Exhibit 10.28
BUSINESS LOAN AGREEMENT
This Agreement, dated as of February 28, 2003, is between Bank
of America, N.A. (the "Bank") and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Inc., a California
corporation (the "Borrower").
1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (as
reduced pursuant to clause (d) below, the "Facility No. 1 Commitment")
is Twenty-Five Million Dollars ($25,000,000).
(b) This is a revolving line of credit. During the availability period, the
Borrower may repay principal amounts and reborrow them.
(c) The Borrower agrees not to permit the principal balance outstanding to
exceed the Facility No. 1 Commitment. If the Borrower exceeds this
limit, the Borrower will immediately pay the excess to the Bank upon
the Bank's demand.
(d) The Borrower shall have the right to reduce the Facility No. 1
Commitment upon 3 days notice to the Bank so long as after giving
effect to such reduction, the aggregate amount outstanding hereunder
(including outstanding letters of credit and reimbursement obligations)
shall not exceed the Facility No. 1 Commitment amount as so reduced.
1.2 Availability Period. The line of credit is available between the date
of this Agreement and March 1, 2006, or such earlier date as the availability
may terminate as provided in this Agreement (the "Facility No. 1 Expiration
Date").
1.3 Repayment Terms.
(a) Except in respect of amounts bearing interest at an optional interest
rate, the Borrower will pay interest on April 1, 2003, and then on the
same day of each month thereafter on the principal outstanding under
this line of credit (excluding the amount of any letter of credit
outstanding) until payment in full of any principal outstanding under
this line of credit. Any interest period for an optional interest rate
(as described below) shall expire no later than the Facility No. 1
Expiration Date.
(b) The Borrower will repay in full all principal and any unpaid interest
or other charges outstanding under this line of credit no later than
the Facility No. 1 Expiration Date.
1.4 Interest Rate.
(a) The interest rate is a rate per year equal to the Bank's Prime Rate
plus the Applicable Margin as defined below.
(b) The Prime Rate is the rate of interest publicly announced from time to
time by the Bank as its Prime Rate. The Prime Rate is set by the Bank
based on various factors, including the Bank's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. The Bank may price loans to its
customers at, above, or below the Prime Rate. Any change in the Prime
Rate shall take effect at the opening of business on the day specified
in the public announcement of a change in the Bank's Prime Rate.
1.5 Optional Interest Rates. Instead of the interest rate based on the rate
stated in the paragraph entitled "Interest Rate" above, the Borrower may elect
the optional interest rates listed below for this Facility No. 1 during interest
periods agreed to by the Bank and the Borrower. The optional interest rates
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shall be subject to the terms and conditions described later in this Agreement.
Any principal amount bearing interest at an optional rate under this Agreement
is referred to as a "Portion." The following optional interest rates are
available:
(a) The LIBOR Rate plus the Applicable Margin as defined below.
(b) The IBOR Rate plus the Applicable Margin as defined below.
1.6 Applicable Margin. The Applicable Margin shall be the following amounts
per annum, based upon the Fixed Charge Coverage Ratio (as defined in the
"Covenants" section of this Agreement), as set forth in the most recent
compliance certificate received by the Bank as required in the Covenants
section; provided, however, that, until the Bank receives the first compliance
certificate or financial statement, such amounts shall be those indicated for
pricing level 1 set forth below:
Applicable Margin
(in percentage points per annum)
Pricing Fixed Charge
Level Coverage Ratio LIBOR/IBOR + PRIME +/-
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1 Greater than or equal to 1.30
to 1.00 0.75 -1.00
2 Greater than or equal to 1.20
to 1.00 but less than 1.30 to
1.00 1.00 -0.75
3 Greater than or equal to 1.10
to 1.00 but less than 1.20 to
1.00 1.25 -0.50
The Applicable Margin shall be in effect from the date the most recent
compliance certificate or financial statement is received by the Bank until the
date the next compliance certificate or financial statement is received;
provided, however, that if the Borrower fails to timely deliver the next
compliance certificate or financial statement, the Applicable Margin from the
date such compliance certificate or financial statement was due until the date
such compliance certificate or financial statement is received by the Bank shall
be the highest pricing level set forth above.
1.7 Letters of Credit.
(a) During the availability period, at the request of the Borrower, the
Bank will issue:
(i) Commercial letters of credit with a maximum maturity of 180
days but not to extend more than 90 days beyond the Facility
No. 1 Expiration Date. Each commercial letter of credit will
require drafts payable at sight or up to 90 days after sight.
(ii) Standby letters of credit with a maximum maturity of 365 days
but not to extend more than 90 days beyond the Facility No. 1
Expiration Date. The standby letters of credit may include a
provision providing that the maturity date will be
automatically extended each year for an additional year unless
the Bank gives written notice to the contrary.
(b) The aggregate amount of the letters of credit outstanding at any one
time (including the drawn and unreimbursed amounts of the letters of
credit) may not exceed Fifteen Million Dollars ($15,000,000) or the
applicable proportionately reduced amount if the Borrower reduces the
amount of the Facility No. 1 Commitment pursuant to Section 1.1(d).
(c) In calculating the principal amount available to be borrowed under the
Facility No. 1 Commitment, the principal balance outstanding under such
facility shall include the amount of any letters of
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credit outstanding, including amounts drawn on any letters of credit
and not yet reimbursed.
(d) The Borrower agrees:
(i) Any sum drawn under a letter of credit shall, unless repaid by
the Borrower, be added to the principal amount outstanding
under this Agreement. The amount will bear interest and be due
as described elsewhere in this Agreement.
(ii) If there is an event of default under this Agreement, to
immediately prepay and make the Bank whole for any outstanding
letters of credit.
(iii) The issuance of any letter of credit and any amendment to a
letter of credit is subject to the Bank's written approval and
must be in form and content satisfactory to the Bank and in
favor of a beneficiary acceptable to the Bank.
(iv) To sign the Bank's form Application and Agreement for
Commercial Letter of Credit or Application and Agreement for
Standby Letter of Credit, as applicable.
(v) To pay any issuance and/or other fees that the Bank notifies
the Borrower will be charged for issuing and processing
letters of credit for the Borrower, so long as such fees are
consistent with that certain letter agreement of even date
herewith between the Bank and the Borrower.
(vi) To allow the Bank to automatically charge its checking account
for applicable fees, discounts, and other charges.
