EXHIBIT 10.21
Second Amended and Restated Loan and
Security Agreement
by and between
CONGRESS FINANCIAL CORPORATION (CENTRAL)
as Lender
and
EAGLE FOOD CENTERS, INC.
as Borrower
Dated: August 24, 2001
TABLE OF CONTENTS
PAGE
SECTION 1. INTERPRETATION; DEFINITIONS.....................................................................1
SECTION 2. CREDIT FACILITIES..............................................................................11
2.1 Revolving Loans................................................................................11
2.2 Letter of Credit Accommodations................................................................11
2.3 Optional Reductions in Maximum Credit..........................................................14
2.4 Mandatory Prepayments..........................................................................14
SECTION 3. INTEREST AND FEES..............................................................................14
3.1 Interest.......................................................................................14
3.2 Servicing Fee..................................................................................16
3.3 Unused Line Fee................................................................................16
3.4 Closing Fee....................................................................................16
3.5 Changes in Laws; Increased Costs of Loans; Breakage Fees.......................................16
SECTION 4. CONDITIONS PRECEDENT...........................................................................17
4.1 Conditions Precedent to Effectiveness..........................................................17
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations..........................18
SECTION 5. GRANT OF SECURITY INTEREST.....................................................................19
5.1 Inventory;.....................................................................................19
5.2 Eligible Real Estate; and......................................................................19
5.3 all products and proceeds of the foregoing, in any form, including insurance proceeds and
all claims against third parties for loss or damage to or destruction of any or all of the
forgoing.......................................................................................19
SECTION 6. COLLECTION AND ADMINISTRATION..................................................................19
6.1 Borrower's Loan Account........................................................................19
6.2 Statements.....................................................................................19
6.3 Collections....................................................................................20
6.4 Payments.......................................................................................21
6.5 Authorization to Make Loans....................................................................21
6.6 Use of Proceeds................................................................................21
SECTION 7. COLLATERAL REPORTING AND COVENANTS.............................................................22
7.1 Collateral Reporting...........................................................................22
7.2 Inventory Covenants............................................................................22
i
7.3 Proceeds Covenants.............................................................................23
7.4 Power of Attorney..............................................................................23
7.5 Right to Cure..................................................................................24
7.6 Access to Premises.............................................................................24
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................................24
8.1 Corporate Existence, Power and Authority; Subsidiaries.........................................25
8.2 Financial Statements; No Material Adverse Change...............................................25
8.3 Chief Executive Office; Collateral Locations...................................................25
8.4 Priority of Liens; Title to Properties; Ownership of Assets....................................25
8.5 Tax Returns....................................................................................26
8.6 Litigation.....................................................................................26
8.7 Compliance with Other Agreements and Applicable Laws...........................................26
8.8 Environmental Compliance.......................................................................26
8.9 Employee Benefits..............................................................................27
8.10 Credit Cards Etc...............................................................................28
8.11 Accuracy and Completeness of Information.......................................................28
8.12 Survival of Warranties; Cumulative.............................................................28
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.............................................................28
9.1 Maintenance of Existence.......................................................................28
9.2 New Collateral Locations.......................................................................28
9.3 Compliance with Laws, Regulations, Etc.........................................................29
9.4 Payment of Taxes and Claims....................................................................30
9.5 Insurance......................................................................................30
9.6 Financial Statements and Other Information.....................................................31
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc........................................32
9.8 Encumbrances...................................................................................32
9.9 Indebtedness...................................................................................33
9.10 Loans, Investments, Guarantees, Etc............................................................34
9.11 Dividends and Redemptions......................................................................34
9.12 Transactions with Affiliates...................................................................35
9.13 Capital Expenditures...........................................................................35
9.14 Adjusted Net Worth.............................................................................35
9.15 Compliance with ERISA..........................................................................35
9.16 Landlord Agreements............................................................................36
9.17 Costs and Expenses.............................................................................36
9.18 Further Assurances.............................................................................37
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.................................................................37
10.1 Events of Default..............................................................................37
10.2 Remedies.......................................................................................39
10.3 Use of Intellectual Property...................................................................40
ii
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW...................................40
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver..........................40
11.2 Waiver of Notices..............................................................................41
11.3 Amendments and Waivers.........................................................................41
11.4 Waiver of Counterclaims........................................................................41
11.5 Indemnification................................................................................42
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS...............................................................42
12.1 Term...........................................................................................42
12.2 Notices........................................................................................43
12.3 Partial Invalidity.............................................................................43
12.4 Successors.....................................................................................43
12.5 Entire Agreement...............................................................................44
12.6 Confidentiality................................................................................44
iii
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Form of Opinion
Exhibit C Form of Accountant Letter
Exhibit D Form of Officer's Certificate
Exhibit E Form of Letter from Accountants
Schedule 1.13.5 Eligible Real Estate
Schedule 8.4 Existing Liens
Schedule 8.6 Litigation
Schedule 8.8 Environmental Matters
Schedule 8.9 Employee Benefits Matters
Schedule 8.10 Credit Cards Etc.
Schedule 9.9(e) Capital Leases
iv
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Second Amended and Restated
Loan and Security Agreement (as
amended, restated, supplemented or otherwise modified, this "Agreement") dated
August 24, 2001 is entered into by and between Congress Financial Corporation
(Central), an
Illinois corporation ("Lender"), and Eagle Food Centers, Inc., a
Delaware corporation ("Borrower"), and amends and restates in its entirety that
certain Amended and Restated
Loan and Security Agreement dated August 7, 2000
entered into by and between the Lender and the Borrower, as previously amended
(the "Original Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower and Lender have agreed, as more fully set forth
herein, to amend and restate the Original Agreement; and
WHEREAS, Lender is willing to continue to provide loans and
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. INTERPRETATION; DEFINITIONS
This Agreement amends and restates the provisions of the Original
Agreement and, as of the Effective Date (as defined in Section 4.1 below),
except as expressly modified herein: (a) all of the terms and provisions of the
Original Agreement shall continue to apply for the period prior to the Effective
Date, including any determinations of payment dates, interest rates, Events of
Default or any amount that may be payable, (b) all of the exhibits and schedules
attached to the Original Agreement shall be deemed to be attached hereto unless
specifically amended hereby and (c) the Obligations (as defined in the Original
Agreement) under the Original Agreement shall continue to be paid or prepaid in
accordance with the Original Agreement on or prior to the Effective Date, and be
secured by the Collateral, and shall, from and after the Effective Date,
continue to be owing, shall constitute Obligations hereunder and shall be
subject to the terms of this Agreement. All references in the Financing
Agreements to the Original Agreement shall be deemed to include references to
this Agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, and such Financing Agreements are hereby amended to
reflect such changed reference.
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code as in effect in the State of
Illinois shall have the
meanings given therein unless otherwise defined in this Agreement. All
references to the plural herein shall also mean the singular and to the singular
shall also mean the plural. All references to Borrower and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or
replaced. An Event of Default shall exist or continue or be continuing until
such Event of Default is cured to the satisfaction of Lender or waived in
accordance with Section 11.3. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:
1.1 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) determined by dividing (1) the
Eurodollar Rate for such Interest Period by (2) a percentage equal to: (i) one
(1) minus (ii) the Reserve Percentage. For purposes hereof, "Reserve Percentage"
shall mean the reserve percentage, expressed as a decimal, prescribed by any
United States or foreign banking authority for determining the reserve
requirement which is or would be applicable to deposits of United States dollars
in a non-United States or an international banking office of Reference Bank used
to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the
proceeds of such deposit, whether or not the Reference Bank actually holds or
has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
1.2 "Adjusted Net Worth" shall mean as to any Person, at any time,
in accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its Subsidiaries (if any), the amount
equal to the sum of (a) the difference between (i) the aggregate net book value
of all assets of such Person and its Subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
minus (ii) the aggregate amount of the indebtedness and other liabilities of
such Person and its Subsidiaries (including tax and other proper accruals) plus
(b) all losses (and minus all gains) recorded after the Closing Date related to
store closings, fixed asset dispositions, lease terminations and/or any other
significant charge (or credit) which is not in the ordinary course of Borrower's
business.
1.3 "Affiliate" shall mean, with respect to a specified person, any
other person, directly or indirectly, controlling or controlled by or under
direct or indirect common control with such specified person. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person, whether through the ownership of voting securities, by agreement or
otherwise; provided, that, beneficial ownership of ten (10%) percent or more of
the voting securities of a person shall be deemed to be control.
1.4 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and revise
reducing and adjusting the amount of Revolving Loans and Letter of Credit
Accommodations which would otherwise be available to Borrower under the lending
formula(s) provided for herein: (a) to reflect events, conditions, contingencies
or risks which, as determined by Lender in its Permitted Discretion, do or may
affect either (i) the Collateral or any other property which is security for the
Obligations or its value, (ii) the assets, business or prospects of Borrower or
(iii) the security interests and other rights of Lender in the Collateral
(including the enforceability, perfection and priority thereof) or
(b) to reflect Lender's belief, in its Permitted Discretion, that any collateral
report or financial information furnished by or on behalf of Borrower to Lender
is or may have been incomplete, inaccurate or misleading in any material respect
or (c) in respect of any state of facts which Lender determines in its Permitted
Discretion constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default; provided, however, that the amount
of any Availability Reserve established hereunder shall be in an amount
reasonably related to Lender's perception of the event or circumstance which
gives rise to such Availability Reserve; provided, additionally, that Lender
will use good faith efforts to give Borrower notice at least two days prior to
establishing any Availability Reserve, but that Lender shall not be liable for
any failure to so notify Borrower, nor shall any such failure (i) reduce any or
all of Borrower's obligations to Lender or (ii) alter Lender's ability to from
time to time, establish and/or revise Availability Reserves.
1.5 "Breakage Fees" shall mean with respect to any Eurodollar Rate
Loan which is at any time paid prior to the last day of its Interest Period,
regardless of the reason for such prepayment, the positive difference, if any,
between the total amount of interest that would have been due for the balance of
the scheduled Interest Period on such Eurodollar Rate Loan if it had not been so
prepaid and the amount of interest that would be earned if the amount of the
prepaid Eurodollar Rate Loan were invested for the remaining balance of such
Interest Period at the CD Rate in effect on the first day of the month in which
such prepayment occurs. As used herein, "CD Rate" shall mean the rate quoted in
the "Money Rates" section of THE WALL STREET JOURNAL for the average of the top
rates paid by New York banks on primary new issues of negotiable certificates of
deposit in amounts of $1 million and more having a 1-month maturity, as
published on the first Business Day of the month in which any prepayment of a
Eurodollar Rate Loan occurs.
1.6 "Business Day" shall mean (a) with respect to any borrowing,
payment or rate selection relating to Eurodollar Rate Loans, a day other than
Saturday or Sunday on which banks are open for business in the States of New
York,
Illinois and North Carolina on which dealings in United States dollars are
carried on in the London interbank market or other applicable Eurodollar Rate
market, and (b) for all other purposes, a day other than Saturday or Sunday on
which banks are open for business in the States of New York,
Illinois and North
Carolina.
1.7 "Capital Expenditures" shall mean, for any period, the sum of
(i) expenditures (except interest capitalized during construction) by Borrower
and its Subsidiaries during such period for the acquisition, construction or
improvement of property, plant and equipment or that otherwise have been or
should be classified as capital expenditures in conformity with GAAP, plus (ii)
all payments not included above made by Borrower and/or its Subsidiaries during
that period under capital leases.
1.8 "Change in Control" shall mean the occurrence of either (a) any
Person or any Persons (other than Odyssey or any Subsidiary of Odyssey, so long
as such Subsidiary remains a Subsidiary of Odyssey) acting together that would
constitute a "group" (for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended, or any successor provision thereto) (a "Group"),
together with any affiliates thereof, shall beneficially own (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended, or any successor
provision thereto) at least 50% of the Voting Stock of Borrower; or (b) any
Person (other than Odyssey or
any Subsidiary of Odyssey, so long as such Subsidiary remains a Subsidiary of
Odyssey), or Group, together with any affiliates thereof, shall succeed in
having sufficient of its nominees elected to the Board of Directors of the
Borrower such that such nominees, when added to any existing director remaining
on the Board of Directors of the Borrower after such election who is an
affiliate of such Group, will constitute a majority of the Board of Directors of
the Borrower.
