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Exhibit 10.12
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of November 17, 1999
between
SPINCYCLE, INC.,
as Borrower
and
LASALLE BANK NATIONAL ASSOCIATION,
as Lender
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ("Agreement"),
dated as of November 17, 1999, is entered into between "Lender" and "Borrower"
(hereinafter defined).
R E C I T A L S:
A. Borrower and Lender, as assignee of Heller Financial, Inc. and
Finova Capital Corporation ("Prior Lenders"), are parties to a Loan and Security
Agreement dated as of April 28, 1998, as amended and supplemented from time to
time (collectively, the "Prior Agreements"), pursuant to which Lender made
revolving loans to Borrower and Borrower granted Lender, as successor to Heller
Financial, Inc., as Agent, a lien on the Collateral.
B. Borrower desires, upon the terms and conditions set forth in this
Agreement, to amend and restate the Prior Agreements in their entirety.
NOW, THEREFORE, in consideration of the parties' mutual agreements
contained herein, the parties hereto agree as follows:
1. DEFINITIONS
1.1 General Terms. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" shall mean all of Borrower's presently existing and
hereafter arising accounts, accounts receivable, contract
rights, instruments, documents, chattel paper, and all other
forms of obligations owing to Borrower arising out of the sale
or lease of goods or the rendition of services by Borrower,
whether or not earned by performance, and any and all credit
insurance, guarantees, letters of credit and other security
therefor, as well as all merchandise returned to or reclaimed
by Borrower, and all products and proceeds of the foregoing.
"Affiliate" shall mean any Person that directly or indirectly,
through one or more intermediaries, controls or is controlled
by, or is under common control with, Borrower.
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"Agreement" shall mean this Amended and Restated Loan and
Security Agreement, any and all exhibits or schedules hereto,
any and all concurrent or subsequent riders to this Amended and
Restated Loan and Security Agreement and any extensions,
supplements, amendments, modifications or restatements to or of
this Amended and Restated Loan and Security Agreement and/or to
or of any such rider.
"Alliance" means Alliance Laundry Systems LLC.
"Alliance Financing" shall mean the term loan by Alliance to
Borrower in the original principal amount of $3,000,000,
evidenced by the Alliance Loan Documents.
"Alliance Loan Documents" shall mean the Loan and Security
Agreement dated November 17, 1999 between Alliance and
Borrower and all other Loan Documents (as such term is
defined therein).
"Alliance Senior Collateral" shall have the meaning provided
therefor in the Intercreditor Agreement.
"Borrower" shall mean SpinCycle, Inc.
"Borrower's Books" shall mean all of Borrower's books and
records including, but not limited to: minute books; ledgers;
records indicating, summarizing, or evidencing Borrower's
assets, liabilities, the Accounts and all information relating
thereto; records indicating, summarizing, or evidencing
Borrower's business operations or financial condition; records
indicating, summarizing, or evidencing Borrower's compliance
with or problems or activities concerning Environmental Laws;
and all computer programs, disc or tape files, printouts, runs,
and other computer prepared information and the equipment
containing such information and any software necessary to
operate the same.
"Business Day(s)" shall mean (a) any day other than a Saturday,
Sunday or other day on which banks in Illinois are closed, and
(b) relative to Eurodollar Loans, any day on which dealings in
Dollars are carried on in the interbank Eurodollar market which
also satisfies the criteria set forth in (a) above.
"Capital Expenditures" shall mean, with respect to any period,
the aggregate of all expenditures (whether paid in cash or
accrued as liabilities and including expenditures for the
portion of capitalized lease obligations amortizable in the
fiscal period of measurement) by Borrower during such period
that are required by Generally Accepted Accounting Principles
to be
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included in or reflected by the property, plant, or equipment
or similar fixed asset accounts in the balance sheet of
Borrower.
"Closing" shall have the meaning set forth in Section 5.1
hereof.
"Code" shall mean the Uniform Commercial Code of the State of
Illinois as in effect from time to time during the Initial Term
and any renewal term hereof, and any and all terms used in this
Agreement which are not otherwise defined herein but are
defined in the Code shall be construed and defined in
accordance with the meaning and definition ascribed to such
terms under the Code.
"Collateral" shall mean each and all of the following wherever
located and whether now existing or owned or hereafter created
or acquired by Borrower: the Accounts; the General Intangibles;
the Negotiable Collateral; the Inventory; Borrower's Books; the
Equipment; any money, deposit accounts or other assets of
Borrower in which Lender receives a Lien or which hereafter
comes into the possession, custody or control of Lender or any
bailee of Lender; and all products and proceeds of every nature
of any of the foregoing, including, but not limited to,
proceeds of insurance covering the Collateral and any and all
Accounts, General Intangibles, Negotiable Collateral,
Inventory, contract rights, instruments, documents and chattel
paper, Equipment, money, deposit accounts or other tangible and
intangible property of Borrower resulting from the sale or
other disposition of the Collateral, and the proceeds and
products thereof.
"Default Rate" shall have the meaning set forth in Section
2.14(c) hereof.
"EBITDA" shall have the meaning provided therefor in the
definition of Senior Interest Coverage Ratio set forth in this
Section.
"Effective Date" shall mean the date on which the conditions
precedent for initial Revolving Loans under Section 5 hereof
have been satisfied and the initial Revolving Loans have been
made.
"Environmental Laws" shall mean any applicable laws, statutes,
rules, regulations, orders, consent decrees, permits or
licenses of any governmental authority, relating to prevention,
remediation, reduction or control of pollution, or protection
of the environment, natural resources and/or human health and
safety, including, without limitation, such applicable laws,
statutes, rules, regulations, orders, consent decrees, permits
or licenses relating to (a) solid waste and/or Hazardous
Materials treatment, storage, disposal, generation and
transactions, (b) air, water, and noise pollution, (c) soil,
ground, water or groundwater contamination, (d) the generation,
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handling, storage, transportation or Release into the
environment of Hazardous Materials, and (e) regulation of
underground and above ground storage tanks.
"Equipment" shall mean the machinery and equipment of Borrower,
including, without limitation, laundry equipment, processing
equipment, data processing and computer equipment with software
and peripheral equipment, and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, molds, dies, attachments,
accessories, automotive equipment, trailers, trucks, motor
vehicles, leasehold improvements and cranes, and other
equipment of every kind and nature, and fixtures, all whether
now owned or hereafter acquired, and wheresoever situated,
together with all additions and accessions thereto,
replacements therefor, all parts therefor, and all manuals,
drawings, instructions, warranties, and rights with respect
thereto, and all products and proceeds of the foregoing, and
condemnation awards and insurance proceeds with respect
thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and all references to sections thereof
shall include such sections and any predecessor and successor
provisions thereto.
"Eurodollar Loan" shall mean any Revolving Loan with respect to
which the Borrower shall have selected an interest rate based
on the LIBOR Rate in accordance with the provisions of Section
2.2(a) of this Agreement; provided, however that there shall
not be in excess of three (3) Eurodollar Loans outstanding at
any one time.
"Event of Default" shall mean the occurrence of any one or more
of the events set forth in Section 12 of this Agreement.
"Excess Issuance Proceeds" shall mean the proceeds of any
issuance of Subordinated Indebtedness consented to by Lender or
any sale of equity securities by Borrower not required to be
paid to Lender by Section 9.9 of this Agreement.
"Fiscal Quarter" shall mean the four (4) fiscal quarterly
periods of Borrower during each Fiscal Year consisting of three
(3), three (3), four (4), and three (3) Reporting Periods,
respectively.
"Fiscal Year" shall mean with respect to Borrower, the fiscal
accounting period of Borrower each year consisting of thirteen
(13) four calendar week accounting periods ending on the last
Sunday of December of each calendar year.
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"Free Cash Flow" shall mean with respect to Borrower for any
period of measurement, the sum of EBITDA for such period, less
Maintenance Capital Expenditures during such period, less
income taxes paid during such period, less interest expense
paid during such period.
"Funded Debt" shall mean Indebtedness of Borrower incurred
under this Agreement, the other Loan Documents, and the
Alliance Loan Documents.
"Funded Debt Interest Expense" shall have the meaning provided
therefor in the definition of Senior Interest Coverage Ratio
set forth in this Section.
"General Intangibles" shall mean all of the Borrower's present
and future general intangibles, contract rights and other
personal property rights of Borrower to all choses or things in
action, tax refund claims, credits, claims, demands, goodwill,
licenses, franchise agreements, subscription costs, patents,
trade names, trademarks, copyrights, rights to royalties,
blueprints, drawings, customer lists, purchase orders, computer
programs, computer discs, computer tapes, literature, reports,
catalogs, methods, sales literature, video tapes, confidential
information and trade secrets, consulting agreements,
employment agreements, leasehold interests in real and personal
property, insurance policies, deposits with insurers relating
to workmen's compensation liabilities, deposit accounts, tax
refunds and proprietary rights in any Equipment, other than
Equipment, Inventory and Accounts, as well as Borrower's Books
relating to any of the foregoing, and all products and proceeds
of the foregoing.
"Generally Accepted Accounting Principles" shall mean, with
respect to any date of determination, generally accepted
accounting principles as used by the Financial Accounting
Standards Board and/or the American Institute of Certified
Public Accountants consistently applied and maintained
throughout the periods indicated.
"Hazardous Materials" shall mean any flammable or explosive
materials, petroleum (including crude oil and its fractions),
radioactive materials, hazardous wastes, toxic substances or
related hazardous materials, including without limitation
polychlorinated biphenyls, friable asbestos, and any substances
defined as, or included in the definition of toxic or hazardous
substances, wastes, or materials under any federal or
applicable state or local laws, ordinances, rules or
regulations including Environmental Laws.
"Indebtedness" shall mean, with respect to any Person, (a)
indebtedness for borrowed money or for the deferred purchase
price of property or services in respect of which such Person
is liable, contingently or otherwise, as obligor or otherwise,
including without limitation accounts payable and accrued
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indebtedness owed by such Person or any commitment by which
such Person assures a creditor against loss, including
contingent reimbursement obligations with respect to letters of
credit, (b) indebtedness guaranteed in any manner by such
Person, including guarantees in the form of an agreement to
repurchase or reimburse, (c) obligations under leases which
shall have been or should be, in accordance with Generally
Accepted Accounting Principles, recorded as capital leases, in
respect of which obligations such Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person assures a
creditor against loss, and (d) any unfunded obligation of such
Person to any Benefit Plan or Multiemployer Plan.
"Indemnified Persons" shall have the meaning set forth in
Section 18.1 hereof.
"Initial Term" shall have the meaning set forth in Section
3.1 hereof.
"Insolvency Proceeding" shall mean, with respect to any Person,
any proceeding commenced by or against such Person, under any
provision of the United States Bankruptcy Code, as amended, or
under any other bankruptcy, reorganization or insolvency law,
or any assignment for the benefit of creditors, formal or
informal moratorium, or compositions or extensions with some or
all creditors of such Person.
"Intercreditor Agreement" shall mean the Intercreditor
Agreement of even date herewith between Alliance and Lender.
"Interest Period" shall mean: (i) as to any Eurodollar Loan,
the period commencing on the date of such Eurodollar Loan and
ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar
month that is 1, 2 or 3 months thereafter, as the Borrower may
elect, and (ii) as to any Reference Rate Loan, the period
commencing on the date of such Reference Rate Loan and ending
on the earlier of (A) the last Business Day of each calendar
month, and (B) the expiration or earlier termination of this
Agreement; provided, however, that (i) if any Interest Period
would end on a day that shall not be a Business Day, such
Interest Period shall be extended to the next succeeding
Business Day unless, with respect to Eurodollar Loans only,
such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on
the immediately preceding Business Day, (ii) no Interest Period
with respect to any Revolving Loan shall end later than the
expiration of the term of this Agreement, (iii) interest shall
accrue from and including the first day of an Interest Period
to and excluding the last day of such Interest Period, and (iv)
no Interest Period may be
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selected if after giving effect thereto Borrower will be unable
to make a principal payment scheduled to be made during such
Interest Period without paying part of a Eurodollar Loan on a
date other than on the last day of an Interest Period
applicable thereto.
"Inventory" shall mean all present and future inventory in
which Borrower has any interest, including, but not limited to,
goods held by Borrower for sale or lease or to be finished
under a contract of service and all of Borrower's present and
future raw materials, work in process, finished goods, supplies
and packing and shipping materials, wherever located, and any
documents of title representing any of the above.
"IRC" shall mean the Internal Revenue Code of 1986, as amended,
and all references to sections thereof shall include such
sections and any predecessor and successor provisions thereto.
"Lender" shall mean LaSalle Bank National Association, a
national banking association.
"Letter of Credit Facility" shall have the meaning set forth in
Section 2.4 hereof.
"Letters of Credit" shall mean any standby letters of credit
which are now or hereafter at any time issued by Lender at the
request of and for the account of Borrower pursuant to the
terms of this Agreement, in form and substance acceptable to
Lender.
"LIBOR Rate" shall mean, with respect to any Eurodollar Loan
for any Interest Period, the interest rate per annum equal to
the quotient obtained by dividing (x) the rate of interest
determined by Lender to be the average of the rate per annum at
which deposits in U.S. dollars are generally offered to Lender
in the London Interbank Market at 11:00 A.M. London time, two
(2) Business Days before the first day of such Interest Period,
for a period equal to such Interest Period and in the amount of
the applicable Eurodollar Loan, by (y) the difference between
one hundred percent (100%) and any applicable reserve
requirements (rounded upward to the nearest whole multiple of
one hundredth (1/100) of one percent per annum), including,
without limitation, any statutory maximum requirement for
Lender to hold reserves for "Eurocurrency Liabilities" under
Regulation D of the Board of Governors of the Federal Reserve
System (or any similar reserves under any successor regulation
or regulations).
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"Lien" shall mean any mortgage, deed of trust, pledge, fixed or
floating charge, lien, security interest, or encumbrance or
security arrangement of any nature whatsoever, whether arising
by written or oral agreement or by operation of law, including
without limitation any conditional sale or title retention
arrangement and any assignment, deposit arrangement or lease
intended as or having the effect of, security.
"Loan Documents" shall mean all agreements, instruments and
documents, including without limitation security agreements,
loan agreements (including without limitation this Agreement),
notes, guarantees, mortgages, deeds of trust, subordination
agreements, intercreditor agreements, pledges, affidavits,
certificates, powers of attorney, consents, assignments,
landlord and mortgagee waivers, opinions, collateral
assignments, reimbursement agreements, contracts, notices,
leases, financing statements, and all amendments, supplements,
restatements and renewals thereof, and all other written
matter, whether heretofore, now or hereafter executed by or on
behalf of Borrower, or any other Person in connection with the
Obligations or the transactions contemplated hereby (including
without limitation any guaranty of the Obligations), and
delivered to Lender, together with all agreements, instruments
and documents referred to therein or contemplated thereby,
whether heretofore, now or hereafter executed by or on behalf
of Borrower or any such other Persons and delivered to Lender,
and all amendments, supplements, restatements and renewals
thereof, but not including any proposal letter, commitment
letter or other comparable documents delivered by Lender prior
to the date hereof and not expressly incorporated herein and
made a part hereof.
"Losses" shall have the meaning set forth in Section 18.1
hereof.
"Maintenance Capital Expenditures" shall have the meaning set
forth in Section 8.20 hereof.
"Maximum Revolving Credit Facility" shall mean $12,000,000.
"Negotiable Collateral" shall mean a letter of credit, advice
of credit, instrument, money, negotiable document, warehouse
receipt, bill of lading, certificated security, certificate of
title, certificate of deposit, chattel paper, or similar
property, and the proceeds thereof.
"Net Worth" means the total of Borrower's stated capital, paid
in surplus and retained earnings, less treasury stock, all as
determined in accordance with Generally Accepted Accounting
Principles.