2. OPTIONAL INTEREST RATES
2.1 Optional Rates. Each optional interest rate is a rate per year.
Interest will be paid on the last day of each interest period and, if such
interest period is longer than 90 days, upon the expiration of 90 days from the
commencement thereof. At the end of any interest period, the interest rate will
revert to the rate stated in the paragraph entitled "Interest Rate" above,
unless the Borrower has designated another optional interest rate for the
Portion. No Portion will be converted to a different interest rate during the
applicable interest period. Upon the occurrence of an event of default under
this Agreement, the Bank may terminate the availability of optional interest
rates for interest periods commencing after the default occurs.
2.2 LIBOR Rate. The election of LIBOR Rates shall be subject to the
following terms and requirements:
(a) The interest period during which the LIBOR Rate will be in effect will
be no shorter than 30 days and no longer than 180 days. The first day
of the interest period must be a day other than a Saturday or a Sunday
on which the Bank is open for business in New York and London and
dealing in offshore dollars (a "LIBOR Banking Day"). The last day of
the interest period and the actual number of days during the interest
period will be determined by the Bank using the practices of the London
inter-bank market.
(b) Each LIBOR Rate Portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000).
(c) The "LIBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Inter-Bank Offered Rate
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(1.00 - Reserve Percentage)
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Where,
(i) "London Inter-Bank Offered Rate" means the interest rate at
which the Bank's London Banking Center, London, Great Britain,
would offer U.S. dollar deposits for the applicable interest
period to other major banks in the London inter-bank market at
approximately 11:00 a.m. London time two (2) London Banking
Days before the commencement of the interest period. A "London
Banking Day" is a day on which the Bank's London Banking
Center is open for business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will include,
but not be limited to, marginal, emergency, supplemental,
special, and other reserve percentages.
(d) The Borrower shall irrevocably request a LIBOR Rate Portion no later
than 12:00 noon California time on the LIBOR Banking Day preceding the
day on which the London Inter-Bank Offered Rate will be set, as
specified above. For example, if there are no intervening holidays or
weekend days in any of the relevant locations, the request must be made
at least three days before the LIBOR Rate takes effect.
(e) The Bank will have no obligation to accept an election for a LIBOR Rate
Portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for periods equal
to the interest period, of a LIBOR Rate Portion are not
available in the London inter-bank market; or
(ii) the LIBOR Rate does not accurately reflect the cost of a LIBOR
Rate Portion.
(f) Each prepayment of a LIBOR Rate Portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date
earlier than the scheduled payment date for such amount as required by
this Agreement.
(g) The prepayment fee shall be in an amount sufficient to compensate the
Bank for any loss, cost or expense incurred by it as a result of the
prepayment, including any loss of anticipated profits and any loss or
expense arising from the liquidation or reemployment of funds obtained
by it to maintain such Portion or from fees payable to terminate the
deposits from which such funds were obtained. The Borrower shall also
pay any customary administrative fees charged by the Bank in connection
with the foregoing. For purposes of this paragraph, the Bank shall be
deemed to have funded each Portion by a matching deposit or other
borrowing in the applicable interbank market, whether or not such
Portion was in fact so funded.
2.3 IBOR Rate. The election of IBOR Rates shall be subject to the
following terms and requirements:
(a) The interest period during which the IBOR Rate will be in effect will
be no shorter than 30 days and no longer than 180 days. The last day of
the interest period will be determined by the Bank using the practices
of the offshore dollar inter-bank market.
(b) Each IBOR Rate Portion will be for an amount not less than Five Hundred
Thousand Dollars ($500,000).
(c) The "IBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
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IBOR Rate = IBOR Base Rate
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(1.00 - Reserve Percentage)
Where,
(i) "IBOR Base Rate" means the interest rate at which
the Bank's Grand Cayman Banking Center, Grand Cayman, British
West Indies, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the
offshore dollar inter-bank market.
(ii) "Reserve Percentage" means the total of the maximum
reserve percentages for determining the reserves to be
maintained by member banks of the Federal Reserve System for
Eurocurrency Liabilities, as defined in Federal Reserve Board
Regulation D, rounded upward to the nearest 1/100 of one
percent. The percentage will be expressed as a decimal, and
will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
(d) The Bank will have no obligation to accept an election for an IBOR Rate
Portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for
periods equal to the interest period, of an IBOR Rate Portion
are not available in the offshore dollar inter-bank market; or
(ii) the IBOR Rate does not accurately reflect the cost of
an IBOR Rate Portion.
(e) Each prepayment of an IBOR Rate Portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date
earlier than the scheduled payment date for such amount as required by
this Agreement.
(f) The prepayment fee shall be in an amount sufficient to compensate the
Bank for any loss, cost or expense incurred by it as a result of the
prepayment, including any loss of anticipated profits and any loss or
expense arising from the liquidation or reemployment of funds obtained
by it to maintain such Portion or from fees payable to terminate the
deposits from which such funds were obtained. The Borrower shall also
pay any customary administrative fees charged by the Bank in connection
with the foregoing. For purposes of this paragraph, the Bank shall be
deemed to have funded each Portion by a matching deposit or other
borrowing in the applicable interbank market, whether or not such
Portion was in fact so funded.
3. FEES AND EXPENSES
3.1 Fees.
(a) Loan Fee. The Borrower agrees to pay a loan fee in the amount of
Sixty-Two Thousand Five Hundred Dollars ($62,500). This fee is due on
the date of this Agreement.
(b) Unused Commitment Fee. The Borrower agrees to pay a fee on any
difference between the Facility No. 1 Commitment and the amount of
credit it actually uses, determined by the average of the daily amount
of credit outstanding during the specified period. The fee will be
calculated at 0.25% per year. For purposes of this paragraph, the
calculation of credit outstanding shall include the issued and undrawn
amount of letters of credit.
This fee is due in arrears on March 31, 2003, on the last day of each
subsequent calendar quarter through December 31, 2005, and on the
Facility No. 1 Expiration Date.
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(c) Waiver Fee. If the Bank, at its discretion, agrees to waive or amend
any terms of this Agreement, the Borrower will, at the Bank's option,
pay the Bank a fee for each waiver or amendment in an amount advised by
the Bank at the time the Borrower requests the waiver or amendment.
Nothing in this paragraph shall imply that the Bank is obligated to
agree to any waiver or amendment requested by the Borrower. The Bank
may impose additional requirements as a condition to any waiver or
amendment.
(d) Late Fee. To the extent permitted by law, the Borrower agrees to pay a
late fee in an amount not to exceed four percent (4%) of any payment
that is more than fifteen (15) days late. The imposition and payment of
a late fee shall not constitute a waiver of the Bank's rights with
respect to the default.
3.2 Expenses. The Borrower agrees to immediately repay the Bank for
expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, title report fees, and documentation fees.
