Exhibit 10.7.3
BANK [LOGO] ONE Business Loan Agreement
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Agreement by and between Bank One, Chicago ("Bank One"), located at Arlington
Heights, Illinois and Factory Card Outlet of America. Ltd. and Factory Card
Outlet Corporation ("Borrower"), located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Borrower has requested certain extension(s) of credit provided by Bank One,
evidenced by the following:
Business Purpose
(a) Revolving Promissory Note $25,000,000 November 1, 1996
------------------------- ----------- ----------------- ---------------------
Instrument Amount Date (Obligor) (Guarantor)
Borrower
--------------------- -------------------------- ---------------------
Obligor Obligor (Obligor) (Guarantor)
(b) Promissory Note $1,500,000 May 1, 1995
------------------------- ----------- ----------------- ---------------------
Instrument Amount Date (Obligor) (Guarantor)
--------------------- -------------------------- ---------------------
Obligor Obligor (Obligor) (Guarantor)
(c)
------------------------- ----------- ----------------- ---------------------
Instrument Amount Date (Obligor) (Guarantor)
--------------------- -------------------------- ---------------------
Obligor Obligor (Guarantor)
Instrument Amount
and any and all renewals, extensions or substitutions therefor ("Obligations").
In consideration of the mutual promises set forth below and the extension(s) of
credit as described above and subject to Borrower's satisfactory fulfillment of
all conditions incident to the borrowing(s), Bank One and Borrower agree as
follows:
ARTICLE I - DEFINITIONS
The following terms shall have the following meanings in this Agreement or in
any document made or delivered pursuant to or in conjunction with this
Agreement:
1.1 All computations and determinations as to accounting or financial matters
shall be made in accordance with generally accepted accounting principles
consistently applied ("GAAP"), and all accounting or financial terms shall have
the meanings ascribed to such terms by GAAP.
1.2 "Indebtedness" shall mean:
(a) All indebtedness and liabilities of whatsoever kind, nature and
description owed to Bank One by Borrower (including Liabilities of Borrower as
defined in any note now or hereafter executed by Borrower in favor of Bank One),
whether direct or indirect, absolute or contingent, due or to become due or
whether now existing or hereafter arising, and howsoever evidenced or acquired,
and whether joint and several;
(b) All future advances which Bank One at any time may, but shall not be
required to, make for the protection or preservation of Bank One's rights and
interests arising hereunder, including, without limitation, advances for taxes,
levies, assessments, insurance, and reasonable attorneys' fees, if allowable by
law; and
(c) All costs and expenses incurred by Bank One in the protection and
preparation for sale of any of the collateral hereinafter described in Section
3.1 in any other security document including, without limitation, attorneys'
fees, if allowable by law, and court costs.
1.3 "Obligation" shall mean the above referenced extension(s) of credit
including any Promissory Note, Guaranty, Letter of Credit or other instrument of
Borrower evidencing any loan, advance, credit or extension or renewal thereof
made or committed by Bank One to Borrower under this Agreement.
1.4 "Person" shall mean and include an individual, partnership, corporation,
trust, unincorporated association or organization, government or any department
or agency thereof.
1.5 "Related Person" shall include, but shall not be confined to, any Person
related to Borrower by common control or ownership.
1.6 "Subordinated Debt" shall mean indebtedness of Borrower which is
subordinated to all indebtedness of Borrower to Bank One under the terms and
conditions approved in writing by Bank One.
1.7 The aforestated definitions, and all other definitions which may be set
forth herein, shall be applicable to the singular and plurals of said defined
term.
ARTICLE II - REPRESENTATIVES AND WARRANTIES
Borrower represents and warrants that:
2.1 If applicable, it is a duly organized, legally existing corporation in good
standing under the laws of the State of Illinois, is qualified to do business in
and is in good standing under the laws of any other state in which it conducts
its business.
2.2 It has the power and is duly authorized to enter into this Agreement and to
execute and deliver to Bank One, now and from time to time hereafter, additional
instruments, resolutions, agreements and other instruments or documents relating
to the Obligation owed to Bank One. It has, by proper action, authorized and
empowered those persons whose signatures appear in this Agreement, and any
instruments, documents and exhibits that have been delivered in connection
herewith to execute the same for and on its behalf.
2.3 The execution by it of this Agreement or any other agreements, instruments,
or documents which may, from time to time hereafter, be executed in respect
hereto and delivered to Bank One, shall not constitute a breach of any
provisions contained in its articles of incorporation or bylaws, or if
promulgated pursuant thereto, and that the performance by it of its obligations
hereunder or any agreements executed by it and delivered hereunder shall not
constitute an event of default under any other agreement to which it is now a
party.