1.8.5 "Closing Date" shall mean August 24, 2001.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.10 "Collateral" shall have the meaning set forth in Section 5
hereof.
1.11 "Consolidated Net Income" for any fiscal year of the Borrower
shall mean the net income of Borrower and its Subsidiaries on a consolidated
basis for such fiscal year, determined in accordance with GAAP (excluding the
effect of all gains or losses related to store closings, fixed asset
dispositions, lease terminations and/or any other significant charge or credit
which is not in the ordinary course of Borrower's business).
1.12 "Congress Accounts" shall have the meaning set forth in Section
6.3 hereof.
1.13 "Eligible Inventory" shall mean Inventory consisting of
finished goods held for resale in the ordinary course of the business of
Borrower which are acceptable to Lender based on the criteria set forth below.
In general, Eligible Inventory at any time shall not include (a)
work-in-process; (b) components which are not part of finished goods; (c) spare
parts for equipment; (d) packaging and shipping materials and/or store displays;
(e) supplies used or consumed in Borrower's business; (f) Inventory at premises
other than those owned and controlled by Borrower, except if (1) Lender shall
have received an agreement in writing from the person in possession of such
Inventory and/or the owner or operator of such premises in form and substance
reasonably satisfactory to Lender acknowledging Lender's first priority security
interest in the Inventory, waiving security interests and claims by such person
against the Inventory and permitting Lender access to, and the right to remain
on, the premises so as to exercise Lender's rights and remedies and otherwise
deal with the Collateral or (2) Borrower is current in all payments owing to the
owner and/or lessor of such premises, is not in default under the agreement
allowing Borrower to occupy or use such premises and is not in default under
Section 9.16 hereof; (g) Inventory subject to a security interest or lien in
favor of any person other than Lender except those permitted in this Agreement;
(h) ▇▇▇▇ and hold goods; (i) Slow Moving Inventory at such time; (j) Inventory
which is not subject to the first priority, valid and perfected security
interest of Lender; (k) returned, spoiled, damaged and/or defective Inventory
and/or salvage items; (l) Inventory purchased or sold on consignment, (m)
perishable items (including, without limitation, produce, fresh fish, floral
items, bakery goods and prepared foods) and (n) in-transit goods not yet
received by Borrower. General criteria for Eligible Inventory may be established
and revised from time to time by Lender in its Permitted Discretion. Any
Inventory which is not Eligible Inventory shall nevertheless be part of the
Collateral.
1.13.5 "Eligible Real Estate" shall mean the Real Property for
which the Lender has received the following:
(a) a Mortgage and evidence that the same has been recorded in all
places to the extent necessary or desirable in the reasonable judgment of
Lender, to create a valid and enforceable first priority lien on such Real
Property in favor of Lender (or in favor of such other trustee as may be
required or desire under local laws);
(b) a valid and effective title insurance policy for an amount not
less than 110% of the value of such Real Property in form and substance
satisfactory to Lender issued by a company and agent acceptable to Lender (i)
insuring the priority, amount and sufficiency of the applicable Mortgage, (ii)
insuring against matters that would be disclosed by surveys and (iii) containing
any legally available endorsements, assurances or affirmative coverage requested
by Lender for protection of its interests;
(c) an environmental audit in form, scope and methodology
satisfactory to Lender of such Real Property conducted by an independent
environmental engineering form acceptable to Lender confirming (i) Borrower is
in compliance with all material applicable Environmental Laws and (ii) the
absence of any material environmental problems; and
(d) an appraisal in form, scope and methodology acceptable to Lender
and by an appraiser acceptable to Lender, addressed to Lender and upon which
Lender is expressly permitted to rely; and
(e) an updated Schedule 1.13.5 showing the appraised value and
amortization of such value of such Real Property.
1.14 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), regulation, rules, codes, license, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
governmental authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.15 "Equipment" shall mean all of Borrower's now owned and
hereafter acquired equipment, machinery, computers, computer hardware, owned and
licensed computer software, vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or
hereafter affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
1.16 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same now exists or may hereafter from time to time be amended,
modified, recodified or supplemented, together with all applicable rules,
regulations and interpretations thereunder or related thereto.
1.17 "ERISA Affiliate" shall mean any person required to be
aggregated with Borrower or any of its Subsidiaries under Sections 414(b),
414(c), 414(m) or 414(o) of the Code.
1.18 "Eurodollar Rate" shall mean, with respect to any Interest
Period for a Eurodollar Rate Loan requested by Borrower by not less than three
(3) Business Days' prior notice to Lender, the interest rate per annum equal to
the arithmetic mean of the rates of interest per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) at which Reference Bank is offered deposits
of United States dollars in the London interbank market (or other Eurodollar
Rate market selected by Borrower and approved by Lender, which approval shall
not be unreasonably withheld) at or about 9:00 a.m. (New York time) two (2)
Business Days prior to the commencement of such Interest Period in amounts
substantially equal to the principal amount of the Eurodollar Rate Loans
requested by and available to Borrower in accordance with this Agreement, with a
maturity of comparable duration to the Interest Period selected by Borrower.
Upon receipt of Borrower's request for a Eurodollar Rate Loan, Lender will, if
requested, provide Borrower with an indication of the prevailing Eurodollar Rate
on the Business Day of such request; provided, however, that the actual
Eurodollar Rate which is applicable to the requested Interest Period shall be
determined as provided above and may be higher or lower than such indicative
rate.
1.19 "Eurodollar Rate Loans" shall mean any Loans or portion thereof
on which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.20 "Event of Default" shall mean the occurrence or existence of
any event or condition described in Section 10.1 hereof.
1.21 "Excess Loan Availability" means, at any time, an amount equal
to the difference between (a) the lesser of (i) the amount calculated pursuant
to Section 2.1(a) hereof at such time and (ii) the Maximum Credit at such time,
minus (ii) the aggregate amount of the Loans and Letter of Credit Accommodations
outstanding at such time.
1.22 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements, and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.22.5 "Fixed Asset Amount" shall mean, as of any date of
determination, the lesser of (i) $11,840,000, which amount shall decrease by
$246,666.67 on October 1, 2001 and on the first day of each calendar month
occurring thereafter or such smaller amount as may be remaining until such
amount equals $0 and (ii) the difference between (A) 50% of the appraised
value of each parcel of Eligible Real Estate as shown on Schedule 1.13.5
attached hereto, (as such Schedule may be amended from time to time) MINUS (B)
the amount that represents the amortized portion of such Eligible Real Estate as
shown on Schedule 1.13.5 attached hereto (as such Schedule may be amended from
time to time); provided that the amount determined by clause (ii) of this
definition shall automatically be reduced on the day any Eligible Real Estate
becomes ineligible in an amount equal to the amount reflected on Schedule 1.13.5
hereto for such Eligible Real Estate. It being agreed and understood that
Borrower may add, substitute for or remove any Eligible Real Estate, provided
such addition, substitution or removal complies with the terms and conditions
pursuant hereto.
1.23 "GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.13 and 9.14 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.24 "Hazardous Materials" shall mean any hazardous, toxic or
dangerous substances, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, friable asbestos, urea formaldehyde
insulation, radioactive materials, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, and/or any other similar substances, materials,
or wastes and including any other substances, materials or wastes that are or
become regulated under any Environmental Law (including, without limitation any
that are or become classified as hazardous or toxic under any Environmental
Law).
1.25 "Information Certificate" shall mean the Information
Certificate of Borrower constituting Exhibit A hereto containing material
information with respect to Borrower, its business and assets provided by or on
behalf of Borrower to Lender in connection with the preparation of this
Agreement and the other Financing Agreements and the financing arrangements
provided for herein.
1.26 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2) or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided that
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.27 "Interest Rate" shall mean: (a) as to Revolving Loans which are
Prime Rate Loans and all other non-contingent Obligations not expressly covered
in the following clause (b), a rate of one half of one percent (.50%) per annum
in excess of the Prime Rate and (b) as to Revolving Loans which are Eurodollar
Rate Loans, a rate of two and one quarter percent (2.25%) per annum in excess of
the Adjusted Eurodollar Rate for the applicable Interest Period selected by
Borrower in accordance with the terms hereof; provided that the Interest Rate
shall
mean the rate of (i) three percent (3.00%) per annum in excess of the Prime Rate
as to Revolving Loans which are Prime Rate Loans and all other non-contingent
Obligations not expressly covered in the following clause (ii) and (ii) five and
one half percent (5.50%) per annum in excess of the Adjusted Eurodollar Rate as
to Revolving Loans which are Eurodollar Rate Loans, in each case at Lender's
option, without notice, (a) for the period on and after the date of termination
or non-renewal hereof, or the date of the occurrence of any Event of Default for
so long as such Event of Default is continuing as determined by Lender and until
such time as such Event of Default has been cured to the satisfaction of Lender
or waived or all Obligations are indefeasibly paid in full (notwithstanding
entry of any judgment against Borrower) and (b) on the Revolving Loans at any
time outstanding in excess of the amounts available to Borrower under Section 2
(if such excess(es) arise or are made without Lender's consent); provided,
however, that Lender reserves the right to condition any consent to such
excess(es) and/or waiver of an Event of Default resulting therefrom, inter alia,
on receiving the higher Interest Rates set forth in the preceding proviso.
1.28 "Inventory" shall mean all of Borrower's now owned and
hereafter existing or acquired raw materials, work in process, finished goods
and all other inventory of whatsoever kind or nature, wherever located.
1.29 "Inventory Advance Rate" shall mean, at any time, the
percentage then being applied for advances against Eligible Inventory pursuant
to Section 2.1(a) hereof.
1.30 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of Borrower or (b) with
respect to which Lender has agreed to indemnify the issuer or guaranteed to the
issuer the performance by Borrower of its obligations to such issuer.
1.31 "Letter of Credit Percentage" shall mean at any time, one
hundred percent (100%) minus the Inventory Advance Rate at such time.
1.32 "Loans" shall mean the Revolving Loans.
1.33 "Material Adverse Effect" shall mean a material adverse effect
upon (i) the business, operations, properties, assets or condition (financial or
otherwise) of Borrower, (ii) the ability of Borrower to perform, or of Lender to
enforce, any of the Obligations and/or (iii) any right of Lender hereunder
and/or under any other Financing Agreement.
1.34 "Maximum Credit" shall mean $50,000,000, as such amount may be
reduced pursuant to Section 2.3 hereof.
1.34.5 "Mortgages" shall mean, each of the mortgages, deeds of
trust, or other real estate security documents delivered by the Borrower with
respect to the Eligible Real Estate in form and substance satisfactory to the
Lender.
1.35 "Obligations" shall mean any and all Revolving Loans, Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness of
every kind, nature and description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under this Agreement or otherwise,
whether now existing or hereafter arising, whether arising before, during or
after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Lender.
1.36 "Odyssey" shall mean Odyssey Partners, L.P., a Delaware limited
partnership.
1.36.5 "Original Closing Date" shall mean May 25, 1995.
1.37 "Payment Account" shall have the meaning set forth in Section
6.3 hereof.
1.38 "Permitted Discretion" means Lender's good faith judgment based
upon any factor which it believes in good faith: (i) will or could adversely
affect the value of any Collateral, the enforceability or priority of Lender's
liens and security interests with respect thereto or the amount which Lender
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to Lender by any person
on behalf of Borrower is incomplete, inaccurate or misleading in any material
respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving Borrower or any of its
Subsidiaries or any of the Collateral, or (iv) creates or reasonably could be
expected to create or result in an Event of Default. In exercising such
judgment, Lender may consider such factors already included in or tested by the
definition of Eligible Inventory, as well as any of the following: (a) the
financial and business climate of Borrower's industry and general macroeconomic
conditions, (b) changes in demand for, and pricing of, Inventory, (c) changes in
any concentration of risk with respect to Inventory, and (d) any other factors
that change the credit risk of lending to Borrower on the security of the
Inventory. The burden of establishing lack of good faith shall be on Borrower.