3.3 Reimbursement Costs.
(a) The Borrower agrees to reimburse the Bank for any expenses it incurs in
the preparation of this Agreement and any agreement or instrument
required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of the Bank's
in-house counsel to the extent permitted by applicable law.
(b) The Borrower agrees to reimburse the Bank for the cost of periodic
field examinations of the Borrower's books, records and collateral, and
appraisals of the collateral, at such intervals as the Bank may
reasonably require. The actions described in this paragraph may be
performed by employees of the Bank or by independent appraisers.
4. DISBURSEMENTS, PAYMENTS AND COSTS
4.1 Disbursements and Payments.
(a) Each payment by the Borrower will be made in immediately available
funds by direct debit to a deposit account as specified below or by
mail to the address shown on the Borrower's statement or at one of the
Bank's banking centers in the United States.
(b) Each disbursement by the Bank and each payment by the Borrower will be
evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrower to sign one or more promissory
notes.
4.2 Telephone and Telefax Authorization.
(a) The Bank may honor telephone or telefax instructions for advances or
repayments or for the designation of optional interest rates and
telefax requests for the issuance of letters of credit given, or
purported to be given, by any one of the individuals authorized to sign
loan agreements on behalf of the Borrower, or any other individual
designated by any one of such authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from
account number 1450802607 owned by the Borrower, or such other of the
Borrower's accounts with the Bank as designated in writing by the
Borrower.
(c) The Borrower will indemnify and hold the Bank harmless from all
liability, loss, and costs in connection with any act resulting from
telephone or telefax instructions the Bank reasonably believes are made
by any individual authorized by the Borrower to give such instructions.
This paragraph will survive this Agreement's termination, and will
benefit the Bank and its officers,
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employees, and agents.
4.3 Direct Debit.
(a) The Borrower agrees that interest and principal payments and any loan
fees will be deducted automatically on their due date from account
number 1450802607 owned by the Borrower or such other of the Borrower's
accounts with the Bank as designated in writing by the Borrower (as
applicable, the "Loan Debit Account").
(b) The Borrower further agrees that all reimbursement obligations, fees
and other liabilities of the Borrower to the Bank relating to
commercial letters of credit will be deducted automatically on their
due date from account number ▇▇▇▇▇▇▇▇▇▇ owned by the Borrower or such
other of the Borrower's accounts with the Bank as designated in writing
by the Borrower (as applicable, the "Letter of Credit Account").
(c) The Borrower will maintain sufficient funds in the Loan Debit Account
and the Letter of Credit Account on the dates the Bank enters debits
authorized by this Agreement. If there are insufficient funds in either
the Loan Debit Account or the Letter of Credit Account on the date the
Bank enters any debit authorized by this Agreement, the Bank may
reverse the debit.
4.4 Banking Days. Unless otherwise provided in this Agreement, a banking
day is a day other than a Saturday, Sunday or other day on which commercial
banks are authorized to close, or are in fact closed, in the state where the
Bank's lending office is located, and, if such day relates to amounts bearing
interest at an offshore rate (if any), means any such day on which dealings in
dollar deposits are conducted among banks in the offshore dollar interbank
market. All payments and disbursements which would be due on a day which is not
a banking day will be due on the next banking day. All payments received on a
day which is not a banking day will be applied to the credit on the next banking
day.
4.5 Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used. Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until paid.
4.6 Default Rate. Upon the occurrence of any default under this Agreement,
all amounts outstanding under this Agreement, including any interest, fees, or
costs which are not paid when due, will at the option of the Bank bear interest
at a rate which is 6.0 percentage point(s) higher than the rate of interest
otherwise provided under this Agreement. This may result in compounding of
interest. This will not constitute a waiver of any default.
5. CONDITIONS
The Bank must receive the following items, in form and content acceptable to the
Bank, before the closing under this Agreement:
(a) Authorizations. Evidence that the execution, delivery and performance
by the Borrower and each guarantor of this Agreement and any instrument
or agreement required under this Agreement have been duly authorized.
(b) Governing Documents. A copy of the organizational documents of the
Borrower and each guarantor.
(c) Guaranties. Guaranties signed by each of the following affiliates of
the Borrower: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Holding, Inc., a Delaware corporation
(the "Parent"); ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Merchandising, Inc., a California
corporation; and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Administration, Inc., a California
corporation.
(d) Good Standing. Certificates of good standing for the Borrower and each
guarantor from their respective states of formation and from any other
state in which the Borrower or any guarantor is
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required to qualify to conduct its business.
(e) Legal Opinion. A written opinion from legal counsel to the Borrower and
the guarantors, covering such matters as the Bank may require.
(f) Insurance. Evidence of insurance coverage, as required in the
"Covenants" section of this Agreement.
(g) Payment of Fees. Payment of all accrued and unpaid expenses incurred by
the Bank as required by the paragraph entitled "Reimbursement Costs."
6. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties as to itself and
each of the guarantors. Each request for an extension of credit constitutes a
renewal of these representations and warranties as of the date of the request:
6.1 Formation. The Borrower and each guarantor are duly formed and existing
under the laws of their respective states of incorporation.
6.2 Authorization. This Agreement, and any instrument or agreement required
hereunder, are within the powers of the Borrower and each guarantor party to
such other instrument or agreement, have been duly authorized, and do not
conflict with the organizational papers of the Borrower and such guarantors.
6.3 Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable against
Borrower or the applicable guarantor party thereto, in each case, except to the
extent that enforceability may be limited by bankruptcy, insolvency or similar
laws, or principles of equity.
6.4 Good Standing. In each state in which the Borrower or any guarantor
does business, it is properly licensed, in good standing, and, where required,
in compliance with fictitious name statutes.
6.5 No Conflicts. This Agreement does not conflict with any law, agreement,
or obligation by which the Borrower or any guarantor is bound.
6.6 Financial Information. All financial and other information that has
been or will be supplied to the Bank is complete and correct and fairly presents
the Borrower's (and any guarantor's) financial condition, including all material
contingent liabilities as of such date and for such period in accordance with
GAAP consistently applied. Since the date of the most recent financial statement
provided to the Bank, there has been no material adverse change in the business
condition (financial or otherwise), operations, properties or prospects of the
Borrower (or any guarantor).
6.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower or any guarantor which, if lost, would
materially impair the financial condition of the Borrower or such guarantor, or
the ability of the Borrower to repay the loan, except as have been disclosed in
writing to the Bank.
6.8 Permits, Franchises. The Borrower and the guarantors possess all
material permits, memberships, franchises, contracts and licenses required and
all material trademark rights, trade name rights, patent rights and fictitious
name rights necessary to enable them to conduct the business in which they are
now engaged in each case, other than any such rights the failure of which to
possess could not reasonably be expected to have a material adverse effect on
the Borrower and the guarantors taken as a whole.
