Exhibit 4.1
TERM LOAN AGREEMENT
among
PULASKI FURNITURE CORPORATION and
▇▇▇▇▇▇ FURNITURE COMPANY, INC.,
as the Borrowers
and
NATIONSBANK, N.A., as the Bank
TABLE OF CONTENTS
TABLE OF CONTENTS.............................................................i
ARTICLE I - DEFINITIONS.......................................................1
ARTICLE II - THE TERM LOAN AND TERM LOAN NOTE................................10
2.1 Term Loan.......................................................10
2.2 Note............................................................10
2.3 Disbursement of Loan............................................11
ARTICLE III - INTEREST, NOTICES OF INTEREST PERIODS AND PAYMENTS.............11
3.1 Selection of Interest Period; Borrowing.........................11
3.2 Payments........................................................14
3.3 Payment on Days Other Than Business Days........................14
3.4 LIBOR Provisions................................................14
ARTICLE IV - PREPAYMENTS.....................................................16
4.1 Optional Prepayments............................................16
4.2 Calculation of Loss or Out-of-Pocket Expense....................16
4.3 Application of Prepayments......................................17
4.4 No Reborrowing..................................................17
ARTICLE V - REPRESENTATIONS..................................................17
5.1 Subsidiaries....................................................17
5.2 Incorporation; Good Standing....................................17
5.3 Corporate Authority.............................................18
5.4 Binding Agreements..............................................18
5.5 Litigation......................................................18
5.6 No Conflicting Agreements.......................................18
5.7 Financial Condition.............................................19
5.8 Employee Benefit Pension Plans..................................19
5.9 Environmental Law Compliance....................................20
5.10 Year 2000 Compliance...........................................20
ARTICLE VI - CONDITIONS OF LOAN..............................................21
6.1 Approval of Bank's Counsel......................................21
6.2 Evidence of Corporate Action....................................21
6.3 Opinion of Borrower's Counsel...................................21
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6.4 Acquisition of Seller...........................................22
6.5 Compliance......................................................22
ARTICLE VII - AFFIRMATIVE COVENANTS..........................................22
7.1 Financial Statements............................................22
7.2 Taxes...........................................................23
7.3 Insurance.......................................................24
7.4 Corporate Existence.............................................24
7.5 Properties......................................................24
7.6 Employee Benefit Pension Plans..................................24
7.7 Compliance With Laws............................................25
7.8 Notice of Environmental Matters.................................25
7.9 Deposit Account.................................................26
7.10 Repayment of Loans.............................................26
7.11 Year 2000 Compliance...........................................26
ARTICLE VIII - NEGATIVE COVENANTS............................................26
8.1 Borrowing.......................................................26
8.2 Mortgages and Pledges...........................................27
8.3 Merger, Acquisition or Sale of Assets...........................28
8.4 Contingent Liabilities..........................................28
8.5 Investments.....................................................29
8.6 Capital Expenditures............................................29
8.7 Sale and Leaseback..............................................29
8.8 Loans...........................................................29
8.9 Environmental Law Compliance....................................30
8.10 Use of Proceeds................................................30
8.11 Business.......................................................31
8.12 Accounting.....................................................31
8.13 Subsidiaries...................................................31
ARTICLE IX - FINANCIAL COVENANTS.............................................31
9.1 Funded Debt to EBITDA...........................................31
9.2 Funded Debt to Capitalization...................................33
9.3 Fixed Charge Coverage Ratio.....................................32
ARTICLE X - EVENTS OF DEFAULT................................................32
ARTICLE XI - MISCELLANEOUS PROVISIONS........................................36
11.1 Costs and Expenses.............................................36
11.2 Setoffs........................................................36
11.3 Cumulative Rights and No Waiver................................36
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11.4 Indemnification of the Bank....................................36
11.5 Mandatory Arbitration..........................................38
11.6 Joint and Several Obligations..................................39
11.7 Notices........................................................40
11.8 Accounting Terms...............................................41
11.9 Entire Agreement...............................................41
11.10 Applicable Law................................................41
11.11 Amendments, Etc...............................................41
11.12 Survivorship..................................................42
11.13 Headings......................................................42
11.14 Execution in Counterparts.....................................42
Exhibit A - Promissory Note
Exhibit B - Notice of Borrowing
Exhibit C - Notice of Conversion/Continuation
Exhibit D - Opinion of Borrowers' Counsel
Exhibit E - Form of Compliance Certificate
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TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT is made as of February 26, 1999, by and among
PULASKI FURNITURE CORPORATION ("Pulaski"), a Virginia corporation, and ▇▇▇▇▇▇
FURNITURE COMPANY, INC. ("▇▇▇▇▇▇"), a Virginia corporation, both of whose
principal offices are located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
and NATIONSBANK, N.A. (the "Bank"), a national banking association with an
office located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
Pulaski and ▇▇▇▇▇▇ (each, a "Borrower" and collectively, the
"Borrowers") have applied to the Bank for a term loan in the amount of Seventeen
Million Dollars ($17,000,000), the proceeds of which will be used to acquire the
assets of ▇▇▇▇▇▇ Heritage Furniture Company, Inc., a Missouri corporation (the
"Seller"), for working capital and for other corporate purposes. The Bank is
willing to make the term loan to the Borrowers upon the terms and conditions
hereinafter set forth.
ACCORDINGLY, each Borrower and the Bank agree as follows:
ARTICLE I
DEFINITIONS
As used herein the following terms shall have the meanings herein
specified and shall include in the singular number the plural and in the plural
number the singular:
"Affiliate" means as to any person, each other person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by or is under common control with such person.
"Agreement" shall mean this agreement as it may be amended from time to
time.
"Applicable Margin" means 0.65% through February 28, 2000. Thereafter,
Applicable Margin for any date means the margin amount expressed as a percentage
shown by the following table using for the purposes hereof the Ratio of Funded
Debt to EBITDA determined as of the last day of the preceding fiscal quarter for
the four (4) fiscal quarters ending on such date.
Funded Debt/EBITDA Ratio Applicable Margin
------------------------ -----------------
2.0 to 1 or less 0.40%
2.01 - 2.50 to 1 0.60%
2.51 - 2.75 to 1 0.70%
2.76 - 3.00 to 1 0.80%
3.01 to 1 or greater 0.90%
Any change in the Applicable Margin shall become effective upon the
delivery to the Bank of the certificate with respect to the financial statements
to be delivered pursuant to Section 7.1 for the fiscal quarter or fiscal year
most recently ended, as the case may be, and shall apply to a LIBOR Loan
outstanding on and after such delivery date. Notwithstanding the foregoing, at
any time during which the Borrowers have failed to deliver to the Bank the
certificate referred to above with respect to a fiscal quarter or fiscal year
following the date that delivery of financial statements relating to such fiscal
quarter or fiscal year are required to be delivered under Section 7.1, the
Funded Debt/EBITDA Ratio shall be deemed, solely for the purposes of calculating
the Applicable Margin, to be 3.01 to 1 or greater until such time as the
Borrowers shall have delivered such certificate and financial statements to the
Bank. Upon the occurrence and during the continuance of an Event of Default, the
Applicable Margin shall automatically and without any prior notice be increased
by two percent (2%) per annum.
"Bank" means NationsBank, N.A., a national banking association.
"Borrowers" shall mean Pulaski Furniture Corporation, a Virginia
corporation, and ▇▇▇▇▇▇ Furniture Company, Inc., a Virginia corporation.
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"Business Day" shall mean any day other than Saturday, Sunday or other
day on which commercial banks in Roanoke, Virginia are authorized or required to
close under applicable laws and, with respect to any LIBOR Loan, a day on which
dealings are carried on in the London interbank market.
"Consolidated Net Worth" means as of any date the sum of capital stock,
additional paid in capital and retained earnings of Pulaski and its Subsidiaries
on a consolidated basis determined in accordance with GAAP.
"Current Maturities of Long-Term Debt" means for any period the current
maturities for such period determined in accordance with GAAP of any long-term
debt of Pulaski and its Subsidiaries, on a consolidated basis.
"▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇ Furniture Company, Inc., a Virginia
corporation.
"Default" shall mean any event, act or condition which with the giving
of notice or lapse of time or both would constitute an Event of Default.