1.39 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.40 [Intentionally Deleted].
1.41 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, at its office in
Charlotte, North Carolina, as its prime rate, whether or not such announced rate
is the best rate available at such bank.
1.42 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.42.5 "Real Property" shall mean all now owned and hereafter
acquired real property of Borrower, including leasehold interests, together with
all buildings, structures, and
other improvements located thereon and all licenses, easements and appurtenances
relating thereto, wherever located.
1.43 "Records" shall mean all of Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Borrower with
respect to the foregoing maintained with or by any other person).
1.44 "Reference Bank" shall mean First Union National Bank, or such
other bank as Lender may from time to time designate.
1.45 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.46 "Sales Tax Reserve" shall mean, at any time, an amount equal to
Borrower's good faith estimate of the accrued but unpaid (whether or not yet
due) sales tax collected from Borrower's customers.
1.47 "Slow Moving Inventory" shall mean, at any time, Inventory
which Borrower has purchased or received more than one hundred and eighty days
prior to such time, other than certain health and beauty aid products
specifically determined (which determination has not been revoked) and set forth
in writing by Lender as not being Slow Moving Inventory which Borrower has
purchased or received less than three hundred and sixty days prior to such time.
1.48 "Subsidiary" shall mean, with respect to any Person (the
"parent"), any corporation, association or other business entity of which
securities or other ownership interests representing more than 50% of the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled by the parent or one or more Subsidiaries of the
parent or by the parent and one or more Subsidiaries of the parent.
1.49 "Value" shall mean, (i) as determined by Lender in good faith,
with respect to Inventory, the lower of (a) cost computed on a
first-in-first-out basis in accordance with GAAP or (b) market value and (ii)
with respect to Eligible Real Estate, the value of such Eligible Real Estate as
determined by an appraisal in form and substance reasonably acceptable to
Lender.
1.50 "Voting Stock" of any Person shall mean the capital stock of
such Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to:
(i) the lesser of: (A) the sum of: (1) fifty-nine percent
(59%) of the Value of Eligible Inventory PLUS (2) the Fixed Asset Amount or (B)
the amount equal to: (1) the Maximum Credit at such time MINUS (2) the then
undrawn amounts of the outstanding Letter of Credit Accommodations, in either
case, less
(ii) the Sales Tax Reserve most recently reported to Lender by
Borrower, LESS
(iii) any Availability Reserves.
(b) Lender may, in its Permitted Discretion, from time to time,
reduce the lending formula with respect to Eligible Inventory. In addition, if
at any time an appraisal of the Inventory conducted by an appraiser acceptable
to Lender indicates that the quotient, expressed as a percentage, of (i) eighty
percent (80%) of the appraised value of the Eligible Inventory on a "going out
of business basis" divided by (ii) the Value of the Eligible Inventory (the
"Appraisal Advance Rate") at such time, is less than the Inventory Advance Rate
at such time, then the Inventory Advance Rate shall, upon notice from Lender to
Borrower, be reduced to the Appraisal Advance Rate at such time (and if the
Inventory Advance Rate at such time is less than the Appraisal Advance Rate at
such time, the Inventory Advance Rate shall, upon notice from Lender to
Borrower, be increased to the lesser of the Appraisal Advance Rate or fifty-nine
percent (59%).
(c) Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit. In the event that the outstanding amount of the Loans, or
the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, the
sublimits for Letter of Credit Accommodations set forth in Section 2.2 or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Lender in that circumstance or on any future occasions and
Borrower shall, within three (3) Business Days of demand by Lender, which may be
made at any time or from time to time, repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained herein,
at the request of Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Lender a letter of credit fee at a rate equal to one and one half percent
(1.5%) per annum on the average daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding
month (or part thereof), payable in arrears as of the first day of each
succeeding month; PROVIDED, that at Lender's option, without notice, after the
occurrence and during the continuance of an Event of Default, such rate shall be
increased by two percent (2%) per annum. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed Letter
of Credit Accommodation is for the purpose of purchasing Eligible Inventory for
which Lender has a first priority perfected security interest in any and all
document(s) of title related to such Inventory, the sum of (A) the Letter of
Credit Percentage of the cost of such Eligible Inventory, plus (B) freight,
taxes, duty and other amounts which Lender estimates must be paid in connection
with such Inventory upon arrival and for delivery to one of Borrower's locations
for Eligible Inventory within the United States of America and (ii) if the
proposed Letter of Credit Accommodation is for any other purpose (including,
without limitation, for the purpose of purchasing Eligible Inventory for which
Lender does not have a first priority perfected security interest in any and all
documents of title related to such Inventory), an amount equal to one hundred
(100%) percent of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, the amount of Revolving Loans
which might otherwise be available to Borrower shall be reduced by the
applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations shall not at any time exceed $20,000,000. At any
time an Event of Default exists or has occurred and is continuing, upon Lender's
request, Borrower will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Lender for the Letter of Credit
Accommodations, and in either case, the Revolving Loans otherwise available to
Borrower shall not be reduced as provided in Section 2.2(c) to the extent of
such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation; PROVIDED, HOWEVER, that Borrower shall
not be required to indemnify Lender for any claims, damages, losses,
liabilities, costs or expenses to the extent caused by (i) the willful
misconduct or gross negligence of Lender in determining whether a request
presented under any Letter of Credit Accommodation complied with the terms of
such Letter of Credit Accommodation or (ii) Lender's failure to pay under any
Letter of Credit Accommodation after the timely presentation to it of a request
for payment strictly complying with the terms and conditions of such Letter of
Credit Accommodation. Borrower assumes all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State
and local taxes, duties and levies relating to any goods subject to any Letter
of Credit Accommodations or any documents, drafts or acceptances thereunder.
Borrower hereby releases and holds Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by Borrower, by any issuer
or correspondent or otherwise with respect to or relating to any Letter of
Credit Accommodation. The provisions of this Section 2.2(e) shall survive the
payment of Obligations and the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods, or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. After the occurrence and during the
continuance of an Event of Default, Lender may take such actions either in its
own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Optional Reductions in Maximum Credit.
(a) Borrower may, at its option, from time to time request in
writing that the Maximum Credit be reduced to any amount not less than
$20,000,000. Any such request shall be irrevocable, unless Lender shall
otherwise agree.
(b) Effective on the first Business Day which is fifteen (15) days
after the date of the receipt by Lender of such written request, the Maximum
Credit shall be reduced as requested by Borrower; PROVIDED, THAT, each such
reduction shall be in the aggregate amount of $5,000,000 or an integral multiple
of $1,000,000 in excess thereof.
(c) Without limiting any of the other rights of Lender pursuant to
the terms hereof, effective on each date when any reduction is effective
pursuant to Section 2.3(b) above, Borrower agrees to automatically and without
demand make a payment to Lender in respect of the Loans in an amount equal to
the excess if any, of the aggregate principal amount of the Loans and
outstanding Letter of Credit Obligations then outstanding over the amount of the
Loans then available to Borrower pursuant to the Maximum Credit as so reduced.
All interest accrued on the principal amount of the Loans paid pursuant to this
Section 2.3(c) shall be paid, or may be charged to any of the loan account(s) of
Borrower maintained by Lender, at Lender's option, on the date such payment of
principal is due.
(d) In connection with each and every reduction in the Maximum
Credit pursuant to this Section 2.3, and at the time of each such reduction,
Borrower shall pay to Lender a reduction fee in an amount equal to .5% of the
amount of such reduction.
2.4 Mandatory Prepayments. Borrower shall make a payment to Lender
in respect of the Loans in an amount equal to 50% of the proceeds received by
the Borrower from the sale of any Eligible Real Estate if, before or after
giving effect to the reduction in the Fixed Asset Amount corresponding to the
release by Lender of its liens on such Eligible Real Estate in connection with
such sale, Borrower has Excess Loan Availability of less than $15,000,000.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the daily average
outstanding principal amount of the Loans and, to the extent permitted by
applicable law, the other non-contingent Obligations from and after the date
when actually paid by Lender, at the Interest Rate. All interest accruing
hereunder on and after the occurrence and during the continuance of an Event of
Default and/or after termination or non-renewal hereof shall be payable on
demand. Lender shall make a good faith effort to pay third-party fees and
expenses when due and not to charge Borrower's loan account for reimbursement of
such Obligations until actually paid by Lender.
(b) Borrower may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans, that Eurodollar Rate Loans be converted to
Prime Rate Loans and/or that any existing Eurodollar Rate Loans continue for an
additional Interest Period. Such request from Borrower shall specify the amount
of the Prime Rate Loans which will be converted to Eurodollar Rate Loans
(subject to the limits set forth below) and the Interest Period to be applicable
to such Eurodollar Rate Loans on not less than three (3) Business Days prior
notice to Lender. Subject to the terms and conditions contained herein, three
(3) Business Days after receipt by Lender of such a request from Borrower, such
Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar
Rate Loans shall continue, as the case may be; PROVIDED THAT (i) no Event of
Default, or event which, merely with notice or passage of time or both, would
constitute an Event of Default, exists or has occurred and is continuing, (ii)
no party hereto shall have sent any notice of termination or non-renewal of this
Agreement, (iii) Borrower shall have complied with all reasonable and customary
procedures as are established by Lender and specified by Lender to Borrower from
time to time for requests by Borrower for Eurodollar Rate Loans, (iv) no more
than four (4) Interest Periods may be in effect at any one time, (v) the
aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof,
(vi) the maximum amount of the Eurodollar Rate Loans at any time requested by
Borrower shall not exceed the amount equal to eighty-five percent (85%) of the
daily average of the principal amount of the Revolving Loans which it is
anticipated will be outstanding during the applicable Interest Period, in each
case as reasonably determined by Borrower pursuant to a good faith written
computation (but with no obligation of Lender to make such Revolving Loans
except as otherwise provided in this Agreement), and (vii) Lender shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available to
Lender through the Reference Bank and can be readily determined as of the
Business Day following the date of the request for such Eurodollar Rate Loan by
Borrower. Any request by Borrower to convert Prime Rate Loans to Eurodollar Rate
Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender and Reference
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Lender and Reference Bank had purchased such deposits to fund the Eurodollar
Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received a request to continue such Eurodollar Rate Loan at least three (3)
Business Days prior to such last day in accordance with the terms hereof. Any
Eurodollar Rate Loans shall, at Lender's option, upon notice by Lender to
Borrower, convert to Prime Rate Loans in the event that (i) an Event of Default
shall exist, (ii) this Agreement shall terminate or not be renewed, or (iii) the
aggregate principal amount of the Prime Rate Loans which have previously been
converted to Eurodollar Rate Loans or existing Eurodollar Rate Loans continued,
as the case may be, at the beginning of an Interest Period shall at any time
during such Interest Period exceed the sum of the then outstanding principal
amount of the Revolving Loans then available to Borrower under Section 2 hereof.
Borrower shall pay to Lender, upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any Breakage Fees and, without
duplication thereof, any other reasonable and customary amounts required to
compensate Lender, the Reference Bank or any Participant for any loss (including
loss of anticipated profits), cost or expense reasonably incurred by such
person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate
Loans pursuant to any of the foregoing; PROVIDED, HOWEVER, that no such Breakage
Fee or other costs shall be payable if such conversion of Eurodollar Rate Loans
to Prime Rate Loans prior to the end of the applicable Interest Period results
from Lender's establishment of Availability Reserves, changes in criteria for
Eligible Inventory, or reduction of the lending formula set forth in Section
2.1(a).