6.9 Other Obligations. Neither the Borrower nor any guarantor is in default
on any obligation for
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borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation, except as have been disclosed in
writing to the Bank.
6.10 Tax Matters. The Borrower has no knowledge of any pending material
assessments or adjustments of its income tax or the income tax of the Parent for
any year and all taxes due have been paid, except as have been disclosed in
writing to the Bank.
6.11 No Event of Default. There is no event which is, or with notice or
lapse of time or both would be, an event of default under this Agreement.
6.12 Insurance. The Borrower has obtained, and maintained in effect, the
insurance coverage required in the "Covenants" section of this Agreement.
6.13 Compliance with Laws. The Borrower and each guarantor are in material
compliance with all applicable laws and regulations.
7. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
7.1 Use of Proceeds. To use the proceeds of Facility No. 1 only for working
capital and general corporate purposes, including repurchases of shares of the
capital stock of the Parent.
7.2 Financial Information. To provide the following financial information
and statements in form and content reasonably acceptable to the Bank, and such
additional information as requested by the Bank from time to time:
(a) Within 90 days after the end of each fiscal year of the Parent, the
consolidated annual financial statements of the Parent. These financial
statements must be audited (with an opinion reasonably satisfactory to
the Bank) by a Certified Public Accountant reasonably acceptable to the
Bank. For significant subsidiaries of the Parent, the Borrower shall
also prepare and deliver to Bank consolidating schedules.
(b) Within 45 days after the end of each fiscal quarter of the Parent
(except in the case of the last fiscal quarter in each fiscal year),
the Parent's quarterly financial statements. These financial statements
may be prepared by the Parent on a consolidated basis.
(c) Within 120 days after the end of each fiscal year of the Parent, a copy
of the management letter in conjunction with the annual audit of the
Parent's fiscal year-end financial statements prepared by the Parent's
independent auditor.
(d) A copy of each Form 10-K Annual Report of the Parent within 90 days
after the end of each fiscal year of the Parent and a copy of each Form
10-Q Quarterly Report of the Parent within 45 days after the end of
each fiscal quarter of the Parent.
(e) Financial projections by quarter for each fiscal year of the Borrower
and the guarantors on a consolidated basis, including balance sheets,
income statements, cash flow statements and capital expenditure
projections, specifying the assumptions used in creating the
projections and otherwise in form and substance acceptable to the Bank.
The projections for each fiscal year shall be provided to the Bank no
later than 60 days after the start of such fiscal year of the Parent.
(f) Within the period(s) provided in subsections (a) and (b) above, a
compliance certificate of the Borrower signed by an authorized
financial officer of the Borrower setting forth (i) the information and
computations (in sufficient detail) to establish that the Borrower is
in compliance with all financial covenants at the end of the period
covered by the financial statements then being
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furnished and (ii) whether there existed as of the date of such
financial statements and whether there exists as of the date of the
certificate, any default under this Agreement and, if any such default
exists, specifying the nature thereof and the action the Borrower is
taking and proposes to take with respect thereto.
7.3 Adjusted Debt to EBITDAR Ratio. To cause the Parent to maintain on a
consolidated basis a ratio of Adjusted Debt to EBITDAR for the twelve-month
period ended on the date of determination of such ratio of not greater than
5.50:1.0. The Borrower's compliance with this covenant shall be tested at the
end of each fiscal quarter of the Parent.
"Adjusted Debt" means all outstanding liabilities for borrowed money and other
interest-bearing liabilities, including current and long term debt, plus eight
(8) times Rent Obligations for the period.
"Rent Obligations" means all obligations in respect of base and contingent rent
and common area maintenance paid or due by the Parent or any of its subsidiaries
during the period under any rental agreements or leases of real or personal
property (other than capitalized leases).
"EBITDAR" means consolidated net income of the Parent and its subsidiaries for
the period, plus, to the extent deducted in the calculation of such consolidated
net income for the period and without duplication, the sum of (a) depreciation
and amortization for the period, plus (b) income tax expense for the period,
plus (c) consolidated total interest expense paid or accrued during the period,
plus (d) write offs, fees and expenses incurred by the Parent and its
subsidiaries during the period in connection and associated, with the closing of
up to ten (10) Charlotte's Room stores in an aggregate cash amount of up to
$2,500,000 and in an aggregate total amount of up to $6,000,000 for the fiscal
quarter accounting periods ended on or about March 31, 2003 through on or about
September 30, 2004 plus (e) Rent Obligations for such period.
7.4 Fixed Charge Coverage Ratio. To maintain on a consolidated basis a
Fixed Charge Coverage Ratio of at least 1.10:1.0. The Borrower's compliance with
this covenant shall be tested at the end of each fiscal quarter of the Parent.
"Fixed Charge Coverage Ratio" means the ratio of (a) for the twelve-month period
ended as of the date of determination thereof, EBITDAR (as defined in paragraph
7.3 above) minus Capital Expenditures to (b) for the twelve-month period ended
as of the date of determination thereof, the sum of interest expense plus Rent
Obligations (as defined in paragraph 7.3 above).
"Capital Expenditures" means any expenditure for or related to fixed assets or
purchased intangibles that is treated as a capital expenditure under generally
accepted accounting principles; provided, however, Capital Expenditures shall
not include: (i) for any twelve-month period that includes the fiscal quarter
ending June 30, 2002, up to an aggregate amount of $6,700,000 of amounts paid or
indebtedness incurred in connection with the Borrower's Ontario, California
distribution center; or (ii) amounts paid or indebtedness incurred in respect of
capital leases. Capital Expenditures shall be calculated (i) net of landlord
allowances for the purchase, lease or other acquisition or construction of fixed
assets, and (ii) in connection with the replacement or repair of any fixed
asset, net of any cash sale or insurance proceeds received by the Parent or any
of its subsidiaries in respect of a sale of or casualty involving the fixed
asset which is replaced or repaired.
7.5 Other Debts. Not to have outstanding or incur, nor to permit the Parent
or any other guarantor to have outstanding or incur, any direct or contingent
liabilities or lease obligations (other than those to the Bank), or become
liable for the liabilities of others, without the Bank's written consent. This
does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit and
other liabilities (not incurred through the borrowing of money or
capitalized leases) incurred in the ordinary course of business.
(b) Endorsing negotiable instruments received in the usual course of
business.
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(c) Obtaining surety bonds in the usual course of business.
(d) Liabilities, lines of credit and leases in existence on the date of
this Agreement and leases entered into after the date hereof in the
ordinary course of business (other than capitalized leases), as
disclosed in writing to the Bank.