2.4 All financial statements and information relating to it which have been or
may hereafter be delivered by it, its agents or accountants to Bank One are true
and correct and have been prepared in accordance with GAAP and that there have
been no material adverse changes in its financial or business condition or
operations since the submission of any financial information to Bank One, and no
material adverse changes in its financial or business condition or operations
are imminent or threatened.
2.5 All of its Federal, State and other tax returns and reports, including
reports to any governmental authority, for the proper maintenance and operation
of its properties, assets and business, as may be required by law to be filed or
paid, have been filed, and all Federal, State and other taxes, assessments, fees
and other governmental charges (other than those presently payable, without
penalty) imposed upon it or its properties or assets, which are due and payable,
have been fully paid unless being contested by it in the ordinary course of
business for which it has provided adequate reserves.
2.6 There is no litigation or, legal or administrative proceedings,
investigations or other action of any nature, pending or, to its knowledge,
threatened against or affecting it, which have not been disclosed to Bank One
and involve the possibility of any judgment or liability not covered by
insurance which may materially or adversely affect any of its properties or
assets or its right to carry on its business as now conducted.
2.7 It has good, valid and marketable title to all of its property and assets
free of any adverse lien, security interest or encumbrance, except liens,
security interests, pledges and encumbrances disclosed to Bank One by Borrower
in writing prior to the date hereof.
2.8 All of the funds loaned to it pursuant to this Agreement have been or will
be used exclusively in its normal business operation, will not be diverted to or
used in any other manner, and will not be used for the purchasing or carrying of
any "Margin Stock" as defined in regulations promulgated by the Federal Reserve
Board or the Securities and Exchange Commission.
2.9 It possesses and will continue to possess all permits, licenses, trademarks,
patents and rights thereto to conduct its business and that its business does
not conflict or violate any valid rights of others with respect to the
foregoing.
2.10 If applicable, it is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof ("ERISA"). Neither a Reportable Event nor a Prohibited Transaction, as
defined per ERISA, has occurred and is continuing with respect to any Plan, nor
has there been a notice of intent to terminate a Plan or appoint a trustee to
administrate a Plan.
2.11 It is in material compliance with all Federal, State and local laws,
ordinances, regulations, rulings and interpretations relating to industrial
hygiene, public health or safety, environmental conditions, the protection of
the environment, the release, discharge, emission or disposal to air, water,
land or ground water, the withdrawal or use of ground water or the use,
handling, disposal, treatment, storage or management of or exposure to Hazardous
Materials ("Hazardous Materials Laws"), the violation of which would have a
material effect on its business, its financial condition or its assets. The term
"Hazardous Materials" means any flammable materials, radioactive materials,
pollutants, toxic substances, hazardous water, hazardous materials, hazardous
substances, polychlorinated biphenyls, asbestos, urea formaldehyde, petroleum
(including its derivatives, by-products or other hydrocarbons) or related
materials or other controlled, prohibited or regulated substances or materials,
including, without limitation, any substances defined or listed as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "pollutants" or "toxic substances" under any Hazardous Materials
Laws. It has not received any written or oral communication or notice from any
judicial or governmental entity nor it is aware of any investigation by any
agency for any violation of any Hazardous Materials Law,
2.12 Details of all litigation, legal or administrative proceedings,
investigation or other action of similar nature, pending or threatened against
it, at any time during the term of this Agreement, which in part or in whole may
or will render any of these Representations and Warranties no longer true,
accurate and correct in each and every respect, will be brought to the attention
of Bank One, in writing, within fifteen (15) days from the date Borrower
acquires knowledge of same.
ARTICLE III - SECURITY
3.1 As security for repayment of the Indebtedness, regardless of whether the
principal sum evidenced by an Obligation is reduced to zero and thereafter
increased/decreased an unlimited number of times, Borrower hereby grants to Bank
One or has previously caused to be granted to Bank One a security interest
and/or lien in or on the following property under separate instrument(s):
|X| Accounts, general intangibles, chattel paper, instruments, and other
forms of obligations and receivables
|X| Inventory, merchandise, raw materials, work in process and supplies
|X| Goods, equipment, machinery, furnishings and other personal property
___ Real estate located at _____________________________________________
___ An assignment of life insurance on the life of ______________________
in an amount no less than $_____________
___ Specific collateral described as follows: ____________________________
___________________________________________
3.2 It is further agreed that the security described above shall secure
repayment of all Indebtedness and that a default in terms of any note, security
agreement, mortgage, or other agreement from Borrower to Bank One shall
constitute a default of all notes, security agreements, mortgages, and other
agreements, and that Bank One may proceed in exercising its rights thereunder in
any order or manner it may choose. The purpose of this section being to
cross-collateralize and cross-default all Indebtedness. Additionally, the
security interest described above, if any, may be modified, added to or deleted
from time to time without modification of this Agreement.