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"Obligations" shall mean all loans, advances, overdrafts,
debts, liabilities (including, without limitation, any and all
amounts charged to Borrower's account pursuant to any agreement
authorizing Lender to charge the loan account maintained by
Lender with respect to Borrower), obligations, reimbursement
and indemnity obligations with respect to Letters of Credit,
covenants, lease payments, guarantees and duties owing by
Borrower to Lender of any kind or description (whether advanced
pursuant to or evidenced by this Agreement, by the Revolving
Loan Note, by any other Loan Document or other agreement,
instrument or document or otherwise), whether direct or
indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including without limitation
any debt, liability or obligation owing from Borrower to
another Person which Lender may have obtained by assignment of
which notice is provided to Borrower (or otherwise as a result
of a payment made by Lender on behalf of Borrower as permitted
under this Agreement or any other Loan Documents) and further
including without limitation all interest, all Out-of-Pocket
Fees and Costs which Borrower is required to pay or reimburse
by this Agreement or any other Loan Document, by law or
otherwise.
"Out-of-Pocket Fees and Costs" shall have the meaning set forth
in Section 2.15(c) hereof.
"Participant" shall mean any Person now or from time to time
hereafter participating with Lender in any of the Revolving
Loans made by Lender to Borrower pursuant to this Agreement.
"Permitted Liens" shall have the meaning set forth in Section
8.1 hereof.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability corporation,
institution, entity or governmental entity.
"Potential Default" shall mean any event which through the
passage of time, service of notice or both, would mature into
an Event of Default.
"Pro Formas" shall have the meaning set forth in Section 7.11
hereof.
"Rate" shall have the meaning set forth in Section 2.14(a)
hereof.
"Reference Rate" shall mean the variable per annum rate of
interest announced from time to time by Lender at its corporate
headquarters in Chicago, Illinois, as its prime or equivalent
rate. The "Reference Rate" is one of Lender's index rates and
merely serves as a basis under which effective rates of
interest are calculated for loans making reference thereto
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and may not be the lowest or best rate at which Lender
calculates interest or extends credit.
"Reference Rate Loan" shall mean any Loan with respect to which
Borrower shall have selected an interest rate based upon the
Reference Rate in accordance with the provisions of Section
2.2(a) of this Agreement.
"Release" shall mean any actual or threatened past, present or
future releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, seeping, injecting, escaping,
leaching, dumping or disposing, whether intentional or not.
"Reporting Period" shall mean each of Borrower's thirteen (13)
annual four week fiscal reporting periods.
"Restriction Agreement" shall have the meaning set forth in
Section 8.8 hereof.
"Revolving Loan Note" shall have the meaning set forth in
Section 2.1 hereof.
"Revolving Loans" shall have the meaning set forth in Section
2.1 hereof.
"Senior Discount Notes" shall mean Borrower's $144,990,000
principal amount of 12-3/4% Series B Senior Discount Notes due
2005, issued pursuant to an Indenture dated as of April 29,
1998 between Borrower and Norwest Bank Minnesota, N.A., as
Trustee (the "Note Indenture").
"Senior Interest Coverage Ratio" shall mean with respect to
Borrower for any period of measurement (a) the total of (i)
Borrower's net income after income taxes (exclusive of any gain
or loss in such period from an asset disposition other than
Inventory in the ordinary course of business and excluding
other extraordinary gains and losses) for such period, plus
(ii) Borrower's amortization, depreciation and other non-cash
charges (excluding Accounts reserves, Inventory reserves and
other reserves incurred in the ordinary course of business) for
such period ("EBITDA"), divided by (b) interest expense paid or
accrued on Funded Debt for such period ("Funded Debt Interest
Expense").
"Subordinated Indebtedness" shall mean Borrower's Indebtedness,
if any, to any Person, the repayment of which has been
subordinated to the repayment of the Obligations on terms and
by written agreement in form and substance acceptable to
Lender.
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"Subsidiary" shall mean any corporation of which more than
fifty percent (50%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether at the
time stock of any other class or classes of such corporation
shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or
indirectly, owned by Borrower, or any partnership, limited
liability company or joint venture of which more than fifty
percent (50%) of the outstanding equity interests are at the
time, directly or indirectly, owned by Borrower.
"Tangible Net Worth" means the sum of the Net Worth of
Borrower, plus the outstanding principal balance of the Senior
Discount Notes, less all of the following: (i) all prepaid
expenses and deposits, (ii) the book value of all such assets
which would be treated as an intangible under Generally
Accepted Accounting Principles, including without limitation,
goodwill, trademarks, tradenames, copyrights, patents,
licenses, deferred charges, unamortized debt discount and
expenses and covenants not to compete, and (iii) accounts,
notes and other receivables due from Affiliates and/or
employees of Borrower.
"Term" shall mean the term of this Agreement, including the
Initial Term and any renewal term.
"Uncured Default" shall mean an Event of Default which shall
be continuing.
1.2 Accounting Terms. Any accounting terms used in this Agreement
which are not specifically defined herein shall have the
meanings customarily given them in accordance with Generally
Accepted Accounting Principles. In the event that changes in
Generally Accepted Accounting Principles shall be mandated by
the Financial Accounting Standards Board and/or the American
Institute of Certified Public Accountants or any similar
accounting body of comparable standing, or shall be recommended
by Borrower's certified public accountants, to the extent that
such changes would modify such accounting terms or the
interpretation or computation thereof as contemplated by this
Agreement at the time of execution hereof, then in such event
such changes shall be followed in defining such accounting
terms only after the Borrower and Lender shall have agreed to
amend this Agreement to reflect the original intent of such
terms in light of such changes, and such terms shall continue
to be applied and interpreted without such change until such
agreement.
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1.3 Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronoun used shall be deemed to
cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and
shall not affect the interpretation of this Agreement. All
references to statutes and related regulations shall include
any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements,
including, without limitation, references to any of the Loan
Documents shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof. The
Recitals to this Agreement are incorporated into this Agreement
in their entirety and deemed to be a part hereof.
2. LOANS; FEES; TERMS OF PAYMENT
2.1 Revolving Credit Facility. Subject to the terms and
provisions of this Agreement including without limitation, that
no Event of Default or Potential Default has occurred and all
other conditions precedent to lending under Section 5 hereof
have been satisfied, upon the request of Borrower, made at any
time and from time to time during the term of this Agreement,
the Lender agrees to make loans and advances (individually, a
"Revolving Loan" and collectively, "Revolving Loans") to
Borrower from time to time in the amount requested by Borrower
so long as the aggregate amount of the Revolving Loans
outstanding at any time does not exceed the sum of the Maximum
Revolving Credit Facility, less the outstanding face amount of
all Letters of Credit.
Lender is hereby authorized to make the Revolving Loans
provided for in this Agreement based upon telephonic or other
instructions received from anyone purporting to be (and which
Lender in good faith believes to be) an authorized
representative of Borrower, or at the discretion of Lender, if
such Revolving Loans are necessary to satisfy any Obligation of
Borrower to Lender.
The Revolving Loans shall be evidenced by, and repayable in
accordance with, the Revolving Loan Note substantially in the
form of Exhibit A to this Agreement ("Revolving Loan Note").
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2.2 Borrowing Procedures.
(a) Lender shall have received, on or before 11:00 a.m.
Chicago time, on the day a Revolving Loan is to be
made, if a Reference Rate Loan, or three (3) Business
Days prior to the date a Revolving Loan is to be made,
if a Eurodollar Loan, including continuations and
conversions (i) an oral request from Borrower for a
Revolving Loan in a specific amount (and a request in
writing, which shall be delivered to Lender on the
same Business Day, executed by an authorized
representative of Borrower), (ii) designation whether
the Revolving Loan is to be a Eurodollar Loan or a
Reference Rate Loan, and if such Revolving Loan is to
be a Eurodollar Loan, the Interest Period or Interest
Periods with respect thereto, and (iii) copies of all
other documents which the Borrower is required to
deliver to Lender hereunder. If such request for a
Revolving Loan is received by Lender before 11:00 a.m.
Chicago time on the day a Reference Rate Loan is to be
made, or before 11:00 a.m. Chicago time three (3)
Business Days prior to the date a Eurodollar Loan is
to be made, subject to the other terms and conditions
of this Agreement, Lender will make such Revolving
Loan on the applicable day on which such Revolving
Loan is to be funded hereunder, subject to any delays
beyond Lender's reasonable control, provided that
Lender shall not be liable for any damages or
liabilities for the failure to so make any Revolving
Loan on the day requested, unless such failure was due
to Lender's gross negligence or wilful misconduct. If
no election as to the type of Revolving Loan is
specified in any such notice by Borrower, then such
Revolving Loan shall be a Reference Rate Loan. If no
Interest Period is specified with respect to a
Eurodollar Loan in such notice, then Borrower shall be
deemed to have selected an Interest Period of one
month's duration. Notwithstanding anything contained
in this Agreement to the contrary, Borrower may not
have more than three (3) Eurodollar Loans outstanding
at any one time, and each request for a Eurodollar
Loan shall be in a minimum initial increment of
$1,000,000.
2.3 Renewals: Conversion and Continuation of Revolving Loans.
(a) Provided no Potential Default or Event of Default has
occurred, upon maturity of any Revolving Loan, upon
notice to Lender given in the manner and at the times
specified in Section 2.2(a) of this Agreement with
respect to Revolving Loans to be renewed, the Borrower
may renew all or any part of any Revolving Loan to it
from Lender with a Revolving Loan of the same or a
different type from Lender, subject to the conditions
and limitations set forth herein and elsewhere in this
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Agreement. Any Revolving Loan or part thereof so
renewed shall be deemed to be repaid in accordance
with this Section 2.3(a) with the proceeds of a new
borrowing hereunder and the proceeds of the new
Revolving Loan, to the extent such proceeds do not
exceed the principal amount of the Revolving Loan
being renewed, shall not be paid by Lender to
Borrower.
(b) Provided no Potential Default or Event of Default has
occurred, the Borrower shall have the right at any
time, upon notice to Lender given in the manner and at
the times specified in Section 2.2(a) of this
Agreement with respect to the Revolving Loans to be
converted or continued, to convert its Eurodollar
Loans into Reference Rate Loans, to convert its
Reference Rate Loans into Eurodollar Loans (specifying
the Interest Period to be applicable thereto), to
convert the Interest Period applicable to any of its
Eurodollar Loans to another permissible Interest
Period, and to continue any of its Revolving Loans
into a subsequent Interest Period of any permissible
duration, subject to the terms and conditions of this
Agreement, and to the following:
(i) each conversion shall be effected by Lender by
applying the proceeds of the new Reference
Rate Loan or Eurodollar Loan, as the case may
be, to the Reference Rate Loan or Eurodollar
Loan (or portion thereof) being converted;
(ii) accrued interest on a Revolving Loan (or
portion thereof) being converted or continued
shall be paid by the Borrower at the time of
conversion or continuation;
(iii) if any Eurodollar Loan is converted at any
time other than the end of an Interest
Period applicable thereto, the Borrower
shall make such payments associated
therewith as are required pursuant to
Section 2.4 at the time such Eurodollar Loan
shall be converted to a Reference Rate Loan;
and
(iv) the Interest Period applicable to any
Eurodollar Loan resulting from a conversion or
continuation shall be specified by the
Borrower in the notice of conversion or
continuation delivered pursuant to this
Section 2.3 provided, however, that if no such
Interest Period shall be specified, the
Borrower shall be deemed to have selected an
Interest Period of one month's duration.
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<PAGE> 16
2.4 Indemnity.
The Borrower hereby agrees to indemnify Lender against any
loss, fee, claim, damage, liability or expense which Lender may
sustain or incur as a consequence of (i) any failure by the
Borrower to fulfill on the date of any borrowing of a
Eurodollar Loan hereunder the applicable conditions set forth
in this Agreement which Borrower is required to fulfill as of
such date with respect to a Revolving Loan, (ii) any failure by
the Borrower to borrow hereunder after notice of borrowing
pursuant to this Agreement has been given to Lender, except
where the availability of Eurodollar Loans is suspended by
Lender pursuant to Section 2.6 of this Agreement, (iii) any
payment, prepayment or conversion of a Eurodollar Loan required
by any provision of this Agreement, or otherwise made on a date
other than the last day of the applicable Interest Period, or
(iv) the occurrence of any Event of Default, including, but not
limited to, any loss or reasonable expense sustained or
incurred or to be sustained or incurred in liquidating or
employing deposits from third parties acquired to effect or
maintain such Revolving Loan or any part thereof as a
Eurodollar Loan. Such loss or reasonable expense shall include,
without limitation, an amount equal to the excess, if any, as
reasonably determined by Lender of its cost of obtaining the
funds for the Eurodollar Loan being paid, prepaid or converted
or not borrowed (based on the LIBOR Rate applicable thereto)
for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest
Period for such Eurodollar Loan (or, in the case of a failure
to borrow, the Interest Period for such Eurodollar Loan which
would have commenced on the date of such failure to borrow)
over the amount of interest (as reasonably determined by
Lender) that could be realized by Lender in reemploying during
such period the funds so paid, prepaid or converted or not
borrowed. A certificate of Lender setting forth any amount or
amounts which Lender is entitled to receive pursuant to this
Section 2.4 shall be conclusive absent manifest error.
2.5 Change in Legality.
(a) Notwithstanding anything to the contrary herein
contained, if any change in any law or regulation or
in the interpretation thereof by any governmental
authority charged with the administration or
interpretation thereof shall make it unlawful for
Lender to make or maintain any Eurodollar Loan or to
give effect to its obligations as contemplated hereby
(an "Illegality"), or if Lender determines that
maintenance of Eurodollar Loans would cause Lender to
implement or modify any reserve, special deposit or
assessment or other requirement, or impose any other
condition on Lender affecting the Revolving Loans
(each of the foregoing circumstances called a
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"Regulatory Action"), then, by written notice to the
Borrower, Lender shall:
(i) declare that Eurodollar Loans will not
thereafter be made by Lender hereunder,
whereupon the Borrower shall be prohibited
from requesting Eurodollar Loans from Lender
hereunder unless such declaration is
subsequently withdrawn; provided, however,
that if after the date of any such declaration
there shall occur any change in law or
regulation or in the interpretation thereof by
any government authority charged with the
administration or interpretation thereof that
shall eliminate such Illegality, Lender shall
as promptly as reasonably practicable notify
the Borrower of such occurrence and withdraw
such declaration; and
(ii) require that all outstanding Eurodollar Loans
made by Lender be converted to Reference Rate
Loans, in which event (1) all such Eurodollar
Loans shall be automatically converted to
Reference Rate Loans as of the effective date
of such notice as provided in paragraph (b)
below and, (2) all payments and prepayments of
principal which would otherwise have been
applied to repay the converted Eurodollar
Loans shall instead be applied to repay the
Reference Rate Loans resulting from the
conversion of such Eurodollar Loans
(b) for purposes of this Section 2 a notice to the
Borrower by Lender pursuant to paragraph (a) above
shall be effective on the date of receipt by the
Borrower.
2.6 Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of LIBOR Rate.
If on or prior to the first day of any Interest Period for any
borrowing of Eurodollar Loans:
(a) the Lender advises the Borrower that deposits in
United States Dollars (in the applicable amounts) are
not being offered to it in the off-shore U.S. Dollar
interbank market for such Interest Period, or
(b) the Lender advises the Borrower that the LIBOR Rate as
determined by the Lender will not adequately and
fairly reflect the cost to Lender of funding the
Eurodollar Loans for such Interest Period, until it
notifies the Borrower that the circumstances giving
rise to such
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<PAGE> 18
suspension no longer exist, the obligations of the
Lender to make Eurodollar Loans shall be suspended
without liability to Lender.
2.7 Increased Cost and Reduced Return.
(a) If on or after the date hereof, the adoption of any
applicable law, rule or regulation, or any change
therein, or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or
compliance by Lender with any request or directive
(whether or not having the force of law) of any such
authority, central bank or comparable agency:
(i) shall subject Lender to any tax, duty or other
charge with respect to its Eurodollar Loans,
the Revolving Loan Note or its obligation to
make Eurodollar Loans, or shall change the
basis of taxation of payments to Lender of the
principal of or interest on its Eurodollar
Loans or any other amounts due under this
Agreement in respect of its Eurodollar Loans
or its obligation to make Eurodollar Loans
(except for changes in the rate of tax on the
overall net income of Lender imposed by the
jurisdiction in which Lender's principal
executive office is located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar
requirement (including, without limitation,
any such requirement imposed by the Board of
Governors of the Federal Reserve System),
against assets of, deposits with or for the
account of, or credit extended by, Lender or
shall impose on Lender or on the interbank
market any other condition affecting Lender's
Eurodollar Loans, the Revolving Loan Note or
its obligation to make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost
to Lender of making or maintaining any Eurodollar Loan, or to
reduce the amount of any sum received or receivable by such
Lender under this Agreement or under the Revolving Loan Note
with respect thereto, by an amount deemed reasonably and in
good faith by Lender to be material, then, Borrower shall,
within fifteen (15) days after demand by Lender setting forth
the computation of the amount of any increased costs, be
obligated to pay Lender such additional amount or amounts as
will compensate Lender for such increased cost or reduction
(computed commencing on the effective date of any event
mentioned herein). Lender agrees to use its best efforts to
give the Borrower notice of the occurrence of any event
mentioned herein.