(e) Capital lease obligations in an aggregate outstanding amount at any
time of up to $2,500,000 on a combined basis for the Borrower, the
Parent and the other guarantors.
(f) Purchase-money indebtedness in an aggregate outstanding amount at any
time of up to $1,000,000 on a combined basis for the Borrower, the
Parent and the other guarantors.
(g) Inter-company payable obligations created in the ordinary course of
business and consistent with past practices of the Borrower, the Parent
and the other guarantors.
(h) Debt assumed in connection with acquisitions permitted under paragraph
7.14(b), subject to the dollar limitation on such debt under such
paragraph.
(i) indebtedness in respect of judgments or awards that do not constitute
an event of default under Section 8.7.
7.6 Other Liens. Not to create, assume, or allow, nor to permit the Parent
or any other guarantor to create, assume or allow, any security interest or lien
(including judicial liens) on property now or later owned by the Borrower, the
Parent or any other guarantor, except:
(a) Liens and security interests in favor of Bank.
(b) Liens for taxes not yet due and deposits and pledges made in connection
with worker's compensation, unemployment insurance, old age pensions or
other social security obligations.
(c) Liens outstanding on the date of this Agreement and disclosed in
writing to the Bank.
(d) Additional purchase money security interests in assets acquired after
the date of this Agreement, if the aggregate principal amount of debt
outstanding at any time that is secured by such security interest does
not exceed $1,000,000.
(e) Additional liens and security interests in assets leased after the date
of this Agreement under capital leases, if the aggregate capital lease
obligations outstanding at any time related to such assets does not
exceed $2,500,000.
(f) Additional liens securing debt permitted under paragraph 7.5(h) or
7.5(i).
(g) Liens of carriers, warehousemen, mechanics and materialmen (i) less
than 120 days old in respect of obligations not overdue or (ii) with
respect to which the obligations related thereto (A) are contested by
the Borrower in good faith by appropriate proceedings and the Borrower
shall have set aside on its book adequate reserves with respect thereto
or (B) do not exceed $100,000 for any individual lien or $500,000 in
the aggregate for all such liens, provided that the Borrower will pay
all such carriers, warehousemen, mechanics and materialmen forthwith
upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor.
7.7 Dividends and Stock Repurchases. Not to, nor to permit the Parent or
any of the other guarantors to, declare or pay any dividends on any of its
shares, and not to purchase, redeem or otherwise acquire for value any of its
shares, or create any sinking fund in relation thereto, except:
(a) so long as no event of default has occurred and is continuing, or would
occur after giving effect thereto, cash and stock dividends and
distributions in an aggregate value of up to $5,000,000 in
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any fiscal year, of which up to $2,500,000 in the aggregate in any
fiscal year may consist of dividends or distributions payable in cash;
(b) so long as no event of default has occurred and is continuing, or would
occur after giving effect thereto, repurchases of shares of capital
stock of the Parent for aggregate purchase consideration in any fiscal
year of up to $12,000,000; and
(c) with the prior written consent of the Bank, which shall not be
unreasonably withheld, dividends, distributions or any such other
transactions between or among the Borrower and the guarantors.
7.8 Transactions with ▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇. Neither the Borrower, the
Parent nor any other guarantor shall make any loans, advances or payments to
their affiliate ▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ other than: (i) an annual monitoring fee
in an amount of up to $250,000 per year; (ii) other amounts in reimbursement of
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇'▇ reasonable out-of-pocket expenses; and (iii)
reimbursement of any expenses incurred by ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇ in connection
with any registered offerings by ▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇.
7.9 Maintenance of Assets.
(a) Not to sell, assign, lease, transfer or otherwise dispose of, or permit
the Parent or any other guarantor to sell, assign, lease, transfer or
otherwise dispose of, any part of its business or assets except: (i)
asset sales or disposition in the ordinary course of business and
consistent with past practices (excluding the termination of store
leases); (ii) so long as no event of default has occurred, would be
created or is continuing, other asset sales (including the termination
of up to eight (8) store leases of the Borrower in any fiscal year);
and (iii) the disposition, by closing, of up to ten (10) Charlotte's
Room stores during the Borrower's fiscal year 2003.
(b) Not to sell, assign, lease, transfer or otherwise dispose of any assets
for less than fair market value, or enter into any agreement to do so.
(c) Not to enter into any sale and leaseback agreement covering any of its
fixed assets.
(d) To maintain and preserve all rights, privileges, and franchises the
Borrower now has to the extent reasonably necessary for its business.
(e) To make any repairs, renewals, or replacements to keep the Borrower's
properties in good working condition.
7.10 Investments. Not to, and not to permit the Parent or any other
guarantor to, have any existing, or make any new, investments in any individual
or entity, or make any capital contributions or other transfers of assets to any
individual or entity, except for:
(a) Existing investments disclosed to the Bank in writing.
(b) Investments in their respective current subsidiaries and any
subsidiaries formed in accordance with Section 7.14(e), and with the
prior written consent of the Bank, which shall not be unreasonably
withheld, investments between or among the Borrower and the guarantors.
(c) Investments in any of the following:
(i) certificates of deposit, bankers' acceptances and money market
mutual funds;
(ii) U.S. treasury bills and other direct or guaranteed obligations
of the federal government or any agency thereof;
(iii) readily marketable securities (including commercial paper, but
excluding restricted stock and stock subject to the provisions
of Rule 144 of the Securities and Exchange
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Commission).
(d) Investments in acquisitions permitted under paragraph 7.14(b) below.
(e) Investments consisting of loans and advances to employees for moving,
entertainment, travel and other similar expenses in the ordinary course
of business not to exceed $100,000 in the aggregate at any time.
7.11 Loans. Not to, nor to permit any guarantor to, make any loans, advances
or other extensions of credit to any individual or entity, except for:
(a) Existing extensions of credit disclosed to the Bank in writing.
(b) Extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the
ordinary course of business to non-affiliated entities.
(c) Transactions permitted under Section 7.10(e).
(d) With the prior written consent of the Bank, which shall not be
unreasonably withheld, loans, transactions or other extensions of
credit between or among the Borrower and the guarantors.
7.12 Intentionally Omitted.
7.13 Change of Ownership. Not to: (i) permit the Parent to cease to own 100%
of all classes of voting shares of the Borrower (ii) permit any person or group
of persons (within the meaning of Section 13 or 14 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (but excluding, collectively, The
SK Equity Fund, L.P. and the SK Investment Fund, L.P. and their affiliates) to
acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Exchange Act) of thirty-five
percent (35%) or more of the outstanding shares of common stock of the Parent;
or (iii) permit during any period of twelve consecutive calendar months,
individuals who were directors of the Parent on the first day of such period to
cease to constitute a majority of the Board of Directors of the Parent. If any
of the foregoing events occurs, then, so long as such event is continuing, the
Bank may, by notice in writing to the Borrower, declare all amounts under this
Agreement to be, and they shall thereupon forthwith become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Borrower.