"EBITDA," for any period, means the following, without duplication,
each calculated for such period: Net Income; plus, to the extent paid or accrued
and deducted in determining Net Income, income taxes, interest expense,
amortization and depreciation of Pulaski and its Subsidiaries on a consolidated
basis determined in accordance with GAAP. For purposes of calculating EBITDA for
Pulaski and its Subsidiaries for the four (4) fiscal quarters ending on April
30, 1999, July 31, 1999, October 31, 1999 and January 31, 2000 in order to
account for the historical impact of Seller after its acquisition by ▇▇▇▇▇▇,
EBITDA shall be determined by adding the amount set forth below to the actual
results of the EBITDA calculation for Pulaski and its Subsidiaries:
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April 30, 1999 - $2,500,000
July 31, 1999 - $1,875,000
October 31, 1999 - $1,250,000
January 31, 2000 - $625,000
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Event of Default" shall have the meaning set forth in Section 10.
"Fixed Charge Coverage Ratio" means as of the end of any fiscal
quarter, for Pulaski and its Subsidiaries on a consolidated basis, the ratio of
(i) the sum of Net Income plus, to the extent paid or accrued and deducted in
determining Net Income, interest expense (including, without duplication, the
interest portion of any capital lease payments), depreciation, amortization, and
rents under operating leases less dividends paid for the four (4) fiscal
quarters ending on such date to (ii) the sum of interest expense (including,
without duplication, the interest portion of any capital lease payments),
Current Maturities of Long-Term Debt due in each such quarter, rents under
operating leases, and the principal portion of capital lease payments, all for
the four (4) fiscal quarters ending on such date. For purposes of calculating
the Fixed Charge Coverage Ratio for Pulaski and its Subsidiaries for the four
(4) fiscal quarters ending on April 30, 1999, July 31, 1999, October 31, 1999
and January 31, 2000 in order to account for the historical impact of Seller
after its acquisition by ▇▇▇▇▇▇, the amount determined pursuant to clause (i)
above shall be increased by the following amounts:
4
April 30, 1999 - $1,647,390
July 31, 1999 - $1,235,543
October 31, 1999 - $ 823,695
January 31, 2000 - $ 411,848
"Funded Debt" means the principal amount of indebtedness for borrowed
money and capitalized lease obligations of Pulaski and its Subsidiaries, on a
consolidated basis determined in accordance with GAAP.
"GAAP" means generally accepted accounting principles as promulgated by
opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements of the Financial Accounting
Standards Board, consistently applied.
"Governmental Authority" means the United States of America, any state
or other political subdivision thereof and any court, agency, department,
commission, board, bureau or instrumentality of any of the foregoing.
"Hazardous Materials" shall mean all materials defined as hazardous
wastes or substances under any local, state or federal environmental laws, rules
or regulations and petroleum, petroleum products, oil and asbestos.
"Interest Period" means the period commencing on the date the Loan or
any portion thereof begins to bear interest at a rate based on LIBOR, which
shall be the last day of the preceding Interest Period except on the day the
Loan is funded, and ending on, but not including, the last day of such period as
selected by the Borrowers pursuant to the provisions set forth below. The
duration of each Interest Period shall be 1, 3, 6, 9 or 12 months, subject in
any case to availability and as the Borrowers may, upon notice received by the
Bank, select; provided, however, that whenever the last day of an Interest
Period would otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding Business
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Day, provided, that if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day, and provided
further that any Interest Period which begins on a day for which there is no
numerically corresponding day in the calendar month during which such Interest
Period is to end shall end on, but not include, the last Business Day of such
calendar month. In no event shall an Interest Period extend beyond October 31,
2005.
"LIBOR" means that rate per annum (rounded upward to the nearest 1/100
of 1%) determined by the Bank to be equal to the quotient of (i) the LIBOR Base
for the Loan or a portion thereof for such Interest Period divided by (ii) one
minus the LIBOR Reserve Percentage for the Loan or such portion thereof for the
Interest Period. The definition of LIBOR is illustrated by the following
formula:
LIBOR = LIBOR Base
----------------------------------------
1 - LIBOR Reserve Percentage
"LIBOR Base" means, for any LIBOR Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "Eurodollar Rate" shall mean, for any Eurodollar
Loan for any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the London interbank offered rate for deposits in Dollars at approximately 11:00
6
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates (rounded upwards, if necessary,
to the nearest 1/100 of 1%).
"LIBOR Loan" means all or a portion of the Loan when it bears interest
based on LIBOR.
"LIBOR Reserve Percentage" means for any Interest Period the reserve
percentage (expressed as a decimal) applicable during such Interest Period under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) (or if more than one such percentage is so
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) for
determining the maximum reserve requirement (including, without limitation, any
marginal reserve requirement) for the Bank in respect of liabilities or assets
consisting of or including Eurocurrency Liabilities (as defined in Regulation D)
having a term equal to such Interest Period.
"Loan" shall have the meaning set forth in Section 2.1.
"Material Adverse Effect" means a material adverse effect on (i) the
condition (financial or otherwise), operations, business, assets, or liabilities
of Pulaski and its Subsidiaries (taken as a whole), (ii) the ability of the
Borrowers to perform any material obligation under this Agreement or the Note,
or (iii) the material rights and remedies of the Bank under this Agreement or
the Note.
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"Net Income" means the consolidated net income of Pulaski and its
Subsidiaries after the deduction of any income taxes Pulaski is required to pay,
determined in accordance with GAAP consistently with the method used by its
accountants in the preparation of its annual financial statements.
"Note" shall have the meaning set forth in Section 2.2.
"PBGC" shall mean the Pension Benefit Guaranty Corporation as created
under ERISA, or any successor thereto under ERISA.
"Prime Rate" shall mean the rate which the Bank establishes from time
to time as its prime rate; any change of interest resulting from a change in the
Prime Rate shall be effective on the effective date of each change therein. The
Borrowers acknowledge and agree that the Prime Rate is a reference used in
determining interest rates on certain loans by the Bank and is not intended to
be the lowest rate of interest charged on any extension of credit to any
customer.
"Prime Rate Loan" means the Loan or any portion thereof bearing
interest based on the Prime Rate.
"Pulaski" means Pulaski Furniture Corporation, a Virginia corporation.
"Pulaski Sales" means Pulaski Foreign Sales Corporation, Inc., a
corporation organized under the laws of the U.S. Virgin Islands.
"Ratio of Funded Debt to Capitalization" means the Ratio of Funded Debt
to the sum of Funded Debt and Consolidated Net Worth of Pulaski and its
Subsidiaries.
"Ratio of Funded Debt to EBITDA" means as of the end of any fiscal
quarter the ratio of Funded Debt as of such date to EBITDA for the four (4)
fiscal quarters ending on such date.
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"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as it may be amended from time to time.
"Restricted Subsidiary" means a Subsidiary (i) the total revenues of
which equal or exceed 10% of the total revenues of Pulaski and its Subsidiaries
(taken as a whole) or (ii) with total assets in excess of $5,000,000.
"Seller" shall mean ▇▇▇▇▇▇ Heritage Furniture Company, Inc.
"Subsidiary" shall mean as to any person, any corporation, partnership,
limited liability company or other entity of which more than fifty percent (50%)
of the outstanding capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other managers of
such corporation, partnership, limited liability company or other entity is at
the time, directly or indirectly, owned by such person (irrespective of whether,
at the time, capital stock or other ownership interests of any other class or
classes of such corporation, partnership, limited liability company or other
entity shall have or might have voting power by reason of the happening of any
contingency). Unless otherwise qualified, references to "Subsidiary" or
"Subsidiaries" herein shall refer to those of Pulaski.
"Tranche" means any portion of the Loan when it bears interest at an
interest rate based on LIBOR for a specified Interest Period and any portion of
the Loan when it bears interest at an interest rate based on the Prime Rate.
"Type" shall mean either a LIBOR Loan or a Prime Rate Loan.
"UCC" means the Uniform Commercial Code as adopted and in effect from
time to time in the Commonwealth of Virginia.
"Written" or "in writing" shall mean any form of written communication
or a communication by means of telex, telecopier device, telegraph or cable.
9
ARTICLE II
THE TERM LOAN AND TERM LOAN NOTE
2.1 Term Loan. The Bank agrees, subject to the terms and conditions
contained herein, to make a term loan (the "Loan") to the Borrowers on or before
February 28, 1999, in the amount of Seventeen Million Dollars ($17,000,000).
