Delaware
corporation (the "Corporation"), GREENFIELD COMMERCIAL CREDIT, L.L.C., a
Michigan limited liability company (the "Lender"), the Corporation's
stockholders who are signatories hereto (hereinafter referred to individually as
a "Stockholder" and collectively as the "Stockholders"), and the Corporation's
wholly-owned subsidiaries signing this Agreement.
B A C K G R O U N D:
A. The Stockholders are the record and beneficial owners of the number
of shares of common stock, $.001 par value per share (the "Common Stock"), of
the Corporation set forth opposite their signatures at the foot of this
Agreement (such shares being hereinafter collectively referred to as the
"Corporation Shares");
B. The Corporation is the owner of all of the shares of common stock
(the "Subsidiary Shares" and, collectively with the Corporation Shares, the
"Shares") of each of its corporate subsidiaries which are signatories to this
Agreement, to wit: The Cookstore, Inc., Sawworth Book Company, Gaylord's, Inc.,
The Cookstore Worthington, Inc., ▇▇▇▇▇▇▇ Book Company and ▇▇▇▇▇▇▇ Enterprises,
Inc. (each a "Subsidiary", collectively, the "Subsidiaries" and, collectively
with the Corporation, the "Corporate Group").
C. The Corporate Group has experienced financial difficulties and has
for several months attempted to obtain permanent replacement financing for its
operations (the "Financing"), while contemporaneously attempting to obtain
additional capital for the expansion of its retail store operations (the
"Recapitalization").
D. The current principal lender of the Corporate Group has imposed
conditions upon the financing available to the Corporate Group which threaten
its continued operations and pursuit of the Recapitalization.
E. The Corporate Group desires to obtain interim loans for a period of
up to six months (the "Loan Period") in an aggregate principal amount of up to
$1,350,000 (the "Loans") from the Lender pursuant to a loan agreement of even
date herewith among the Lender, the Corporate Group and ▇▇▇▇ ▇▇▇▇▇▇▇ (the "Loan
Agreement") for the purpose of allowing the Corporate Group a sufficient
opportunity to complete the Recapitalization and obtain the Financing;
F. The parties hereto acknowledge that if the Financing and/or the
Recapitalization are not completed within the Loan Period that necessary and
appropriate reductions in costs, increases in efficiencies and other measures (a
"Turnaround Plan") must be implemented so as to restore the profitability of the
Corporate Group.
G. The members of the Corporate Group, with the assistance of the
Stockholders, desire to assure Lender that they will implement a Turnaround Plan
in the event the Corporate Group is unsuccessful in obtaining the Financing
and/or completing the Recapitalization.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Turnaround Plan. Each Member of the Corporate Group agrees that in
the event of a Default under the terms of the Loan Agreement, including the
failure of the Corporation to repay all amounts due to Lender at the maturity of
the Loans, they shall mutually engage the services of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ &
Associates of Troy, Michigan ("Consultant") on terms satisfactory to the Lender.
The terms of the engagement of Consultant shall include the immediate
implementation of a Turnaround Plan recommended by Consultant for the operations
of the Corporation and the Subsidiaries and its immediate implementation by the
Corporate Group.
2. Implementation of Turnaround Plan. The Stockholders and the Corporate
Group agree that in the event they fail to so engage Consultant and/or implement
a Turnaround Plan, that it is their desire that Lender have the ability to cause
the Corporation to so engage Consultant and to cause the Corporate Group to
immediately implement a Turnaround Plan by exercising the voting power
represented by the Shares pursuant to the proxy rights granted in Paragraph 3
below.
3. Irrevocable Proxy. Subject to the terms, conditions and provisos
hereinafter set forth, for so long as any of the Obligations (as defined in the
Loan Agreement) remain outstanding, each of the Stockholders and the
Corporation, does hereby irrevocably nominate and appoint the Lender as its, his
or her true and lawful proxy, with full power of substitution, in its, his or
her name, place and ▇▇▇▇▇, to vote all of the Shares owned by such Stockholder
and/or the Corporation and standing in its, his or her name, at any meeting of
the stockholders of the Corporation or any Subsidiary, as the case may be, and
upon any matter in which the stockholders of the Corporation or any Subsidiary
are entitled to vote; provided, that, for so long as no Default (as defined in
the Loan Agreement) has occurred and is continuing, the Stockholder and the
Corporation shall be entitled to vote the Shares owned by it, him or her and
standing in its, his or her name with respect to all such corporate matters.