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<PAGE> 19
In addition, Lender may, upon notice to Borrower, elect to
increase the interest rate applicable to all Eurodollar Loans
made subsequent thereto, to compensate Lender for such
increased cost or reduced yield.
2.8 Regulations Affecting Loans. If (a) Regulation D, Regulation M
or any other regulation of the Board of Governors of the
Federal Reserve System or any other Federal regulation, or (b)
after the date hereof, the adoption of any applicable law, rule
or regulation, or any change, amendment to, deletion from or
revision, modification or other change therein, or any change
in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
by any court, or compliance by Lender with any request or
directive (whether or not having the force of law) of any such
authority, central bank or comparable agency,
(a) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by
the Federal Reserve Board), special deposit, special
assessment or similar requirement against assets of,
deposits with or for the account of, or credit
extended by, Lender; or
(b) shall impose on Lender any other condition affecting
the Revolving Loans;
and the result of any of the foregoing is to increase the cost
to Lender of making or maintaining the Revolving Loans, or to
reduce the amount of any sum received or receivable by Lender
under this Agreement or under the Revolving Loan Note with
respect thereto, then on the earlier of termination of this
Agreement or fifteen (15) days after demand by Lender setting
forth the computation of the amount of any increased costs,
Borrower shall pay directly to Lender from time to time such
additional amount or amounts as Lender reasonably determines
will compensate Lender for such increased cost or such
reduction. Lender agrees to use its best efforts to give the
Borrower notice of the occurrence of any event mentioned herein
prior to Lender's demand for payment.
2.9 Letter of Credit Facility.
(a) Subject to the terms and provisions of this Agreement,
including without limitation, that no Event of Default
or Potential Default has occurred and all other
conditions precedent to lending under Section 5 hereof
have been satisfied, Lender may, at Borrower's request
and for the account of Borrower, issue Letters of
Credit; provided, that the aggregate undrawn face
amount of the Letters of Credit shall not
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<PAGE> 20
at any time exceed the sum of Five Hundred Thousand
Dollars ($500,000.00) (the "Letter of Credit
Facility") and no Letter of Credit shall have a term
extending beyond the term of this Agreement.
(b) Borrower agrees to pay to (i) Lender upon the opening
of a Letter of Credit and thereafter on demand,
Lender's standard administrative and operating fees
and charges in effect from time to time for issuing,
administering and paying draws under any Letters of
Credit, plus (ii) a fee, payable upon issuance of each
Letter of Credit and annually thereafter equal to two
percent (2.00%) per annum of the aggregate face amount
available to be drawn under such Letter of Credit.
Borrower shall execute Lender's customary form of
application and related documents for each Letter of
Credit requested by it.
(c) Borrower agrees to reimburse Lender, within one (1)
Business Day after demand, for each payment made by
Lender under or pursuant to any Letter of Credit
issued by Lender on behalf of Borrower. Borrower
further agrees to pay to Lender, on demand, interest
at the Default Rate on any amount paid by Lender under
or pursuant to any such Letter of Credit from the due
date of payment until the date of reimbursement to
Lender. Lender shall, upon the request of Borrower
when no Event of Default or Potential Default exists
(to the extent the Revolving Credit Facility shall
then be in effect and there is additional availability
for Revolving Loans thereunder, but without regard to
the other conditions precedent set forth in Section
5), provide for the payment of any reimbursement
obligations due to Lender and any interest accrued
thereon under the Letter of Credit Facility by
advancing the amount thereof to Borrower as a
Revolving Loan.
(d) Borrower's obligation to reimburse Lender for payments
and disbursements made by Lender under any Letter of
Credit requested by Borrower and issued by Lender
shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff,
counterclaim or defense to payment which Borrower may
have or have had against Lender, including, without
limitation, any defense based on the failure of the
demand for payment under such Letter of Credit to
conform to the terms of such Letter of Credit, the
legality, validity, regularity or enforceability of
such Letter of Credit, or the identity of the
transferee of such Letter of Credit or the sufficiency
of any transfer if such Letter of Credit is
transferable; provided, however that Borrower shall
not be obligated to reimburse Lender for any wrongful
payment or disbursement made under any Letter of
Credit as a result of acts or omissions constituting
gross
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<PAGE> 21
negligence or willful misconduct on the part of Lender
or any of its officers, employees or agents.
(e) Notwithstanding anything to the contrary herein, upon
the occurrence of an Event of Default or upon
termination of the Letter of Credit Facility or
termination of this Agreement whether by expiration of
the existence of such facility or the term or
otherwise, an amount equal to the aggregate amount of
the outstanding Obligations of Borrower under or in
connection with Letters of Credit shall, at Lender's
option and without demand upon or further notice to
Borrower, be deemed (as between Lender and Borrower)
to have been paid or disbursed by Lender under the
Letters of Credit issued by Lender (notwithstanding
that such amounts may not in fact have been so paid or
disbursed), and a Revolving Loan to Borrower in the
amount of such Obligations to have been made and
accepted, which Revolving Loan shall be immediately
due and payable. In lieu of the foregoing, at the
election of Lender at any time after an Event of
Default, or upon expiration or termination of the
Letter of Credit Facility or this Agreement, whether
by expiration of the term or otherwise, Borrower
shall, upon Lender's demand, deliver to Lender cash or
wire transfer of immediately available funds, in an
amount equal to the aggregate outstanding face amount
of all Letters of Credit. Any such cash and/or any
amounts received by Lender in payment of the Revolving
Loan made pursuant to this paragraph shall be
delivered to and held by Lender in a separate account
appropriately designated as a cash collateral account
in relation to this Agreement and the Letters of
Credit and shall be retained by Lender as collateral
security in respect of, first, Borrower's Obligations
under or in connection with the Letters of Credit and
then, all other Obligations. Such amounts shall not be
used by Lender to pay any amounts drawn or paid under
or pursuant to any Letter of Credit, but may be
applied to reimburse Lender for drawings or payments
under or pursuant to Letters of Credit which Lender
has paid, or if no such reimbursement is required, to
payment of such other Obligations as Lender shall
determine. Any amounts remaining in any cash
collateral account established pursuant to this
paragraph following payment in full of all Obligations
shall be returned to Borrower.
(f) In determining whether to make any payment under or
pursuant to any Letter of Credit, Lender shall have no
obligation to Borrower or any other Person other than
to confirm that any documents required to be delivered
have been delivered and that such documents comply on
their face with the requirements of such Letter of
Credit. No other
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<PAGE> 22
action taken or omitted by Lender under or in
connection with any Letter of Credit, if taken or
omitted in the absence of gross negligence or willful
misconduct, shall put Lender under any resulting
liability to Borrower.
2.10 Payments.
(a) Borrower shall make each payment in respect of the
principal of and interest on the Revolving Loans and
any other payments due under this Agreement not later
than 12:00 p.m. Chicago time on the day when due, in
United States dollars, to Lender at its office in
Chicago, Illinois in immediately available funds.
(b) Borrower shall, at the time of making such payment
under this Agreement or the Revolving Credit Note,
specify to Lender the amounts payable by Borrower
hereunder to which such payment is to be applied (and
in the event that it fails to so specify, or if an
Event of Default has occurred and has not been cured
or waived as set forth in this Agreement, Lender shall
distribute such payment in such manner as Lender may
determine to be appropriate).
2.11 Sharing of Payments, Etc. Borrower agrees that, in addition to
(and without limitation of) any right of set-off, bankers' lien
or counterclaim Lender might otherwise have, Lender shall be
entitled, at its option, to offset balances held by it for the
account of Borrower at any of its offices, against any
Obligations which are not paid when due subject to any
applicable grace periods (regardless of whether such balances
are then due to Borrower), in which case it shall promptly
notify Borrower thereof, provided that Lender's failure to
provide such notice shall not affect the validity thereof.
2.12 All Loans One Obligation. All Loans by Lender to Borrower under
this Agreement shall constitute Obligations of Borrower,
secured by Lender's Lien on the Collateral, and by any Lien
heretofore, now or at any time or times hereafter granted by
Borrower to Lender under any Loan Document.
2.13 Payment of Over Advances. If, at any time and for any reason,
the outstanding Revolving Loans exceed the Maximum Revolving
Credit Facility, any such excess shall immediately be due and
payable by Borrower to Lender, and prior to such repayment such
over advances shall bear interest at the Default Rate.
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2.14 Interest.
(a) Rate. All Obligations owed by Borrower to Lender
(except for Eurodollar Loans and those Obligations
evidenced by a note other than the Revolving Loan
Note, or covered by any other Section of this
Agreement or other agreement which specifically
provides for a rate of interest different from that
provided for herein) shall bear interest on the unpaid
principal balance thereof, at a rate per annum
(computed on the basis of the actual number of days
elapsed over a 360 day year) equal to the Reference
Rate, plus one percent (1.00%) (the "Rate"). Interest
owed on the Obligations (other than Eurodollar Loans)
shall be payable monthly in arrears on the first
Business Day of each month.
In addition to calculations of the Rate as provided
above, in the event that the Reference Rate announced
is, from time to time hereafter, changed, adjustment
in the Rate shall be made on the effective date of
such change in the Reference Rate. Lender shall use
reasonable efforts to notify Borrower of each change
in the Reference Rate as soon as practicable, but
Borrower's obligation to pay all interest at the Rate
and Default Rate as provided in this Agreement shall
not be affected by, nor shall Lender have any
liability for, any failure to so notify Borrower.
(b) LIBOR Rate. Subject to the provisions of Section 2.14
of this Agreement, each Eurodollar Loan shall bear
interest on the unpaid principal balance thereof at a
rate per annum (computed on the basis of the actual
number of days elapsed over a 360 day year) equal to
the LIBOR Rate for the Interest Period in effect for
such Eurodollar Loan, plus three percent (3.00%).
Interest on Eurodollar Loans shall be payable in
arrears on the last day of the applicable Interest
Period.
(c) Default Rate. Notwithstanding the foregoing, the
Obligations shall bear interest, from and after
written notice by Lender to Borrower of the occurrence
of an Event of Default and for so long as such Event
of Default has not been cured or waived as set forth
in this Agreement, and without constituting a waiver
of any such Event of Default, on the balances owing
from time to time, at a rate per annum equal to two
percentage (2.00%) points above the Rate (the "Default
Rate"), payable on demand.
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<PAGE> 24
(d) Maximum Interest. It is the intention of Lender and
Borrower to comply with the laws of the State of
Illinois, and notwithstanding any provision to the
contrary contained herein or in the other Loan
Documents, Borrower shall not be required to pay, and
Lender shall not be permitted to collect, any amount
in excess of the maximum amount of interest permitted
by applicable law ("Excess Interest"). If any Excess
Interest is provided for or determined to have been
provided for by a court of competent jurisdiction in
this Agreement or in any of the other Loan Documents,
then in such event (i) the provisions of this Section
2.14(d) shall govern and control; (ii) Borrower shall
not be obligated to pay any Excess Interest; (iii) any
Excess Interest that Lender may have received
hereunder shall be, at Lender's option, (A) applied as
a credit against either the outstanding principal
balance of the Revolving Loans or accrued and unpaid
interest hereon, (B) refunded to the payor thereof, or
(C) any combination of the foregoing; (iv) the
interest rate provided for herein shall be
automatically reduced to the maximum rate allowed
under applicable law, and this Agreement and the other
Loan Documents shall be deemed to have been, and shall
be, reformed and modified to reflect such reduction;
and (v) Borrower shall not have any action against
Lender for any damages arising out of the payment or
collection of any Excess Interest. Notwithstanding the
foregoing, if any interest payment or other charge or
fee payable hereunder or under any of the other Loan
Documents exceeds the maximum amount then permitted by
applicable law, then to the extent permitted by law,
Borrower shall be obligated to pay the maximum amount
then permitted by applicable law and Borrower shall
continue to pay the maximum amount from time to time
permitted by applicable law until all such interest
payments and other charges and fees otherwise due
hereunder or under any of the other Loan Documents (in
the absence of such restraint imposed by applicable
law) have been paid in full.
(e) Charges to Loan Account. Notwithstanding anything in
this Agreement to the contrary, Lender may, at its
option, charge any principal, interest or fees payable
hereunder or under any of the other Loan Documents to
the loan account maintained by Lender with respect to
Borrower, and any amounts so charged shall thereupon
constitute Obligations hereunder and shall thereafter
accrue interest as provided for in this Agreement.
2.15 Fees. In consideration of Lender's establishing the Maximum
Revolving Credit Facility hereunder and making of the Revolving
Loans hereunder, Borrower shall pay to Lender the following
fees and charges:
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<PAGE> 25
(a) Unused Line Fee. An unused line fee of one-half of one
percent (.50%) per annum (computed on the basis of a
year of 360 days and charged for the actual number of
days elapsed) of the amount by which the Maximum
Revolving Credit Facility exceeds the average daily
balance of the Revolving Loans, payable monthly in
arrears, on the first day of each month commencing the
first day of the first calendar month following the
Closing date.
(b) Closing Fee. A one-time closing fee equal to
$120,000.00, payable at the Closing.
(c) Out-of-Pocket Fees, Costs and Expenses. All reasonable
out-of-pocket fees, costs and expenses ("Out-of-Pocket
Fees and Costs"), incurred by Lender in connection
with the documentation, negotiation and closing of
this Agreement and the other Loan Documents and the
ongoing administration of the Revolving Loans and any
and all reasonable costs of enforcement of this
Agreement or the other Loan Documents or collection of
the Obligations, including, without limitation, the
reasonable fees, costs and expenses of attorneys and
paralegals in connection with all of the foregoing,
all of which shall be part of the Obligations, payable
on demand. Prior to an Event of Default, Lender shall
provide Borrower with copies of invoices of charges
and expenses setting forth all Out-of-Pocket Fees and
Costs. There shall be included as Out-of-Pocket Fees
and Costs, but without limitation of the foregoing
sentence, certain specific categories of Out-of-Pocket
Fees and Costs related to Collateral as follows: (i)
any reasonable costs or expenses incurred by Lender
concerning any property of Borrower relating to
Environmental Laws, including without limitation, for
consultants or engineers; (ii) any out-of-pocket fees,
costs and expenses for audits or examinations by
Lender or its agents or representatives, of Borrower
or the Collateral; and (iii) any reasonable appraisal
and evaluation fees and expenses, including for
appraisers retained by Lender in Lender's discretion
to appraise Equipment, Inventory or any other
Collateral or property of Borrower which are
undertaken pursuant to and as limited by Section
6.2(c).
2.16 Lender Rights to Collect Directly. Lender or Lender's designee
may, after the occurrence of an Event of Default which has been
declared by Lender by notice to Borrower, (i) notify customers
or account debtors of Borrower that the Accounts have been
assigned to Lender and that Lender has a Lien thereon, and (ii)
collect the Accounts directly, and charge the reasonable
collection costs and expenses to Borrower's account.
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<PAGE> 26
2.17 Disputes, Returns and Allowances. Returns and allowances, if
any, as between Borrower and its customers, will be on the same
basis and in accordance with the usual customary practices of
Borrower, as they exist at this time. After the occurrence of
an Event of Default which has not been cured or waived as set
forth in this Agreement, no discount, credit or allowance shall
be granted by Borrower to any account debtor without Lender's
consent, and no return of merchandise shall be accepted by
Borrower outside the ordinary course of its business without
Lender's consent. Lender may, in its discretion, after the
occurrence of an Event of Default which has not been cured or
waived as set forth in this Agreement, settle or adjust
disputes and claims directly with account debtors for amounts
and upon terms which Lender considers advisable, and in such
cases, Lender will credit Borrower's account with only the net
amounts received by Lender in payment of such disputed
Accounts, after deducting all Out-of-Pocket Fees and Costs
incurred or expended in connection therewith.