ARTICLE IV - AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any Indebtedness is outstanding or
so long as this Agreement is in effect, Borrower shall:
4.1 Maintain insurance against fire, business interruption, public liability,
theft and other casualty on its insurable real and personal property to their
full replacement costs with companies acceptable to Bank One and against
liability on account of damage to persons or property and as required under all
applicable Workers' Compensation Laws. Furthermore, Borrower shall maintain any
other insurance as may from time to time be reasonably requested by Bank One,
shall insert a joint loss payee clause naming Bank One in all fire and extended
coverage policies and shall deliver certified copies of all such insurance
policies to Bank One upon demand.
4.2 Maintain, keep, and preserve its buildings and properties and every part
thereof in good repair, working order, and condition and from time to time make
all needful and proper repairs, renewals, replacements, additions, betterments,
and improvements thereto, so that at all times the efficiency thereof shall be
fully preserved and maintained.
4.3 Duly pay and discharge or cause to be paid and discharged all taxes,
assessments, and other governmental charges imposed upon it and its properties
or any part thereof or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies, which if unpaid might by law become a
lien or charge upon its property, except such items as are being in good faith
appropriately contested and for which it has provided adequate reserves.
4.4 Carry on and conduct its business in substantially the same manner and in
substantially the same fields as such business is now and has heretofore been
carried on, maintain management with the same expertise and experience, and if
management is to be changed, immediately notify Bank One of said change, and
maintain its legal existence, and comply with all valid and applicable statutes,
rules and regulations.
4.5 Maintain, keep, and preserve a system of accounting in accordance with GAAP,
deliver to Bank One financial reports in a form satisfactory to Bank One as Bank
One may request from time to time, permit the duly authorized representative(s)
of Bank One at all reasonable times to examine and inspect the books and records
of it or any related business entity of it, to make abstracts and copies
thereof, and to visit and inspect any of its property wherever the same may be
located.
4.6 Comply with all laws and regulations which it is required to comply with
including Hazardous Materials Laws and regulations, and permit Bank One to make
environmental audits from time to time if requested by Bank One with costs of
same to be paid by Borrower.
ARTICLE V - NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any Indebtedness is outstanding or
so long as this Agreement is in effect, except for that previously disclosed in
writing to and consented to by Bank One, Borrower shall not without prior
written consent of Bank One:
5.1 Create, incur or assume any indebtedness for borrowed money, other than to
Bank One, or act as guarantor for any indebtedness other than Subordinated Debt
outstanding as of the date of this Agreement of others in an aggregate
amount greater than $ 00 at any time. For purpose hereof, sale of accounts
receivable and or entering into capital leases of personal property shall be
deemed the incurring of indebtedness for borrowed money.
5.2 Mortgage, pledge, assign, hypothecate, encumber, create or grant a security
interest in any of its assets except to Bank One, nor sell, lease, transfer,
assign or otherwise dispose of any of its assets, properties or business outside
of the ordinary course of business, except secured purchase money or lease
indebtedness up to the amount permitted by Section 5.1, if any.
5.3 Invest in, loan or advance money to, organize or participate in the
organization or in the creation of any other business entity.
5.4 Merge, transfer, acquire or consolidate with or into any other entity,
change ownership, dissolve, and/or transfer or sell any assets outside of the
ordinary course of business without the prior written consent of Bank One.
5.5 If Borrower is a corporation, release, redeem, retire, purchase, or
otherwise acquire directly or indirectly any of its capital stock, or make any
changes in its capital structure, or pay, set aside, allocate or declare any
dividends, in cash or other property, upon its capital stock, except that
Borrower may purchase its capital stock for the benefit of or issue additional
capital stock to its employees in accordance with the terms with any Employee
Stock Purchase Plan established as of _______________, 1996.
ARTICLE VI - ADDITIONAL COVENANTS
Borrower agrees that each additional covenant listed below is fully applicable
if marked by an "X" or a check in the applicable box or boxes, or if the
information necessary to complete same is typed or written in the appropriate
space provided.
|_| 6.1 GUARANTY. Prior to or contemporaneous with the execution of this
Agreement, Borrower shall deliver to Bank One the Guaranty(s) of
_________________________________________ (Guarantor(s) name(s)) in
form and content acceptable to Bank One which Guaranty(s) shall
provide for liability of the Guarantor(s) for payment of the
Indebtedness and performance of the terms, conditions and provisions
of this Agreement and any and all applicable Security documents and
agreements.