7.14 Additional Negative Covenants. Not to, nor to permit any guarantor to,
without the Bank's written consent:
(a) Except to the extent permitted in Section 7.14(b)(ii) below, enter into
any consolidation, merger, or other combination, or become a partner in
a partnership, a member of a joint venture, or a member of a limited
liability company.
(b) Acquire or purchase a business or its assets other than: (i) the
acquisition of assets in the ordinary course of business (which shall
include the opening of new stores) consistent with past practices and
so long as no event of default has occurred and is continuing or would
result therefrom; and (ii) non-hostile acquisitions of the stock or
assets of entities engaged primarily in the same line of business as
the Borrower for total purchase consideration, including assumption of
direct or contingent secured or unsecured debt, of up to $5,000,000 in
any fiscal year of the Borrower, provided that with respect to any
stock acquisition, the acquired entity shall either (x) concurrently
with such acquisition, be merged with and into the Borrower, with the
Borrower being the surviving entity or (y) comply with the requirements
of Section 7.14(e).
(c) Engage in any business activities substantially different from the
Borrower's present business.
(d) Liquidate or dissolve the Borrower's business.
-13-
(e) Create any additional subsidiaries unless:
(i) one hundred percent (100%) of the capital stock or other
equity interests of such subsidiary is owned by the Borrower
or one of the guarantors;
(ii) prior to the formation of such subsidiary, the Borrower shall
notify the Bank thereof in writing; and
(iii) such new subsidiary shall contemporaneously with its formation
become a guarantor of all obligations hereunder and deliver to
the Bank all such evidence of corporate or other
authorization, legal opinions and other documentation as the
Bank may reasonably request.
7.15 Notices to Bank. To promptly notify the Bank in writing of:
(a) Any lawsuit which if determined adversely to Borrower or the applicable
guarantor would have a material adverse effect on the business, assets
or prospects of the Borrower and the guarantors, taken as a whole.
(b) Any substantial dispute between any governmental authority and the
Borrower (or any guarantor).
(c) Any event of default under this Agreement, or any event which, with
notice or lapse of time or both, would constitute an event of default.
(d) Any material adverse change in the Borrower's and the guarantors'
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit, taken as a whole.
(e) Any change in the Borrower's name, legal structure, place of business,
or chief executive office if the Borrower has more than one place of
business.
(f) Any actual or contingent liabilities of the Borrower or any guarantor
which are likely to have a material adverse effect on the business,
assets or prospects of the Borrower and the guarantors, taken as a
whole.
7.16 Insurance.
(a) General Business Insurance. To maintain insurance as is usual for the
business in which it is engaged, including business interruption
insurance acceptable to the Bank.
(b) Evidence of Insurance. Upon the request of the Bank, to deliver to the
Bank a copy of each insurance policy, or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
7.17 Compliance with Laws. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with authority
over the Borrower's business except to the extent that any such failure to
comply could not reasonably be expected to have a material adverse effect on the
Borrower and the Guarantors, taken as a whole.
7.18 ERISA Plans. Promptly during each year, to pay and cause any
subsidiaries to pay contributions adequate to meet at least the minimum funding
standards under ERISA with respect to each and every Plan; file each annual
report required to be filed pursuant to ERISA in connection with each Plan for
each year; and notify the Bank within ten (10) days of the occurrence of any
Reportable Event that might constitute grounds for termination of any capital
Plan by the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer any Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time. Capitalized terms in this paragraph shall have the meanings
defined within ERISA.
-14-
7.19 Books and Records. To maintain adequate books and records.
7.20 Audits. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit, and make copies of books and records at any
reasonable time and, prior to the occurrence and continuance of an event of
default, upon reasonable notice. If any of the Borrower's properties, books or
records are in the possession of a third party, the Borrower authorizes that
third party to permit the Bank or its agents to have access to perform
inspections or audits and to respond to the Bank's requests for information
concerning such properties, books and records.
7.21 Cooperation. To take any action reasonably requested by the Bank to
carry out the intent of this Agreement.
7.22 Bank as Principal Depository. To maintain the Bank as its principal
depository bank, including for the maintenance of business, cash management,
operating and administrative deposit accounts.
8. DEFAULT AND REMEDIES
If any of the following events of default occurs, the Bank may do one or more of
the following: declare the Borrower in default, stop making any additional
credit available to the Borrower, and require the Borrower to repay its entire
debt immediately and without prior notice. In addition, if any event of default
occurs, the Bank shall have all rights, powers and remedies available under any
instruments and agreements required by or executed in connection with this
Agreement, as well as all rights and remedies available at law or in equity. If
an event of default occurs under the paragraph entitled "Bankruptcy," below,
with respect to the Borrower, then the entire debt outstanding under this
Agreement will automatically be due immediately.
8.1 Failure to Pay. The Borrower fails to make a payment under this
Agreement when due.
8.2 Other Bank Agreements. The Borrower (or any Obligor) or any of the
Borrower's related entities or affiliates fails to meet the conditions of, or
fails to perform any obligation under any other agreement the Borrower (or any
Obligor) or any of the Borrower's related entities or affiliates has with the
Bank or any affiliate of the Bank. For purposes of this Agreement, "Obligor"
shall mean any guarantor.
8.3 Cross-default. Any event of default occurs under any agreement
evidencing indebtedness for borrowed money in connection with, or if the
creditor has the right to accelerate, any credit the Borrower (or any Obligor)
has obtained from anyone else or which the Borrower (or any Obligor) has
guaranteed in an amount exceeding Five Hundred Thousand Dollars ($500,000)
individually or One Million Dollars ($1,000,000) in the aggregate.
8.4 False Information. The Borrower or any Obligor has given the Bank
materially false or misleading information or representations.
8.5 Bankruptcy. The Borrower or any Obligor files a bankruptcy petition, a
bankruptcy petition is filed against any of the foregoing parties, or the
Borrower or any Obligor makes a general assignment for the benefit of creditors.
The default, if caused by an involuntary bankruptcy petition, will be deemed
cured if any bankruptcy petition filed against the Borrower or any Obligor is
dismissed within a period of forty-five (45) days after the filing; provided,
however, that the Bank will not be obligated to extend any additional credit to
the Borrower during that period; and provided further that such cure opportunity
will be terminated upon the entry of an order for relief in any bankruptcy case
arising from such a petition.