2.18 Lender Statements. Lender may render from time to time,
statements of the Obligations owing by Borrower to Lender,
including statements of all principal, interest, and Out-of-
Pocket Fees and Costs owing, and such statements shall be
presumed to be correct and accurate and constitute an account
stated between Borrower and Lender unless, within sixty (60)
days after receipt thereof by Borrower, Borrower shall deliver
to Lender, in accordance with Section 16 of this Agreement, at
Lender's place of business indicated in Section 16 hereof,
written objection thereto specifying the error or errors, if
any, contained in any such statement.
3. TERM OF THIS AGREEMENT; PREPAYMENTS
3.1 Term.
(a) Initial Term and Renewal Terms. This Agreement shall
have a term (the "Initial Term") commencing on the
Effective Date and expiring on September 30, 2001.
(b) Lender Right to Terminate. Notwithstanding the
foregoing, upon the occurrence of an Event of Default,
Lender may in accordance with Section 13.1 of this
Agreement terminate this Agreement without notice,
except that this Agreement shall terminate
automatically upon an Event of Default under Section
12.6 or 12.7.
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<PAGE> 27
(c) Effects of Termination. On the date of termination or
expiration of this Agreement, all Obligations owed by
Borrower shall become immediately due and payable
without notice or demand and shall be repaid in cash
or by a wire transfer of immediately available funds.
Notwithstanding termination, until all Obligations
have been fully repaid, Lender shall retain its Lien
on the Collateral of Borrower, and Borrower shall
continue to immediately turn over to Lender, in kind,
all collections received with respect to the Accounts.
3.2 Prepayment. Subject to Sections 2.3 and 2.4 of this Agreement,
Borrower may borrow, repay and reborrow Revolving Loans subject
to the terms of this Agreement.
3.3 Termination.
The indemnifications set forth in Sections 2, 18 and elsewhere
in this Agreement shall survive termination of this Agreement.
4. CREATION OF LIEN AND COLLATERAL
4.1 Security Interest. Borrower hereby grants to Lender, a
continuing Lien and security interest in all presently existing
and hereafter arising Collateral which Borrower now or
hereafter owns or has an interest in, wherever located, to
secure prompt repayment of any and all Obligations owed and to
be owed by Borrower to Lender and to secure prompt performance
by Borrower of each and all of its covenants and obligations
under this Agreement and the other Loan Documents. Lender's
Lien and security interest in the Collateral shall attach to
all Collateral without further act on the part of Lender or
Borrower. In the event that any Collateral, including proceeds,
is evidenced by or consists of Negotiable Collateral, Borrower
shall, immediately upon receipt thereof, endorse and assign
such Negotiable Collateral over to Lender (or in blank if
requested by Lender) and deliver actual physical possession of
the Negotiable Collateral to Lender.
4.2 Preservation of Collateral and Perfection of Security
Interests. Borrower shall execute and deliver to Lender,
concurrently with Borrower's execution of this Agreement, and
at any time or times hereafter immediately at the request of
Lender, all financing statements, amendments or continuations
of financing statements, fixture filings, security agreements,
chattel mortgages, assignments, endorsements of certificates of
title, affidavits, reports, notices, schedules of accounts,
letters of authority and all other documents that Lender may
reasonably request, in form satisfactory to Lender, that are
required to perfect and maintain perfected Lender's Liens in
the Collateral and to fully consummate all of the transactions
contemplated under this
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<PAGE> 28
Agreement. Borrower hereby irrevocably makes, constitutes and
appoints Lender (and any of Lender's officers, employees or
agents designated by Lender), with full power of substitution
by Lender, as Borrower's true and lawful attorney with power to
sign the name of Borrower on any of the above-described
documents or on any other similar documents which need to be
executed, recorded and/or filed to perfect or continue
perfected Lender's Lien in the Collateral upon the failure of
Borrower to do so after a request by Lender. For purposes
hereof, photocopies of this Agreement or any other Loan
Document constituting a security agreement may be filed by
Lender as a financing statement.
4.3 Inspection, Appointment as Attorney-in-Fact. Lender (through
any of its officers, employees or agents) shall have the right,
at any time or times during Borrower's usual business hours, or
during the usual business hours of any third party having
control over the records of Borrower, to inspect and verify
Borrower's Books and the Collateral in order to verify the
amount or condition of, or any other matter relating to, the
Collateral and Borrower's financial condition; provided that,
unless an Event of Default has occurred or Lender in good faith
believes that Borrower has breached a representation, warranty
or covenant hereunder, Lender shall give Borrower two (2)
Business Days' notice of Lender's inspections. In addition,
Borrower hereby appoints Lender (and any of Lender's officers,
employees or agents designated by Lender), with full power of
substitution by Lender, as Borrower's attorney-in-fact, with
power: to endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or
security that may come into Lender's possession; to sign
Borrower's name on any invoice or bill of lading relating to
any Accounts, on drafts against account debtors, on schedules
and assignments of Accounts, on verifications of Accounts and
on notices to account debtors; after an occurrence of an Event
of Default, to notify the post office authorities to change the
address for delivery of Borrower's mail to an address
designated by Lender, to receive and open all mail addressed to
Borrower, and to retain all mail relating to the Collateral and
forward all other mail to Borrower; to send, whether in writing
or by telephone, request for verifications of Accounts and
request for verifications of trade and other Indebtedness of
Borrower; and after the occurrence of an Event of Default, to
do all things necessary to carry out this Agreement. Borrower
ratifies and approves all acts of the attorney acting in
accordance with this Section 4.3 (other than those acts which
constitute gross negligence or willful misconduct) and neither
Lender nor any other Person acting as Borrower's attorney
hereunder will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law made in good faith
except as result of gross negligence or willful misconduct. The
appointment of Lender as Borrower's attorney, and each and
every one of Lender's rights and powers
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as set forth in this Section 4.3, being coupled with an
interest, are irrevocable so long as any Accounts in which
Lender has a Lien remain unpaid and until all of the
Obligations have been fully repaid and this Agreement shall
have expired or been terminated.
5. CONDITIONS PRECEDENT
5.1 Closing: Conditions to Initial Loan and Closing. The initial
Revolving Loan hereunder shall be made upon the Effective Date
hereunder at the offices of Lender's counsel ("Closing"). In
addition to those conditions set forth in Section 2 of this
Agreement and set forth in Section 5.2 with respect to all
Revolving Loans hereunder, prior to or contemporaneously with
the making of the initial Revolving Loan hereunder at Closing,
Lender shall be satisfied that all of the following conditions
precedent shall have been satisfied in a manner satisfactory to
Lender.
(a) Satisfactory Due Diligence. Lender shall have
completed and shall be satisfied with the results of
(i) due diligence by Lender and its counsel with
respect to Borrower; (ii) Lender's examination of
Borrower, including a review of prior years'
"management letters" by Borrower's independent
certified public accountants, to the extent such
management letters exist; (iii) the results of
investigations, including any consultants' reports,
concerning Environmental Laws; (iv) all appraisals
reasonably required by Lender; and (v) any
governmental approvals, waivers or consents.
(b) No Adverse Change. There shall have been, as
determined by Lender in its reasonable discretion (i)
no material adverse change since August 8, 1999 in the
operations (financial or otherwise) of Borrower, and
(ii) no material litigation or claims with respect to
this Agreement or otherwise which could have a
material adverse effect on the condition, financial or
otherwise, business, property or assets of Borrower or
the results of the operation of Borrower, the
Collateral, Lender's Liens or ability to enforce its
rights and remedies hereunder or the ability of
Borrower to pay or perform the Obligations.
(c) Senior Loan. Lender shall have received evidence
reasonably satisfactory to it that Lender has a first
priority perfected Lien on the Collateral (other than
the Alliance Senior Collateral) and a second priority
perfected Lien on the Alliance Senior Collateral, and
all financing statements and other documents Lender
deems reasonably necessary to perfect such Lien shall
have been filed and recorded.
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(d) Required Documents. Lender shall have received all of
the following documents, each in form and substance
reasonably satisfactory to Lender and its counsel,
duly executed and dated the Effective Date (or such
other date prior thereto as shall be reasonably
satisfactory to Lender), where required:
(i) Agreement. Multiple copies of this Agreement
as requested by Lender.
(ii) Revolving Loan Note. The Revolving Loan Note.
(iii) Intercreditor Agreement. The Intercreditor
Agreement.
(iv) Assignments of Leases. Assignments to Lender,
for collateral purposes, of all leases of
Borrower for any of Borrower's places of
business or leased locations where Collateral
is located, other than locations where the
Alliance Senior Collateral is located.
(v) Landlord and Mortgagee Waivers. Landlord,
mortgagee and bailee waivers for any of
Borrower's places of business, equipment
locations or Inventory storage or processing
locations, including without limitation, all
leased locations or where any Collateral is
located or where payroll and Accounts are
processed, except for such premises which are
owned by Borrower and subject only to the Lien
of Lender, together with any necessary
landlord consents to any subleases or lease
assignments to Borrower.
(vi) Certificate for Certified Resolutions,
Incumbency By-Laws. A secretary's certificate
for the Borrower with respect to resolutions
of the directors of Borrower authorizing this
Agreement and all related transactions and the
incumbency of Borrower's officers.
(vii) Legal Opinion. A legal opinion of Pedersen &
Houpt, counsel for Borrower, in form and
substance reasonably acceptable to Lender.
(viii) Organizational Documents. A copy of the
by-laws and the Certificate of Incorporation
of the Borrower, as amended to and including
the Closing date, certified by the Secretary
of State of the State of incorporation of
Borrower.
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(ix) Insurance. A certified list with copies of
insurance policies of Borrower; certificates
of liability and other third party insurance
of Borrower, each showing Lender as
certificate holder and additional insured;
certificates of property and boiler and
machinery insurance, each showing Lender as
certificate holder and lender loss payee, with
a form of lender's loss payable clause in form
and in accordance with the requirements of
Section 9.2 of this Agreement to Lender
attached to each such certificate; a
certificate of business interruption insurance
of Borrower, showing Lender as certificate
holder, lender's loss payee, and assignee of
such policy, with lender's loss payable clause
and the collateral assignment of such
insurance policy, in form and substance
satisfactory to Lender.
(x) Good Standing Certificates. Good standing
certificates and qualifications to do business
for Borrower in the State of its incorporation
and in each other State in which the failure
of Borrower to be qualified to transact
business as a corporation would have a
material adverse impact on Borrower.
(xi) Officer's Certificate. A certificate executed
by the President of Borrower in his capacity
as such officer, stating that (a) no Event of
Default or Potential Default has occurred and
is continuing, (b) no material adverse change
in the condition or operations, financial or
otherwise, or in the business prospects of
such Borrower's business, has occurred since
August 8, 1999, and (c) no litigation,
investigation or proceeding, or injunction,
writ or restraining order of the type
described in Section 7.8 or Section 9.3 hereof
is pending or threatened.
(xii) Releases. Evidence of releases of any other
Liens on the Collateral other than Permitted
Liens.
(xiii) Completion of Transactions. Satisfactory
evidence of completion of the Alliance
Financing.
(xiv) Remarketing Agreement An agreement of Alliance
for the benefit of Lender pursuant to which
Alliance agrees to assist Lender in
liquidating the Equipment in the event of the
exercise by Lender of its remedies after the
occurrence of an Event of Default.
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(xv) Payoff Letters and Releases. Payoff letters,
releases and UCC-3 termination statements,
executed by any secured party designated by
Lender, in a form appropriate for recording
and filing, as to any Lien recorded against
the Collateral and which is not permitted
hereunder.
(xvi) Pro Formas. The Pro Formas.
(xvii) Other. Such other documents as Lender shall
reasonably request.
(e) Out-of-Pocket Fees and Costs. Lender shall have
received reimbursement for all Out-of-Pocket Fees and
Costs which then have been paid or incurred by Lender.
5.2 Condition to All Loans. Notwithstanding any other provisions
contained in this Agreement, the making of each Revolving Loan
provided for in this Agreement shall be conditioned upon the
satisfaction of the matters set forth in this Section 5.2, and
each request by the Borrower for a Revolving Loan shall
constitute a representation to Lender that each such condition
set forth below has been met or satisfied.
(a) Warranties and Representations. All of the warranties
and representations contained in this Agreement or any
other Loan Document shall be true and correct in all
material respects on and as of the date of such
Revolving Loan as if made on such date and each
request for a Revolving Loan shall constitute an
affirmation by Borrower that such warranties and
representations are then true and correct in all
material respects.
(b) Borrower's Request. Lender shall have received a
request in the manner set forth in Section 2.2 of this
Agreement and copies of all other documents required
to have been delivered to Lender hereunder. Lender
shall be entitled, but not required, to rely on oral
requests for Revolving Loans from officers from time
to time designated by Borrower to Lender in writing,
and shall be fully protected in doing so.
(c) No Default. As determined by Lender in its reasonable
discretion, no Potential Default shall have occurred
and be continuing or will result from such Revolving
Loan and no Event of Default shall have occurred which
has not been cured or waived as set forth in this
Agreement or will result from such Revolving Loan.
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(d) Other Requirements and Other Documents. Lender shall
have received, in form and substance reasonably
satisfactory to Lender, all certificates, orders,
authorizations, consents, affidavits, schedules,
instruments, security agreements, financing
statements, and other documents which are provided for
hereunder, or which Lender may at any time reasonably
request.
6. WARRANTIES, REPRESENTATIONS, AND COVENANTS --
COLLATERAL
Borrower warrants, represents, covenants and agrees that:
6.1 Collateral Warranties Generally. Borrower has and will continue
to have good and marketable title to the portion of the
Collateral owned by it; the Collateral is free and clear of all
Liens, except (i) as may be consented to in writing by Lender,
(ii) as held by Lender, or (iii) Permitted Liens.
6.2 Account Warranties and Covenants. The Accounts are and will, at
all times pertinent hereto, be bona fide existing obligations
created by the sale and delivery of merchandise or the
rendition of services to account debtors in the ordinary course
of business, free of Liens (except those described in Section
6.1), and are unconditionally owed to Borrower without
defenses, disputes, offsets or counterclaims which have been
asserted, rights of return or cancellation, except for any such
defenses, offsets or counterclaims which may arise in the
ordinary course of Borrower's business.
6.3 Inventory and Equipment Warranties and Covenants.
(a) Borrower shall keep the Inventory and Equipment only
at the locations specified in Schedule 6.3 hereto or
at (i) locations consented to by Lender upon 30 days'
prior written notice to Lender, or (ii) new store
locations permitted by Section 8.20 of this
Agreement, and in the case of (i) and (ii) above,
execution by Borrower or any other Persons of such
financing statements, landlord, mortgagee, bailee,
warehouseman or other agreements requested by Lender
in its reasonable discretion.
(b) All Inventory is now and at all times hereafter shall
be of good and merchantable quality, free from defects
that make the Inventory unsalable in the ordinary
course of Borrower's business (as determined by Lender
in its reasonable discretion).
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(c) Borrower shall keep and maintain the Equipment in good
operating condition and repair (normal wear and tear
excepted) in a manner consistent with that maintained
by prudent business people in similar circumstances
and, subject to the terms of this Agreement, make
necessary or appropriate replacements thereto.
Borrower shall not permit any items of Equipment to
become a fixture to real estate or an accession to
other property and the Equipment is now and shall at
all times remain and be personal property to the
extent that under applicable law, such Equipment would
be deemed to be fixtures and/or otherwise part of the
real property, except where Lender first receives a
landlord's waiver satisfactory to it, establishing the
priority of Lender's Lien in such Equipment. Borrower
shall promptly deliver to Lender any and all evidence
of ownership, if any, of any of the Equipment
including, without limitation, certificates of title
and applications for title. Borrower shall maintain
accurate, itemized records describing the kind, type,
quality, quantity and value of the Equipment and shall
furnish Lender with a current schedule containing the
foregoing information when requested, and Borrower
shall not sell, lease, or otherwise dispose of or
transfer any of the Equipment or any part thereof,
except as otherwise permitted under the terms of this
Agreement. Borrower shall, as and when requested by
Lender, procure and supply to Lender, at Borrower's
expense, annual appraisals of the Equipment Collateral
by appraisers and in form reasonably satisfactory to
Lender; provided, however, that upon or after the
occurrence of an Event of Default, Borrower's
obligations for such appraisals shall not be limited
to annual appraisals and Lender may request or procure
additional appraisals at Borrower's expense.