| | 6.2 FINANCIAL REPORTS. Borrower covenants in accordance with Section 4.5
that it will deliver to Bank One:
| | (a) Within ninety (90) days after the end of each fiscal year of
Borrower, audited, consolidated financial statements of Borrower
prepared in accordance with GAAP which shall include a Balance
Sheet, Statement of Income, Statement of Reconciliation of Net
Worth, Statement of Changes in Financial Position and Notes to
financial statements and within thirty (30) days from the
applicable filing deadline, Borrower's Federal income tax return.
|X| (b) Within thirty (30) days after the end of each fiscal month of
Borrower, internally prepared financial statements of Borrower
prepared in accordance with GAAP which shall include a Balance
Sheet at the end of each such period and an Income Statement for
the period from the beginning of the current fiscal year to the
end of such period. These statements shall be prepared on
substantially the same accounting basis as the statements
required in Section 6.2(a) above, if applicable, and the accuracy
of the statements (subject to audit and year-end adjustments)
shall be certified by the chief financial officer or president of
Borrower.
|X| (c) Simultaneously with the financial statements required above,
a Compliance Certificate, in form attached to this Agreement,
certifying that the financial statements are complete and correct
and that the Borrower has no knowledge of any condition, event or
act which with notice or lapse of time or both, could constitute
an Event or Default or which materially and adversely could
affect the financial condition or operations of Borrower, or if
such condition, event or acts exist, specifying the nature and
status thereof.
|_| (d) Within ___________________ (__) days after the end of each
_______________ year, signed and dated personal financial
statements of all individual Guarantor(s) and Obligor(s), if any,
on Bank One's forms, and by May 1 of each calendar year, the
personal income tax returns filed for the past calendar year of
all individual Guarantor(s) and Obligor(s), if any.
|_| (e) Simultaneously with the financial statements required in
___________ above, __________ financial statement(s) of all
corporate or partnership Guarantor(s) and Obligor(s), if any,
prepared in accordance with GAAP.
|X| 6.3 TANGIBLE NET WORTH. Borrower agrees to maintain a Tangible Net Worth
plus Subordinated Debt of not less than either (check one):
|X| (a) Twenty Five Million DOLLARS ($ 25,000,000) or
|_| (b) the amount(s) set forth for the following period(s):
Period(s) Amount(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
"Tangible Net Worth" shall be determined in accordance with GAAP and
shall be deemed to include the amount of total assets of Borrower
excluding the amount of Intangible Assets of Borrower minus the amount
of total liabilities of Borrower, exclusive of Subordinated Debt, if
any.
"Intangible Assets" shall be determined in accordance with GAAP and be
deemed to include at book value, without limitation, leasehold
improvements, goodwill, patents, copyrights, secret processes,
deferred expenses relating to sales, general administrative, research
and development expense, and all amounts due from any officer,
employee, director, shareholder or Related Person.
|X| 6.4 DEBT TO TANGIBLE NET WORTH. Borrower agrees to maintain ratio of Debt
to Tangible Net Worth plus Subordinated Debt of not more than either
(check one):
|X| (a) 1.65 to 1. _________ or
|_| (b) the ratio(s) set forth for the following period(s):
Period(s) Ratio(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
"Debt" shall be determined in accordance with GAAP and shall be deemed
to include all liabilities of Borrower including but not limited to
accruals, deferrals net of deferred rent liability, and capitalized
leases, less Subordinated Debt, if any.
|_| 6.5 WORKING CAPITAL. Borrower agrees to maintain net working capital
(Current Assets less current liabilities) of not less than either
(check one):
|_| (a) DOLLARS ($________________) or
|_| (b) the amount(s) set forth for the following period(s):
Period(s) Amount(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
"Current Assets" shall be determined in accordance with GAAP and shall
be deemed to include inventory at lower of cost or current market
value less any amounts due from any officer, employee, director,
shareholder or Related Person.