8.6 Receivers. A receiver or similar official is appointed for a
substantial portion of the Borrower's or any Obligor's business, or the business
of the Borrower or any Obligor is terminated, or, if any Obligor is anything
other than a natural person, such Obligor is liquidated or dissolved.
8.7 Judgments. Any final judgments or arbitration awards in excess of One
Million Dollars ($1,000,000) are entered against the Borrower or any Obligor, or
any settlement agreement in excess of One Million Dollars ($1,000,000) with
respect to any litigation or arbitration is entered into by the Borrower
-15-
or any Obligor, and remain undischarged, unsatisfied and unstayed for more than
30 days.
8.8 Material Adverse Change. A material adverse change occurs, or is
reasonably likely to occur, in the Borrower's (or any Obligor's) business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay the credit.
8.9 Government Action. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's or any Obligor's financial
condition or ability to repay.
8.10 Default under Related Documents. Any event of default occurs under any
guaranty or other document required by or delivered in connection with this
Agreement or any such document is no longer in effect, or any guarantor purports
to revoke or disavow its guaranty.
8.11 ERISA Plans. Any one or more of the following events occurs with
respect to a Plan of the Borrower subject to Title IV of ERISA, provided such
event or events could reasonably be expected, in the judgment of the Bank, to
subject the Borrower to any tax, penalty or liability (or any combination of the
foregoing) which, in the aggregate, could have a material adverse effect on the
financial condition of the Borrower and the guarantors, taken as a whole:
(a) A reportable event shall occur under Section 4043(c) of ERISA with
respect to a Plan.
(b) Any Plan termination (or commencement of proceedings to terminate a
Plan) or the full or partial withdrawal from a Plan by the Borrower or
any ERISA Affiliate.
8.12 Other Breach Under Agreement. The Borrower fails to meet the conditions
of, or fails to perform any obligation under, any term of this Agreement not
specifically referred to in this Article. This includes any failure or
anticipated failure by the Borrower to comply with any financial covenants set
forth in this Agreement, whether such failure is evidenced by financial
statements delivered to the Bank or is otherwise known to the Borrower or the
Bank. Notwithstanding the foregoing, an event of default shall not be deemed to
have occurred hereunder if the Borrower fails to comply with Section 7.1, 7.2,
7.12, 7.15., 7.16, 7.17, 7.18, 7.19, 7.20, 7.21 or 7.22 of this Agreement if
such failure of compliance is unintentional, is capable of being cured, and is
in fact cured within 30 days after notice from the Bank to the Borrower of its
occurrence.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
9.2 California Law. This Agreement is governed by California law.
9.3 Successors and Assigns. This Agreement is binding on the Borrower's and
the Bank's successors and assigns. The Borrower agrees that it may not assign
this agreement without the Bank's prior consent. With the Borrower's prior
consent absent the occurrence and continuance of an event of default and in the
Bank's sole discretion following the occurrence and during the continuance of an
event of default, the Bank may sell participations in or assign part or all of
the loan to Eligible Assignees, in each case in minimum amounts of $5,000,000,
and may exchange financial information about the Borrower with actual or
potential participants or Eligible Assignees who agree to be bound by the
confidentiality provisions hereof. If a participation is sold or all or a
portion of the loan is assigned, the purchaser will have the right of set-off
against the Borrower.
For the purpose of this Section 9.3, the term "Eligible Assignee" shall mean:
(a) any affiliate of the Bank; (b) any commercial bank having total assets of
$1,000,000,000 or more; (c) any (i) savings bank, savings and loan association
or similar financial institution or (ii) insurance company engaged in the
business of writing insurance which, in either case (A) has total assets of
$1,000,000,000 or more, (B) is engaged in the business of lending money and
extending credit under credit facilities substantially similar to those extended
under this Agreement and (C) is operationally and procedurally able to meet the
obligations of
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the Bank hereunder to the same degree as a commercial bank; and (d) any other
financial institution (including a mutual fund or other fund) having total
assets of $1,000,000,000 or more which meets the requirements set forth in
subclauses (B) and (C) of clause (c) above; provided that each Eligible Assignee
must either (aa) be organized under the laws of the United States of America,
any State thereof or the District of Columbia or (bb) be organized under the
laws of the Cayman Islands or any country which is a member of the Organization
for Economic Cooperation and Development, or a political subdivision of such a
country, and (i) act hereunder through a branch, agency or funding office
located in the United States of America and (ii) be exempt from withholding of
tax on interest and deliver to the Borrower the requisite United States Internal
Revenue Service form or forms evidencing such exemption.
9.4 Arbitration and Waiver of Jury Trial.
(a) This paragraph concerns the resolution of any controversies or claims
between the parties, whether arising in contract, tort or by statute,
including but not limited to controversies or claims that arise out of
or relate to: (i) this agreement (including any renewals, extensions or
modifications); or (ii) any document related to this agreement
(collectively a "Claim"). For the purposes of this arbitration
provision only, the term "parties" shall include any parent
corporation, subsidiary or affiliate of the Bank involved in the
servicing, management or administration of any obligation described or
evidenced by this agreement.
(b) At the request of any party to this agreement, any Claim shall be
resolved by binding arbitration in accordance with the Federal
Arbitration Act (Title 9, U.S. Code) (the "Act"). The Act will apply
even though this agreement provides that it is governed by the law of a
specified state.
(c) Arbitration proceedings will be determined in accordance with the Act,
the applicable rules and procedures for the arbitration of disputes of
JAMS or any successor thereof ("JAMS"), and the terms of this
paragraph. In the event of any inconsistency, the terms of this
paragraph shall control.
(d) The arbitration shall be administered by JAMS and conducted, unless
otherwise required by law, in any U.S. state where real or tangible
personal property collateral for this credit is located or if there is
no such collateral, in the state specified in the governing law section
of this agreement. All Claims shall be determined by one arbitrator;
however, if Claims exceed Five Million Dollars ($5,000,000), upon the
request of any party, the Claims shall be decided by three arbitrators.
All arbitration hearings shall commence within ninety (90) days of the
demand for arbitration and close within ninety (90) days of
commencement and the award of the arbitrator(s) shall be issued within
thirty (30) days of the close of the hearing. However, the
arbitrator(s), upon a showing of good cause, may extend the
commencement of the hearing for up to an additional sixty (60) days.
The arbitrator(s) shall provide a concise written statement of reasons
for the award. The arbitration award may be submitted to any court
having jurisdiction to be confirmed and enforced.