2.2 Note. The obligation of the Borrowers to repay the Loan shall be
evidenced by the Borrowers' promissory note (the "Note") payable to the order of
the Bank at its office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, or such other place as the Bank may from time to time designate,
substantially in the form of Exhibit A attached hereto with the blanks therein
appropriately completed, dated as of the date of the Loan in the original
principal amount of Seventeen Million Dollars ($17,000,000) and payable in
installments as herein provided. A principal installment of Three Hundred
Seventy-Five Thousand Dollars ($375,000) will be due and payable on the Note on
April 30, 1999, and on each July 31, October 31, January 31 and April 30
thereafter to and including January 31, 2002. A principal installment of Seven
Hundred Fifty Thousand Dollars ($750,000) will be due and payable on the Note on
April 30, 2002, July 31, 2002, October 31, 2002, and January 31, 2003. A
principal installment of Eight Hundred Seventy-Five Thousand Dollars ($875,000)
will be due and payable on April 30, 2003 and on each July 31, October 31,
January 31 and April 30 thereafter to and including July 31, 2005. A principal
installment of Seven Hundred Fifty Thousand Dollars ($750,000) will be due and
payable on October 31, 2005, on which date the entire unpaid principal balance
of the Loan and all interest accrued thereon will be due and payable in full.
The Note shall bear interest at the rates and interest shall be payable as set
forth in Section 3.
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2.3 Disbursement of Loan. The Bank shall disburse the proceeds of the
Loan to wire transfer instructions initiated by Pulaski.
ARTICLE III
INTEREST, NOTICES OF INTEREST
PERIODS, AND PAYMENTS
3.1 Selection of Interest Period; Borrowing.
(a) Initial Interest Period. The Borrowers shall give the Bank (i) at
least three (3) Business Days' notice of the Loan (which notice may be in
writing or by telecopy, telex or telegraph, or by telephone, if immediately
confirmed in writing, substantially in the form attached hereto as Exhibit B)
(the "Notice of Borrowing") prior to the proposed funding date, of the intention
of the Borrowers to borrow hereunder at a rate based on LIBOR and the initial
Interest Period or Interest Periods, and in the case of more than one Interest
Period, the amount of the Loan to which each is to apply, and (ii) notice on or
before the proposed funding date of the intention to borrow based on the Prime
Rate. If the Notice of Borrowing is given to the Bank after 12:00 noon (Eastern
Time), it shall be deemed to have been given on the following Business Day. If
the Borrowers fail to borrow all or any portion of the Loan after giving a
Notice of a Borrowing of all or any portion of the Loan as a LIBOR Loan, it will
reimburse the Bank for any loss or out-of-pocket expense incurred by the Bank in
connection with such failure to borrow the LIBOR Loan as if such failure to
borrow were a prepayment of such LIBOR Loan, computed in accordance with the
provisions of Section 4.2.
(b) Conversions and Continuations.
(i) Subject to the provisions of Sections 3.4(b) and (c)
hereof, the Borrowers shall have the option on any Business Day to convert all
of the Loan or any Tranche from one Type to another Type or, upon the expiration
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of any Interest Period, to continue all of the Loan or any Tranche as the same
Type with the succeeding Interest Period of such continued Loan or Tranche to
commence on the last day of the Interest Period of the Loan or Tranche to be
continued; provided, that (A) a LIBOR Loan may be converted into a different or
the same Type only on the last day of an Interest Period applicable thereto, (B)
no partial conversion of a LIBOR Loan or continuation of a LIBOR Loan, as
permitted under this Section 3.1(b), shall reduce the outstanding principal
amount of any such Loan or Tranche to less than $1,000,000, (C) no conversion to
a LIBOR Loan or continuation of a LIBOR Loan as permitted under this Section
3.1(b) may be made if a Default or Event of Default is then in existence, and
(D) conversions to a LIBOR Loan shall be in amounts equal to at least
$1,000,000, or if greater, in integral multiples of $500,000.
(ii) Each such conversion or continuation shall be effected by
the Borrowers delivering to the Bank a Notice of Conversion/Continuation
(substantially in the form of Exhibit C) on or before the date of the proposed
conversion to or continuation of a Prime Rate Loan or at least three Business
Days before the date of the proposed conversion to or continuation of a LIBOR
Rate Loan, each such notice to be given prior to 12:00 P.M. (Roanoke, Virginia
time) on the date specified.
(iii) In lieu of delivering a Notice of
Conversion/Continuation, the Borrowers may give the Bank telephonic notice of
the proposed conversion or continuation by the dates and times applicable to the
Type; provided, that such notice shall be promptly confirmed in writing by
delivery to the Bank of a Notice of Conversion/Continuation. The Bank shall
incur no liability to either Borrower in acting upon any telephonic notice
referred to above which the Bank believes, in good faith, to have been given by
a duly authorized officer of a Borrower or for otherwise acting in good faith
under this Section 3.1(b).
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(iv) Each Notice of Conversion/Continuation (or telephonic
notice in lieu thereof) shall be irrevocable, and shall specify the amount of
the Loan or Tranche to be so converted into or continued as and, if to be
converted to or continued as a LIBOR Loan, the Interest Period to be applicable
thereto. Notwithstanding the foregoing or the provisions of Section 3.4 hereof,
if an Event of Default is in existence or would result from any proposed
continuation of or conversion to a LIBOR Loan, such Loan may not be continued as
or converted to a LIBOR Loan but instead shall be automatically converted on the
last day of such Interest Period into a Prime Rate Loan.
(c) Absence of Notice. If, upon the expiration of any Interest Period
for a LIBOR Loan, the Borrowers have failed to elect a new Interest Period to be
applicable to a LIBOR Loan, the Borrowers shall be deemed to have elected to
convert such LIBOR Loan into a LIBOR Loan with an Interest Period of one month
effective as of the expiration date of such current Interest Period.
(d) Interest Basis; Interest Payment Dates.
Borrowers agree to pay interest in respect of the unpaid
principal amount of the Loan from the date of the Loan until the Loan is paid in
full, at the following rates per annum:
(i) during such period that all or a portion of the Loan is a
Prime Rate Loan, the Prime Rate;
(ii) during such period that all or a portion of the Loan is a
LIBOR Loan, LIBOR for the related Interest Period plus the Applicable Margin.
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(e) Interest Payment Dates. Interest on any LIBOR Loan or Prime Rate
Loan shall be computed on the basis of the actual number of days elapsed over a
year of 365 days and shall be payable in arrears on each January 31, April 30,
July 31 and October 31.
3.2 Payments. The disbursement of the Loan and each payment of the
principal of and interest on the Note shall be made in federal or other
immediately available funds. For purposes of this provision, collected funds on
deposit with the Bank are immediately available funds.
3.3 Payment on Days Other Than Business Days. Whenever any payment to
be made hereunder or under the Note shall be stated to be due on a day other
than a Business Day, except as provided in the definition of Interest Period
with respect to a LIBOR Loan, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest to be paid on such date.
3.4 LIBOR Provisions.
(a) Increased Costs. If either (i) the introduction of or any change by
any central bank or other Governmental Authority (whether or not having the
force of law) (including, without limitation, any change by way of imposition or
increase of reserve requirements other than those included in the computation of
LIBOR but excluding any income tax on the overall income of the Bank) in or in
the interpretation of any law or regulation by any central bank or other
Governmental Authority (whether or not having the force of law), or (ii) the
compliance by the Bank with any guideline or directive from any central bank or
other Governmental Authority (whether or not having the force of law), shall
result in any actual increase in the cost to the Bank of maintaining a LIBOR
Loan or reduce the amount receivable by the Bank on the Loan or any portion
thereof, the Borrowers shall from time to time, upon demand by the Bank, pay to
the Bank additional amounts sufficient to indemnify the Bank against such
increased cost actually incurred or reduction in amount actually received. A
certificate in reasonable detail as to the amount of such increased cost or
reduction in amount received and method of calculation shall be submitted to the
Borrowers by the Bank and shall be conclusive (absent manifest error).