(d) The Inventory and Equipment is not now and shall not
at any time or times hereafter be stored with a
bailee, warehouseman or similar party without Lender's
prior written consent, and, in such event, Borrower
will upon Lender's request, concurrent therewith,
cause any such bailee, warehouseman or similar party
to issue and deliver to Lender, in a form acceptable
to Lender, warehouse receipts in Lender's name
evidencing the storage of the Inventory or Equipment.
(e) Borrower shall keep correct and accurate records
itemizing and describing the kind, type, quality and
quantity of the Inventory, and its costs therefor, all
of which records shall be available at all times after
demand to any of Lender's officers, agents, and
employees for inspection and copying.
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(f) Lender shall have the right at all times during
Borrower's usual business hours, to inspect and
examine the Inventory and Equipment and to check and
test the same as to quality, quantity, value, and
condition; provided that prior to an Event of Default,
Lender shall provide Borrower two (2) Business Days'
prior notice of any such inspection, and Lender shall
use its good faith efforts to minimize interference
with Borrower's business in conducting such
inspections.
7. GENERAL CONTINUING WARRANTIES AND REPRESENTATIONS
Borrower warrants, represents, covenants and agrees that:
7.1 Office. The chief executive office or principal place of
business of Borrower is at the address indicated in Section 16
hereof, and Borrower covenants and agrees that it will not,
during the term of this Agreement, without at least thirty (30)
days prior written notification to Lender and the delivery to
Lender, if requested, of an executed landlord's or mortgagee's
waiver and Code financing statements in form acceptable to
Lender, relocate either such chief executive office or
principal place of business.
7.2 Existence. Borrower is and shall at all times hereafter be a
corporation, duly organized and existing under the laws of the
state of its organization and qualified and licensed to do
business, and is good standing, in any state in which it
conducts its business or in which the failure to qualify would
have a material adverse effect on the condition, financial or
otherwise, business, property or results of operations of
Borrower, which states include, as of the date hereof and as of
the Closing date, the states listed on Schedule 7.2.
7.3 Authority. Borrower has the right and power and is duly
authorized to enter into this Agreement and the other Loan
Documents.
7.4 Validity. This Agreement and all of the other Loan Documents
are the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, except
as limited by applicable bankruptcy, reorganization, insolvency
or similar laws affecting the enforcement of creditor's rights
generally.
7.5 No Breach. The execution by Borrower of this Agreement and the
other Loan Documents shall not constitute a breach of any
provision contained in Borrower's Certificate of Incorporation
or by-laws, nor does it constitute an event of default under
any material agreement to which Borrower is now or hereafter
becomes a party, nor does it violate any order, decree or
judgment of any court or governmental commission or agency.
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7.6 Solvency. On the Effective Date both prior to and after the
transactions contemplated in connection with the Closing and
the Alliance Financing, and at all times thereafter, Borrower's
assets (determined at present fair saleable value) are and
shall be greater than Borrower's liabilities (taking into
account all liabilities of Borrower, whether fixed or
contingent, direct or indirect, disputed or undisputed and
whether or not required to be reflected on a balance sheet
prepared in accordance with Generally Accepted Accounting
Principles other than Borrower's liabilities under the Senior
Discount Notes); Borrower is and shall at all times hereafter
be able to pay its debts as they mature, and Borrower does not
and will not have an unreasonably small amount of capital.
Borrower has and at all times hereafter will have sufficient
capital to carry on its business and transactions as now
conducted and as planned to be conducted in the future.
7.7 Compliance With Laws. Borrower is in compliance in all material
respects with all applicable laws, rules and regulations of any
governmental authority, including but not limited to the
Securities Act of 1933, the Securities Exchange Act of 1934,
the Fair Labor Standards Act, Environmental Laws, laws relating
to income, unemployment, payroll or social security taxes and
Benefit Plans (as defined in Section 7.15 hereof) as required
by ERISA, except for those laws, rules and regulations the
violation of which would not have a material adverse effect on
the condition, financial or otherwise, business, property or
results of operations of Borrower.
7.8 Actions or Proceedings. Except as disclosed on Schedule 7.8,
there are no actions or proceedings pending by or against
Borrower before any court, administrative agency or other
governmental entity and Borrower has no knowledge of any
pending, threatened or imminent litigation, governmental
investigations or claims, complaints, actions or prosecutions
involving Borrower, or any breaches by Borrower or any other
Person of any agreement to which Borrower is a party, except
for actions, proceedings, litigation, investigations, claims,
complaints, actions, prosecutions and breaches that involve
claims that do not exceed $100,000 individually or $200,000 in
the aggregate.
7.9 Trademarks, Licenses, etc. Borrower owns or possesses rights to
use all licenses, patents, patent applications, copyrights,
service marks, trademarks and trade names required to continue
to conduct its business as heretofore or presently conducted.
All such licenses, patents, patent applications, copyright
registrations, service marks, trademarks and trade names are
listed on Schedule 7.9. No such license or trademark has been
declared invalid, been limited by order of any governmental
authority or by agreement, or is the subject of any
infringement, interference or similar proceeding or
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<PAGE> 37
challenge, except for those licenses or trademarks which if
challenged, limited or rendered invalid, would not have a
material adverse effect on the condition, financial or
otherwise, business, property or results of operations of
Borrower, the Collateral, Lender's Liens or Lender's ability to
enforce its rights and remedies hereunder.
7.10 Financial Statements. All financial statements relating to
Borrower which have been or may hereafter be delivered by
Borrower to Lender fairly present the financial condition of
Borrower for the periods related thereto and have been prepared
in accordance with Generally Accepted Accounting Principles,
subject to year-end adjustments and the absence of footnotes
with respect to interim financial statements, and there has
been no material adverse change in the financial condition of
Borrower since the submission of such financial information to
Lender.
7.11 Pro Formas. Borrower has furnished to Lender, (i) profit and
loss statements and cash flow projections for each Reporting
Period after the Closing through December 21, 2003, and (ii)
balance sheets, profit and loss statements and cash flow
projections reflected annually for the next five (5) Fiscal
Years, including the Fiscal Year 1999, all certified by the
Chief Executive Officer or a Vice President of Borrower and
(except as stated above), based on Generally Accepted
Accounting Principles, and on financial data as of the
Effective Date, and which are attached hereto as Schedule 7.11
(the "Pro Formas"). The Pro Formas are complete and accurate,
and fairly present Borrower's assets, liabilities and financial
condition, on the bases described above, as of the Effective
Date, but taking into account the transactions contemplated by
this Agreement and those contemplated as of the Effective Date
under the other Loan Documents. There are no omissions from the
Pro Formas or other facts and circumstances not reflected in
the Pro Formas which are or may be material.
7.12 Conduct of Business. Except as contemplated hereby, since
August 8, 1999, Borrower has not (i) incurred any debts,
obligations, or liabilities (absolute, accrued, or contingent
and whether due or to become due) except current liabilities
incurred in the ordinary course of business, none of which
(individually or in the aggregate) materially and adversely
affects the business or properties of Borrower, except as set
forth in Schedule 7.12; (ii) paid any obligation or liability
other than current liabilities in the ordinary course of
business, or discharged or satisfied any Liens or encumbrances
other than those securing current liabilities, in each case in
the ordinary course of business or as required by the terms of
this Agreement; (iii) declared or made any payment to or
distribution to its stockholders as such, or purchased or
redeemed any of its shares of capital stock, or obligated
itself to do so; (iv) mortgaged, pledged, or subjected to any
Lien any of its
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<PAGE> 38
assets, tangible or intangible (other than Permitted Liens);
(v) sold, transferred or leased any of its assets except in the
usual and ordinary course of business; (vi) suffered any
physical damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting its properties or
business; (vii) except as set forth in Schedule 7.12, entered
into any transaction other than in the usual and ordinary
course of business and other than as contemplated hereby;
(viii) encountered any strikes or work stoppages or labor union
organizing activities; (ix) issued or sold any shares of
capital stock or other securities or granted any options or
similar rights with respect thereto other than pursuant to
Borrower's existing stock option plans, as such plans may be
amended with the approval of Borrower's stockholders; or (x)
agreed to do any of the foregoing other than pursuant hereto.
To Borrower's knowledge after due inquiry, there has been no
material adverse change in the business, financial condition,
operations or results of operations of Borrower since August 8,
1999.
7.13 Environmental Laws. Except as disclosed on Schedule 7.13: (i)
Borrower and all properties owned or operated by Borrower
comply with all Environmental Laws; (ii) Borrower is not
subject to any actual or threatened judicial or administrative
proceeding, investigation or inquiry into the possibility of
violation of any Environmental Laws; (iii) neither the Borrower
nor its properties is the subject of actual or, to the best of
Borrower's knowledge after due inquiry, threatened governmental
authority investigation or inquiry evaluating whether any
remedial action is needed to respond to a Release of any
Hazardous Material or other substance into the environment, and
Borrower does not have knowledge or notice of the presence on
or under any property owned or operated by it, or of the
Release of, any Hazardous Material; (iv) there is no claim
pending or, to the best of Borrower's knowledge after due
inquiry, threatened against Borrower relating to damage,
contribution, cost recovery compensation, loss, or injury
resulting from the Release of, or exposure to, any Hazardous
Material other than as listed on Schedule 7.13, which Hazardous
Material is stored in or under Borrower's properties in the
ordinary course of business in accordance with Environmental
Laws; and (v) Borrower has not filed, nor was required to file,
any notice under any law, regulation or rule indicating past or
present generation, transportation, treatment, storage or
disposal of a Hazardous Material or reporting a Release of a
Hazardous Material into the environment and has not engaged in
such activity other than in accordance with Environmental Laws
where failure to file such notice or report will not have a
material adverse effect on Borrower. Borrower does not have any
known contingent liability in connection with any Release of
any Hazardous Material into the environment; and Borrower has
not received notice, nor has reason to expect notice, of any
potential liability under any Environmental Law.
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7.14 Permits and Licenses. Borrower has not been in breach or
default under, and is current and in good standing with respect
to, all governmental approvals, permits, certificates,
licenses, inspections, consents and franchises necessary to
continue to conduct its business and to own or lease and
operate its respective properties as heretofore conducted,
owned, leased or operated, including, without limitation, any
and all governmental approvals, permits, certificates,
licenses, inspections, consents and franchises related to
Environmental Laws.
7.15 ERISA. Neither Borrower nor any ERISA Affiliate (defined below)
of Borrower, nor any Benefit Plan (defined below) is in
violation in any material respect of any of the provisions of
ERISA or any of the qualification requirements of Section
401(a) of the IRC; no Prohibited Transaction (defined below) or
Reportable Event (defined below) has occurred with respect to
any Benefit Plan, nor has any Benefit Plan been the subject of
a waiver of the minimum funding standard under Section 412 of
the IRC; nor has any Benefit Plan experienced an accumulated
funding deficiency under Section 412 of the IRC; nor has any
Lien been imposed upon Borrower or any ERISA Affiliate of
Borrower under Section 412(n) of the IRC; nor has any Benefit
Plan been amended in such a way that the security requirements
of Section 401(a)(29) of the IRC apply; no notice of intent to
terminate a Benefit Plan has been distributed to affected
parties or filed with the Pension Benefit Guaranty Corporation,
or any successor agency (the "PBGC"), under Section 4041 of
ERISA, nor has any Benefit Plan been terminated under Section
4041(e) of ERISA; the PBGC has not instituted proceedings to
terminate, or appoint a trustee to administer, a Benefit Plan
and no event has occurred or condition exists which might
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer,
any Benefit Plan; neither Borrower nor any ERISA Affiliate of
Borrower would be liable for any amount pursuant to Sections
4062, 4063 or 4064 of ERISA if all Benefit Plans terminated as
of the most recent valuation dates of such Benefit Plans;
neither Borrower nor any ERISA Affiliate of Borrower maintains
any employee welfare benefit plan, as defined in Section 3(l)
of ERISA, which provides any benefits to an employee or the
employee's dependents with respect to claims incurred after the
employee separates from service other than is required by
applicable law; and neither Borrower nor any ERISA Affiliate of
Borrower has incurred or expects to incur any withdrawal
liability to any Multiemployer Plan (defined below), or
contributes to a Multiemployer Plan. As used herein, (a)
"Benefit Plan" shall mean an employee benefit plan of Borrower
or an ERISA Affiliate, as defined in Section 3(3) of ERISA; (b)
"ERISA Affiliate" shall mean any Person which, together with
Borrower, would be treated as a single employer under Section
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<PAGE> 40
4001(a)(14) of ERISA or IRC Section 414(b), (c), (m), (n) or
(o), as applicable; (c) "Multiemployer Plan" shall mean a plan
described in Section 4001(a)(3) of ERISA which covers employees
of Borrower or any ERISA Affiliate; (d) "Prohibited
Transaction" shall mean any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of
ERISA, and any transaction described in Section 4975(c) of the
IRC which is not exempt by reason of Sections 4975(c)(2) or (d)
of the IRC, and which could result in any excise tax, fine,
penalty or other liability being imposed on Borrower; and (e)
"Reportable Event" shall mean a reportable event described in
Section 4043 of ERISA or the regulations thereunder, for which
the thirty (30) day notice requirement has not been waived.
7.16 Customer and Trade Relations. There exists no actual or to the
best of Borrower's knowledge after diligent inquiry, threatened
termination, cancellation or limitation of, or any modification
or change in, the business relationship between Borrower and
any customer or any group of customers whose purchases
individually or in the aggregate are material to the business
of Borrower, or with any material supplier, and there exists no
present condition or state of facts or circumstances which
would materially adversely affect Borrower or prevent Borrower
from conducting such business after the consummation of the
transactions contemplated by this Agreement in substantially
the same manner in which it has heretofore been conducted by
Borrower.
7.17 Other Names. The businesses conducted by Borrower have not been
conducted under any corporate, trade or fictitious name other
than those names listed on Schedule 7.17 hereto.
7.18 Tax Obligations. Borrower has filed complete and correct
federal, state and local tax reports and returns required to be
filed by them, prepared in accordance with any applicable laws
or regulations, and except for extensions duly obtained, have
either duly paid all taxes, duties and charges owed by it, or
made adequate provision for the payment thereof. There are no
material unresolved questions or claims concerning any tax
liability of Borrower. None of the transactions contemplated
hereby or under any agreements referred to hereunder will
result in any material tax liability for Borrower or result in
any other material adverse tax consequence for Borrower.
7.19 Employee Controversies. There are no strikes, work stoppages or
controversies pending or, to the best of Borrower's knowledge
after diligent inquiry and investigation, threatened, between
Borrower and any of its employees, other than employee
grievances arising in the ordinary course of
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business which are not, in the aggregate, material to the
financial condition, results of operations or business of
Borrower.
7.20 Investment Company Act. Borrower is not an "investment company"
nor a company "controlled" by an investment company within the
meaning of the Investment Company Act of 1940, as amended.
7.21 Full Disclosure. This Agreement, the financial statements
delivered in connection herewith, and the representations and
warranties of Borrower herein and in any other document
delivered or to be delivered by or on behalf of Borrower in
connection therewith, do not and will not contain any untrue
statement of a material fact or omit a material fact necessary
to make the statements contained therein or herein, in light of
the circumstances under which they were made, not misleading.
There is no material fact which Borrower has not disclosed to
Lender in writing which materially and adversely affects or, so
far as Borrower can foresee, would materially and adversely
affect the assets, business, prospects, profits, or condition
(financial or otherwise) of Borrower, the rights of Lender or
the ability of Borrower to perform this Agreement.