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first Business Day of each calendar month and shall
be calculated on the daily average principal balance of the non-contingent
Obligations outstanding on the basis of a three hundred sixty (360) day year and
actual days elapsed (including the date of borrowing but excluding the date of
payment if made in accordance with Section 6.3(b)). The interest rate on
non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or
decrease by an amount equal to each increase or decrease in the Prime Rate
effective on the first day of the month after any change in such Prime Rate is
announced based on the Prime Rate in effect on the last day of the month in
which any such change occurs. In no event shall charges constituting interest
payable by Borrower to Lender exceed the maximum amount or the rate permitted
under any applicable law or regulation, and if any such part or provision of
this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
3.2 Servicing Fee. Borrower shall pay to Lender monthly a servicing
fee in an amount equal to $5,000 in respect of Lender's services for each full
month (or pro rated for any partial month) while this Agreement remains in
effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be fully earned as of and payable in advance on the first day of
each month.
3.3 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee equal at a rate equal to one quarter of one percent (.25%) per annum
calculated upon the amount by which the Maximum Credit exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) while
this Agreement is in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be payable on the first day of each month in
arrears.
3.4 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of $250,000, which shall be fully earned on the Closing Date.
3.5 Changes in Laws; Increased Costs of Loans; Breakage Fees.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to Prime
Rate Loans in the event that any change in applicable law or regulation (or the
interpretation or administration thereof by a banking authority or regulator)
shall make it unlawful for Lender, Reference Bank or any Participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans. In the event that any change in applicable law
or regulation (or the interpretation or administration thereof by a banking
authority or regulator) shall (i) result in the increase in the costs to Lender,
Reference Bank or any Participant of making or maintaining any Eurodollar Rate
Loans or (ii) reduce the amounts received or receivable by Lender in respect
thereof, by an amount deemed by Lender to be material, Borrower shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrower) any amounts required to compensate Lender, the Reference
Bank or any Participant with Lender for any loss (including loss of anticipated
profits), cost or expense reasonably incurred by such person as a result of the
foregoing, including, without limitation, any such loss, cost or expense
reasonably incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such person to make or maintain the Eurodollar Rate
Loans or any portion thereof (but not including any tax based upon the net
income of Lender); PROVIDED that in the event that Lender shall determine that
the applicable Eurodollar Rate does not adequately reflect the cost to Lender of
making or maintaining the Eurodollar Rate Loans, then, unless Borrower
compensates Lender for Lender's increased cost of funds, Lender may suspend
generally the prospective availability of the Eurodollar Rate option for new
Interest Periods and/or Loans until such condition no longer exists. A
certificate of Lender setting forth the basis for the determination of such
amount necessary to compensate Lender as aforesaid shall be delivered to
Borrower and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether
pursuant to acceleration, upon maturity or otherwise), including any payments
pursuant to the application of collections under Section 6.3 or any other
payments made with the proceeds of Collateral, Borrower shall pay to Lender upon
demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) Breakage Fees and, without duplication thereof, any other reasonable
and customary amounts required to compensate Lender, the Reference Bank or any
Participant with Lender for any additional loss (including loss of anticipated
profits), cost or expense reasonably incurred by such person as a result of such
prepayment or payment, including, without limitation, any loss, cost or expense
reasonably incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such person to make or maintain such Eurodollar Rate
Loans or any portion thereof. A certificate of Lender setting forth the basis
for the determination of such amount necessary to compensate Lender as aforesaid
shall be delivered to Borrower and shall be conclusive, absent manifest error.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Effectiveness. This Agreement shall
become effective on the Business Day on which each of the following conditions
precedent has been satisfied (or waived by Lender) (such date, the "Effective
Date").
(a) Lender shall have received evidence, in form and substance
reasonably satisfactory to Lender, that Lender has valid perfected and first
priority security interests in and liens upon the Collateral, subject only to
the security interests and liens permitted herein or in the other Financing
Agreements;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be reasonably
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including, without limitation, records
of requisite corporate action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or its counsel to
be certified by appropriate corporate officers or governmental authorities;
(c) Borrower shall provide evidence satisfactory to Lender
demonstrating that after payment or provision for the payment of all fees and
expenses of the transactions contemplated by the Financing Agreements and the
disbursement of the proceeds of the initial Loans and the issuance of the
initial Letter of Credit Accommodations and after application of the lending
formula and all reserves as provided in this Agreement, the Excess Loan
Availability shall be greater than or equal to $20,000,000;
(d) Lender shall have established and be maintaining the Congress
Accounts;
(e) Lender shall have received, in form and substance reasonably
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem reasonably necessary or
desirable in order to permit, protect and perfect its security interests in and
liens upon the Collateral or to effectuate the provisions or purposes of this
Agreement and the other Financing Agreements, including, without limitation,
acknowledgements by landlords, mortgagees and warehousemen of Lender's security
interests in the Collateral, waivers by such persons of any security interests,
liens or other claims by such persons to the Collateral and agreements
permitting Lender access to, and the right to remain on, the premises to
exercise its rights and remedies and otherwise deal with the Collateral;
(f) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance reasonably satisfactory to Lender, and certificates of
insurance policies and/or endorsements naming Lender as loss payee;
(g) Lender shall have received an opinion letter from ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ counsel to Borrower, in form and substance satisfactory to Lender;
(h) Lender shall have received, in form and substance reasonably
satisfactory to Lender, an agreement from each issuer of each credit card, debit
card, ATM card and each other form of payment accepted by Borrower for the sale
of Inventory, or if different, each Person which makes payments with respect to
each such card and/or other form of payment, pursuant to which each such Person
has agreed to transfer (in a manner acceptable to Lender) to the Payment Account
(or such other account as is acceptable to Lender), in immediately available
funds, any and all payments due from such Person arising out of the sale or
other disposition of Inventory by or on behalf of Borrower; and
(i) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance reasonably satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto (except to the
extent any such representation or warranty expressly by its terms relates only
to an earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court of before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans or providing
the Letter of Credit Accommodations, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements or
(ii) has or could reasonably be expected to have a material adverse effect on
the assets, business or prospects of Borrower or would impair the ability of
Borrower to perform its obligations hereunder or under any of the other
Financing Agreements or of Lender to enforce any Obligations or realize upon any
of the Collateral; and
(c) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such Loan
or providing each such Letter of Credit Accommodation and after giving effect
thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, the
following property and interests in property of Borrower, whether now owned or
hereafter acquired or existing, and wherever located (together with all other
collateral security for the Obligations at any time granted to or held or
acquired by Lender, collectively, the "Collateral"):
5.1 Inventory;
5.2 Eligible Real Estate; and
5.3 all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of any or all of the forgoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to Borrower each month a
statement setting forth the balance in Borrower's loan account(s) maintained by
Lender for Borrower pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrower and
conclusively binding upon Borrower as an account stated except to the extent
that Lender receives a written notice from Borrower of any specific exceptions
of Borrower thereto within thirty (30) days after the date such statement has
been mailed by Lender. Until such time as Lender shall have rendered to Borrower
a written statement as provided above, the balance in Borrower's loan account(s)
shall be presumptive evidence of the amounts due and owing to Lender by
Borrower.
6.3 Collections.
(a) Lender shall establish and maintain, at Borrower's expense, in
the name of Lender, deposit accounts (the "Congress Accounts") into which
Borrower shall promptly deposit all payments constituting proceeds of Inventory
in the identical form in which such payments are made, whether by cash, check or
other manner, except as otherwise agreed to in writing by the Lender in its sole
discretion. The banks at which the Congress Accounts are established shall wire,
or otherwise transfer, in immediately available funds, on a daily basis, all
funds received or deposited into the Congress Accounts to such bank account of
Lender as Lender may from time to time designate for such purpose ("Payment
Account"). Borrower agrees that all payments
made to such Congress Accounts or other funds received and collected by Lender,
whether as proceeds of Inventory or otherwise shall be the property of Lender.
In addition, Borrower shall cause each and every issuer of each credit card,
debit card, ATM card and each other form of payment accepted by Borrower or, if
different, each Person which makes payments with respect to each such card
and/or other form of payment, to transfer (in a manner acceptable to Lender) to
the Payment Account (or such other account as is acceptable to Lender), in
immediately available funds, any and all payments due from each such Person as a
result of the sale of Inventory by Borrower. Borrower shall not accept any
credit card, debit card, ATM card or other form of payment unless the issuer
thereof, or if different, each Person which makes payments with respect to each
such card and/or other form of payment, has, pursuant to an agreement in form
and substance reasonably satisfactory to Lender, agreed to transfer (in a manner
acceptable to Lender) to the Payment Account (or such other account as is
acceptable to Lender), in immediately available funds, any and all payments due
from such Person as a result of the sale or other disposition of Inventory by
Borrower.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations on the date of receipt of immediately available
funds by Lender in the Payment Account. For purposes of calculating the amount
of the Revolving Loans available to Borrower such payments will be applied
(conditional upon final collection) to the Obligations on the Business Day of
receipt by Lender in the Payment Account, if such payments are received within
sufficient time (in accordance with Lender's usual and customary practices as in
effect from time to time) to credit Borrower's loan account on such day, and if
not, then on the next Business Day.
(c) Borrower, as soon as is practicable after receipt thereof, shall
deposit or cause the same to be deposited in the Congress Accounts, or remit the
same or cause the same to be remitted, in kind, to Lender, as the property of
Lender, any monies, checks, notes, drafts or any other payment relating to
and/or proceeds of Collateral which come into their possession or under their
control. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Congress Account is established or any other bank or person
involved in the transfer of funds to or from the Congress Accounts arising out
of Lender's payments to or indemnification of such bank or person. The
obligation of Borrower to reimburse Lender for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment
Account as provided in Section 6.3 or such other place as Lender may designate
from time to time. Lender may apply payments received or collected from Borrower
or for the account of Borrower (including, without limitation, the monetary
proceeds of collections or of realization upon any Collateral) to such of the
Obligations, whether or not then due, in such order and manner as Lender
determines. At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrower. Borrower
shall make all payments to Lender on the Obligations free and clear of, and
without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes (other than income or franchise taxes attributable to the
net income of Lender which Borrower is required by law to withhold and which
requirement either can not be avoided by the delivery of appropriate
documentation or can be avoided but Lender has failed to deliver such
documentation after written request therefor from Borrower),
deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrower shall be liable to pay to Lender, and
does hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from anyone purporting to be an officer of Borrower
or other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
11:00 a.m. Chicago time on any day shall be deemed to have been made as of the
opening of business on the immediately following Business Day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrower when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) the repayment of
obligations owing to the agent, the co-agents and the lenders under the Original
Agreement and (b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements. All other Loans made or Letter of Credit Accommodations provided by
Lender to Borrower pursuant to the provisions hereof shall be used by Borrower
only for working capital purposes or general corporate purposes of Borrower.
None of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Loans to
be considered a "purpose credit" within the meaning of Regulation G of the Board
of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form reasonably satisfactory to Lender: (a) on a weekly
basis or, at any or all times that the Excess Loan Availability is less than or
equal to $10,000,000, more frequently (including, without limitation, on a daily
basis) as Lender may request, (i) an officer's certificate setting forth the
amount of the Sales Tax Reserve as of the day immediately preceding the date of
such officer's certificate, (ii) perpetual inventory reports, (iii) inventory
reports by category and (b) upon Lender's request and to the extent practicable,
(i) copies of customer statements and credit memos, remittance advices and
reports, and copies of deposit slips and bank statements,
(ii) copies of shipping and delivery documents, and (iii) copies of purchase
orders, invoices and delivery documents for Inventory acquired by Borrower; and
(c) such other reports as to the Collateral as Lender shall reasonably request
from time to time. If any of Borrower's records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrower hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Lender and
to follow Lender's instructions with respect to further services at any time
that an Event of Default exists or has occurred and is continuing.