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(b) LIBOR Deposits Unavailable. If before the beginning of any Interest
Period, by reason of circumstances affecting the London interbank market
generally, deposits in dollars are not being offered to the Bank, the Bank shall
forthwith give notice thereof to the Borrowers, whereupon (unless the Borrowers
and the Bank shall have agreed on an alternative method of determining the
interest rate for the Loan) at the expiration of any applicable Interest Period
any LIBOR Loan shall become a Prime Rate Loan.
(c) Changes in Law Rendering a LIBOR Loan Unlawful. If, after the date
of this Agreement, the introduction of, or any change in, any applicable law,
rule or regulation or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance by the Bank with any guideline or directive (whether or
not having the force of law) of any such Governmental Authority, shall make it
unlawful or impossible for the Bank to maintain a LIBOR Loan, the Bank shall
promptly notify the Borrowers, and the obligation of the Bank to have the Loan,
or any portion thereof bear interest at a rate based on LIBOR shall forthwith be
suspended for the duration of such illegality or impossibility. Upon such notice
(i) if the Bank may lawfully continue to maintain a LIBOR Loan to such day or
days, on the last day of each then current Interest Period, unless otherwise
agreed to by the Borrowers and the Bank, each LIBOR Loan shall become a Prime
Rate Loan, and (ii) immediately if the Bank may not lawfully continue to
maintain a LIBOR Loan to such day or days, the Loan shall immediately become a
Prime Rate Loan.
15
(d) Certificate. The Bank shall furnish to the Borrowers upon request a
certificate outlining in reasonable detail the computation of any amounts
claimed by it under this Section 3.4 giving rise to a change in LIBOR and the
assumptions underlying such computations.
ARTICLE IV
PREPAYMENTS
4.1 Optional Prepayments. On the last day of any Interest Period, the
Borrowers shall have the right without premium or penalty to prepay any LIBOR
Loan. At any time and from time to time the Borrowers shall have the right
without premium or penalty to prepay all or any portion of a Prime Rate Loan.
The Borrowers may prepay all or any part of a LIBOR Loan which bears interest at
a rate based on LIBOR at any time and from time to time other than the last day
of the Interest Period used in determining such interest rate provided that at
the time of such prepayment the Borrowers reimburse the Bank for any loss or
out-of-pocket expense incurred by the Bank in connection with such prepayment,
computed in accordance with the provisions of Section 4.2.
4.2 Calculation of Loss or Out-of-Pocket Expense. The loss or
out-of-pocket expense resulting from a prepayment of a LIBOR Loan on a day other
than the last day of an Interest Period which is applicable to the amount of
such prepayment shall be an amount equal to the excess of (i) the interest that
would have been received from the Borrowers on the amount prepaid during the
remaining portion of the Interest Period in question had the Borrowers not
prepaid the Loan or such portion without giving effect to the Applicable Margin
or to the provisions of Section 3.4 over (ii) the amount of interest which would
have accrued on such funds if the Bank had placed such funds on deposit with a
prime bank in the London interbank market from the date of such prepayment until
the end of such Interest Period, determined as of the time of such prepayment
using an assumed Interest Period which commences on the date of prepayment and
ends on the last day of the originally scheduled Interest Period, discounted in
16
each case to the present value using the interest rate then existing on U.S.
Treasury obligations maturing as of the end of such Interest Period, as
reasonably determined by the Bank. A certificate in reasonable detail setting
forth the calculation of such loss or expense, including the amount and method
of calculation, shall be submitted to the Borrowers by the Bank and, in the
absence of manifest error, shall be conclusive.
4.3 Application of Prepayments. Each partial prepayment of the Note
shall be applied to the installments of principal payable on the Note in the
inverse order of their maturity.
4.4 No Reborrowing. Amounts prepaid on the Loan may not be reborrowed.
ARTICLE V
REPRESENTATIONS
The Borrowers jointly and severally represent and warrant to the Bank
that:
5.1 Subsidiaries. Pulaski has the following Subsidiaries and none
others:
Pulaski Foreign Sales Corporation, Inc.
▇▇▇▇▇▇ Furniture Company, Inc.
5.2 Incorporation; Good Standing. Pulaski is a corporation duly
organized and existing in good standing under the laws of the Commonwealth of
Virginia and has the corporate power to own its property and to carry on its
business activities as now being conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary and in which the failure so to qualify would have a
Material Adverse Effect. ▇▇▇▇▇▇ is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of Virginia and has the
corporate power to own its property and to carry on its business activities as
now being conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the character of the properties owned by it
therein or in which the transaction of its business makes such qualification
necessary and in which the failure so to qualify would have a Material Adverse
17
Effect. Pulaski Sales is a corporation duly organized and existing in good
standing under the laws of the U. S. Virgin Islands and has the corporate power
to own its property and to carry on its business activities as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned by it therein or in
which the transaction of its business makes such qualification necessary and in
which the failure so to qualify would have a Material Adverse Effect.
5.3 Corporate Authority. Each of Pulaski and its Subsidiaries have full
corporate power and authority to enter into this Agreement, to make the
borrowings hereunder, to execute and deliver the Note and to incur the
obligations provided for herein and therein, all of which have been duly
authorized by all necessary corporate action. No consent or approval of
shareholders or consent or approval of, notice to or filing with any public
authority is required as a condition to the validity of this Agreement or the
Note.
5.4 Binding Agreements. This Agreement constitutes, and the Note, when
issued and delivered pursuant hereto for value received, will constitute, the
valid and legally binding joint and several obligations of the Borrowers
enforceable in accordance with their terms except to the extent such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and moratorium laws and similar laws relating generally to the
enforcement of creditors' rights.
5.5 Litigation. There are no proceedings pending or, so far as the
officers of the Borrowers know, threatened before any court or administrative
agency that, in the opinion of the officers of the Borrowers, is likely to have
a Material Adverse Effect.
5.6 No Conflicting Agreements. There is no charter, bylaw or preference
stock provision of Pulaski or any of its Subsidiaries and no provision of any
existing mortgage, indenture, contract or agreement binding on Pulaski or any of
18
its Subsidiaries or affecting their property that would conflict with or in any
way prevent the execution, delivery or carrying out of the terms of this
Agreement or the Note.
5.7 Financial Condition. The consolidated balance sheet of Pulaski and
its Subsidiaries as of November 1, 1998, and the related consolidated statements
of income and retained earnings and of cash flows for the period then ended,
certified by Ernst & Young LLP, heretofore delivered to the Bank, fairly present
the financial condition of Pulaski and its Subsidiaries and the results of their
operations and their cash flows as of the dates and for the periods referred to
therein and have been prepared in accordance with GAAP. There are no material
liabilities, direct or indirect, fixed or contingent, of Pulaski and its
Subsidiaries as of the dates of such balance sheets that are not reflected
therein or in the notes thereto. There has been no material adverse change in
the financial condition or operations of Pulaski and its Subsidiaries since the
dates of said balance sheets. The balance sheet of the Seller as of December 31,
1998, and the related statements of income, stockholders' equity and cash flows
for the period then ended, certified by Myers, Baker, ▇▇▇▇ and ▇▇▇▇▇▇,
heretofore delivered to the Bank, fairly present the financial condition of the
Seller and the results of its operations and its cash flows as of the date and
for the period referred to therein and have been prepared in accordance with
GAAP applied on a consistent basis. There are no material liabilities, direct or
indirect, fixed or contingent, of the Seller as of the date of such balance
sheet that are not reflected therein or in the notes thereto. There has been no
material adverse change in the financial condition or operations of the Seller
since the date of said balance sheet.
5.8 Employee Benefit Pension Plans. No fact, including, but not limited
to, any Reportable Event as defined in Section 4043 of ERISA exists in
connection with any employee benefit plan of Pulaski or any of its Subsidiaries
covered by ERISA (including any plan of any member of a controlled group of
19
corporations and all trades and businesses (whether or not incorporated) under
common control which, together with Pulaski or any of its Subsidiaries, are
treated as a single employer, under Section 414 of the Internal Revenue Code of
1986, as amended), which could constitute grounds for the termination of any
such plan by the PBGC or for the appointment of any trustee to administer such
plan by the appropriate United States District Court.