|X| 6.6 CURRENT RATIO. Borrower agrees to maintain a Current Ratio (Current
Assets divided by current liabilities including outstanding balance
of business purpose revolving promissory note of even date and any
renewal thereof) of not less than either (check one):
|X| (a) 1.20 to 1. ________ or
|_| (b) the ratio(s) set forth for the following period(s):
Period(s) Ratio(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
|_| 6.7 CASH FLOW RATIO. Borrower agrees to maintain a Cash Flow Ratio (net
income after taxes plus depreciation plus amortization to current
maturities of long term debt) of not less than either (check one):
|_| (a) _________. _________ to _________ _________
|_| (b) the amount(s) set forth for the following period(s):
Period(s) Ratio(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
|X| 6.8 DEBT SERVICE COVERAGE RATIO. Borrower agrees to maintain a Debt
Service Coverage Ratio (net income before interest expense, and
depreciation and amortization charges, plus or minus inventory
capitalization adjustment, deferred rent adjustment and nonrecurring
items to interest expenses plus current maturities of long term
debt of not less than either (check one):
|X| (a) 1.50 to 1. ________ or
|_| (b) the ratio(s) set forth for the following period(s):
Period(s) Ratio(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
|_| 6.9 CAPITAL EXPENDITURES. Borrower agrees not to purchase, lease or
otherwise acquire or enter into any commitment to purchase, lease or
otherwise acquire additional capital assets where the aggregate
liability or expenditure therefore exceeds the following, except with
prior written consent by Bank One (check one):
|_| (a) $_______________ per fiscal year commencing with fiscal
year ___________or
|_| (b) the amount(s) set forth for the following period(s):
Period(s) Amount(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
|X| 6.10 SUBORDINATION OF DEBT. Borrower shall cause to be subordinate all
Indebtedness including interest thereon ("Junior Indebtedness"), which may at
any time now or hereafter be owed to any officer, employee, director,
shareholder or Related Person by the Borrower in favor of all Indebtedness,
including interest thereon ("Senior Indebtedness") due Bank One. Borrower shall
obtain and deliver to Bank One subordination agreements from said officers,
employees, directors, shareholders or Related Persons for said Junior
Indebtedness in form and content acceptable to Bank One. Upon the occurrence of
an Event of Default under this Agreement, Borrower shall without notice from
Bank One immediately cease payment of any fees or advances to any officer,
employee, director, shareholder or Related Person and shall also cease payment
of the sums, if any, allowed to be paid by the terms of the Subordination
Agreement(s).
|X| 6.11 DEPOSIT ACCOUNTS. Borrower shall establish and maintain its principal
deposit accounts at Bank One as long as any Indebtedness remains outstanding or
so long as this Agreement remains in effect.
|_| 6.12 COMPENSATION. Borrower agrees, except with prior written consent of
Bank One, that salary, withdrawals, bonuses and all other compensation paid, in
cash or otherwise, by Borrower to the following person(s) shall not exceed the
following amount(s).
Person(s) Amount(s)
__________________________ $_______________________________
__________________________ $_______________________________
__________________________ $_______________________________
|X| 6.13 BORROWING BASE. Borrower is subject to certain "Borrowing Base"
conditions as set forth in the "Borrowing Base" Addendum attached hereto and
made a part hereof.
|_| 6.14 OPINION OF COUNSEL. If required by Bank One, Bank One shall receive a
favorable written opinion of Counsel for Borrower acceptable to Bank One in form
and substance satisfactory to Bank One in its sole discretion, relating to the
Representations and Warranties set forth herein and such other matters as Bank
One may reasonably request.
|X| 6.15 ADDITIONAL PROVISIONS. If any, as are set forth in the Rider attached
hereto and made part hereof.
ARTICLE VII - DEFAULT AND REMEDIES
7.1 Borrower shall be in default hereunder upon the happening of any of the
following ("Event of Default"):
(a) The occurrence of an event of default under the terms of any evidence
of Indebtedness or any Obligation, security agreement, mortgage and
other agreement executed in connection therewith or herewith,
including any renewal, extension or modification thereof or hereof or
in any other obligation or agreement with Bank One, whether now or
hereafter existing;
(b) Non-performance of any covenant, warranty or liability contained or
referred to herein; or
(c) If any warranty, representation or statement made or furnished to Bank
One by or on behalf of Borrower, Guarantor or any Obligor, in
connection with this Agreement, or to induce Bank One to make a loan
to Borrower, proves to have been false in any material respect when
made or furnished.
7.2 Upon the occurrence of an Event of Default, Bank One may, at its option,
declare principal and accrued interest of all Indebtedness to be immediately due
and payable, without presentation, demand, protest or notice of any kind, all of
which are hereby expressly waived. Bank One shall have all the rights and
remedies of a Secured Party under the Uniform Commercial Code, as enacted in the
state where Bank One's principal office is located, said rights and remedies
being cumulative in nature. Bank One may set off any of the Borrower's or
Guarantor's deposits or accounts, and any other indebtedness of Bank One to
Borrower against the Indebtedness before or after an Event of Default, without
first looking to any property securing payment thereof.
7.3 Acceptance of payment, in full or part, or waiver of any Event of Default
shall not operate as a waiver of any current or later Event of Default, nor of
any other right of Bank One.
7.4 The provisions of this Agreement concerning any Event of Default are not
intended in any way to affect any rights of Bank One with respect to any
Indebtedness of Borrower to Bank One which may or hereafter be payable on
demand.