7.2 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain Inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall cause an
independent firm acceptable to Lender to conduct a cycle count of the Inventory
in accordance with Borrower's existing practices with respect thereto on the
Original Closing Date, but at any time or times as Lender may request on or
after an Event of Default, and promptly following such physical inventory shall
supply Lender with a report in the form and with such specificity as may be
reasonably satisfactory to Lender concerning such physical count; (c) Borrower
shall not remove any Inventory from the locations set forth or permitted herein,
without the prior written consent of Lender, except for sales of Inventory in
the ordinary course of Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
upon Lender's request, Borrower shall, at its expense, no more than once in any
twelve (12) month period, but at any time or times as Lender may request (i) on
or after an Event of Default has occurred and is continuing or (ii) on or after
a date on which the amount available under the lending formula set forth in
Section 2.1(a) hereof exceeds the outstanding Loans and Letter of Credit
Accommodations by less than $10,000,000, deliver or cause to be delivered to
Lender written reports or appraisals as to the Inventory in form, scope and
methodology (including, without limitation, on a "going out of business" basis)
acceptable to Lender and by an appraiser acceptable to Lender, addressed to
Lender or upon which Lender is expressly permitted to rely; (e) Borrower shall
produce, use, store and maintain the Inventory, with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including, but not limited to, the requirements
of the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (f) Borrower assumes all responsibility
and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (g) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory, other than in accordance
with Borrower's policies in existence on the Original Closing Date; (h) Borrower
shall keep the Inventory in good and marketable condition (ordinary wear and
tear excepted); and (i) Borrower shall not, without prior written notice to
Lender, acquire or accept any Inventory on consignment or approval.
7.2.5 Eligible Real Estate Covenants. With respect to the Eligible
Real Estate: (a) upon Lender's request at any time the Excess Loan Availability
is less than $15,000,000, Borrower shall, at its expense, but at any time or
times as Lender may request on or after an Event of Default, deliver or cause to
be delivered to Lender written appraisals as to the Eligible Real Estate in
form, scope and methodology acceptable to Lender and by an appraiser acceptable
to Lender, addressed to Lender and upon which Lender is expressly permitted to
rely; (b)
Borrower shall use the Eligible Real Estate with all reasonable care and caution
and in accordance with applicable standards of any insurance and in conformity
with all applicable laws; and (c) Borrower assumes all responsibility and
liability arising from the use of the Eligible Real Estate.
7.3 Proceeds Covenants.
(a) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any proceeds of Inventory or Real Property, by
mail, telephone, facsimile transmission or otherwise.
(b) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) extend the time of payment of,
compromise, settle or adjust for cash, credit, or otherwise, and upon any terms
or conditions, any and all proceeds of Inventory and thereby discharge or
release any party or parties in any way liable for payment thereof without
affecting any of the Obligations, (ii) demand, collect or enforce payment of any
amounts constituting proceeds of Inventory, but without any duty to do so, and
Lender shall not be liable for its failure to collect or enforce the payment
thereof nor for the negligence of its agents or attorneys with respect thereto
other than any such failure resulting from Lender's or its agents' or attorneys'
gross negligence or willful misconduct and (iii) take whatever other action
Lender may reasonably deem necessary or desirable for the protection of its
interests.
7.4 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment on proceeds of Inventory or other Collateral, (ii)
enforce payment of proceeds of Inventory by legal proceedings or otherwise,
(iii) exercise all of Borrower's rights and remedies to collect any proceeds of
Inventory or other Collateral, (iv) sell or assign any proceeds of Inventory
upon such terms, for such amount and at such time or times as Lender deems
advisable, (v) settle, adjust, compromise, extend or renew any claim
representing proceeds of Inventory, (vi) discharge and release any claim
representing proceeds of Inventory, (vii) prepare, file and sign Borrower's name
on any proof of claim in bankruptcy or other similar document against any party
owing amounts representing the proceeds of Collateral, (viii) notify the post
office authorities to change the address for delivery of remittances from
account debtors or other obligors in respect of proceeds of Collateral to an
address designated by Lender, and open and dispose of all mail addressed to
Borrower and handle and store all mail relating to the Collateral, and (ix) do
all acts and things which are necessary, in Lender's determination, to fulfill
Borrower's obligations under this Agreement and the other Financing Agreements
and (b) at any time to (i) take control in any manner of any item of payment or
proceeds thereof constituting Collateral or otherwise received in or for deposit
in the Congress Accounts or otherwise received by Lender, (ii) have access to
any lockbox or postal box into which remittances from account debtors or other
obligors in respect of proceeds of Collateral are sent or received, (iii)
endorse Borrower's name upon any items of payment or proceeds thereof
constituting Collateral or otherwise received by Lender and deposit the same in
Lender's account for application to the Obligations, (iv) endorse Borrower's
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Inventory or any proceeds thereof or any other
Collateral, including any warehouse or other receipts, or bills of
lading and other negotiable or non-negotiable documents, and (v) execute in
Borrower's name and file any UCC financing statements or amendments thereto.
Borrower hereby releases Lender and its officers, employees and designees from
any liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Lender's own gross negligence or willful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.
7.5 Right to Cure. Lender may, at its option, (a) cure any default
by Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral (except those permitted by the terms of this Agreement) and
(c) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge Borrower's account therefor,
such amounts to be repayable by Borrower on demand. Lender shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrower. Any payment
made or other action taken by Lender under this Section shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
accordingly.
7.6 Access to Premises. From time to time as reasonably requested by
Lender, at the cost and expense of Borrower, (a) Lender or its designee shall
have complete access to all of Borrower's premises during normal business hours
and after reasonable prior notice to Borrower, or at any time and without notice
to Borrower if an Event of Default exists or has occurred and is continuing, for
the purposes of inspecting, verifying and auditing the Collateral and all of
Borrower's books and records, including, without limitation, the Records, and
(b) Borrower shall promptly furnish to Lender such copies of such books and
records or extracts therefrom as Lender may reasonably request, and (c) use
during normal business hours such of Borrower's personnel, equipment, supplies
and premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of the
proceeds of Inventory and realization of Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following
(which shall survive the execution and delivery of this Agreement), the truth
and accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not be reasonable likely to have a Material Adverse Effect. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder are all within Borrower's
corporate powers, have been duly authorized and are not in contravention of
applicable law or the terms of Borrower's certificate of incorporation, by-laws,
or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any subsidiaries
except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP and present fairly
in all material respects the financial condition and the results of operation of
Borrower as at the dates and for the periods set forth therein (PROVIDED that
monthly or quarterly statements are subject to normal year-end adjustments and
may not contain all footnote information required by GAAP). Borrower has
informed its auditors that a primary intent of Borrower was for the professional
services provided or to be provided by its auditors to benefit or influence
Lender. Except as disclosed in any interim financial statements furnished by
Borrower to Lender prior to the date of this Agreement, there has been no
material adverse change in the assets, liabilities, properties and condition,
financial or otherwise, of Borrower, since the date of the most recent audited
financial statements furnished by Borrower to Lender prior to the date of this
Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief
executive office of Borrower and Borrower's Records concerning Inventory and the
proceeds thereof are located only at the address set forth below and its only
other places of business and the only other locations of Collateral, if any, are
the addresses set forth in the Information Certificate, subject to the right of
Borrower to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by Borrower and sets forth the owners and/or operators thereof and to the
best of Borrower's knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties; Ownership of Assets. The
security interests and liens granted to Lender under this Agreement and the
other Financing Agreements constitute valid and perfected first priority liens
and security interests in and upon the Collateral subject only to existing liens
indicated on Schedule 8.4 hereto and the other liens permitted under Section 9.8
hereof. Borrower has good and marketable title to all of its properties and
assets subject to no liens, mortgages, pledges, security interests, encumbrances
or charges of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 hereto or permitted under Section 9.8
hereof. All material assets employed in Borrower's business are owned by
Borrower or leased by Borrower under arms-length transactions with unaffiliated
third parties, unless consented to in writing by Lender prior to the time such
asset is placed into service. Borrower has obtained and holds in full force and
effect all patents, trademarks, servicemarks, tradenames, copyrights and other
such rights, free from burdensome restrictions, which are necessary for the
operation of its business as presently conducted. No product sold by Borrower
infringes any patents, trademark, servicemark, tradename, copyright, license or
other right owned by any other Person. The Subsidiaries of Borrower, taken as a
whole, do not own inventory having a fair market value in excess of $500,000.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a
timely manner all income and franchise and all material other tax returns,
reports and declarations which are required to be filed by it (without, other
than with respect to returns filed prior to the Original Closing Date, any
requests for extension except as previously disclosed in writing to Lender).
All information in such tax returns, reports and declarations is complete and
accurate in all material respects. Borrower has paid or caused to be paid all
taxes due and payable or claimed due and payable in any assessment received by
it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves in accordance with GAAP have been set aside
on its books. Adequate provision has been made in accordance with GAAP for the
payment of all accrued and unpaid Federal, State, county, local, foreign and
other taxes whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on Schedule 8.6, there is no
present investigation by any governmental agency pending, or to the best of
Borrower's knowledge threatened, against or affecting Borrower, its assets or
business and there is no action, suit, proceeding or claim by any Person
pending, or to the best of Borrower's knowledge threatened, against Borrower or
its assets or goodwill, or against or affecting any transactions contemplated by
this Agreement, which if adversely determined against Borrower would reasonably
be likely to have a Material Adverse Effect. With respect to conditions or
events arising after the Closing Date, but otherwise of a type required to be
disclosed on Schedule 8.6 hereto, Borrower may deliver to Lender, from time to
time, in writing, supplements to Schedule 8.6 and for purposes of the continuing
representation and warranty set forth in this Section 8.6 as of any future date,
such representation and warranty shall be deemed made as of such date by
Borrower subject to all such supplements delivered on or prior to such date.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower
is not in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local governmental authority.
8.8 Environmental Compliance. Except as set forth on Schedule 8.8
hereto, or as could not reasonably be likely to have a Material Adverse Effect:
(a) Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates any applicable Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder and the operations of Borrower
comply in all material respects with all Environmental Laws and all required
licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) There has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any governmental authority or any other
person nor, or to the best of Borrower's knowledge, is any pending or threatened
with respect to (i) any non-compliance with or violation of the requirements of
any Environmental Law by Borrower or (ii) the release, spill or discharge, of
any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Borrower or its business, operations or assets or any properties at which
Borrower has transported, stored or disposed of any Hazardous Materials.
(c) Borrower has no liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Borrower has all licenses, permits, certificates, approvals or
similar authorizations required to be obtained or filed in connection with the
operations of Borrower under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid and in full
force and effect.
8.9 Employee Benefits.
(a) Except as set forth on Schedule 8.9 hereto, Borrower has not
engaged in any transaction in connection with which Borrower or any of its ERISA
Affiliates could be subject to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, including
any accumulated funding deficiency described in Section 8.9(c) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has
been or is reasonably expected by Borrower to be incurred with respect to any
employee pension benefit plan of Borrower or any of its ERISA Affiliates. There
has been no reportable event (within the meaning of Section 4043(b) of ERISA for
which the requirement of a 30-day notice has not been waived under ERISA) or any
other event or condition with respect to any employee pension benefit plan of
Borrower or any of its ERISA Affiliates which is reasonably expected to result
in a termination of any such plan by the Pension Benefit Guaranty Corporation.
(c) Except as set forth on Schedule 8.9 hereto, full payment has
been made of all amounts which Borrower or any of its ERISA Affiliates is
required under Section 302 of ERISA and Section 412 of the Code to have paid
under the terms of each employee pension benefit plan as contributions to such
plan as of the last day of the most recent fiscal year of such plan ended prior
to the Closing Date, and no accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any employee pension benefit plan, including any penalty or tax
described in Section 8.9(a) hereof.
(d) Except as set forth on Schedule 8.9 hereto, the current value of
all vested accrued benefits under all employee pension benefit plans maintained
by Borrower that are subject to Title IV of ERISA does not exceed the current
value of the assets of such plans allocable to such vested accrued benefits. The
terms "current value" and "accrued benefit" have the meanings specified in
ERISA.
(e) Except as set forth on Schedule 8.9 hereto, neither Borrower nor
any of its ERISA Affiliates is or has ever been obligated to contribute to any
"multiemployer plan" (as such term is defined in Section 4001(a)(3) of ERISA)
that is subject to Title IV of ERISA.
8.10 Credit Cards Etc. Schedule 8.10 hereto sets forth a true,
accurate and complete list of all of the credit cards, debit cards and ATM cards
(and the issuers thereof) which Borrower accepts for payment.