Upon the occurrence of a Default, and during the continuance thereof, the Lender
shall have the irrevocable full power and authority, as the true and lawful
proxy of the Stockholders and the Corporation, to vote in person or by further
proxy, the Shares at all meetings of the stockholders of the Corporation and any
Subsidiary, as applicable, or to give written consents in lieu of voting such
Shares in respect of any and all matters on which such Shares are entitled to
vote, including, without limitation, the election of directors. During any such
period in which the Lender shall have the right to exercise voting powers with
respect to the Shares, the Lender shall have the right to waive notice of any
meeting of the stockholders of the Corporation and any Subsidiary, as
applicable, in respect of such Shares and may exercise any power or perform any
act hereunder by an agent or attorney duly authorized and appointed by it. The
irrevocable proxy set forth above is a power coupled with an interest.
- 2 -
4. No Conflict. Nothing herein contained shall disqualify the
Lender from serving as such proxy by reason of the fact that the Lender or any
firm or corporation affiliated with the Lender is in any way interested in such
transaction or contract.
5. Receipt of Additional Stock Certificates.
(a) In the event that the Stockholders or the Corporation or any
of them shall receive any shares of the Corporation or any Subsidiary or any
successor or successors of the Corporate Group issued by way of dividend,
split-up, recapitalization, reorganization, merger, consolidation, or any other
change or adjustment in respect of the Shares held by any of them prior to the
payment of the Obligations, such Stockholders and the Corporation, as
applicable, shall hold the stock certificates representing such additional or
changed shares, to the extent that such shares have voting rights (including
voting rights contingent upon the occurrence of specified events), subject to
the terms of this Agreement, and the provisions of Paragraph 3 above shall apply
thereto.
(b) The term "Shares", as used in this Agreement, shall include,
in addition to the Corporation Shares owned of record by the Stockholders on the
date hereof, as indicated opposite the signature of such Stockholder below, and
the Subsidiary Shares owned of record by the Corporation on the date hereof, all
additional shares of common stock or other securities of the Corporation or any
Subsidiary, as the case may be, having power to vote for the election of
directors of the Corporation or any Subsidiary, as the case may be, or any
successor or successors of the members of the Corporate Group, acquired by the
Stockholders or the Corporation pursuant to Paragraph 5(a) above.
6. Representations and Covenants as to Capitalization of Corporation.
(a) The Stockholders and the Corporation hereby represent and
warrant to Lender that the total number of issued and outstanding shares of
voting stock of the Corporation as of the date hereof is 3,785,000; and that the
total number of voting shares of the Corporation beneficially owned by the
Stockholders and which are the subject of this Agreement as of the date hereof
is 1,930,525. None of the Stockholders holds any options, warrants, rights, or
other securities of the Corporation to acquire or purchase any voting securities
of the Corporation or to convert other securities of the Corporation into such
voting securities except that the 60,000 share of the Corporation's Series A
Preferred Stock ($5.00 Par Value), all of which is owned by the Stockholders, is
convertible into Common Stock at the rate of approximately $.84 per share of
such Common Stock for each dollar of Par Value of each such share of such
Preferred Stock.
(b) Prior to payment in full of the Obligations, the Corporation
shall not, without Lender's prior written consent, issue any Common Stock or
other voting securities (or securities convertible into Common Stock or such
voting securities) except in connection with the exercise of warrants currently
outstanding. Except as described in the Corporation's Annual Report for the
Fiscal Year ended December 31, 1996 filed on Form 10-KSB with the Securities and
Exchange Commission, no warrants or similar rights to purchase, acquire or
convert into voting securities of the Corporation are outstanding.