5.9 Environmental Law Compliance. The conduct of Pulaski's business
operations and those of any Subsidiary and the conduct of the proposed business
operations of Pulaski and its Subsidiaries following the acquisition of the
assets of the Seller by ▇▇▇▇▇▇ does not and will not violate any federal laws,
rules or ordinances for environmental protection, including, but not limited to,
the following: Clean Air Act, 42 U.S.C. ss. 7401, et seq.; Federal Water
Pollution Control Act, 33 U.S.C. ss. 1251, et seq.; ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇
U.S.C. ss. 6901, et seq.; Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or "SUPERFUND"), 42 U.S.C. ss. 9601, et seq.; National
Environmental Policy Act, 42 U.S.C. ss. 4321, et seq.; regulations of the
Environmental Protection Agency and any applicable local or state law, rule,
regulation or rule of common law and any judicial interpretation thereof
relating primarily to the environment or Hazardous Materials other than any such
violation or violations which will not cause or result in and might not
reasonably be expected to cause or result in a Material Adverse Effect.
5.10 Year 2000 Compliance.
(a) Pulaski has (i) begun analyzing the operations of Pulaski and its
Subsidiaries and Affiliates that could be adversely affected by failure to
become Year 2000 compliant (that is, that computer applications, imbedded
microchips and other systems will be able to perform date-sensitive functions
prior to and after December 31, 1999) and (ii) developed a plan for becoming
20
Year 2000 compliant in a timely manner, the implementation of which is on
schedule in all material respects. Pulaski reasonably believes that it will
become Year 2000 compliant for its operations and those of its Subsidiaries and
Affiliates on a timely basis except to the extent that a failure to do so could
not reasonably be expected to have a Material Adverse Effect.
(b) Pulaski reasonably believes any suppliers and vendors that are
material to the operations of Pulaski and its Subsidiaries and Affiliates (taken
as a whole) will be Year 2000 compliant for their own computer applications
except to the extent that a failure to do so could not reasonably be expected to
have a Material Adverse Effect.
ARTICLE VI
CONDITIONS OF LOAN
The obligation of the Bank to make the Loan is subject to each of the
following conditions precedent:
6.1 Approval of Bank's Counsel. All legal matters incident to the Loan,
including all documents and opinions, shall be reasonably satisfactory to
counsel for the Bank.
6.2 Evidence of Corporate Action. The Bank shall have received (i)
certified copies of papers evidencing all corporate action taken by the
Borrowers to authorize this Agreement, the Note and the borrowing hereunder, and
(ii) such other papers as the Bank shall reasonably require.
6.3 Opinion of Borrowers' Counsel. The Bank shall have received a
favorable written opinion of counsel for the Borrowers, dated as of the date of
the making of the Loan, substantially in the form of Exhibit D attached hereto
and otherwise satisfactory in form and substance to the Bank and its counsel.
21
6.4 Acquisition of Seller. ▇▇▇▇▇▇ shall have acquired the assets of the
Seller in accordance with the Asset Purchase Agreement by and among ▇▇▇▇▇▇, the
Seller, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ previously delivered to and approved
by the Bank.
6.5 Compliance. At the time of the making of the Loan (i) the Borrowers
shall have complied and shall then be in compliance in each case in all material
respects with all the terms, covenants and conditions of this Agreement that are
applicable to it, (ii) there shall exist no Event of Default and no Default
shall have occurred and be continuing, and (iii) the representations and
warranties contained in Article V hereof shall, except to the extent that they
relate solely to an earlier date, be true in all material respects with the same
effect as though such representations and warranties had been made at the time
of the making of the Loan
ARTICLE VII
AFFIRMATIVE COVENANTS
Until payment in full of the Note and performance of all other monetary
obligations of Borrowers hereunder, except those set forth in Section 11.4,
Pulaski will:
7.1 Financial Statements. Furnish to the Bank (i) as soon as available
but in no event more than forty-five (45) days after the end of each fiscal
quarter, a consolidated balance sheet of Pulaski and its Subsidiaries as of the
end of such quarter and a consolidated income statement and a consolidated
statement of cash flows for such quarter and for that portion of the fiscal year
ending on the last day of such quarter, accompanied by a schedule setting forth
the calculations to show compliance with the financial covenants contained
herein, certified by the chief executive officer or the chief financial officer
of Pulaski, together with a certificate of that officer stating whether any
event has occurred or condition exists that constitutes an Event of Default or a
Default hereunder, and, if so, stating the facts with respect thereto; (ii) as
soon as available, but in no event more than one hundred twenty (120) days after
the close of each of Pulaski's fiscal years, a copy of the annual audit report
22
of Pulaski in reasonable detail, prepared in accordance with generally accepted
accounting principles applied on a basis consistent with that of the preceding
year and certified by independent certified public accountants satisfactory to
the Bank, which report shall include a consolidated balance sheet of Pulaski and
its Subsidiaries of the end of such fiscal year, a consolidated income statement
of Pulaski and its Subsidiaries for such fiscal year, and consolidated
statements of stockholders' equity and of cash flows of Pulaski and its
Subsidiaries for such fiscal year, accompanied by a certificate of said
accountants stating that in the course of making their audit they did not
discover any condition existing as of the end of such fiscal year that
constituted an Event of Default or a Default hereunder, or, if they did, stating
the facts with respect thereto; (iii) promptly upon their receipt, copies of all
management letters received by Pulaski from its accountants; and (iv) such
additional information, reports or statements as the Bank may from time to time
reasonably request. Pulaski will also upon request, and will cause its
Subsidiaries to permit the Bank and its agents to inspect its books and records
and those of its Subsidiaries during normal business hours and discuss their
affairs with their officers and employees and the officers and employees of its
Subsidiaries.
7.2 Taxes. Pay and discharge all taxes, assessments and governmental
charges upon it, its income and its properties prior to the date on which
penalties are attached thereto, and cause its Subsidiaries to do so, unless and
to the extent only that such taxes, assessments and governmental charges shall
be contested by them in good faith and by appropriate proceedings, and Pulaski
shall have set aside on its books adequate reserves with respect to any such
tax, assessment or charge so contested.
23
7.3 Insurance. Maintain and cause its Subsidiaries to maintain adequate
insurance with responsible companies reasonably satisfactory to the Bank in such
amounts and against such risks as is customarily carried by owners of similar
businesses and property.
7.4 Corporate Existence. Maintain and cause its Restricted Subsidiaries
to maintain its and their corporate existence in good standing.
7.5 Properties. Maintain, preserve and protect and cause its Restricted
Subsidiaries to maintain, preserve and protect all franchises and trade names
and preserve all the remainder of their property used or useful in the conduct
of their business and keep the same in good repair, working order and condition,
and from time to time make or cause to be made all needful and proper repairs,
renewals, replacements, betterments and improvements thereto (subject to the
limitations of Section 8.6 hereof) so that the business carried on in connection
therewith may be properly and efficiently conducted at all times, and permit the
Bank and its agents to enter upon and inspect such properties during normal
business hours, provided that nothing contained herein shall require Pulaski or
any of its Restricted Subsidiaries to repair, maintain or replace any property
which is not of substantial use in the business of Pulaski or any such
Restricted Subsidiary and nothing contained herein shall prevent Pulaski or any
Restricted Subsidiary from selling or otherwise disposing of any such property
if such property is no longer of substantial use in the business of Pulaski or
such Restricted Subsidiary.
7.6 Employee Benefit Pension Plans. During each year within the time
required by law, pay contributions that in the judgment of the chief executive
and chief financial officers of Pulaski after reasonable inquiry are believed
adequate to meet at least all applicable minimum funding standards set forth in
Sections 302 through 305 of ERISA, with respect to each employee benefit plan of
Pulaski and any of its Subsidiaries covered by ERISA (including any plan of any
24
member of a controlled group of corporations and all trades and businesses
(whether or not incorporated) under common control which, together with Pulaski
or any of its Subsidiaries, are treated as a single employer, under Section 414
of the Internal Revenue Code of 1986, as amended), and file or cause to be filed
each annual report required to be filed pursuant to Section 103 of ERISA in
connection with each such plan for each year and notify the Bank within ten (10)
days of the occurrence of a Reportable Event (as defined in Section 4043 of
ERISA) that could reasonably be expected to constitute grounds for termination
of any such plan by PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer any such plan, provided that nothing
contained herein shall prohibit Pulaski or any of its Subsidiaries from
terminating any such plan if it has theretofore complied with the provisions of
this Section.