8.11 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading in
light of the circumstances under which made. No event or circumstance has
occurred which has had or could reasonably be expected to have a Material
Adverse Effect which has not been fully and accurately disclosed to Lender in
writing.
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder, except to the extent that such
representation or warranty expressly by its terms relates to an earlier date,
and shall be conclusively presumed to have been relied on by Lender regardless
of any investigation made or information possessed by Lender. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which Borrower shall now or
hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Except permitted by Section 9.7
hereof, Borrower shall at all times preserve, renew and keep in full, force and
effect its corporate existence and rights and franchises with respect thereto
and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted. Borrower shall give
Lender thirty (30) days prior written notice of any proposed change in its
corporate name, which notice shall set forth the new name and Borrower shall
deliver to Lender a copy of the amendment to the Certificate of Incorporation of
Borrower providing for the name change certified by the Secretary of State of
the jurisdiction of incorporation of Borrower as soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location
within the continental United States provided Borrower (a) gives Lender thirty
(30) days prior written notice of the intended opening of any such new location
and (b) executes and delivers, or causes to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including, without limitation, UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, State or
local governmental authority, including, without limitation, ERISA, the
Occupational Safety and Hazard Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, and all statutes, rules, regulations, orders, permits
and stipulations relating to environmental pollution and employee health and
safety, including, without limitation, all of the Environmental Laws.
(b) Borrower shall monitor its continued compliance with all
Environmental Laws in all of its operations, including regular reviews of such
compliance by employees or agents of Borrower who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrower to Lender.
Borrower shall take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
(c) To the extent the circumstances could reasonably be expected to
give rise to liability under Environmental Laws in excess of $250,000, Borrower
shall give both oral and written notice to Lender immediately upon Borrower's
receipt of any notice of, or Borrower's otherwise obtaining knowledge of, (i)
the occurrence of any event involving the release, spill or discharge, of any
Hazardous Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by Borrower or (B) the release, spill
or discharge, threatened or actual, of any Hazardous Material or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which affects Borrower or its business,
operations or assets or any properties at which Borrower transported, stored or
disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is material non-compliance, or any
condition which requires any action by or on behalf of Borrower in order to
avoid any material non-compliance, with any Environmental Law, Borrower shall,
at Lender's request and Borrower's expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of the site
where Borrower's non-compliance or alleged non-compliance with such
Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting forth the results
of such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Lender a supplemental report of such engineer whenever the scope of such
non-compliance, or Borrower's response thereto or the estimated costs thereof,
shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) (to the
extent they are not directly attributable to Lender's willful misconduct or
gross negligence) directly or indirectly arising out of or attributable to the
use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material,
including, without limitation, the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of Borrower and the
preparation and implementation of any closure, remedial or other required plans.
All representations, warranties, covenants and indemnifications in this Section
9.3 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves in accordance with GAAP have been set aside on its
books. Borrower shall be liable for any tax or penalties imposed on Lender as a
result of the financing arrangements provided for herein and Borrower agrees to
indemnify and hold Lender harmless with respect to the foregoing, and to repay
to Lender on demand the amount thereof, and until paid by Borrower such amount
shall be added and deemed part of the Loans; PROVIDED, THAT, nothing contained
herein shall be construed to require Borrower to be liable for, pay or to
indemnify Lender for any income or franchise taxes (including any interest or
penalties thereon and whether imposed directly upon Lender or required to be
withheld from payments to Lender) attributable to the income of Lender from any
amounts charged or paid hereunder to Lender. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be reasonably satisfactory to Lender
as to form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrower fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrower. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrower in
obtaining, and at any time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance. Borrower
shall cause Lender to be named as a loss payee and an additional insured (but
without any liability for any premiums) under such insurance policies and
Borrower shall obtain non-contributory lender's loss payable endorsements to all
insurance policies in form and substance reasonably satisfactory to Lender. Such
lender's loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Lender as its interests may appear and further
specify that Lender shall be paid regardless of any act or omission by Borrower
or any of its affiliates. At its option, Lender may apply any insurance proceeds
received by Lender at any time to the cost of repairs or replacement of
Collateral and/or to payment of the Obligations, whether or not then due, in any
order and in such manner as Lender may determine or hold such proceeds as cash
collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Borrower and its Subsidiaries (if any) in
accordance with GAAP and Borrower shall furnish or cause to be furnished to
Lender: (i) within thirty (30) days after the end of each fiscal month, monthly
unaudited consolidated financial statements (including a balance sheet, a
statement of income and loss and a statement cash flow), in reasonable detail,
fairly presenting the financial position and the results of the operations of
Borrower and its Subsidiaries as of the end of and through such fiscal month,
subject to normal year-end adjustments, and (ii) within ninety (90) days after
the end of each fiscal year, audited consolidated financial statements
(including a balance sheet, a statement of income and loss, a statement of cash
flow and a statement of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its
Subsidiaries as of the end of and for such fiscal year, together with (X) the
opinion of independent certified public accountants, which accountants shall be
an independent accounting firm selected by Borrower and reasonably acceptable to
Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly in all material respects the results of operations and
financial condition of Borrower and its Subsidiaries as of the end of and for
the fiscal year then ended (y) a letter from such accountants addressed to
Lender and in the form of Exhibit E hereto and (z) a copy of the "management
letter" received by Borrower with respect to such audit (which shall be
delivered to Lender as soon as it is available, but in no event to exceed one
hundred fifty (150) days after the end of the applicable fiscal year).
(b) Borrower shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise and
(ii) the occurrence of any Event of Default or event which, with the passage of
time or giving of notice or both, would constitute an Event of Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrower to any
court or other government agency pursuant to any order, request or demand or to
any participant or assignee or prospective participant or assignee to the extent
such participant or assignee (or prospective participant or assignee) agrees to
keep information confidential in a manner consistent with its customary
practices. Borrower hereby irrevocably authorizes and directs all accountants or
auditors to deliver to Lender, at Borrower's expense, copies of the financial
statements of Borrower and any reports or management letters prepared by such
accountants or auditors on behalf of Borrower and to disclose to Lender such
information as they may have regarding the business of Borrower. Any documents,
schedules, invoices or other papers delivered to Lender may be destroyed or
otherwise disposed of by Lender one (1) year after the same are delivered to
Lender, except as otherwise designated by Borrower to Lender in writing.
(e) Not later than January 1 of each year hereafter during the term
of this Agreement, Borrower shall deliver to Lender an updated letter addressed
to Borrower's auditors substantially in the form of Exhibit C hereto. In
addition, on or about January 1 of each year Borrower shall inform its auditors
that a primary intent of Borrower is for the professional services provided or
to be provided by its auditors to benefit or influence Lender.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Borrower shall not, directly or indirectly, (a) merge into or with or
consolidate with any other Person or permit any other Person to merge into or
with or consolidate with it, or (b) sell, assign, lease or transfer to any other
Person, abandon or otherwise dispose of any stock or indebtedness or any of its
assets to any other Person (except for (i) sales of Inventory in the ordinary
course of business or (ii) the disposition of worn-out or obsolete Equipment or
Equipment no longer used in the business of Borrower so long as such sales do
not involve Equipment having an aggregate fair market value in excess of
$5,000,000 for all such Equipment disposed of in any fiscal year of Borrower,
(iii) the sale of Borrower's Westville, Indiana warehouse facility in
consideration for the release of all associated liabilities, (iv) any sale and
leaseback transaction, (v) the sale of the assets related to Borrower's bakery
business being engaged in by The Eagle Bakery division of the Borrower, and (vi)
the sale of Borrower's closed stores), (vii) the sale of Borrower's Real
Property not used in the Borrower's business or (c) form or acquire any
Subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any of
the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, EXCEPT: (a) liens and security
interests of Lender; (b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves in accordance with GAAP have been set aside
on its books; (c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of Borrower's business to the
extent: (i) such liens secure indebtedness which is not overdue or (ii) such
liens secure indebtedness relating to claims or liabilities which are fully
insured and being defended at the sole cost and expense and at the sole risk of
the insurer or being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower, in each case prior to the
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of real property (and with respect to leasehold interests, mortgages,
obligations, liens and other encumbrances incurred, created, assumed or
permitted to exist and arising by, through or under a landlord or owner of the
leased property, with or without the consent of the lessee) which do not
interfere in any material respect with the use of such real property or ordinary
conduct of the business of Borrower as presently conducted thereon or materially
impair the value of the real property which may be subject thereto; (e) purchase
money security interests in Equipment (including capital leases) and purchase
money mortgages on real estate not to exceed $75,000,000 in the aggregate at any
time outstanding so long as such security interests and mortgages do not apply
to any property of Borrower other than the Equipment or real estate so acquired,
and the indebtedness secured thereby does not exceed the cost of the Equipment
or real estate so acquired, as the case may be; and (f) the security interests
and liens set forth on Schedule 8.4 hereto; (g) liens incurred and pledges and
deposits made in the ordinary course of business in connection with workmen's
compensation, unemployment insurance, old-age pensions and other social security
benefits; (h) liens securing the performance of bids, tenders, leases, contracts
(other than for the repayment of borrowed money), statutory obligations, surety,
customs and appeal bonds and other obligations of like nature, incurred as an
incident to and in the ordinary course of business; (i) liens created in
connection with capital leases permitted by Section 9.7(b)(iv) hereof as long as
such liens relate solely to the property subject to such capital leases; (j)
liens on equipment or other property (other than Inventory) existing at the time
such property is acquired by Borrower; provided, in each case, that such liens
were not created in contemplation of such acquisition by Borrower; (k) mortgages
upon real property owned by Borrower on the Closing Date or hereafter acquired
by Borrower, provided that (i) the principal amount of the indebtedness secured
by such lien does not exceed the fair
market value of the real property to which such lien relates and (ii) the
incurrence of such indebtedness is permitted by Section 9.9 hereof; and (l)
extensions, renewals and replacements of liens referred to in paragraphs (a)
through (k) of this Section 9.8; PROVIDED, HOWEVER, that any such extension,
renewal or replacement lien shall be limited to the property or assets covered
by the lien extended, renewed or replaced and that the principal amount of the
obligations secured by any such extension, renewal or replacement lien shall be
in an amount not greater than the principal amount of the obligations secured by
the lien extended, renewed or replaced.