(e) The arbitrator(s) will have the authority to decide whether any Claim
is barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis. For purposes of the application of the
statute of limitations, the service on JAMS under applicable JAMS rules
of a notice of Claim is the equivalent of the filing of a lawsuit. Any
dispute concerning this arbitration provision or whether a Claim is
arbitrable shall be determined by the arbitrator(s). The arbitrator(s)
shall have the power to award legal fees pursuant to the terms of this
agreement.
(f) This paragraph does not limit the right of any party to: (i) exercise
self-help remedies, such as but not limited to, setoff; (ii) initiate
judicial or non-judicial foreclosure against any real or personal
property collateral; (iii) exercise any judicial or power of sale
rights, or (iv) act in a court of law to obtain an interim remedy, such
as but not limited to, injunctive relief, writ of possession or
appointment of a receiver, or additional or supplementary remedies.
(g) The procedure described above will not apply if the Claim, at the time
of the proposed submission to arbitration, arises from or relates to an
obligation to the Bank secured by real property. In this case, all of
the parties to this agreement must consent to submission of the Claim
to arbitration. If both parties do not consent to arbitration, the
Claim will be resolved as follows: The parties will
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designate a referee (or a panel of referees) selected under the
auspices of JAMS in the same manner as arbitrators are selected in JAMS
administered proceedings. The designated referee(s) will be appointed
by a court as provided in California Code of Civil Procedure Section
638 and the following related sections. The referee (or presiding
referee of the panel) will be an active attorney or a retired judge.
The award that results from the decision of the referee(s) will be
entered as a judgment in the court that appointed the referee, in
accordance with the provisions of California Code of Civil Procedure
Sections 644 and 645.
(h) The filing of a court action is not intended to constitute a waiver of
the right of any party, including the suing party, thereafter to
require submittal of the Claim to arbitration.
(i) By agreeing to binding arbitration, the parties irrevocably and
voluntarily waive any right they may have to a trial by jury in respect
of any Claim. Furthermore, without intending in any way to limit this
agreement to arbitrate, to the extent any Claim is not arbitrated, the
parties irrevocably and voluntarily waive any right they may have to a
trial by jury in respect of such Claim. This provision is a material
inducement for the parties entering into this agreement.
9.5 Severability; Waivers. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement must be
in writing.
9.6 Attorneys' Fees. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and in
connection with any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. In the event that any case is commenced by or against the
Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar
or successor statute, the Bank is entitled to recover costs and reasonable
attorneys' fees incurred by the Bank related to the preservation, protection, or
enforcement of any rights of the Bank in such a case. As used in this paragraph,
"attorneys' fees" includes the allocated costs of the Bank's in-house counsel.
9.7 Individual Liability. If the Borrower is a natural person, the Bank may
proceed against the Borrower's business and non-business property in enforcing
this and other agreements relating to this loan. If the Borrower is a
partnership, the Bank may proceed against the business and non-business property
of each general partner of the Borrower in enforcing this and other agreements
relating to this loan.
9.8 One Agreement. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements among the Bank,
the Borrower and the guarantor concerning this credit;
(b) replace any prior oral or written agreements among the Bank, the
Borrower and the guarantors concerning this credit; and
(c) are intended by the Bank, the Borrower and the guarantors, as the
final, complete and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail. Any reference in any
related document to a "promissory note" or a "note" executed by the Borrower and
dated as of the date of this Agreement shall be deemed to refer to this
Agreement, as now in effect or as hereafter amended, renewed, or restated.
9.9 Indemnification. The Borrower will indemnify and hold the Bank harmless
from any loss, liability, damages, judgments, and costs of any kind relating to
or arising directly or indirectly out of (a) this
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Agreement or any document required hereunder, (b) any credit extended or
committed by the Bank to the Borrower hereunder, and (c) any litigation or
proceeding related to or arising out of this Agreement, any such document, or
any such credit. This indemnity includes but is not limited to attorneys' fees
(including the allocated cost of in-house counsel). This indemnity extends to
the Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys, and assigns. This indemnity will
survive repayment of the Borrower's obligations to the Bank. All sums due to the
Bank hereunder shall be obligations of the Borrower, due and payable immediately
without demand.
9.10 Notices. Unless otherwise provided in this Agreement or in another
agreement between the Bank and the Borrower, all notices required under this
Agreement shall be personally delivered or sent by first class mail, postage
prepaid, or by overnight courier, to the addresses on the signature page of this
Agreement, or sent by facsimile to the fax numbers listed on the signature page,
or to such other addresses as the Bank and the Borrower may specify from time to
time in writing. Notices and other communications shall be effective (i) if
mailed, upon the earlier of receipt or five (5) days after deposit in the U.S.
mail, first class, postage prepaid, (ii) if telecopied, when transmitted, or
(iii) if hand-delivered, by courier or otherwise (including telegram, lettergram
or mailgram), when delivered.
9.11 Headings. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
9.12 Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
9.13 Confidentiality. The Bank agrees to hold any confidential information
that it may receive from the Borrower pursuant to this Agreement in confidence,
except for disclosure: (a) to any affiliate of the Bank; (b) to legal counsel
and accountants for the Borrower or the Bank; (c) to other professional advisors
to the Borrower or the Bank, provided that the recipient has accepted such
information subject to a confidentiality agreement substantially similar to this
Section 9.13; (d) to regulatory officials having jurisdiction over the Bank; (e)
as required by law or legal process, provided that the Bank agrees to notify the
Borrower of any such disclosures unless prohibited by applicable law, or in
connection with any legal proceeding to which the Bank and the Borrower are
adverse parties; and (f) to another financial institution in connection with a
disposition or proposed disposition to that financial institution of all or part
of the Bank's interests hereunder or a participation interest in the Bank's
interests hereunder, provided that the recipient has accepted such information
subject to a confidentiality agreement substantially similar to this Section
9.13. For the purposes of the foregoing, "confidential information" shall mean
any information respecting the Borrower or the guarantors reasonably considered
by the Borrower to be confidential, other than (i) information previously filed
with any governmental agency and available to the public, (ii) information
previously published in any public medium from a source other than, directly or
indirectly, the Bank, and (iii) the information previously disclosed by the
Borrower to any person not associated with the Borrower which does not owe a
professional duty of confidentiality to the Borrower and which has not executed
an appropriate confidentiality agreement with the Borrower. Nothing in this
Section shall be construed to create or give rise to any fiduciary duty on the
part of the Bank to the Borrower.
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This Agreement is executed as of the date stated at the top of the first page.
Bank of America, N.A. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Inc.
BY /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ BY /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President Treasurer
BY /s/ ▇▇▇▇ ▇▇▇▇▇▇ BY /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President President
Address where notices to the Bank are to be Address where notices to the
sent: Borrower are to be sent:
▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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