7.5 No delay or failure of Bank One in exercising any right, power, remedy or
privilege hereunder shall affect such right, power or privilege or be construed
as a waiver against Bank One.
7.6 Any waiver, permit, consent or approval by Bank One of any breach or Event
of Default hereunder must be in writing and shall be effective only to the
extent set forth in such writing.
ARTICLE VIII - MISCELLANEOUS
8.1 All notices required to be given under any term of this Agreement shall be
sufficient if mailed, via registered or certified mail, return receipt
requested, or sent via overnight or hand courier, to the parties at their
respective addresses as previously set forth.
8.2 All documents referred to in this Agreement shall for all purposes be
considered part of this Agreement, and all terms used in this Agreement shall
have the meaning set forth in said documents, and this Agreement shall include
all of the provisions stated in said documents.
8.3 This Agreement is a continuing agreement and shall continue in effect
notwithstanding that from time to time, no Indebtedness may exist. This
Agreement shall continue as to any Indebtedness and as to any and all renewals,
extensions or modifications thereof.
8.4 This Agreement may be executed in several counter-parts, each of which shall
be an original and all of which shall constitute the same instrument.
8.5 This Agreement, together with all other documents executed concurrently
herewith or attached hereto, constitutes the full and complete Agreement of the
parties and may not be modified except by written instrument signed by all
parties hereto.
8.6 This Agreement shall be binding upon and inure to the benefit of Borrower
and Bank One and their respective successors and assigns.
8.7 Borrower agrees to pay on demand all costs and expenses in connection with
the negotiation, preparation, execution, delivery, filing, recording,
administration, enforcement, litigation, collection, or filing of any legal
action on or for any Obligation, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel for Bank One, with respect thereto.
Time is of the essence of all requirements of Borrower hereunder. The
obligations of Borrower under this paragraph shall survive payment of any
Obligation.
8.8 This Agreement shall be governed and construed in accordance with the laws
of the state where Bank One's principal office is located.
8.9 Any provision contained in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
8.10 Borrower shall fully and promptly pay, perform, discharge, defend,
indemnify and hold harmless Bank One from any and all claims, orders, demands,
causes of action, proceedings, judgments, or suits and all liabilities, losses,
costs or expenses (including, without limitation, technical consultant fees,
count costs, expenses paid to third parties and reasonable legal fees) and
damages arising out of, or as a result of (i) any release, discharge, deposit,
dump, spilt, leak or placement of any Hazardous Material into or on any
Collateral or property owned, leased, rented or used by Borrower (the
"Property") at any time; (ii) any contamination of the soil or ground water of
the Property or damage to the environment and natural resources of the Property
or the result of actions whether arising under any Hazardous Material Law, or
common law; or (iii) any toxic, explosive or otherwise dangerous Material which
have been buried beneath or concealed within the Property. This indemnity shall
survive termination of this Agreement.
8.11 This Agreement contains the entire agreement of the panties and supersedes
all prior agreements and understandings, oral or written, with respect to the
subject matter hereof.
Executed this 1st day of November, 1996.
BORROWER:
Bank One, Chicago, NA Factory Card Outlet of America Ltd.
By: ___________________________ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Its ___________________________ Factory Card Outlet Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
RIDER TO BUSINESS LOAN AGREEMENT
DATED NOVEMBER 1, 1996
1. Borrower shall pay to Bank One a commitment fee equal to .25% per year
of the daily average unused amount of the Obligations, except that the
commitment fee shall equal .40% for any quarterly period when the outstanding
principal balance of the Obligation is less than $5,000,000, such payment due on
the last day of each calendar quarter.
2. Borrower shall maintain a Fixed Cost Coverage Ration with 87.5% of that
provided in the financial projections provided Bank One prior to the date of
this Agreement. "Fixed Cost Coverage Ratio" means the ratio of (a) the twelve
month rolling average of the sum of (i) earnings before interest, taxes and
non-store depreciation and amortization charges, plus (ii) rental payments, to
(b) the twelve month rolling average of the sum of (i) interest payments due and
payable plus (ii) rental payments. The "Fixed Cost Coverage Ratio" will be
reinstated beginning November 30, 1996.
3. Borrower shall maintain a Leverage Ratio of not greater than 4.00:1.
"Leverage Ratio" means the ratio of (a) the sum of (i) all indebtedness and
other liabilities of Borrower, but excluding Subordinated Debt plus (ii) 3 times
the aggregate of all of Borrower's obligations under operating leases to (b)
Tangible Net Worth plus Subordinated Debt.
4. In the event there is a default hereunder occasioned by a breach of a
covenant in paragraph 2 or 3 immediately above, which default continues for two
consecutive months, in addition to all other remedies available to Bank One
hereunder, Borrower is prohibited from executing any leases for the opening of
any new store or other retail outlet without the prior written consent of Bank
One.