9.9 Indebtedness. Borrower shall not incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness, EXCEPT (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings diligently pursued and available to Borrower,
and with respect to which adequate reserves in accordance with GAAP have been
set aside on its books; (c) purchase money indebtedness (including capital
leases) to the extent not incurred or secured by liens (including capital
leases) in violation of any other provision of this Agreement; (d) obligations
or indebtedness set forth on the Information Certificate; (e) obligations in
respect of capital leases outstanding on the Closing Date set forth on Schedule
9.9(e) hereto; (f) indebtedness arising under the Indenture (as in effect on the
Closing Date) governing Borrower's 11% Senior Notes due April 15, 2005; (g)
indebtedness incurred with respect to capital leases as long as Borrower is not
in violation of Section 9.13 hereof; (h) indebtedness incurred with respect to
the mortgages permitted by Section 9.8(e) and indebtedness incurred hereafter in
an amount not to exceed $10,000,000 in any fiscal year of Borrower with respect
to mortgages permitted by Section 9.8(k); and (i) other unsecured indebtedness
of Borrower having an aggregate outstanding principal amount of not more than
$10,000,000; PROVIDED, THAT, Borrower covenants and agrees that (i) Borrower
shall only make regularly scheduled payments of principal and interest in
respect of such obligations and indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such obligations or
indebtedness as in effect on the Closing Date, (ii) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of any such
obligations or indebtedness or any agreement, document or instrument related
thereto as in effect on the Closing Date, or (B) redeem, retire, defease,
purchase or otherwise acquire any such obligations or indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose; PROVIDED, THAT,
Borrower may redeem or retire the indebtedness described in clause (f) of this
Section 9.9 as long as (A) immediately after giving effect to such redemption or
retirement, Borrower has Excess Loan Availability of at least $15,000,000 and
(B) no Event of Default, or event or circumstance which with the giving of
notice or the passage of time, or both, would constitute an Event of Default,
shall exist and be continuing and (iii) Borrower shall furnish to Lender all
notices or demands in connection with all such obligations and indebtedness
either received by Borrower or on its behalf, promptly after the receipt
thereof, or sent by Borrower or on its behalf, concurrently with the sending
thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not,
directly or indirectly, make any loans or advance money or property to any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the stock or indebtedness or all or a substantial part of
the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, except: (a) the
endorsement of instruments for collection or deposit in the ordinary course of
business; (b) investments in: (i) short-term direct obligations of the United
States Government, (ii) negotiable certificates of deposit issued by any bank
reasonably satisfactory to Lender, payable to the order of Borrower or to bearer
and delivered to Lender, and (iii) commercial paper rated A-1 or P-1, (iv)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or issued by any governmental agency thereof and backed by the full
faith and credit of the United States of America, in each case maturing within
one (1) year or less from the date of acquisition, and (v) investments in money
market funds and mutual funds which invest substantially all of their assets in
securities of the types described in clauses (i) through (iv) above; and (c) the
guarantees set forth in the Information Certificate; (d) loans from Borrower to
Borrower's Subsidiary BOGOs, Inc. in the ordinary course of business in an
amount not to exceed $3,000,000 at any one time outstanding; e) loans to
landlords in the ordinary course of business in connection with improvements
made to property leased to Borrower, not to exceed an aggregate amount of
$3,000,000 at any time outstanding; (f) loans to Borrower by Borrower's
Subsidiary, Talon Insurance Company, Inc., (g) loans in an amount not to exceed
$300,000 at any time outstanding by Borrower to its chief executive officer to
finance the purchase of shares of Borrower's common stock by such chief
executive officer and (h) loans, in an amount not in excess of $300,000 in any
fiscal year of Borrower, to employees of Borrower for moving costs incurred or
to be incurred by such employees.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing; PROVIDED, HOWEVER, that Borrower may
make any such payment as long as (i) immediately after giving effect to such
payment, Borrower has Excess Loan Availability of at least $15,000,000 and (ii)
no Event of Default, or event or circumstance which with the giving of notice or
the passage of time, or both, would constitute an Event of Default, shall exist
and be continuing.
9.12 Transactions with Affiliates. Borrower shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any Affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair and
reasonable terms no less favorable to Borrower than Borrower would obtain in a
comparable arm's length transaction with an unaffiliated person; provided,
HOWEVER, that this Section 9.12 shall not restrict the ability of any Subsidiary
of Borrower to (i) pay, directly or indirectly, dividends or make any other
distributions in respect of its capital stock or pay any indebtedness or other
obligation owed to Borrower or any other Subsidiary of the Borrower; (ii) make
loans or advances to Borrower or any Subsidiary of Borrower; (iii) transfer any
of its property or assets to Borrower; or (iv) enter into employment agreements
with its senior executives or make loans to its chief executive officer in
connection with his purchase of Borrower's common stock.
9.13 Capital Expenditures. Borrower shall not, and shall not permit
its Subsidiaries to, make or incur (or commit to make or incur) any Capital
Expenditures, except
Capital Expenditures of Borrower and its Subsidiaries in any of the periods set
forth below not in excess of the amount set forth below opposite such period:
Period Maximum Amount
------ --------------
Borrower's fiscal year 2001 and each fiscal $75,000,000 or such greater
year of the Borrower thereafter amount as agreed to by Lender
in writing prior to the first
day of such fiscal year
; provided, that if the maximum amount set forth above exceeds
the aggregate amount of Capital Expenditures made and/or
incurred and/or committed to be made and/or incurred during
the applicable period (the "Earlier Period"), then the maximum
amount set forth above for the period immediately following
such Earlier Period shall be increased by the lesser of (i)
the amount of such excess and (ii) the dollar amount set forth
above with respect to such Earlier Period.
9.14 Adjusted Net Worth. Borrower shall, at all times, maintain
Adjusted Net Worth of not less than $3,000,000.
9.15 Compliance with ERISA. Borrower shall not with respect to any
"employee pension benefit plans" maintained by Borrower or any of its ERISA
Affiliates:
(a) (i) terminate any of such employee pension benefit plans so as
to incur any liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA, (ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust created
thereunder which would subject Borrower or such ERISA Affiliate to a tax or
penalty or other liability on prohibited transactions imposed under Section 4975
of the Code or ERISA, (iii) fail to pay to any such employee pension benefit
plan any contribution which it is obligated to pay under Section 302 of ERISA,
Section 412 of the Code or the terms of such plan, (iv) allow or suffer to exist
any accumulated funding deficiency, whether or not waived, with respect to any
such employee pension benefit plan, (v) allow or suffer to exist any occurrence
of a reportable event or any other event or condition which presents a material
risk of termination by the Pension Benefit Guaranty Corporation of any such
employee pension benefit plan that is a single employer plan, which termination
could reasonably be expected to result in any liability to the Pension Benefit
Guaranty Corporation or (vi) incur any withdrawal liability with respect to any
multiemployer pension plan which singly or in the aggregate could reasonably be
expected to result in a payment by the Borrower and/or a liability of the
Borrower in excess of $100,000.
(b) As used in this Section 9.15, the term "employee pension benefit
plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
9.16 Landlord Agreements. Borrower shall use reasonable best efforts
to obtain agreements, in form and substance reasonably satisfactory to Lender,
from each owner of real property leased from time to time by Borrower, and each
mortgagee with respect to real property owned from time to time by Borrower,
pursuant to which each such Person, among other things, acknowledges Lender's
interest in the Collateral, waives any and all claims such Person has or
may have to all or any portion of the Collateral and permits Lender access to
and the right to remain on the applicable premises to exercise Lender's rights
and remedies and to otherwise deal with the Collateral. Borrower covenants and
agrees that Borrower shall, within ten (10) days of the end of each calendar
month, deliver an officer's certificate, in the form of Exhibit D hereto or such
other form as is agreed to by Lender, setting forth the information, as of the
last day of such calendar month, required by Exhibit D. Lender shall have the
right at any time or times, in Lender's name or in the name of a nominee of
Lender, to verify, by mail, telephone or otherwise, any or all of the
information set forth on one or more officer's certificates delivered pursuant
to this Section.
9.17 Costs and Expenses. Borrower shall pay to Lender on demand all
reasonable out-of-pocket costs, expenses, filing fees and taxes (other than
income taxes payable on the income of Lender or franchise taxes payable by
Lender) paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Lender's rights in the Collateral,
this Agreement, the other Financing Agreements and all other documents related
hereto or thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including, but not limited to: (a) all costs and expenses of
filing or recording (including Uniform Commercial Code financing statement
filing taxes and fees and documentary taxes); (b) costs and expenses and fees
for title insurance and other insurance premiums, environmental audits, surveys,
assessments, engineering reports and inspections, appraisal fees and search
fees; (c) costs and expenses of remitting loan proceeds, collecting checks and
other items of payment, and establishing and maintaining the Congress Accounts,
together with Lender's customary charges and fees with respect thereto; (d)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (e) costs and expenses of preserving and
protecting the Collateral; (f) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Lender arising out
of the transactions contemplated hereby and thereby (including, without
limitation, preparations for and consultations concerning any such matters); and
(g) the reasonable fees and disbursements of counsel (including legal
assistants) to Lender in connection with any of the foregoing.
9.18 Further Assurances. At the request of Lender at any time and
from time to time, Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or
more of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Borrower fails to pay when due any of the Obligations or fails
to perform any or all of the terms, covenants, conditions or provisions
contained in any or all of Sections 9.1, 9.2, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10,
9.11, 9.12, 9.13, 9.14, 9.15 or 9.16 hereof;
(b) Borrower fails to perform any or all of the terms, covenants,
conditions or provisions (i) contained in any or all of Sections 9.3, 9.4, 9.18
hereof and such failure shall continue unremedied for ten (10) or more days or
(ii) arising under or pursuant to this Agreement and/or any other Financing
Agreement (other than those described in any or all of Section 10.1(a) or
10.1(b)(i) hereof) and such failure shall continue unremedied for twenty (20) or
more days;
(c) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(d) one or more judgments for the payment of money is rendered
against Borrower or any Subsidiary of Borrower in excess of $1,000,000 in the
aggregate and shall remain undischarged or unvacated for a period in excess of
thirty (30) days or execution shall at any time not be effectively stayed, or
any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against Borrower or any Subsidiary of
Borrower or any of their assets;
(e) Borrower or any Subsidiary of Borrower (other than Eagle
Pharmacy Co., Milan Distributing Co. or Eagle Country Markets, Inc.) which is a
partnership or corporation, dissolves or suspends or discontinues doing
business;
(f) Borrower or any Subsidiary of Borrower becomes Insolvent (as
defined under the bankruptcy laws of the United States of America now or
hereafter in effect), makes an
assignment for the benefit of creditors, makes or sends notice of a bulk
transfer or calls a meeting of its creditors in their capacity as creditors, one
of the purposes of which is to restructure or reorganize indebtedness of
Borrower or principal creditors in their capacity as creditors, one of the
purposes of which is to restructure or reorganize indebtedness of Borrower;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Subsidiary of Borrower or all or any
material part of its properties and such petition or application is not
dismissed within sixty (60) days after the date of its filing or Borrower or any
Subsidiary of Borrower shall file any answer admitting or not contesting such
petition or application or indicates its consent to, acquiescence in or approval
of, any such action or proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Subsidiary of Borrower or for all or any
part of its property; or
(i) any default by Borrower, any Subsidiary of Borrower under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Lender, in any case in an amount in excess of $1,000,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by Borrower under any material (given the specific
circumstances) contract lease, license or other obligation (including, without
limitation, Borrower's obligation to pay sales tax) to any person other than
Lender, which default continues for more than the applicable cure period, if
any, with respect thereto;
(j) any Change in Control shall have occurred;
(k) the indictment of Borrower under any criminal statute, or
commencement of criminal or civil proceedings against Borrower or any Subsidiary
of Borrower, pursuant to which statute or proceedings the penalties or remedies
sought or likely to be available include forfeiture of any of the Collateral or
any material amount of other property of Borrower.
(l) any event or circumstance shall occur or exist and such event or
circumstance is likely, in the Lender's reasonable judgment, to have a Material
Adverse Effect; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower, any Subsidiary of Borrower or any other Person,
except as such notice or consent is expressly provided for hereunder or required
by applicable law. All rights, remedies and powers granted to Lender hereunder,
under any of the other Financing Agreements, the Uniform Commercial Code or
other applicable law, are cumulative, not exclusive and enforceable, in Lender's
discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a court
of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower or any other Person to
collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (PROVIDED, THAT, upon the occurrence of any
Event of Default described in Sections 10.1(g) and/or 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with Lender having the right to purchase the whole or any part of the
Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of Borrower, which right or equity of redemption
is hereby expressly waived and released by Borrower and/or (vii) terminate this
Agreement. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, five (5) days prior notice by
Lender to Borrower designating the time and place of any public sale or the time
after which any private sale or other intended disposition of Collateral is to
be made, shall be deemed to be reasonable notice thereof and Borrower waives any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, Borrower
waives the posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due.
Borrower shall remain liable to Lender for the payment of any deficiency with
interest at the highest rate provided for herein and all costs and expenses of
collection or enforcement, including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event
of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to Borrower.