- 3 -
(c) Prior to payment in full of the Obligations, the Corporation
and the Subsidiaries shall not authorize the issuance, and shall not issue, any
additional shares of common stock, any voting securities and any securities
convertible into such common stock or other voting securities, except as shall
be required in connection with the exercise or conversion of warrants and other
rights to purchase, or to convert securities of the Corporation into, Common
Stock, but only to the extent that such warrants and other rights are
outstanding on the date hereof and described in the Corporation's 1996 Form
10KSB.
7. Termination.
(a) The irrevocable proxy created hereby shall be effective and
remain in force until the payment in full of the Obligations.
(b) The death, disability or incompetency of a Stockholder during
the term of this Agreement shall in no way affect the validity or enforceability
of this Agreement the provisions of which shall remain in full force and effect
and be binding on the personal representative of such Stockholder.
8. Notices. All notices, statements, instructions or other documents
required to be given hereunder, shall be in writing and shall be given either
personally or by mailing the same in a sealed envelope, first-class mail postage
prepaid and either registered or certified, return receipt requested, addressed
to, or sent by telegram, telex, telecopy of similar form of telecommunication
(with a copy to follow by mail):
If to the Lender:
Greenfield Commercial Credit L.L.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Corporation or any Subsidiary
The ▇▇▇▇▇▇▇ Companies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and if to the Stockholders, at their respective addresses set forth on the
signature pages hereof or to such other addresses as a Stockholder or the Lender
shall designate pursuant to notice in the manner set forth herein.
9. Entire Agreement. This Agreement constitutes the entire understanding
among the parties hereto with respect to the subject matter hereof and no
modification, amendment or waiver of any provision of this Agreement shall be
valid unless in writing signed by the Lender and Stockholders representing a
beneficial interest in a majority of the Shares hereunder.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators and permitted successors and assigns.
- 4 -
11. Governing Law. Regardless of the place of execution, this Agreement
shall be governed by and construed in accordance with the laws of the State of
Ohio, except that the proxy set forth in Paragraph 3, to the extent applicable
to the voting power of the Corporate Shares, shall be governed by the laws of
the State of Delaware (without regard to Delaware's conflicts of laws
principles). Each Stockholder agrees to submit to personal jurisdiction and to
waive any objection as to venue of federal or state courts in the State of
Michigan.
12. Counterparts. This Agreement may be executed in any number of
counterparts as may be convenient or necessary, and it shall not be necessary
that the signatures of all parties hereto or thereto be contained on any one
counterpart hereof or thereof. Additionally, the parties hereto agree that for
purposes of facilitating the execution of this Agreement, (a) the signature
pages taken from the separate individually executed counterparts of this
Agreement may be combined to form multiple fully executed counterparts and (b) a
facsimile transmission shall be deemed to be an original signature for all
purposes. All executed counterparts of this Agreement shall be deemed to be
originals, but all such counterparts taken together or collectively, as the case
may be, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Turnaround
Agreement the day and year first above written.
CORPORATION:
THE ▇▇▇▇▇▇▇ COMPANIES, INC., SAWWORTH BOOK COMPANY,
a Delaware corporation an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------- ----------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and CEO Its: Chairman and CEO
SUBSIDIARIES:
▇▇▇▇▇▇▇ BOOK COMPANY, GAYLORD'S, INC.,
an Ohio corporation an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------- ----------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and CEO Its: Chairman and CEO
- 5 -
▇▇▇▇▇▇▇ ENTERPRISES, INC. THE COOKSTORE, INC.
an Ohio corporation an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------- ----------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and CEO Its: Chairman and CEO
THE COOKSTORE WORTHINGTON, INC.
an Ohio corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------
▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman and CEO
LENDER:
GREENFIELD COMMERCIAL CREDIT L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
-----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Its: President
STOCKHOLDERS: No. of Shares of Common Stock Owned
------------- -----------------------------------
678,580
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
424,691
▇▇▇▇ ▇▇▇▇▇▇▇
198,344
▇▇▇▇ ▇▇▇▇▇▇▇
198,344
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
198,344
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
160,877
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
71,345
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
- 6 -