5. Borrower shall not acquire any other business or make investments in
any other person or entity without providing Bank One with prior written notice
thereof and all information relative thereto as requested by Bank One.
6. Without the prior written consent of Bank One, Factory Card Outlet of
America, Ltd. shall make no loans, advances or extensions of credit, nor pay any
dividends or other distributions on account of its common stock, to Factory Card
Outlet Corporation.
INITIAL /s/ [Illegible] 11/19
BANK [LOGO] ONE "Borrowing Base" Addendum
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This "Borrowing Base" Addendum to the Business Loan Agreement additionally
governs the $25,000,000 Promissory Note ("Note") of Borrower, set forth in the
Agreement as an Obligation.
Borrower agrees so long as the Note or the indebtedness represented thereby is
outstanding or so long as the Agreement is in effect, the following shall apply:
1. Note Advancement Formula. The proceeds of the Note may be advanced,
repaid and readvanced an unlimited number of times with Borrower's right to
borrowing under the Note limited in that the total principal balance at any time
outstanding on the Note shall not exceed, prior to request for a draw or advance
or after a draw or advance, the borrowing base formula as hereinafter set forth.
The "Borrowing Base" formula as of any date shall mean the lesser of:
(a) the Note amount, or
(b) the total amount of one or more (as marked) of the following (check as
applicable):
|_| (a) ____________ % of Borrower's Eligible Accounts Receivable up
to a maximum of $_________
|X| (b) 50% of Borrower's Eligible Inventory up to a maximum of $N/A
|_| (c) ____________ % of Borrower's Eligible Raw Materials up to a
maximum of $________
|_| (d) ____________ % of Borrower's Eligible Equipment up to a
maximum of $_________
|_| (e) ____________ % Other (describe):_________________________
2. "Eligible Account Receivable" means an account receivable of Borrower
from a party (the "Account Debtor"), now existing or hereafter arising, which
meets all the following requirements at the time it came into existence and
continues to meet the same until it is collected in full:
(a) The account is due and payable in full and is less than
____________(________) days old from the due date shown on the original invoice
date (which first due date is not greater than sixty (60) days from invoice
date); (b) The account arose in the ordinary course of Borrower's business from
the performance of services or any outright and lawful sale or lease of goods by
Borrower. If goods are involved, all such goods having been lawfully shipped to
Account Debtor, and Borrower has possession of (and will deliver as required
hereunder) or has delivered to Bank One copies of all invoices, shipping
documents and delivery receipts evidencing such shipments; (c) The right to
payment has been fully earned by completed performance; (d) There has not been a
progress billing nor has Borrower extended the time for payment without the
consent of Bank One; for the purposes hereof, "progress billing" means any
invoice for goods sold or leased or services rendered under a contract or
agreement pursuant to which the Account Debtor's obligation to pay such invoice
is conditioned upon the Borrower's completion of any further performance under
the contract or agreement; (e) The account is not subject to any prior
assignment, claim, lien or security interest; (f) The true record of the amount
owed is reflected on Borrower's books and on any invoice or statement delivered
to Bank One relating to the account is owing to Borrower; (g) The account is not
subject to any setoff, counterclaim, credit, allowance, adjustment or discount
(excepting only any applicable discount for prompt payment); (h) Borrower has
not received notice of any liquidation, reorganization, dissolution, termination
or existence, insolvency, business failure, appointment of a receiver for all or
any part of the property of, assignment for the benefit of creditors made by, or
filing of a petition under any bankruptcy or insolvency statute by or against,
Account Debtor; (i) The account did not arise from a transaction with a Person,
or entity affiliated with Borrower; (j) The Account is not owed by the
government of the United States of America, or any department, agency, public
corporation, or other instrumentality thereof, unless the Federal Assignment of
Claims Act of 1940, as amended, and any other steps necessary to perfect Bank
One's security interest therein, have been complied with to the Bank One's
satisfaction with respect to such Account; (k) The Account is not owed by any
state, municipality or other political subdivision of the United States of
America, or any department, agency, public corporation, or other instrumentality
thereof and as to which Bank One determines that its security interest therein
is not or cannot be perfected; (I) Bank One has not informed Borrower that in
Bank One's reasonable credit judgment that the prospect of collection of such
Account is impaired or that the Account may not be paid by reason of the Account
Debtor's financial inability to pay or which is owed by an Account Debtor which
Bank One, in its reasonable credit judgment, otherwise deems to be
uncreditworthy; (m) The account did not arise out a contract or purchase order
prohibiting any assignment thereof or the creation of any security interest
therein and Borrower has not received any account acceptance, chattel paper,
promissory note, trade, payment instrument, draft or written agreement (other
than invoices, shipping documents and delivery receipts) with respect to such
account or payment thereof; (n) The account did not arise from an Account Debtor
whose mailing address or executive offices are located outside the United States
or is not organized under the laws of the United States or any state, unless the
obligation is secured and payable by an irrevocable letter of credit or
acceptance in form and substance satisfactory to Bank One; and (o) Other (if
any)______________________________________________________
In the event that more than _______ percent (___%) of the accounts
receivable from any one Account Debtor shall at any time become more than
________________________(______) days past due, none of the accounts receivable
outstanding from that Account Debtor shall be included in calculating Borrower's
Eligible Accounts Receivable, until such time, if any, as Bank One may, in its
sole discretion, determine otherwise.