7.7 Compliance With Laws. Comply and cause each of its Subsidiaries to
comply in all material respects with all applicable laws, rules, regulations and
orders of any governmental authority having jurisdiction over them, including,
without limitation, the Americans with Disabilities Act of 1990 and those laws,
rules, regulations and orders relating to the environment.
7.8 Notice of Environmental Matters. Immediately advise the Bank in
writing of (i) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed or, to the knowledge of
either Borrower, threatened pursuant to any applicable federal, state, or local
laws, ordinances or regulations relating to any Hazardous Materials affecting
the business operations of Pulaski or any of its Subsidiaries, and (ii) all
claims made or, to the knowledge of either Borrower, threatened by any third
party against Pulaski or any of its Subsidiaries relating to damages,
contribution, cost recovery compensation, loss or injury resulting from any
Hazardous Materials and immediately notify the Bank of any remedial action taken
by either Borrower in response to any such action or claim or threatened action
or claim with respect to the business operations of Pulaski or any of its
Subsidiaries.
25
7.9 Deposit Account. Maintain the principal depository account of
Pulaski with the Bank.
7.10 Repayment of Loans. Repay not less than Three Million Five Hundred
Thousand Dollars ($3,500,000) of term loans (including the Loan) of Pulaski in
each of its fiscal years.
7.11 Year 2000 Compliance. Promptly notify the Bank in the event either
Borrower determines that any computer application which is material to the
operations of Pulaski or any of its Subsidiaries or any of their material
vendors or suppliers will not be fully Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect.
ARTICLE VIII
NEGATIVE COVENANTS
Until payment in full of the Note and performance of all other
obligations of the Borrowers hereunder other than those set forth in Section
11.4, without the written consent of the Bank, Pulaski will not:
8.1 Borrowing. Create, incur, assume or suffer to exist any liability
for borrowed money or the deferred payment for goods and services or permit any
of its Restricted Subsidiaries to create, incur, assume or suffer to exist any
liability for borrowed money or the deferred payment for goods and services,
except (i) liabilities under this Agreement, (ii) liabilities in existence as of
the date of this Agreement which are described on Schedule 1 attached hereto,
(iii) accrued expenses and trade accounts payable arising in the ordinary course
of business and payable on customary terms, (iv) purchase money obligations
26
(including capitalized lease obligations), provided no such obligations in
excess of Five Hundred Thousand Dollars ($500,000) are incurred in any fiscal
year, and (v) liabilities under any interest rate protection agreement relating
to the Loan or any other indebtedness permitted hereby.
8.2 Mortgages and Pledges. Create, incur, assume or suffer to exist any
mortgage, pledge, lien or other encumbrance of any kind upon, or any security
interest in, any of its property or assets, whether now owned or hereafter
acquired, or permit any of its Restricted Subsidiaries to do so, except (i)
liens for taxes not yet delinquent or being contested in good faith and by
appropriate proceedings; (ii) liens in connection with workers' compensation,
unemployment insurance, or other social security obligations; (iii) deposits or
pledges to secure bids, tenders, contracts (other than contracts for the payment
of money), leases, statutory obligations, surety or appeal bonds, and other
obligations of like nature arising in the ordinary course of business; (iv)
mechanic's, ▇▇▇▇▇▇▇'▇, materialman's, landlord's, carrier's, or other like liens
arising in the ordinary course of business with respect to obligations that are
not due or that are being contested in good faith; (v) mortgages, pledges, liens
and encumbrances in favor of the Bank; (vi) zoning restrictions, easements,
licenses, restrictions on the use of real property or minor irregularities in
the title thereto, which do not, in the opinion of Pulaski, materially impair
the use of such property in the operation of the business of Pulaski or any of
its Subsidiaries or the value of such property for the purposes of such
business; (vii) any mortgage, encumbrance or other lien upon, or security
interest in, any property hereafter acquired by Pulaski or any of its
Subsidiaries created contemporaneously with such acquisition to secure or
provide for the payment or financing of any part of the purchase price thereof,
or the assumption of any mortgage, encumbrance or lien upon, or security
interest in, any such property hereafter acquired existing at the time of such
acquisition, or the acquisition of any such property subject to any mortgage,
27
encumbrance or other lien or security interest without the assumption thereof to
the extent they are not prohibited under Section 8.6, provided that each such
mortgage, encumbrance, lien or security interest shall attach only to the
property so acquired and fixed improvements thereon; (viii) liens existing on
the date of this Agreement which are described on Schedule 2 attached hereto;
and (ix) liens for judgments which do not otherwise constitute an Event of
Default. Nothing contained in this Section 8.2 shall prohibit either Borrower or
any of its Restricted Subsidiaries from entering into any lease required to be
capitalized by GAAP in accordance with the Financial Accounting Standards Board
Statement No. 13 (Accounting for Leases) in effect on June 1, 1992, provided
such lease is not otherwise prohibited by the terms of this Agreement.
8.3 Merger, Acquisition or Sale of Assets. Enter into any merger or
consolidation with, or acquire all or substantially all of the assets of, any
person, firm, joint venture or corporation (except for investments not exceeding
$5,000,000 in the aggregate), or sell, lease or otherwise dispose of all or
substantially all of its assets except in the ordinary course of its business,
or permit any of its Restricted Subsidiaries to do so.
8.4 Contingent Liabilities. Assume, guarantee, endorse or otherwise
become surety for or upon the obligation of any other person, firm, joint
venture or corporation, or permit any of its Restricted Subsidiaries to do so,
except by the endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
8.5 Investments. Purchase or acquire the obligations or stock of, or
any other interest in, any other person, firm, joint venture, corporation or
other enterprise whatsoever, or permit any Restricted Subsidiary to do so,
except (i) accounts receivable arising in the ordinary course of its business
and other receivables arising out of the sale of equipment which is not
prohibited by Section 8.3; (ii) certificates of deposit issued by banks that are
members of the Federal Reserve System and have total assets of not less than One
Billion Dollars ($1,000,000,000); (iii) direct obligations of the United States
of America; (iv) obligations of agencies of the United States Government if the
28
payment of all principal and interest thereof is guaranteed by the United States
of America; (v) commercial paper issued by corporations domiciled in the United
States of America and maturing within nine (9) months or less from the date of
investment and given the highest rating by ▇▇▇▇▇'▇ Investors Service, Inc. or by
Standard and Poor's Ratings Group, a division of The McGraw Hill Companies,
Inc.; (vi) repurchase agreements having maturities not more than one (1) year
from the date of acquisition which are entered into with banking institutions
described in clause (ii) above; and (vii) money market funds or mutual funds
which invest solely in obligations described in clauses (i), (ii), (iii) and
(iv) of this Section 8.5 and (viii) any such investments which do not exceed
$5,000,000 in the aggregate for Pulaski and its Subsidiaries.
8.6 Capital Expenditures. Make any capital expenditures exceeding Seven
Million Five Hundred Thousand Dollars ($7,500,000) in the aggregate for Pulaski
and its Subsidiaries in fiscal year 1999 or in any fiscal year thereafter, or
permit any of its Subsidiaries to do so.
8.7 Sale and Leaseback. Directly or indirectly enter into, or cause any
of its Restricted Subsidiaries to enter into, any arrangement whereby either
Pulaski or any such Restricted Subsidiary shall sell or transfer any of the
fixed assets then owned by either of them and shall thereupon or within one year
thereafter rent or lease the assets so sold or transferred.
8.8 Loans. Make or permit any of its Restricted Subsidiaries to make
loans or advances to any person, firm, joint venture or corporation, except in
the normal course of business and except that Pulaski or any of its Subsidiaries
may make loans to its employees, provided the aggregate amount of all such loans
to employees (other than advances in the ordinary course of business for travel
and other expenses, which shall not be limited by this section) does not exceed
One Million Dollars ($1,000,000) at any time outstanding.