7.22 Year 2000 Compliance. The Borrower and its Affiliates have
reviewed the areas within their business and operations which
could be adversely affected by, and have developed or are
developing a program to address on a timely basis, the "Year
2000 Problem" (that is, the risk that computer applications
used by the Borrower and its Affiliates may be unable to
recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December
31, 1999), and have made related appropriate inquiry of
material suppliers and vendors. Based on such review and
program, the Borrower believes that the "Year 2000 Problem"
will not have a material adverse effect on the Borrower, its
financial condition, business and operations, and its ability
to pay and perform the Obligations. From time to time, at the
request of Lender, the Borrower and its Affiliates shall
provide to Lender such updated information or documentation as
is reasonably requested regarding the status of its efforts to
address the "Year 2000 Problem".
8. NEGATIVE COVENANTS
The Borrower will not, without Lender's prior written consent:
8.1 Sale, Transfer or Encumbrance of Assets. Sell, lease, pledge,
encumber, grant or permit a Lien on (other than Permitted
Liens), or otherwise dispose of or transfer, whether by sale or
otherwise, any of its assets, except for (a) sales of Inventory
in the ordinary course of business, (b) sales of items of
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Equipment which are obsolete, worn-out or otherwise not useable
in Borrower's businesses up to an aggregate of $100,000 in
sales proceeds in any Fiscal Year so long as (i) no Event of
Default has occurred and which has not been cured or waived as
set forth in this Agreement, or Potential Default exists, (ii)
the proceeds thereof are applied to the principal balance of
the Obligations, (iii) Lender has prior written notice thereof,
(iv) such sales are on price and other terms, and Borrower
proposes to apply the proceeds of each such sale to the
Obligations in a manner, reasonably acceptable to Lender, and
(v) the transfer of assets in each such sale will not result in
any impairment in use or value of the Collateral remaining
after each such sale, or (c) the closure of Borrower's
locations listed on Schedule 8.1 hereto or such other locations
consented to by Lender in writing, which consent shall not be
unreasonably withheld, provided that the Equipment located at
any closed facility is transferred to locations of Borrower
listed on Schedule 6.3 hereto or locations permitted by Section
6.3(a) of this Agreement. For purposes of this Agreement,
"Permitted Liens" shall mean any or all of the following: (i)
Liens to Lender, (ii) Liens securing the payment of taxes or
other governmental charges not yet due and payable, (iii) Liens
securing claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons imposed without
action of such parties, provided that the payment thereof is
not yet required; (iv) Liens incurred or deposits made in the
ordinary course of Borrower's business in connection with
worker's compensation, unemployment insurance, social security
and other like laws, (v) easements, rights of way, restrictions
and other similar encumbrances incurred in the ordinary course
of business that, in the aggregate, are not substantial in
amount and that do not in any case materially detract from the
value of the property subject thereto or materially interfere
with the ordinary conduct of Borrower's business, (vi) Liens in
connection with purchase money security interests for the
purchase of Equipment up to an aggregate sum not to exceed One
Hundred Thousand Dollars ($100,000) for any purchase and One
Hundred Thousand Dollars ($100,000) in the aggregate for
purchases during any Fiscal Year, provided the documents
relating to any such purchases must be in form and substance
reasonably satisfactory to Lender, (vii) Liens listed on
Schedule 8.1, and (viii) Liens in favor of Alliance.
8.2 Name or Identity Change. Change Borrower's name, business
structure, or identity, or add any new fictitious name.
8.3 Guaranties. Guarantee or otherwise become in any way liable
with respect to the obligations of any third party except by
endorsement of instruments or items of payments for deposit to
the general account of Borrower or which are transmitted or
turned over to Lender.
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8.4 Change in Business. Enter into any business not related to
Borrower's present business or make any change in Borrower's
financial structure or in any of its business objectives,
purposes, or operations which would adversely affect the
ability of Borrower to repay the Obligations, the value of the
Collateral or Lender's rights and remedies hereunder, or create
any Subsidiary or change the form of Borrower's business entity
from a corporation.
8.5 Loans and Investments. Except as set forth on Schedule 8.5,
make any advance, loan, investment or material acquisition of
assets other than (i) advances made to employees in the
ordinary course of business for travel and business related
expenses so long as the amount of such advances do not exceed
Fifty Thousand Dollars ($50,000) in the aggregate outstanding
at any time; (ii) investments in short-term direct obligations
of the United States government; (iii) investments in
negotiable certificates of deposit issued by a bank having
capital and surplus of not less than $100,000,000, payable to
the order of Borrower or to bearer, and (iv) investments in
commercial paper rated A-1 or P-1; provided, that with respect
to clauses (ii), (iii) and (iv), Borrower shall assign all such
investments to Lender in form acceptable to Lender.
8.6 Indebtedness. Incur or make any commitments or agreements to
incur or suffer to exist any Indebtedness, other than (i)
unsecured trade debt and accrued expenses arising in the
ordinary course of Borrower's business, (ii) Indebtedness
incurred with respect to Maintenance Capital Expenditures in
accordance with Section 8.20 hereof up to the aggregate sum of
$500,000 in any Fiscal Year, (iii) Indebtedness incurred in
connection with Liens arising under Section 8.1(v) of this
Agreement, (iv) Indebtedness incurred in connection with the
Alliance Financing, or (v) obligations under the Note
Indenture.
8.7 Prepayments. Prepay any existing Indebtedness owing to any
Person, except that (i) Borrower may prepay trade creditors in
the ordinary course of business, and (ii) Borrower may prepay
Lender as provided in this Agreement.
8.8 Affiliate Transactions. Transfer any cash or property to any
direct or indirect owner of or beneficial owner of any interest
in Borrower or other Affiliate or enter into any transaction,
including without limitation the purchase, lease, sale or
exchange of property or the rendering of any service to or by
any direct or indirect owner of or beneficial owner of any
interest in Borrower or other Affiliate; provided that Borrower
may (i) sell Inventory to Affiliates, for cash for fair value
in the ordinary course of business pursuant to terms that are
no less favorable to Borrower than the terms upon which
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such transactions would have been made had such transfers or
transactions been made at arm's length to or with a Person that
is not an Affiliate, and notice thereof has been given to
Lender, (ii) pay compensation for services to employees who are
direct or indirect owners of or beneficial owners of any
interest in Borrower in the ordinary course of Borrower's
business, (iii) pay Pedersen & Houpt for legal services
performed for Borrower, and (iv) repurchase common stock of
Borrower pursuant to that certain Stock Transfer Restriction
Agreement between Borrower and certain of its shareholders
("Restriction Agreement") as permitted by Section 8.12 hereof.
8.9 Consolidations, Mergers. Merge or consolidate with any other
Person, or enter into any joint venture or become a partner in
any partnership.
8.10 Liquidations. Adopt or undertake a plan of liquidation or
dissolution.
8.11 Suspension of Business. Suspend or terminate the transaction of
its business or abandon the Collateral.
8.12 Redemptions and Distributions. Except for the purchase or
redemption of capital stock of officers of Borrower who
terminate their employment with Borrower or whose employment is
terminated by Borrower and repurchases by Borrower of capital
stock of Borrower pursuant to the Restriction Agreement, up to
the aggregate sum of $50,000 in any Fiscal Year, purchase,
redeem, retire or otherwise acquire any shares of its capital
stock or declare or pay, directly or indirectly, any cash or
other property, dividends or distributions to its shareholders.
8.13 Unpermitted Uses of Loans. Use any part of the proceeds of the
Revolving Loans hereunder for any purpose which constitutes a
violation of, or is inconsistent with, any applicable
regulations of the Board of Governors of the Federal Reserve
System, including without limitation, the purchase or carrying
of (or refinancing of indebtedness originally incurred to
purchase or carry) margin securities.
8.14 ERISA. Adopt or agree to contribute to any tax qualified
Benefit Plan, except for a 401(k) Plan or as previously
approved by Lender in writing.
8.15 Consignment. Sell any goods on consignment, bill and hold, or
similar terms, except as permitted in writing by Lender.
8.16 Bank Accounts. Unless Borrower first notifies Lender and
obtains any necessary blocked account agreements from such
financial institution, establish any depository, operating or
other account at any financial institution other than those
accounts listed on Schedule 8.16 hereof.
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8.17 Compensation. Unless approved by Borrower's board of directors,
pay total compensation, including salaries, withdrawals, fees,
bonuses, commissions, drawing accounts, and other payments,
whether directly or indirectly, in money or otherwise, to the
officers of Borrower in any fiscal year, in amounts in excess
of one hundred twenty percent (120%) of the total compensation
for the immediately preceding fiscal year, paid or accrued by
Borrower or its Affiliates to or for the benefit of such
Persons (individually).
8.18 Lease Modifications. Modify or amend the material terms of or
terminate any lease of real property, except for the
termination of the leases for the stores listed on Schedule 8.1
hereto.
8.19 New Leases. Enter into any lease of real property without
obtaining an executed landlord's waiver and except where such
lease contains a consent to assignment thereof to Lender, both
in form attached hereto as Exhibit C.
8.20 Capital Expenditures. Make any Capital Expenditures except for
(i) Capital Expenditures to maintain or upgrade existing
business locations of Borrower, up to the aggregate sum of
$1,000,000 in any Fiscal Year ("Maintenance Capital
Expenditures"), (ii) Capital Expenditures either to maintain or
upgrade existing business locations or for the construction and
equipping of new business locations, up to the aggregate sum of
seventy-five percent (75%) of Free Cash Flow in any Fiscal
Year, and (iii) Capital Expenditures either to maintain or
upgrade existing business locations or for the construction of
new business locations, up to the aggregate sum of ninety
percent (90%) of any Excess Issuance Proceeds, provided such
sums are actually spent on Capital Expenditures within twelve
(12) months of their receipt by Borrower.
9. AFFIRMATIVE COVENANTS - GENERAL
So long as any Obligations are outstanding, Borrower covenants and
agrees that:
9.1 Taxes. All assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed
against, Borrower or any of its property have been paid, and
shall hereafter be paid in full, before delinquency, except
those assessments and taxes the validity of which is being
contested in good faith by appropriate proceedings, do not
impair the priority of Lender's Liens on the Collateral and as
to which Borrower shall have set aside adequate reserves (as
determined by Lender in its reasonable discretion). Borrower
will make timely payment or deposit of all FICA payments and
withholding taxes required of it by applicable laws, and will,
upon request, furnish Lender with proof reasonably satisfactory
to it that Borrower has made such payments or deposits.
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9.2 Insurance. Borrower, at its expense, shall keep and maintain
the Collateral insured under "all risk" or equivalent types of
policies against loss or damage by fire, theft, explosion,
sprinklers and all other hazards and risks ordinarily insured
against by other owners who use such properties in similar
business for the full insurable value thereof as necessary to
prevent application of any co-insurance provisions. Borrower
shall also keep and maintain business interruption insurance
and public liability and property damage insurance relating to
Borrower's ownership and use of the Inventory, Equipment and
its other assets. All such policies of insurance shall be in
such form, with such companies, and in such amounts as may be
reasonably satisfactory to Lender. Borrower shall deliver to
Lender certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All such
policies of insurance (except those of public liability and
those insuring improvements to real estate leased by Borrower
(the "Real Property Improvement Insurance") shall contain an
endorsement in a form reasonably satisfactory to Lender showing
Lender as the lender loss payee on all Collateral with a waiver
of warranties, and absent the occurrence of a Potential Default
or an Event of Default, all proceeds payable thereunder in
excess of the aggregate sum of One Hundred Thousand Dollars
($100,000) shall be payable to Lender and, upon receipt by
Lender, shall be applied on account of the Obligations owing to
Lender. Absent the occurrence of a Potential Default or Event
of Default, Borrower may retain proceeds up to the aggregate
sum of One Hundred Thousand Dollars ($100,000) to be used by
Borrower for the repair or replacement of any damaged or
destroyed Collateral. Upon the occurrence of a Potential
Default or Event of Default, all insurance proceeds (other than
the Real Property Improvement Insurance proceeds) shall be paid
to Lender. To secure the payment of the Obligations, Borrower
grants Lender a Lien in and to all such policies of insurance
(except those of public liability and the Real Property
Improvement Insurance) and the proceeds thereof, and except as
provided above, Borrower shall direct all insurers under such
policies of insurance to pay all proceeds thereof directly to
Lender as its interest may appear. After the occurrence of a
Potential Default or Event of Default, Borrower hereby
irrevocably appoints Lender (and any of Lender's officers,
employees or agents designated by Lender) as Borrower's
attorney-in-fact for the purpose of making, settling and
adjusting claims under such policies of insurance, endorsing
the name of Borrower on any check, draft, instrument or other
item of payment for the proceeds of such policies of insurance
and for making all determinations and decisions with respect to
such policies of insurance. Prior to an Event of Default or
Potential Default, Borrower shall not make, settle or adjust
claims in excess of One Hundred Thousand Dollars ($100,000)
under such policies of insurance without prior consultation
with and written consent of Lender. Borrower will not cancel
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any of such policies without Lender's prior written consent.
Borrower shall obtain by endorsement upon the policy or
policies of insurance issued to Borrower as required above, or
by independent instruments furnished to Lender, an agreement
from each insurer that it will give Lender at least thirty (30)
days' written notice before any such policy or policies of
insurance shall be materially altered or canceled, and that no
act or default of Borrower, or any other Person, shall affect
the right of Lender to recover under such policy or policies of
insurance required above or to pay any premium in whole or in
part relating thereto. Lender, without waiving or releasing any
Obligations or any Event of Default may, but shall have no
obligation to, obtain and maintain such policies of insurance
that Borrower is required to carry hereunder and pay such
premiums and take any other action with respect to such
policies which Lender deems advisable. All sums disbursed by
Lender in accordance with this Section 9.2, as well as
reasonable attorneys' fees, court costs, expenses and other
charges relating thereof, shall constitute Out-of-Pocket Fees
and Costs and shall be payable on demand.
9.3 Litigation. Borrower shall immediately notify Lender in writing
of any suit in law or equity or administrative proceeding
involving money or property, and seeking damages in excess of
$100,000 individually or $200,000 in the aggregate.
9.4 Books and Records. Borrower at all times hereafter shall keep
proper books of record and account in which full and true
entries will be made of all dealings or transactions with
respect to or in relation to the business and affairs of
Borrower, and shall maintain a standard and modern system of
accounting, in accordance with Generally Accepted Accounting
Practices with ledger and account cards and/or computer tapes,
discs, printouts, and records pertaining to the Collateral
which contain information as may from time to time be
reasonably requested by Lender. Borrower agrees to permit
Lender and any of its employees, officers or agents, at all
times during Borrower's usual business hours, or the usual
business hours of third Persons having control thereof, to have
access to and examine all of Borrower's Books relating to the
Collateral, the Obligations, Borrower's financial condition and
the results of Borrower's operations, and, in connection
therewith, permit Lender or any of its agents, employees or
officers to copy and make extracts therefrom; provided that
prior to an Event of Default, Lender shall provide Borrower two
(2) Business Days' prior notice of such examinations and Lender
shall use its good faith efforts to minimize interference with
Borrower's business.
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9.5 Compliance with Laws. Borrower shall comply in all material
respects with all Federal, State, local and foreign laws, rules
and regulations, including, but not limited to the Securities
Act of 1933, the Securities Exchange Act of 1934, the Fair
Labor Standards Act, Environmental Laws, laws relating to
income, unemployment, payroll or social security taxes and
pension funds and retirement benefit programs as required by
ERISA.
9.6 Expense Reimbursements. Borrower shall within five (5) Business
Days of demand by Lender, reimburse Lender for all sums
expended by Lender which constitute Out-of-Pocket Fees and
Costs if Borrower fails to pay same. Absent the occurrence of
an Event of Default, Lender shall provide Borrower with copies
of invoices for such Out-of-Pocket Fees and Costs. Lender may
charge any or all of such amounts expended for Out-of-Pocket
Fees and Costs to the loan account maintained by Lender with
respect to Borrower and such amounts shall be part of the
Obligations subject to interest at the Rate or Default Rate, as
applicable.