3, "Eligible Inventory" means all tangible personal property, goods,
merchandise and other personal property now owned or hereafter acquired by
Borrower, wheresoever located in the United States, which is leased or
furnished, or held to be furnished, under contracts of sale, lease or service
and all finished goods which meet all of the following specifications: (a) the
inventory is lawfully owned by Borrower, is not subject to any lien, claim,
consignment, security interest or prior assignment and has not been held by
Borrower for more than ________________________(______) months; (b) Borrower has
the right of assignment thereof and the power to grant security interests
therein; (c) the inventory arose or was acquired in the ordinary course of
Borrower's business and no substantial portion thereof represents returned,
rejected or damaged goods; (d) no account receivable or document of title has
been created or issued with respect to such inventory; (e) the inventory does
not represent work-in-process, spare parts, packaging and shipping materials,
supplies, or returned or defective inventory; and (f) the inventory is not
otherwise regarded by Bank One as unsuitable collateral. "Eligible Inventory"
shall be valued in accordance with GAAP, excluding, however, (i) the amount of
progress payments, predelivery payments, deposits and any other sums received by
Borrower in anticipation of the sale and delivery of Eligible Inventory, and
(ii) all Eligible Inventory on lease to others. "Eligible Raw Materials" shall
mean all raw materials and components to be used in Borrower's business, meeting
all Eligible Inventory requirements and shall be valued in accordance with GAAP.
4. "Eligible Equipment" means that inventory of new or used machinery and
equipment of Borrower and all accessions thereto and products thereof. For the
purposes of determining the Borrowing Base, Eligible Equipment shall be valued
at either (check one):
_______ (a) cost minus accumulated depreciation in accordance with GAAP as
shown on Borrower's equipment/inventory report,
_______ (b) the equipment's then current appraised fair market value, or
_______ (a) the equipment's then current appraised liquidation value.
5. "Eligible Collateral" shall mean all Eligible Accounts Receivable,
Eligible Inventory, Eligible Raw Materials, Eligible Equipment and the other
property, if any described above.
6. Reporting. Borrower will supply no later than five (5) calendar days
from the end of each week/month (strike one), or more frequently, if requested
by Bank One a compliance certificate in a form and format acceptable to Bank
One, certifying Borrower's compliance and the requirements hereof.
7. Borrowing Base Deficiency. In the event the amount outstanding under
the Note exceeds the Borrowing Base at any time, then Borrower shall be required
to immediately reduce the outstanding principal balance to comply with the
Borrowing Base. Borrower shall pay to Bank One with its compliance certificate
by certified check, cashier's check or cash, the deficiency. If the deficiency
is not paid down as herein called for, the Note may be declared in default.
8. Change of Note Advancement Formula. Bank One retains the sole
discretion, to reduce the allowable percentage of any Eligible Collateral to be
used in calculating the Borrowing Base formula based upon the Eligible
Collateral changing in length, type or term from the Eligible Collateral
originally presented to and agreed upon between Bank One and Borrower prior to
the signing of this Agreement and/or based upon the present or projected
operating or financial condition of borrower.
9. Audits. Borrower agrees that Bank One shall have the right to make
audits to verify the Eligible Collateral report(s) that have been submitted to
Bank One from time to time. Such audits will be made at the request of Bank One
and shall be determined as to frequency solely by Bank One. Borrower also agrees
to make copies available to Bank One of all audits performed by state or federal
regulatory agencies. Audit costs, expenses and monitoring costs will be either
paid directly by Borrower or reimbursed to Bank One if Bank One has paid such
costs and expenses.
10. Draws by Borrower. No draw or advance shall be permitted unless
Borrower shall have timely provided Bank One with additional information and
certifications required hereunder, the amount of the advance sought by Borrower,
all invoices, shipping documents and delivery receipts evidencing the
shipment(s) against which the draw or advance is requested, and unless Borrower
shall be in compliance with all terms of this Agreement.