29
8.9 Environmental Law Compliance. Use or permit any other party to use
any Hazardous Materials at any of the places of business of Pulaski or any of
its Subsidiaries except such materials as are incidental to their normal course
of business, maintenance and repair, and are in strict accordance with
applicable laws, unless such use will not cause or result in and might not
reasonably be expected to cause or result in a Material Adverse Effect. If the
Bank has reasonable cause to believe that this covenant has or will be violated,
Pulaski agrees to permit the Bank, its agents, contractors and employees to
enter and inspect any of the places of business of Pulaski, and agrees to cause
any of its Subsidiaries to permit such entry and inspection as to any place of
business of such Subsidiary, at any reasonable times upon three (3) days' prior
notice for the purposes of conducting an environmental investigation and audit
(including taking physical samples) to insure that Pulaski is complying with
this covenant and to pay the reasonable costs for such inspections if the Bank
has reasonable cause to believe a violation of this Section has occurred.
Pulaski shall provide the Bank, its agents, contractors, employees and
representatives with access to and copies of any and all data and documents
relating to or dealing with any Hazardous Materials used, generated,
manufactured, stored or disposed of by business operations of Pulaski or any of
its Subsidiaries within five (5) days of the request therefor.
8.10 Use of Proceeds. Use or permit any Subsidiary to use, all or any
part of the proceeds of any of the Loan for the purpose of purchasing or
carrying any margin stock, as that term is defined in Regulation U of the Board
of Governors of the Federal Reserve System, or otherwise in violation of
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System.
30
8.11 Business. Engage in any business other than the business in which
Pulaski and its Subsidiaries are presently engaged and any business of
substantially the same type.
8.12 Accounting. Change the fiscal year or method of accounting of
Pulaski.
8.13 Subsidiaries. Organize, acquire or own any Restricted Subsidiary
(other than a Borrower), unless such restricted Subsidiary unconditionally
guarantees the Loan pursuant to a guaranty in form and substance satisfactory to
the Bank and its counsel.
ARTICLE IX
FINANCIAL COVENANTS
Until payment in full of the Note and performance of all other
obligations of the Borrowers hereunder other than those set forth in Section
11.4, without the written consent of the Bank, of the Borrowers will not:
9.1 Funded Debt to EBITDA. Permit the Ratio of Funded Debt to EBITDA of
Pulaski and its Subsidiaries to exceed 3.25 to 1 as of the end of the fiscal
quarters ending on or about April 30, 1999, on or about July 31, 1999, and on or
about October 31, 1999; or to exceed 3.0 to 1 as of the end of the fiscal
quarter ending on or about January 31, 2000, or as of the end of any fiscal
quarter thereafter.
9.2 Funded Debt to Capitalization. Permit the Ratio of Funded Debt to
Capitalization of Pulaski and its Subsidiaries to exceed 0.50 to 1 as of the end
of the fiscal quarter ending on or about April 30, 1999, or as of the end of any
fiscal quarter thereafter.
9.3 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio
of Pulaski and its Subsidiaries to be less than 1.50 to 1 as of the end of the
fiscal quarter ending on or about April 30, 1999, or as of the end of any fiscal
quarter thereafter.
31
ARTICLE X
EVENTS OF DEFAULT
If one or more of the following events of default (each an "Event of
Default") shall occur:
10.1 Default shall be made by the Borrowers in the payment of any
interest upon the Note when such interest is due and payable, and such default
shall continue for a period of five (5) days; or
10.2 Default shall be made in the payment of any principal of the Note,
when and as the same becomes due and payable, whether at the stated maturity
thereof or by acceleration or otherwise; or
10.3 Default shall be made in the due observance or performance of any
term, covenant, or agreement contained in Article VIII or Article IX of this
Agreement and such default shall continue unremedied for a period of thirty (30)
days, or default shall be made in the due observance or performance of any other
term, covenant or agreement contained in this Agreement and such default shall
continue unremedied for a period of thirty (30) days after written notice
thereof from the Bank to the Borrowers; or
10.4 Default shall be made in the payment of any installment of
principal or interest on any indebtedness of Pulaski or any of its Subsidiaries
to the Bank other than the Loan, when and as the same becomes due and payable,
whether at the stated maturity thereof or by acceleration or otherwise; or
32
10.5 A custodian, other than a trustee, receiver or agent appointed or
authorized to take charge of less than substantially all of the property of
Pulaski or any of its Restricted Subsidiaries for the purpose of enforcing a
lien against such property, is appointed for, or takes possession of any
material property or assets of, Pulaski or any of its Restricted Subsidiaries;
or
10.6 Any representation or warranty made by either Borrower herein or
any statement or representation made in any certificate, report or opinion
delivered pursuant hereto shall prove to have been incorrect in any material
respect when made; or
10.7 Either Pulaski or any of its Restricted Subsidiaries shall be
generally not paying its debts as such debts become due, shall become insolvent
or unable to meet its obligations as they mature, shall make an assignment for
the benefit of creditors, shall consent to the appointment of a trustee or a
receiver, or shall admit in writing its inability to pay its debts as they
mature; or
10.8 A trustee or receiver (other than a custodian described in Section
10.5) shall be appointed for Pulaski or any of its Restricted Subsidiaries or
for a substantial part of the properties of any of them without the consent of
either Borrower, as the case may be, and not be discharged within thirty (30)
days; or
10.9 Any case in bankruptcy shall be commenced, or any reorganization,
arrangement, insolvency or liquidation proceedings shall be instituted, by or
against Pulaski or any of its Restricted Subsidiaries, and, if commenced or
instituted against either, be consented to by any of them, as the case may be,
or remain undismissed for a period of forty-five (45) days; or
10.10 Any default shall be made in the performance of any other
obligation or obligations incurred in connection with any indebtedness for
borrowed money of Pulaski or any of its Subsidiaries aggregating One Million
Dollars ($1,000,000) or more, if such default causes the holder of such notes or
indebtedness (or a trustee on behalf of such holder) to cause them or it to
become due prior to their or its stated maturity, or any such note or
indebtedness becomes due prior to its stated maturity or shall not be paid when
due; or
33
10.11 One or more final judgments for the payment of money aggregating
in excess of One Million Dollars ($1,000,000) which is or are not adequately
insured or indemnified against shall be rendered at any time against Pulaski or
any of its Subsidiaries (and not satisfied or otherwise discharged) and the same
shall remain undischarged for a period of thirty (30) days during which time
execution shall not be effectively stayed; or
10.12 Either Pulaski or any of its Restricted Subsidiaries shall be in
default under the terms of any interest rate protection agreement to which
either Pulaski or any of its Restricted Subsidiaries is a party and such default
shall continue after any applicable grace period or if there is no grace period,
for a period of thirty (30) days, or as a result of any default any other party
to such agreement shall have the right to exercise any remedy thereunder; or
10.13 Any substantial part of the properties of Pulaski or any of its
Restricted Subsidiaries shall be sequestered or attached and shall not have been
returned to the possession of Pulaski or any of its Restricted Subsidiaries or
released from such attachment within thirty (30) days; or
10.14 The occurrence of a Reportable Event as defined in Section 4043
of ERISA which could constitute grounds for termination of any employee benefit
plan of Pulaski or any of its Subsidiaries covered by ERISA by the PBGC or
grounds for the appointment by the appropriate United States District Court of a
trustee to administer any such plan, then, (A) upon the occurrence of an Event
of Default described in Section 10.9 hereof, (i) the entire outstanding
principal balance of the Note and all accrued interest thereon and all other
amounts payable by the Borrowers to the Bank shall automatically and immediately
become due and payable without presentment, demand, protest or any notice of any
kind, or any other action by or on behalf of the Bank, all of which are hereby
waived, anything contained herein or in the Note to the contrary
notwithstanding, and (ii) the Bank may proceed to enforce payment of the Note
and to exercise any and all of its rights hereunder, under the Note, or
otherwise available to the Bank, and (B) upon the occurrence of any Event of
Default other than an Event of Default described in Section 10.9 hereof, the
Bank may, by written notice to Pulaski, declare the Note to be forthwith due and
payable, whereupon the Note shall be forthwith due and payable, both as to
principal and interest, without presentment, demand, protest or any other notice
34
of any kind, all of which are hereby expressly waived, anything contained herein
or in the Note to the contrary notwithstanding, and the Bank may proceed to
enforce payment of the Note and exercise any and all of their rights hereunder,
under the Note or otherwise available to the Bank. In the event the Bank demands
payment under the provisions of this Section 10 during any unexpired Interest
Period, the Borrowers will pay, in addition to principal and interest, all
reasonable losses, expenses and liabilities which Bank may sustain as the result
of such acceleration (including, without limitation, breakage costs and funding
losses, determined as provided in Section 4.2).