10.3 Use of Intellectual Property. Borrower hereby irrevocably
grants Lender a license to use any and all of Borrower's right, title and
interest in, to and under any and all trademarks, tradenames, copyrights (and
materials subject to one or more copyrights) and other intellectual property,
without cost to Lender, to the extent Lender reasonably deems it necessary to
assist Lender in any and all liquidations of Collateral or for the practical
realization of the benefits intended to be granted to Lender hereunder.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT
AND THE OTHER FINANCING AGREEMENTS AND ANY DISPUTE ARISING OUT OF THE
RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS
(WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the courts of the State of
Illinois located in
Chicago,
Illinois and the United States District Court for the Northern District
of
Illinois and waive any objection based on venue or FORUM NON CONVENIENS with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction which Lender reasonably
deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
(5) days after the same shall have been so deposited in the U.S. mails, or, at
Lender's option, by service upon Borrower in any other manner provided under the
rules of any such courts. Within thirty (30) days after such service, Borrower
shall appear in
answer to such process, failing which Borrower shall be deemed in default and
judgment may be entered by Lender against Borrower for the amount of the claim
and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER
EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any
provision hereof shall be amended, modified, waived or discharged orally or by
course of conduct, but only by a written agreement signed by an authorized
officer of Lender. Lender shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its rights, powers and/or
remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Lender of any right, power and/or
remedy on any one occasion shall not be construed as a bar to or waiver of any
such right, power and/or remedy which Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims)
in any action or proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on, incurred
by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
reasonable fees and expenses of counsel, other than any losses, claims, damages,
liabilities, costs or expenses directly resulting from Lender's or its
directors', agents' employees' or counsel's gross negligence or willful
misconduct. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
Closing Date (the "Renewal Date"), with the Renewal Date being extended on each
Renewal Date to the date one year from the date of the then current Renewal Date
unless this Agreement and the other Financing Agreements have been terminated
prior to the then current Renewal Date pursuant to the terms hereof. On each
extension of the Renewal Date Borrower shall pay Lender a renewal fee of
$50,000, which fee shall be fully earned and payable on each applicable Renewal
Date. Lender or Borrower may terminate this Agreement and the other Financing
Agreements effective on the Renewal Date or on the anniversary of the Renewal
Date in any year by giving to the other party at least sixty (60) days prior
written notice; PROVIDED, THAT, this Agreement and all other Financing
Agreements must be terminated simultaneously. Upon the effective date of
termination or non-renewal of the Financing Agreements, Borrower shall pay to
Lender, in full, all outstanding and unpaid Obligations and shall furnish cash
collateral to Lender in such amounts as Lender determines are reasonably
necessary to secure Lender from loss, cost, damage or expense, including
attorneys' fees and legal expenses, in connection with any or all issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such cash collateral shall be remitted
by wire transfer in Federal funds to such bank account of Lender, as Lender may,
in its discretion, designate in writing to Borrower for such purpose. Interest
shall be due until and including the next Business Day, if the amounts so paid
by Borrower to the bank account designated by Lender are received in such bank
account later than 12:00 noon, Chicago time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in an amount equal
to (i) 3% of the Maximum Credit if terminated prior to the first anniversary
hereof; (ii) 2% of the Maximum Credit if terminated on or after the first
anniversary hereof but before the second anniversary hereof; and (iii) 1% of the
Maximum Credit if terminated on or after the second anniversary hereof but
before the Renewal Date. Such early termination fee shall be presumed to be the
amount of damages sustained by Lender as a result of such early termination and
Borrower agrees that it is reasonable under the circumstances currently
existing. The early termination fee provided for in this Section 12.1 shall be
deemed included in the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be
in writing and (a) made to Lender at its address set forth below and to Borrower
at its chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and
any other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower and with Borrower's consent (which consent shall not be
unreasonably withheld or delayed), assign its rights and delegate its
obligations under this Agreement and the other Financing Agreements and, with
Borrower's consent (which consent shall not be unreasonably withheld or delayed)
in the case of an assignment, further may assign, or sell participations in, all
or any part of the Loans, the Letter of Credit Accommodations or any other
interest herein to another financial institution or other person, in which
event, the assignee or participant shall have, to the extent of such assignment
or participation, the same rights and benefits as it would have if it were
Lender hereunder, except as otherwise provided by the terms
of such assignment; provided, HOWEVER, that in the case of any participation (i)
Lender's obligations under this Agreement shall remain unchanged, (ii) Lender
shall remain solely responsible to Borrower for the performance of such
obligations, (iii) no such grant of a participation shall, without the consent
of Borrower, require Borrower to file a registration statement with the
Securities and Exchange Commission or apply to qualify the Loans under the blue
sky laws of any State, (iv) Borrower shall continue to deal solely and directly
with Lender in connection with Lender's rights and obligations under this
Agreement and (v) Lender shall retain the sole right to enforce the obligations
of Borrower relating to the Loans and to approve any amendment, modification or
waiver of any provision of this Agreement (other than a modification, alteration
or amendment hereof in any "material respect" (within the meaning of such term
in any or all applicable participation agreements) or a waiver or release of any
"material rights" (within the meaning of such term in any or all applicable
participation agreements)).
12.5 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
12.6 Confidentiality. Lender shall use good faith efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrower pursuant to this Agreement, PROVIDED,
that, nothing contained herein shall limit the disclosure of any such
information: (i) to the extent required by statute, rule, regulation, subpoena
or court order, (ii) to bank examiners and other regulators, auditors and/or
accountants, (iii) in connection with any litigation with Borrower to which
Lender is a party or in connection with any other litigation, PROVIDED, that,
Lender shall notify Borrower of Lender's receipt of a request for any
information from any third party in connection with any such litigation, (iv) to
any assignee or participant (or prospective assignee or participant) which shall
have agreed to treat such information as confidential or (v) to counsel for
Lender or any participant or assignee (or prospective participant or assignee).
[Signature page follows]
IN WITNESS WHEREOF, Lender and Borrower have caused these presents
to be duly executed as of the day and year first above written.
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION EAGLE FOOD CENTERS, INC.
(Central)
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ S. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President Title: Senior Vice President-
Chief Financial Officer
and Secretary
Address: Chief Financial Officer:
------- -----------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ 67 & Knoxville Road
Suite 2200 Milan,
Illinois 61264
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
[Signature Page to Second Amended and Restated
Loan and Security Agreement]
EAGLE FOOD CENTERS, INC.
Real Estate Amortization Prepared by: ▇. ▇▇▇▇▇▇
Loan and Security Agreement
(in millions)
AMORTIZED VALUE
MONTH 1 2 3 4 5 6 7 8 9 10
STORE APPRAISED AVAIL- ------------------------------------------------------------------------------------------
NUMBER LOCATION VALUE ABILITY ENDING
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 2,170 1,085 1,062 1,040 1,017 995 972 949 927 904 882 859
009 Rockford, IL 2,150 1,075 1,053 1,030 1,008 985 963 941 918 896 873 851
016 Burlington, IA 1,650 825 808 791 773 756 739 722 705 688 670 653
018 Dubuque, IA 3,630 1,815 1,777 1,739 1,702 1,664 1,626 1,588 1,550 1,513 1,475 1,437
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ 2,300 1,150 1,126 1,102 1,078 1,054 1,030 1,006 982 958 934 910
062 Kewanee, lL 1,450 725 710 695 680 665 649 634 619 604 589 574
075 Rock Island, IL 2,250 1,125 1,102 1,078 1,055 1,031 1,008 984 961 938 914 891
089 Bettendorf, IA 5,080 2,540 2,487 2,434 2,381 2,328 2,275 2,223 2,170 2,117 2,064 2,011
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ 3,000 1,500 1,469 1,438 1,406 1,375 1,344 1,313 1,281 1,250 1,219 1,188
----------------- ----------------------------------------------------------------------------------
Total 23,680 11,840 11,593 11,347 11,100 10,853 10,607 10,360 10,113 9,867 9,620 9,373
================= ==================================================================================
AMORTIZED VALUE
MONTH 11 12 13 14 15 16 17 18 19 20
STORE APPRAISED AVAIL- ------------------------------------------------------------------------------------------
NUMBER LOCATION VALUE ABILITY ENDING
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 2,170 1,085 836 814 791 769 746 723 701 678 656 633
009 Rockford, IL 2,150 1,075 829 806 784 761 739 717 694 672 649 627
016 Burlington, IA 1,650 825 636 619 602 584 567 550 533 516 498 481
018 Dubuque, IA 3,630 1,815 1,399 1,361 1,323 1,286 1,248 1,210 1,172 1,134 1,097 1,059
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ 2,300 1,150 886 863 839 815 791 767 743 719 695 671
062 Kewanee, lL 1,450 725 559 544 529 514 498 483 468 453 438 423
075 Rock Island, IL 2,250 1,125 867 844 820 797 773 750 727 703 680 656
089 Bettendorf, IA 5,080 2,540 1,958 1,905 1,852 1,799 1,746 1,693 1,640 1,588 1,535 1,482
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ 3,000 1,500 1,156 1,125 1,094 1,063 1,031 1,000 969 938 906 875
----------------- ---------------------------------------------------------------------------
Total 23,680 11,840 9,127 8,880 8,633 8,387 8,140 7,893 7,647 7,400 7,153 6,907
================= ===========================================================================
AMORTIZED VALUE
MONTH 21 22 23 24 25 26 27 28 29 30
STORE APPRAISED AVAIL- ------------------------------------------------------------------------------------------
NUMBER LOCATION VALUE ABILITY ENDING
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 2,170 1,085 610 588 565 543 520 497 475 452 429 407
009 Rockford, IL 2,150 1,075 605 582 560 537 515 493 470 448 426 403
016 Burlington, IA 1,650 825 464 447 430 413 395 378 361 344 327 309
018 Dubuque, IA 3,630 1,815 1,021 983 945 908 870 832 794 756 718 681
039 Jacksonville, IL 2,300 1,150 647 623 599 575 551 527 503 479 455 431
062 Kewanee, lL 1,450 725 408 393 378 363 347 332 317 302 287 272
075 Rock Island, IL 2,250 1,125 633 609 586 563 539 516 492 469 445 422
089 Bettendorf, IA 5,080 2,540 1,429 1,376 1,323 1,270 1,217 1,164 1,111 1,058 1,005 ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ 3,000 1,500 844 813 781 750 719 688 656 625 594 563
----------------- ---------------------------------------------------------------------------
Total 23,680 11,840 6,660 6,413 6,167 5,920 5,673 5,427 5,180 4,933 4,687 4,440
================= ===========================================================================
AMORTIZED VALUE
MONTH 31 32 33 34 35 36 37 38 39 40
STORE APPRAISED AVAIL- ------------------------------------------------------------------------------------------
NUMBER LOCATION VALUE ABILITY ENDING
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 2,170 1,085 384 362 339 316 294 271 249 226 203 181
009 Rockford, IL 2,150 1,075 381 358 336 314 291 269 246 224 202 179
016 Burlington, IA 1,650 825 292 275 258 241 223 206 189 172 155 138
018 Dubuque, IA 3,630 1,815 643 605 567 529 492 454 416 378 340 303
039 Jacksonville, IL 2,300 1,150 407 383 359 335 311 288 264 240 216 192
062 Kewanee, lL 1,450 725 257 242 227 211 196 181 166 151 136 121
075 Rock Island, IL 2,250 1,125 398 375 352 328 305 281 258 234 211 188
089 Bettendorf, IA 5,080 2,540 900 847 794 741 688 635 582 529 476 423
301 Geneseo, IL 3,000 1,500 531 500 469 438 406 375 344 313 281 250
----------------- ---------------------------------------------------------------------------
Total 23,680 11,840 4,193 3,947 3,700 3,453 3,207 2,960 2,713 2,467 2,220 1,973
================= ===========================================================================
AMORTIZED VALUE
MONTH 41 42 43 44 45 46 47 48
STORE APPRAISED AVAIL- ---------------------------------------------------------------
NUMBER LOCATION VALUE ABILITY ENDING
---------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 2,170 1,085 158 136 113 90 68 45 23 0
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ 2,150 1,075 157 134 112 90 67 45 22 (0)
▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ 1,650 825 120 103 86 69 52 34 17 -
018 Dubuque, IA 3,630 1,815 265 227 189 151 113 76 38 -
039 Jacksonville, IL 2,300 1,150 168 144 120 96 72 48 24 (0)
062 Kewanee, lL 1,450 725 106 91 76 60 45 30 15 0
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 2,250 1,125 164 141 117 94 70 47 23 -
▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ 5,080 2,540 370 318 265 212 159 106 53 0
301 Geneseo, IL 3,000 1,500 219 188 156 125 94 63 31 -
----------------- --------------------------------------------------
Total 23,680 11,840 1,727 1,480 1,233 987 740 493 247 0
================= ==================================================