9.7 ERISA Reportable Events. Borrower shall furnish to Lender: (a)
as soon as possible, but in no event later than thirty (30)
days after it knows or has reason to know that any Reportable
Event with respect to any Benefit Plan has occurred, a
statement of the Chief Executive Officer of Borrower setting
forth the details concerning such Reportable Event and the
action which it proposes to take with respect thereto, together
with a copy of the notice of such Reportable Event given to the
PBGC, if a copy of such notice is available to Borrower; (b)
upon request by Lender, promptly after the filing thereof with
the United States Internal Revenue Service or the PBGC, copies
of each annual report with respect to each Benefit Plan; (c)
promptly after receipt thereof, a copy of any notice of any
potential material liability, adverse determination letter,
ruling or opinion it may receive from the PBGC or the Internal
Revenue Service with respect to any Benefit Plan; (d) when the
same is made available to participants in a Benefit Plan, all
notices of a significant reduction in the rate of benefit
accrual or plan termination to the participants by the
administrator of such Benefit Plan; and (e) promptly after
receipt thereof, any notice from any Multiemployer Plan to
which it or any of its ERISA Affiliates contributes which
quantifies any actual or potential withdrawal liability which
will or may be imposed upon the withdrawal of Borrower or any
ERISA Affiliate of Borrower from such Multiemployer Plan.
9.8 Intellectual Property. Upon Borrower's acquisition of any
patents, trademarks, licenses or other intellectual property
rights, Borrower shall notify Lender of same in writing and
take all steps that Lender reasonably deems necessary to create
a first priority lien and security interest in such assets in
favor of Lender.
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9.9 Prepayment of Obligations. Borrower shall utilize the net
proceeds of any issuance of Subordinated Indebtedness or
issuance and sale of equity securities permitted by this
Agreement or otherwise consented to by Lender (after deduction
of all issuance and underwriting fees and reasonable costs
associated therewith), to prepay the outstanding Obligations to
the extent of such proceeds. Any excess proceeds remaining
after prepayment of the Obligations in full may be utilized by
Borrower for any purpose permitted by this Agreement and
Borrower shall not be permitted to request additional Revolving
Loans hereunder until it has fully utilized such excess
proceeds. Borrower shall further prepay the Obligations with
any Excess Issuance Proceeds not used to fund Capital
Expenditures, to the extent permitted by Section 8.20 of this
Agreement, within twelve (12) months of Borrower's receipt of
such Excess Issuance Proceeds.
10. AFFIRMATIVE COVENANTS - REPORTING
Borrower shall furnish or cause to be furnished to Lender the
following:
10.1 (a) Periodic Financial Statements. As soon as practicable
and in any event within thirty (30) days following the
end of each Reporting Period (i) a statement of income
and a statement of cash flow of Borrower for each such
Reporting Period and for the period from the beginning
of the then current fiscal year of Borrower to the end
of such Reporting Period, (ii) a balance sheet of
Borrower as of the end of such Reporting Period, and
(iii) with respect to such statement of income and
balance sheet, in comparative form, figures for the
corresponding Reporting Periods in the preceding
Fiscal Year of Borrower, all in reasonable detail and
certified by the Chief Executive Officer of Borrower
as fairly presenting the financial condition of
Borrower in accordance with Generally Accepted
Accounting Principles, subject to changes resulting
from normal year-end adjustments and the absence of
footnotes.
(b) Yearly Financial Statements. As soon as practicable
and in any event within ninety (90) days after the end
of each Fiscal Year of Borrower, a statement of income
of Borrower for such Fiscal Year, and a balance sheet
of Borrower as of the end of such Fiscal Year, and a
statement of cash flow of Borrower for such Fiscal
Year, all setting forth in comparative form,
corresponding figures for the period covered by the
preceding annual audit and as of the end of the
preceding Fiscal Year of Borrower, all in reasonable
detail and in scope in accordance with audits
performed for Borrower in prior years and examined and
certified by independent certified public
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accountants of recognized national standing selected
by Borrower and reasonably satisfactory to Lender,
whose opinion shall be unqualified and shall be in
scope in accordance with audits performed for Borrower
in prior years, in form and substance satisfactory to
Lender.
(c) Projections. As soon as practicable and in any event
not later than thirty (30) days prior to the beginning
of each Fiscal Year of Borrower hereafter, preliminary
drafts of projected balance sheets, statements of
income and cash flow for Borrower, for each month
during such Fiscal Year, which shall include the
assumptions used therein, together with final versions
of same within sixty (60) days after the beginning of
each Fiscal Year containing appropriate supporting
details as requested by Lender, along with
consolidated calculations with respect to compliance
with covenants in the same manner as required in
connection with the delivery of financial statements
under (a) and (b) above.
(d) Management Letters, Tax Distributions. As soon as
practicable and in any event within ten (10) days of
delivery to Borrower a copy of any letter issued by
Borrower's independent public accountants or other
management consultants, if any are issued, with
respect to Borrower's financial or accounting systems
or controls, including all so-called "management
letters".
(e) Yearly Reports. In conjunction with the delivery of
the annual presentation of projections or budgets
referred to in subsection (c) above, a letter signed
by the Chief Executive Officer of Borrower,
describing, comparing and analyzing, in reasonable
detail, all changes and developments between the
anticipated financial results included in such
projections or budgets for the prior Fiscal Year and
the historical financial statements of Borrower for
such prior Fiscal Year.
(f) SEC Reports. Within five (5) days after the same are
sent, copies of all financial statements and reports
that Borrower sends to the Securities and Exchange
Commission or any holders of other Indebtedness.
(g) Other Information. With reasonable promptness, such
other business or financial data, reports, appraisals
and projections as Lender may reasonably request.
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All financial statements delivered to Lender pursuant to the
requirements of this subsection (except where otherwise
expressly indicated) shall be prepared in accordance with
Generally Accepted Accounting Principles as provided in this
Agreement. Together with each delivery of financial statements
required by subsections (a) and (b) above, Borrower shall
deliver to Lender an officer's certificate in the form of
Exhibit B hereto stating that (i) there exists no Event of
Default or Potential Default, or if an Event of Default or
Potential Default exists, specifying the nature thereof, the
period of existence thereof and what action Borrower proposes
to take with respect thereto, (ii) no material adverse change
in the condition, financial or otherwise, business, property,
including without limitation, with respect to Environmental
Laws, or results of operations of Borrower has occurred since
the previous certificate was sent to Lender by Borrower or, if
any such change has occurred, specifying the nature thereof and
what action Borrower has taken or proposes to take with respect
thereto, (iii) all insurance premiums then due have been paid
before delinquent, (iv) all taxes then due have been paid or,
for those taxes which have not been paid before delinquent, a
statement of the taxes not paid and a description of Borrower's
rationale therefor, (v) except as previously reported to
Lender, no litigation, investigation or proceeding, or
injunction, writ or restraining order involving claims in
excess of $100,000 individually or $200,000 in the aggregate is
pending or to the best of Borrower's knowledge after diligent
inquiry, threatened, and (vi) stating whether or not Borrower
is in compliance with the representations, warranties and
covenants in this Agreement, including a calculation of
financial covenants in the schedule attached to such officer's
certificate in form satisfactory to Lender. Lender shall
exercise reasonable efforts to keep such information, and all
information acquired as a result of any inspection conducted in
accordance with this Agreement, confidential, provided that
Lender may communicate such information (A) to any other Person
in accordance with the customary practices of commercial
lenders relating to routine trade inquiries, (B) to any
regulatory authority, or pursuant to any order, judgement or
decree of any court having jurisdiction over Lender, (C) to any
other Person in connection with the exercise of Lender's rights
hereunder, or (D) with Borrower's consent, which consent will
not be unreasonably withheld, conditioned or delayed, to any
Participant or prospective Participant.
10.2 Accounting Information. Borrower authorizes Lender to discuss
the financial condition of Borrower with Borrower's independent
public accountants and agrees that such discussion or
communication shall be without liability to either Lender or
Borrower's independent public accountants. Prior to the
occurrence of a Potential Default or Event of Default, Lender
shall use its best efforts to notify Borrower of Lender's
discussions with Borrower's accountants. Borrower shall deliver
a letter
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addressed to such accountants authorizing them to comply with
the provisions of this subsection, and authorizing Lender to
rely on financial statements of Borrower issued by such
accountants, which letter shall be acknowledged and consented
to in writing by such accountants, and be in form and substance
satisfactory to Lender.
10.3 Other Information and Changes. Borrower shall promptly supply
Lender with such other information concerning its affairs as
Lender may request from time to time hereafter, and shall
promptly notify Lender of any material adverse change in
Borrower's financial condition and of any condition or event
which constitutes a breach of or an Event of Default under this
Agreement.
11. AFFIRMATIVE COVENANTS - FINANCIAL
11.1 Tangible Net Worth. Borrower shall maintain its Tangible Net
Worth in an amount of not less than the amount set forth
opposite each period set forth below, measured quarterly, as of
the last day of each Fiscal Quarter.
MINIMUM TANGIBLE NET WORTH
Period Minimum Level
Closing Date to and including
December 26, 1999 $90,000,000
December 27, 1999 to and including $85,000,000
June 11, 2000
June 12, 2000 and thereafter $80,000,000
11.2 Senior Interest Coverage Ratio. Borrower shall maintain a
Senior Interest Coverage Ratio, calculated and tested as of the
last day of each respective Fiscal Quarter, cumulatively for
the rolling thirteen (13) Reporting Periods ending on the last
day of each such Fiscal Quarter of not less 3.00 : 1.00;
provided that for purposes of determining the ratio described
above for the Fiscal Quarters ending December 26, 1999, March
19, 2000, and June 11, 2000, EBITDA and Funded Debt Interest
Expense shall be deemed to equal EBITDA and Funded Debt
Interest Expense for such Fiscal Quarter (and, in the case of
the later two such determinations, each previous Fiscal Quarter
commencing with the Closing), multiplied by 13/3rds, 13/3rds,
and 13/3rds respectively.
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11.3 Minimum Net Book Value of Laundry Equipment. Borrower shall own
at all times, laundry Equipment having a net book value of not
less than $30,000,000.
12. EVENTS OF DEFAULT
Any one or more of the following shall constitute an Event of Default
by Borrower under this Agreement:
12.1 Payment. If Borrower fails to pay, when due and payable or when
declared due and payable, all or any portion of the Obligations
representing principal or interest owing to Lender, or Borrower
fails to pay, when due and payable or when declared due and
payable, any other Obligations and such failure is not cured
within five (5) days of such breach.
12.2 Breach of Covenants. If Borrower fails or neglects to perform,
keep or observe any term, provision, condition, covenant, or
agreement contained in this Agreement, any other Loan Document,
or any other present or future agreement between Borrower and
Lender and/or evidencing and/or securing the Obligations,
except the failure to comply with Sections 8.2, 8.18, 9.1, 9.3,
9.4, 9.5, 9.7 and 9.8 of this Agreement shall not be an Event
of Default unless such failure continues for a period of thirty
(30) days following notice by Lender to Borrower.
12.3 Breach of Representation. If any representation, warranty,
statement, report, or certificate made or delivered by
Borrower, or any of its officers, employees or agents on behalf
of Borrower, to Lender is false in any material respect when
made or deemed to be made.
12.4 Material Adverse Change. If in Lender's reasonable discretion
(i) there is a material impairment of the prospect of repayment
of all or any portion of the Obligations, (ii) there is any
impairment of the priority of Lender's Liens on all or a
portion of the Collateral (including without limitation a Lien,
levy or assessment in any amount of the type referred to in
Section 12.9 hereof), or (iii) a material adverse change has
occurred in the condition (financial or otherwise), business,
property or results of operations of Borrower.
12.5 Attachment or Levy. If all or any of Borrower's assets in
excess of Fifty Thousand Dollars ($50,000) in the aggregate are
attached, seized, subjected to a writ or distress warrant, or
are levied upon, or come into the possession of any trustee,
receiver, controller, custodian or assignee for the benefit of
creditors (or any other Person with similar powers or duties)
unless, with respect to any such assets, such attachment,
seizure, writ, warrant or levy
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shall be dismissed, released or stayed within thirty (30) days
of issuance thereof.
12.6 Voluntary Insolvency. If an Insolvency Proceeding is commenced
by Borrower.
12.7 Involuntary Insolvency. If an Insolvency Proceeding is
commenced against Borrower except that if Borrower is
contesting such Insolvency Proceeding in good faith, such
Insolvency Proceeding shall not constitute an Event of Default
unless such Insolvency Proceeding is not dismissed within sixty
(60) days of the commencement of such Insolvency Proceedings.
12.8 Injunction. If Borrower is enjoined, restrained or in any way
prevented by court order from continuing to conduct all or any
material part of its business affairs and such order continues
for more than thirty (30) days.
12.9 Governmental Lien. Except as permitted by Section 9.1, if a
notice of Lien, levy or assessment in excess of Ten Thousand
Dollars ($10,000) in the aggregate, is filed of record with
respect to any or all of Borrower's assets by the United States
Government, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other
governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities in excess of Ten
Thousand Dollars ($10,000) in the aggregate, becomes a Lien,
whether choate or otherwise, upon any or all of Borrower's
assets and the same is not paid on or before the due date
thereof.
12.10 Judgment. If a judgment or other claim in excess of Fifty
Thousand Dollars ($50,000) individually, or One Hundred
Thousand Dollars ($100,000) in the aggregate, becomes a Lien
upon any or all of Borrower's assets, or any individual
judgment or other claim in excess of One Hundred Thousand
Dollars ($100,000) is entered against Borrower and is not
stayed, vacated or discharged within thirty (30) days of the
entry thereof.
12.11 Other Indebtedness. If there is a default in any agreement with
respect to Indebtedness in excess of One Hundred Thousand
Dollars ($100,000) to which Borrower is a party with another
Person resulting in a right by such Person to accelerate the
maturity of Borrower's Indebtedness or to exercise any other
right or remedy.
12.12 Prepayment. If Borrower makes any prepayment on account of
Indebtedness for borrowed money, except for prepayments to
Lender.
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12.13 ERISA Reportable Event. If (a) any Reportable Event which
Lender determines constitutes grounds for the termination of
any Benefit Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to
administer any such Plan, shall have occurred and be continuing
thirty (30) days after written notice of such determination
shall have been given to Borrower by Lender, or any such
Benefit Plan shall be terminated within the meaning of Title IV
of ERISA, or a trustee shall be appointed by the appropriate
United States District Court to administer any such Plan, or
the PBGC shall institute proceedings to terminate any Benefit
Plan; and (b) in case of any event described above in this
Section 12.13, the aggregate amount of Borrower's liability
under Sections 4062, 4063 or 4064 of ERISA shall exceed one
percent (1.00%) of its Net Worth, or (c) there shall be a
withdrawal from any Multiemployer Plan as a result of which the
aggregate amount of Borrower's liability in relation thereto
shall exceed one percent (1%) of its Net Worth.
12.14 Change of Control. If any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), shall become, or
obtain rights (whether by means of warrants, options or
otherwise) to become the "beneficial owner" (as defined in
Rules 13(d)-3 and 13(d)-5 under the Exchange Act, directly or
indirectly, of more than 30% of the outstanding common stock of
Borrower or the occurrence of a Change of Control (as defined
in the Note Indenture).
12.15 Default Under the Alliance Financing. If an Event of Default or
(as defined therein) occurs under the Alliance Loan Agreement.
Notwithstanding anything contained in this Section 12 or contained in
any other provision of this Agreement or the other Loan Documents to
the contrary, in the event of the institution of Insolvency Proceedings
against Borrower, Lender shall not be obligated to make advances to
Borrower during the sixty (60) day grace period under Section 12.7
13. RIGHTS AND REMEDIES
13.1 Rights and Remedies Generally. Upon the occurrence of an Event
of Default by Borrower under this Agreement and notice thereof
by Lender to Borrower, except as hereinafter provided, Lender
may, at its sole election, without notice of its election and
without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by the Revolving Loan Note, or otherwise,
immediately due and payable; provided, that all
Obligations shall be immediately due and payable
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without notice or demand upon an Event of Default
under Section 12.6 or 12.7;
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement, or any
other agreement between Borrower and Lender;
(c) Terminate this Agreement as to any future liability or
obligation of Lender with respect to the Revolving
Loans and Letters of Credit but without affecting
Lender's rights and Lien in the Collateral and without
affecting the Obligations owing by Borrower to Lender;
(d) Without notice to or demand upon Borrower, make such
payments and do such acts as Lender considers
necessary or reasonable to protect its Lien in the
Collateral. Borrower agrees to assemble the Collateral
if Lender so requires, and to make the Collateral
available to Lender at such location as Lender may
designate. Borrower authorizes Lender to enter the
premises where the Collateral is located subject to
the terms of the related real estate leases, take and
maintain possession of the Collateral, or any part of
it, and to pay, purchase, contest or compromise any
Lien which in the opinion of Lender appears to be
prior or superior to its Lien (exclusive of the Lien
of Alliance on the Alliance Collateral) and to pay all
expenses incurred in connection therewith;
(e) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale and sell
(in the manner provided for herein) the Collateral;
(f) Sell some or all of the Collateral at either public or
private sales, or both, by way of one or more
contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's
premises subject to the terms of the related real
estate leases) as is commercially reasonable in the
opinion of Lender. It is not necessary that the
Collateral be present at any such sale.