35
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Costs and Expenses. The Borrowers will pay all reasonable
out-of-pocket expenses incurred by the Bank in connection with the negotiation
and preparation of this Agreement and the Note (whether or not the transactions
hereby contemplated shall be consummated), the making of the Loan hereunder, any
waiver of any provision hereof, or any amendment or amendment and restatement
hereof, the enforcement of the rights of the Bank in connection with this
Agreement or with the Loan or the Note, including, but not limited to, the
reasonable fees and disbursements of counsel for the Bank, provided the fees of
counsel for the negotiation and preparation of this Agreement and the Note do
not exceed Fifteen Thousand Dollars ($15,000).
11.2 Setoffs. If an Event of Default shall have occurred and be
continuing, the Bank shall have the right to setoff against all property of
either Borrower now or at any time hereafter in the Bank's possession in any
capacity whatever (including, without limitation, any balance or share of any
deposit, trust or agency account) as security for all liabilities of the
Borrowers to the Bank.
11.3 Cumulative Rights and No Waiver. Each and every right granted to
the Bank hereunder or under any other document delivered hereunder or in
connection herewith, or allowed it by law or equity, shall be cumulative and may
be exercised from time to time. No failure on the part of the Bank to exercise,
and no delay in exercising, any right shall operate as a waiver thereof, nor
shall any single or partial exercise by the Bank of any right preclude any other
or future exercise thereof or the exercise of any other right.
11.4 Indemnification of the Bank
(a) Each Borrower shall indemnify, defend and hold the Bank and its
respective successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, reasonable costs
36
or other expenses (including reasonable attorneys' fees and court costs) arising
from or in any way related to actual or threatened damage to the environment,
agency costs of investigation, personal injury or death, or property damage, due
to a release or alleged release of Hazardous Materials, arising from the
business operations of Pulaski or any of its Subsidiaries or in the surface or
ground water arising from the business operations of Pulaski or any of its
Subsidiaries or gaseous emissions arising from the business operations of
Pulaski or any of its Subsidiaries or any other condition existing or arising
from the business operations of Pulaski or any of its Subsidiaries resulting
from the use or existence of Hazardous Materials, whether such claim proves to
be true or false. The term "property damage" as used in this paragraph includes,
but is not limited to, damage to any real or personal property of Pulaski or any
of its Subsidiaries, the Bank or any third parties. The obligations of the
Borrowers under this paragraph shall survive the repayment of the Loan.
(b) From and at all times after the date of this Agreement, and in
addition to all of the Bank's other rights and remedies against the Borrowers,
each Borrower agrees to hold the Bank harmless from, and to indemnify the Bank
against all losses, damages, reasonable costs and expenses (including, but not
limited to, reasonable attorneys' fees, costs and expenses) incurred by the Bank
from and after the date hereof, whether direct, indirect or consequential, as a
result of or arising from or relating to any suit, action or proceeding by any
person other than one of the Borrowers, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any person under any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution or
performance of, or the financing transactions contemplated by, this Agreement,
the Note and any other documents relating to the Loan, or the furnishing of
37
funds to either Borrower by the Bank, pursuant to this Agreement; provided,
however, that the foregoing indemnification shall not protect the Bank from
loss, damage, cost or expense directly attributable to its willful misconduct or
gross negligence. All of the foregoing losses, damages, reasonable costs and
expenses of the Bank shall be payable by the Borrowers within five (5) days
after demand by the Bank.
(c) The undertakings contained in this Section 11.4 are in addition to
any contained in any security agreement, deed of trust or other collateral
document now or hereafter delivered to or for the benefit of the Bank.
11.5 Mandatory Arbitration. Any controversy or claim between or among
the parties hereto, including, but not limited to, those arising out of or
relating to this Agreement, the Note or any other related agreements or
instruments, including any claim based on or arising from an alleged tort, shall
be determined by binding arbitration in accordance with the Federal Arbitration
Act (or if not applicable, the applicable state law), the Rules of Practice and
Procedure for the Arbitration of Commercial Disputes of J.A.M.S./Endispute or
any successor thereof ("J.A.M.S.") and the "Special Rules" set forth below. In
the event of any inconsistency, the Special Rules shall control. Judgment upon
any arbitration award may be entered in any court having jurisdiction. Any party
to this Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which this
Agreement applies in any court having jurisdiction over such action.
(a) Special Rules. The arbitration shall be conducted in Roanoke,
Virginia, and administered by J.A.M.S. who will appoint an arbitrator; if
J.A.M.S. is unable or legally precluded from administering the arbitration, then
38
the American Arbitration Association will serve. All arbitration hearings will
be commenced within ninety (90) days of the demand for arbitration; further, the
arbitrator shall, upon a showing of cause, be permitted to extend the
commencement of such hearing only for up to an additional sixty (60) days.
(b) Reservations of Rights. Nothing in this Agreement shall be deemed
to (i) limit the applicability of any otherwise applicable statutes of
limitation or repose and any waivers contained in this Agreement; (ii) be a
waiver by the Bank of the protection afforded to it by 12 U.S.C. ss. 91 or any
substantially equivalent state law; (iii) limit the right of the Bank (A) to
exercise self-help remedies such as (but not limited to) setoff, or (B) to
foreclose against any real or personal property collateral, or (C) to obtain
from a court provisional or ancillary remedies such as (but not limited to)
injunctive relief, writ of possession or the appointment of a receiver or the
right of Pulaski or ▇▇▇▇▇▇ to contest any such action; or (iv) limit the right
of any party to initiate a proceeding under the United States Bankruptcy Code.
The Bank may exercise such self-help rights, foreclose upon such property, sell
or otherwise dispose of collateral after default or obtain such provisional or
ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to this Agreement. Neither the exercise of self-help
remedies nor the institution or maintenance of an action for foreclosure or for
provisional or ancillary remedies shall constitute a waiver of the right of any
party, including the claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning resort to such remedies. No provision in this
Agreement regarding submission to jurisdiction and/or venue in any court is
intended or shall be construed to be in derogation of the provisions in this
Agreement for arbitration of any controversy or claim.
11.6 Joint and Several Obligations. The obligations of the Borrowers
under this Agreement and the Note shall be joint and several.
39
11.7 Notices. Any notice shall be conclusively deemed to have been
received by a party hereto and be effective on the day on which delivered to
such party at the addresses set forth below (or at such other address as such
party shall specify to the other party in writing) or if sent by registered or
certified mail, on the third business day after the day on which mailed,
addressed to such party at said address:
If to the Borrowers:
Pulaski Furniture Corporation
One ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer
If to the Bank:
NationsBank, N.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (Zip 24011)
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
11.8 Accounting Terms. Except as otherwise expressly provided herein,
all accounting terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Bank hereunder shall be prepared, in accordance with GAAP
except that interim financial statements shall be subject to year-end
adjustments and the omission of footnotes.
40
11.9 Entire Agreement. This Agreement (including the Note and other
agreements and documents referred to herein) constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings, oral
and written, between the parties with respect to the subject matter hereof.
11.10 Applicable Law. This Agreement and the Note shall be construed in
accordance with and governed by the laws of the Commonwealth of Virginia.
11.11 Amendments, Etc. No amendment of any provision of this Agreement
or the Note shall be effective unless it is in writing and signed by the
Borrowers and the Bank, and no waiver of any provision of this Agreement or the
Note, nor consent to any departure by either Borrower therefrom, shall be
effective unless it is in writing and signed by the Bank. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it is given.
11.12 Survivorship. All covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto shall
survive the making of the Loan herein contemplated and the execution and
delivery of the Note and shall continue in full force and effect so long as the
Note is outstanding and unpaid. Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of either Borrower which are contained in this Agreement shall bind and
inure to the benefit of the successors and assigns of the Bank.
11.13 Headings. Section and Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
41
11.14 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
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42
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized officers, all as of the day and year first
above written.
PULASKI FURNITURE CORPORATION
By
---------------------------------
Its
--------------------------------
▇▇▇▇▇▇ FURNITURE COMPANY, INC.
By
---------------------------------
Its
--------------------------------
NATIONSBANK, N.A.
By
---------------------------------
Its
--------------------------------