Lender is hereby granted a license or other right to
use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, logo, trade
secrets, trade names, trademarks, customer lists and
advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in
completing production of, advertising for sale and
selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to
Lender's benefit.
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13.2 Notice of Disposition. Lender shall give notice of the
disposition of the Collateral as follows:
(i) Lender shall give Borrower and each holder of
a Lien in the Collateral who has filed with
Lender a written request for notice, a notice
in writing of the time and place of public
sale, or, if the sale is a private sale or
some other disposition other than a public
sale is to be made of the Collateral, the time
on or after which the private sale or other
disposition is to be made;
(ii) The notice to Borrower shall be personally
delivered or mailed, postage prepaid, as
provided in Section 16, at least ten (10)
calendar days before the date fixed for the
sale, or at least ten (10) calendar days
before the date on or after which the private
sale or other disposition is to be made,
unless the Collateral is perishable or
threatens to decline speedily in value. Notice
to Persons other than Borrower claiming an
interest in the Collateral shall be sent to
such addresses as they have furnished to
Lender; and
(iii) If the sale is to be a public sale, Lender
shall also give notice of the time and place
by publishing a notice one time at least ten
(10) calendar days before the date of the sale
in a newspaper of general circulation in the
county in which the sale is to be held. Lender
may bid in any way permitted by applicable law
and purchase at any public sale.
13.3 Expenses of Enforcement. Borrower shall pay all Out-of-Pocket
Fees and Costs incurred in connection with Lender's enforcement
and exercise of any of its rights and remedies as herein
provided, whether or not suit is commenced by Lender. Any
deficiency which exists after disposition of the Collateral as
provided above will be paid immediately by Borrower. Any excess
will be returned, without interest to Borrower or such other
Person as may be entitled thereto by Lender.
13.4 Rights Cumulative. Lender's rights and remedies under this
Agreement, all other Loan Documents and all other agreements
with Borrower shall be cumulative. Lender shall have all other
rights and remedies not inconsistent herewith as provided under
the Code, by law, or in equity. No exercise by Lender of one
right or remedy shall be deemed an election, and no waiver by
Lender of any default on Borrower's part shall be deemed a
continuing waiver. No delay by Lender shall constitute a
waiver, election or acquiescence by it.
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14. TAXES AND EXPENSES REGARDING THE COLLATERAL
14.1 If Borrower fails to pay promptly when due to any other Person,
monies which Borrower is required to pay by reason of any
provision in this Agreement in accordance with the provisions
of this Agreement (including without limitation for any tax,
expense or with respect to any Lien), or to promptly contest
same by proper proceedings diligently pursued and establish
adequate reserves therefor as required by the terms of this
Agreement, Lender may, but need not, pay the same after any
notice required hereunder and charge Borrower's account
therefor, and Borrower shall promptly reimburse Lender. All
such sums shall become additional Obligations owing to Lender,
shall bear interest at the applicable interest rate hereunder
and shall be secured by the Collateral. Any payments made by
Lender shall not constitute: (i) an agreement by Lender to make
similar payments in the future, or (ii) a waiver by Lender of
any Event of Default under this Agreement. In connection with
any payment made by Lender pursuant to this Section 14.1,
Lender need not inquire as to, or contest the validity of, any
such expense, tax or Lien and the receipt of the usual official
notice for the payment thereof shall be conclusive evidence
that the same was validly due and owing, and the receipt of any
other notice with respect to all other such monies due
hereunder shall be prima facia evidence that the same was
validly due and owing.
15. CERTAIN WAIVERS
15.1 Application of Payments. Except as expressly provided in this
Agreement, Borrower waives the right to direct the application
of any and all payments at any time or times hereafter received
by Lender on account of any Obligations owed by Borrower,
including without limitation amounts received which are the
proceeds of any insurance policy, and Borrower agrees that
Lender shall have the continuing exclusive right to apply and
reapply such payments in any manner as Lender may deem
advisable, notwithstanding any entry by Lender upon its books.
15.2 Demand, etc. Except as specifically provided herein, Borrower
waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any
default, notice of nonpayment at maturity, notice of intent to
accelerate, and notice of acceleration, notice prior to
Lender's taking possession or control of any of the Collateral,
or any bond or security which might be required by any court
prior to allowing Lender to exercise any of Lender's remedies,
including the issuance of an immediate writ of possession, the
release, compromise, settlement, extension or renewal of any or
all commercial paper, accounts, documents, instruments, chattel
paper, and guarantees at any time held by Lender on
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which Borrower may in any way be liable, the benefit of all
valuation, appraisement and exemption laws, and any right to
require a marshalling of assets by Lender or to require that
Lender first resort to some or any portion of any Collateral
before sale, foreclosure or realization on any other portion
thereof.
15.3 Risk of Loss Regarding Collateral. Beyond the safe custody of
the Collateral in its possession, Lender shall not in any way
or manner be liable or responsible for: (a) the Collateral in
its possession (or in the possession or control of any agent or
bailee); (b) any loss or damage thereto occurring or arising in
any manner or fashion from any cause, including without
limitation, lost profits, incidental or consequential damages;
or (c) any diminution in the value thereof. Except where
occasioned by gross negligence or willful misconduct of Lender,
all risk of loss, damage or destruction of the Collateral shall
be borne by Borrower.
15.4 Confidentiality. Borrower authorizes its accounting firm and/or
service bureau to provide Lender with such information
requested by Lender pursuant to or in accordance with Section
10.2 of this Agreement, and authorizes Lender to contact
directly any such accounting firm and/or service bureau in
order to obtain such information. Prior to the occurrence of a
Potential Default or Event of Default, Lender shall notify
Borrower prior to contacting such accounting firm or service
bureau, but in no event shall Lender be liable to Borrower for
failure to provide such notice.
16. NOTICES
Except as otherwise expressly provided herein, any notice required or
desired to be served, given or delivered hereunder shall be in the form
and manner specified below, and shall be addressed to the party to be
notified as follows:
If to Lender at: LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Attn: John Thurston
Facsimile No. 312/904-6225
With a copy to: Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Attn: Jeffrey L. Elegant, Esq.
Facsimile No. 312/840-7720
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If to Borrower at: SpinCycle, Inc.
15990 N. Greenway/Hayden Loop, Suite 400
Scottsdale, AZ 85260
Attn: Peter Ax
Facsimile No. 602/707-9967
With copies to: Pedersen & Houpt
161 N. Clark Street, Suite 3100
Chicago, Illinois 60601
Attn: Amy Yates, Esq.
Facsimile No. 312/641-6895
or to such other address as each party designates to the other by
notice in the manner herein prescribed. Notice shall be deemed given
hereunder if (i) delivered personally or otherwise actually received,
(ii) sent by overnight delivery service, (iii) mailed by first-class
United States mail, postage prepaid, registered or certified, with
return receipt requested, or (iv) sent via telecopy machine with a
duplicate signed copy sent on the same day as provided in clause (ii)
above. Notice mailed as provided in clause (iii) above shall be
effective upon the expiration of three (3) Business Days after its
deposit in the United States mail, and notice telecopied as provided in
clause (iv) above shall be effective upon receipt of such telecopy if
the duplicate signed copy is sent under clause (ii) above. Notice given
in any other manner described in this section shall be effective upon
receipt by the addressee thereof; provided, however, that if any notice
is tendered to an addressee and delivery thereof is refused by such
addressee, such notice shall be effective upon such tender unless
expressly set forth in such notice.
17. CHOICE OF LAW AND VENUE
17.1 This Agreement shall be deemed to have been made in the State
of Illinois and the validity of this Agreement, its
construction, interpretation and enforcement, and the rights of
parties hereunder and concerning the Collateral, shall be
determined under, governed by and construed in accordance with
the laws of the State of Illinois. The parties agree that at
Lender's election, all actions or proceedings arising in
connection with this Agreement shall be tried and litigated
only in the state and federal courts located in the County of
Cook, State of Illinois. Borrower waives any right it may have
to assert the doctrine of forum non conveniens or to object to
such venue and hereby consents to any court ordered relief.
Borrower consents that all service of process upon it be made
by registered mail or messenger directed to it at the address
set forth in Section 16 above and that service so made shall be
deemed to be completed upon the earlier of actual receipt or
three (3) Business Days after the same shall have been posted
to Borrower's address. Nothing contained in this Section 17
shall affect the
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right of Lender to serve legal process in any other manner
permitted by law or affect the right of Lender to bring any
action or proceeding against Borrower or its property in the
courts of any other jurisdiction.
18. INDEMNITY
18.1 Borrower hereby shall indemnify, hold harmless and defend
Lender and its directors, officers, agents, counsel and
employees ("Indemnified Persons") from and against all losses,
claims, damages, costs, expenses and liabilities ("Losses"),
whether such Losses arise or notice thereof is received by
Lender during the Initial Term or any renewal term or after
termination of this Agreement, incurred by any of them arising
principally out of or relating to this Agreement or under any
other transaction contemplated hereby except for any such
Losses caused by the gross negligence or willful misconduct of
such Indemnified Persons, and shall reimburse Lender and each
other Indemnified Person for any reasonable expenses including
in connection with the investigation of, preparation for or
defense of any actual or threatened claim, action or proceeding
arising therefrom (including any such costs of responding to
discovery requests or subpoenas), regardless of whether any
Indemnified Person is a party thereto. Each Indemnified Person
may select its own counsel with respect to any Losses, in
addition to Borrower's counsel, and shall be indemnified
therefor hereunder.
19. GENERAL PROVISIONS
19.1 Acceptance. This Agreement shall be binding and deemed
effective when executed by Borrower and accepted and executed
by Lender.
19.2 Binding Agreement. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the
parties, provided, however, that Borrower may not assign this
Agreement or any rights hereunder without Lender's prior
written consent and any prohibited assignment shall be
absolutely void. No consent to an assignment by Lender shall
release Borrower from its Obligations to Lender. Lender may not
assign this Agreement and its rights and duties hereunder,
without Borrower's written consent, such consent not to be
unreasonably withheld, conditioned or delayed, and Borrower
shall execute and deliver such documents in connection with
such assignment as Lender or such assignee may reasonably
request. Lender may not transfer, negotiate or grant
participations in all or any part of, or any interest in its
rights and benefits hereunder without Borrower's written
consent, such consent not to be unreasonably withheld,
conditioned or delayed. In connection therewith, Lender may
disclose all documents and information which Lender now or
hereafter may have relating to Borrower or Borrower's business,
but shall
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use all reasonable efforts to ensure that the recipient of such
information maintains the confidentiality of such information
as required by the terms of this Agreement.
19.3 Section Headings. Section headings and section numbers have
been set forth herein for convenience only. Unless the contrary
is compelled by the context, everything contained in each
paragraph applies equally to this entire Agreement.
19.4 Construction. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Lender
or Borrower, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by
all parties and shall be construed and interpreted according to
the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of the parties hereto.
19.5 Severability. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the
purpose of determining the legal enforceability of any specific
provision.
19.6 Entire Agreement. This Agreement cannot be changed or
terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations, if any, are
merged into this Agreement. This Agreement may be amended only
by a written agreement signed by duly authorized officers of
Borrower and Lender.
19.7 No Fiduciary Relationship or Joint Venture. No provision herein
or in any of the other Loan Documents and no course of dealing
between the parties hereto shall be deemed to create any
fiduciary relationship between Lender and Borrower nor to
create any partnership or joint venture between Lender and
Borrower.
19.8 Publicity. Subject to the other confidentiality provisions of
this Agreement, Borrower hereby consents to the issuance or
dissemination by Lender to the public of information describing
the credit accommodations entered into pursuant to this
Agreement (as it may be amended, modified and supplemented from
time to time) including without limitation the name and address
of Borrower, a general description of Borrower's business and
the use of Borrower's name and logo in connection therewith.
19.9 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original but all
of which shall together constitute one and the same instrument.
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19.10 Conflict. In the event of a conflict between the terms of this
Agreement and the terms of any other Loan Documents, the terms
of this Agreement shall be controlling.
19.11 WAIVER OF JURY TRIAL
LENDER AND BORROWER ACKNOWLEDGE THAT THE RIGHT TO A TRIAL BY
JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THE RIGHT MAY BE
WAIVED. BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY,
IRREVOCABLY AND WITHOUT COERCION, WAIVE ALL RIGHTS TO TRIAL BY
JURY OF ALL DISPUTES BETWEEN THEM. NEITHER LENDER NOR BORROWER
SHALL BE DEEMED TO HAVE GIVEN UP THIS WAIVER OF JURY TRIAL
UNLESS THE PARTY CLAIMING THAT THIS WAIVER HAS BEEN
RELINQUISHED HAS A WRITTEN INSTRUMENT SIGNED BY THE OTHER PARTY
STATING THAT THIS WAIVER HAS BEEN GIVEN UP.
19.12 Restatement of Prior Agreement. This Agreement constitutes an
amendment and restatement of, and a replacement and substitute
for the Prior Agreements. The Obligations under the Prior
Agreements are continuing indebtedness and nothing contained in
this Agreement shall be deemed to constitute payment,
settlement or novation of the Obligations under the Prior
Agreement or otherwise effect Lender's Lien on the Collateral
under the Prior Agreements, which shall continue in full force
and effect. Borrower hereby confirms that the Obligations under
the Prior Agreements are validly existing and enforceable and
that Borrower presently has no defenses, rights of setoff or
counterclaims against Lender arising out of the Prior
Agreements. Upon execution of this Agreement, this Agreement
shall amend and supersede and is substituted for the Prior
Agreements in their entirety. All references to Heller
Financial, Inc., Finova Capital Corporation, Agent or Lenders
in any other Loan Documents assigned by Heller Financial, Inc.
and/or Finova Capital Corporation to Lender pursuant to that
certain Assignment and Assumption Agreement dated November 17,
1999 among Borrower, Lender, Heller Financial, Inc., and Finova
Capital Corporation, shall be deemed to refer to Lender and
except as amended and restated hereby, shall remain unchanged
and in full force and effect and are hereby ratified and
affirmed by the parties hereto.
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IN WITNESS WHEREOF, Borrower has executed and delivered this Agreement.
SPINCYCLE, INC.
By: /s/ Tim Yost
------------------------------------
Title: Vice President
------------------------------------
Address: 15590 N. Greenway/Hayden Loop
Suite 400
Attention: Peter Ax
Facsimile: 602/707-9967
ACCEPTED this 17th day of November, 1999 at Lender's place of business
in the City of Chicago, State of Illinois.
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ John Thurston
------------------------------------
Title: Vice President
------------------------------------
Address: 135 South LaSalle Street
Chicago, Illinois 60603
Attn: John Thurston
Facsimile: 312/904-6225
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Schedules and Exhibits
EXHIBITS
Exhibit A Form of Revolving Loan Note
Exhibit B Form of Compliance Certificate
Exhibit C Form of Landlord's Waiver and Lease Assignment Provision
SCHEDULES
Schedule 6.3 - Location of Inventory
Schedule 7.2 - States Where Borrower is Qualified
Schedule 7.8 - Litigation
Schedule 7.9 - Intellectual Property
Schedule 7.11 - Pro Formas
Schedule 7.12 - Conduct of Business
Schedule 7.13 - Environmental Compliance
Schedule 7.17 - Fictitious Names
Schedule 8.1 - Permitted Liens, Facilities to be Closed
Schedule 8.16 - Bank Accounts
